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    Working Moms: The Good and the Bad News

    Aug 7 • Economic Thinkers, Gender Issues, Households, Labor, Macroeconomic Measurement • 323 Views

    Two recent studies about working moms give good news and bad.

    The good first. If you work during your child’s first year, and you contribute considerably to the family income, or if your child care is very good, or if you are sensitive to your children, then his or her cognitive development will equal those of stay-at-home moms.   

    Now the bad. As a working mother with an MBA, 15 years after graduation, “lesser job experience, greater career discontinuity and shorter work hours…,” will contribute to a gender pay gap of 25%. By contrast, perhaps as illustrated by Elena Kagan, Sonia Sotomayor, and Condaleezza Rice, women whose careers resembled those of men earned equal pay. 

    The Economic Lesson

    Labor force statistics include participation rates. Defined as a statistic that compares the size of the labor force to its potential total, female participation rates for June, 2010 were 58.5% while male participation rates were close to 71.3%.

    The labor force includes all people who are employed, who are looking for a job, and who are 16 or older. There are close to 155 million people in the U.S. labor force. 

    Average gender wage gap differentials for different occupations are noted in an earlier econlife post. For different countries, you can look here.

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    An Amazing Unemployment Visual

    Aug 6 • Businesses, Labor, Macroeconomic Measurement • 407 Views

    Wow! Changing the color of individual counties from light to dark, month by month, this graphic actively displays how the U.S. moved from a 4.6% unemployment rate during January 2007 to 9.7% during May, 2010. In 30 seconds it tells more than pages of analysis.

    The Economic Lesson

    According to the Bureau of Labor Statistics, with a civilian noninstitutional labor force of 154.4 million people, 9.7% represents 14.97 million individuals. More specifically, the unemployment rate for men over 16 years old is 10.5%. For women over 16 years old, it is 8.3%. 


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    Who Do You Trust?

    Aug 5 • Businesses, Economic Debates, Economic History, Economic Thinkers, Government, Macroeconomic Measurement, Thinking Economically • 347 Views

    Moderated by late show host Johnny Carson, there once was a TV show called “Who Do You Trust?” Initially aired during 1957, the quiz show had husbands (interesting–1950s version would have only husbands making the decision) deciding whether they or their wives would answer questions.

    With the current debate about the impact of stimulus spending, I thought of the show’s title. Based on “who” we trust, many of us select who we want to answer, “Is the stimulus working?”

    For those who trust the Keynesian outlook, Moody’s Mark Zandi and Princeton economist Alan Blinder provide the right answers. In a recent paper, Zandi and Blinder conclude that the financial bailout had the greatest impact. Saying that the Fed’s asset purchases and bank stress tests were critical for the current economic improvement, they point out that stimulus spending alone would not have sufficed. However, they say that the complementary character of both sets of policies tended “to reinforce each other.”

    By contrast, those who question the impact of government spending will gravitate toward Stanford economist John Taylor and Harvard’s H. Gregory Mankiw. Commenting on the Blinder/Zandi paper, Dr. Taylor says that they use an old Keynesian model for hypothetical data input. Never, he says, do they use current data on what actually happened–just what was supposed to have occurred.

    There is lots more to read on both sides. For the Keynesians’ view, you might want to look at what the Councll of Economic Advisors and Paul Krugman have said. To read more of the market dominated perspective, Arnold Kling, Tyler Cowen, and Russell Roberts have noted their opinions. 

    The Economic Lesson

    To simplify our market economy, economists like to draw a circular flow model with 2 concentric circles. As shown here, essentially, resources and goods and services move around the outer circle while dollars occupy the inner circle.

    The key, though, is that the Keynesians believe that during a recession we have to draw a huge government rectangle to help the other two. By contrast, those who believe the market should function with little outside help will depict the circular flow model with minimal governmental influence.

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    Social Insecurity: Part 2

    Aug 4 • Government, Macroeconomic Measurement • 354 Views

    The average social security check received by a retired grandma is $1169. Multiply that by 35 million recipients, add to it other social security obligations, and this year, you have more money leaving than entering the social security “bank account”.

    Next year everything should be okay but not for long. The crisis starts in 2016 when the system will be swamped by baby boomers. What should be done? The Congressional Budget Office has suggested 5 categories of solutions: 1) Change taxes. 2) Change benefits. 3) Pay more to low income earners. 4) Raise the retirement age further. 5) Reduce cost-of-living adjustments.

    The Economic Lesson

    Hoping to give “ownership” to all of us, the creators of Social Security designed a universal pay-as-you-go program in 1935. When we “pay-as-you-go”, we are giving today’s workers payroll tax dollars to today’s social security recipients.

    Looking at the potential problems, should social security remain a universal program with common “ownership?”

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    Aug 3 • Innovation, Labor, Thinking Economically • 412 Views

    In a  wonderful NYC Radio Lab podcast about success, Malcolm Gladwell also explains why genius is closely related to love.

    Recorded at the  92nd Street Y in NYC, writer Malcolm Gladwell and Radio Lab host Robert Shulwich preceded their conclusions about genius with reasons that people are successful. Gladwell began with a list of birth dates for Canadian hockey players. Pointing out that 17 of a group of 25 were born between January and April, he said the reason was the cut off date for children’s hockey leagues. With a January 1st cut off date, the boys who just missed the deadline were the biggest and oldest in the next class. The result? They were the best, got reinforced as the best, and excelled at hockey.

    Similarly fortuitous, Microsoft co-founder Bill Gates attended a private school whose students were given the opportunity to use a computer long before before PCs and Apples existed. As a result, he knew when mainframe computer time was available in the middle of the night at a university and, as a teenager, regularly snuck out of his home to use it.

    And this takes us to love. Not only did Bill Gates have an opportunity but he loved what he was doing. According to Malcolm Gladwell, most of us are successful and even rise to the genius level because of more than brains. It often is a combination of luck, talent, and love.

    Malcolm Gladwell also looked at success in a 2008 New Yorker Magazine article. Commenting on football players, teachers, and financial advisors, he discusses how tough it is to predict success. People can earn the right degrees, function well during interviews, and perform optimally in similar situations. Still, selecting the person who will be truly successful in a job happens less frequently than we might expect.

    The Economic Lesson

    In our mixed economy, with the market and government both affecting production and distribution, success is nurtured through a variety of incentives. Starting with demand and supply, many of the the market’s incentives focus on self-interest. Through taxes, spending, and regulatory policy, government can target incentives more specifically to shape our behavior. Consequently, aren’t the market and government providing a definition of success?

    And then, we can return to Malcolm Gladwell with his recipe for achieving success and his observation that success is tough to predict.

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