Economists Sing “All the Single Ladies”

(via Planet Money & the Wall Street Journal)

Nationwide, women who work full time still earn about 20 percent less, on average, than men. But there’s one demographic where women outearn men: people who are single, childless, and between the ages of 22 and 30. Within that universe, U.S. women earn 8 percent more than men, on average, according to a new report from the research firm Reach Advisors.

Women in this group out-earn men by an even larger margin in some metro areas — 17 percent in New York, 11 percent in San Francisco, and a high of 21 percent in Atlanta, to name a few.

The gap is driven by a bunch of familiar trends. More women than men are graduating from college these days; the wage premium for college degrees is increasing; and high-paying jobs in male-dominated fields such as manufacturing and construction are disappearing. (Also, in general, women’s wages tend to stagnate or fall after they have kids.)

This wage pattern started to emerge in big cities years ago, but it’s now spread more widely. The authors of the report looked at data from 2,000 towns and cities around the country, and found three main community-level factors that tend to boost women’s earnings relative to men within this demographic:

(1) The community has a heavy dependence on knowledge-based jobs, which in turn serves as a magnet for well-educated women.

(2) The community has majority-minority population (i.e., non-Hispanic whites are less than 50% of the total population). This is in part due to Hispanic and African-American women being almost twice as likely as their male peers to earn bachelor’s and graduate degrees.

(3) The community has seen a decimation of the manufacturing employment base, making it more difficult for men without similarly high levels of education to earn solid incomes.

Here is a list of cities where women earn more than men, from the Wall Street Journal

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The Beauty of Data Visualization

Feeling overwhelmed by data? Wondering what some of the economic data thrown around in the news actually means? This TED talk won’t answer all of those questions, but it does demonstrate the power and beauty of data visualization, and how this method of analyzing data can reveal new patterns. In economic development, data visualization helps us understand the broader economic context within which communities operate and helps us make strategic decisions about where resources should be allocated to encourage economic vitality. The relationships between different regions in the country, the relative impact of new policies, and broader shifts in global industry are all complex problems that data visualization can help us begin to understand.

David McCandless of Information is Beautiful talks data visualization in recently posted TED talk (above). He explains how information design can help us get through information glut on the Web and how simple charts can show patterns that we never would have seen otherwise. He uses his own works and collaborations as evidence.

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Indian Economy Accelerating

photo courtesy Valentina Barca

MUMBAI — While many developed economies worry increasingly about slowing growth and continued high unemployment, India said Tuesday that its economy was accelerating.

Sharp increases in manufacturing, mining and services helped India — still considered a developing economy, along with China — grow at a rate of 8.8 percent in the three months that ended in June, compared with the same period a year earlier. It was its fastest pace in more than two years. The economy grew at a rate of 8.6 percent in the quarter that ended in March.

Economists said the new data reflected the strength of India’s recovery from the global financial crisis, but they added that the economy might not be able to keep up the pace in coming months. The growth rates of industrial production and exports, for instance, have begun to fall.

Indian leaders have said they would like to push the economy back up to growth of 9 percent — a pace it achieved a couple of years ago — and eventually to 10 percent. India needs faster growth to alleviate poverty and increase job opportunities for a young population; about half the Indian people are 25 or younger.

But economists say that those higher growth rates will be hard to achieve until India invests much more in its infrastructure and further loosens government control over the economy. Moreover, a slowdown in the rest of the world could hurt India’s growth by reducing the flow of foreign investment into the country and reducing demand for its exports.

“This was the quarter in which you would have seen the fastest year-on-year number for this year,” said Tushar Poddar, an economist with Goldman Sachs in Mumbai who projects that India will grow at a rate of 8.2 percent during the 2010-11 fiscal year, which started in April. “I don’t think the 9 percent is coming anytime soon.”

The Indian government estimates the economy could grow as much as 8.75 percent this year, and the International Monetary Fund says growth could hit 9.4 percent.

Like China, India has rebounded relatively quickly from the global recession. But the two countries have done so very differently. Domestic consumption, which is not as big a component of the Chinese economy, has been crucial in the revival of the Indian economy.

Car sales in India, for instance, climbed 38 percent in July, and large carmakers like Ford, Nissan and Volkswagen are significantly expanding production capacity in the country.

Other foreign companies are also looking to tap India as it spends more. Harley Davidson, the motorcycle maker, and California Pizza Kitchen, the U.S. restaurant chain, recently opened their first Indian outlets in Mumbai.

This year, strong monsoon rains have helped bolster the Indian agricultural sector, which sustains more than half of its 1.2 billion people, though it makes up just 16 percent of the economy. Agriculture grew at a pace of 2.8 percent in the latest quarter, up from 1.9 percent a year earlier, when several parts of the country suffered a drought.

Optimism about the economy and strong corporate profit growth have helped push the Indian stock market to its highest level in two years. On Tuesday, however, the country’s benchmark stock indexes were down a little less than 1 percent.

But stronger growth has also helped stoke inflation, especially for food, energy and other essential items. Wholesale prices have been climbing at about 10 percent a year in recent months.

The Reserve Bank of India has raised its benchmark interest rates three times so far this year in response to higher inflation, and officials have indicated that further increases might be needed.

In the Tuesday report, however, the government said that personal consumption had slowed sharply in the most recent quarter. Some analysts said those numbers are often revised.

“Bottom line: Another rocker. India is flying,” said Frederic Neumann, an economist at HSBC, in a note. “A little surprising is that consumption hasn’t gone full steam yet. But give it a little time and it will. That’s why more pre-emptive tightening is still warranted.”

By VIKAS BAJAJ Published: August 31, 2010 www.nytimes.com

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Income Inequality and Financial Crises

David A. Moss, an economic and policy historian at the Harvard Business School, has spent years studying income inequality. While he has long believed that the growing disparity between the rich and poor was harmful to the people on the bottom, he says he hadn’t seen the risks to the world of finance, where many of the richest earn their great fortunes.

Now, as he studies the financial crisis of 2008, Mr. Moss says that even Wall Street may have something serious to fear from inequality — namely, another crisis.

The possible connection between economic inequality and financial crises came to Mr. Moss about a year ago, when he was at his research center in Cambridge, Mass. A colleague suggested that he overlay two different graphs — one plotting financial regulation and bank failures, and the other charting trends in income inequality.

Mr. Moss says he was surprised by what he saw. The timelines danced in sync with each other. Income disparities between rich and poor widened as government regulations eased and bank failures rose.

“I could hardly believe how tight the fit was — it was a stunning correlation,” he said. “And it began to raise the question of whether there are causal links between financial deregulation, economic inequality and instability in the financial sector. Are all of these things connected?”

Professor Moss is among a small group of economists, sociologists and legal scholars who are now trying to discover if income inequality contributes to financial crises. They have a new data point, of course, in the recent banking crisis, but there is only one parallel in the United States — the 1929 market crash.

Income disparities before that crisis and before the recent one were the greatest in approximately the last 100 years. In 1928, the top 10 percent of earners received 49.29 percent of total income. In 2007, the top 10 percent earned a strikingly similar percentage: 49.74 percent. In 1928, the top 1 percent received 23.94 percent of income. In 2007, those earners received 23.5 percent. Mr. Moss and his colleagues want to know if huge gaps in income create perverse incentives that put the financial system at risk. If so, their findings could become an argument for tax and social policies aimed at closing the income gap and for greater regulation of Wall Street.

This inquiry is one that some conservative economists are already dismissing.

R. Glenn Hubbard, for instance, who was the top economic advisor to former President George W. Bush, said income inequality was not the culprit in the most recent crisis.

“Cars go faster every year, and G.D.P. rises every year, but that doesn’t mean speed causes G.D.P.,” said Mr. Hubbard, dean of the Columbia Business School and co-author of the coming book “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity.”

Even scholars who support the inquiry say they aren’t sure that researchers will be able to prove the connection. Richard B. Freeman, an economist at Harvard, is comparing about 125 financial crises around the globe that occurred over the last 30 years. He said inequality soared before many of these crises. But, Mr. Freeman added, the data from different nations is difficult to compare. And Professor Freeman says he has found some places, like the Scandinavian countries, where there were crises without much inequality, suggesting that other factors, like deregulation, may be the best explanations.

For his part, Mr. Moss said that income inequality might have complicated links to financial crises. For instance, inequality, by putting too much power in the hands of Wall Street titans, enables them to promote policies that benefit them — like deregulation — that could put the system in jeopardy.

Inequality may also push people at the bottom of the ladder toward choices that put the financial system at risk, he said. And low-income homeowners could have better afforded their mortgages if not for the earnings gap.

(Mr. Hubbard has a different take: He says many lower-income homeowners should not have had mortgages in the first place. The latest crisis, he says, was caused by policymakers who decided to “democratize credit” by expanding home ownership. Their actions were driven by a desire to address inequality, but those policymakers were misguided and should have improved education instead, he adds.)

Scholars who study inequality often focus on people at the bottom. But, Mr. Moss said, the incentives of people at the top also deserve more scrutiny.

He pointed to the recent work of Margaret M. Blair, who teaches at Vanderbilt University Law School and is active with the Tobin Project, the nonprofit organization Mr. Moss founded a few years ago to study issues like economic inequality. She is researching whether financial workers promote bubbles and highly leveraged systems, even unconsciously. Ms. Blair said that because financial bubbles often lead to higher returns, financial workers have the potential to make more, and this pattern can influence their trading strategies and the policies they promote. Those decisions, in turn, drive even greater income inequality, she said.

After the 1929 crash, the income gap narrowed dramatically and remained low for decades, because of the huge wealth lost by people at the top and the sweeping financial reforms introduced in the 1930s that reined in Wall Street.

So far, the results are not as dramatic in the wake of the recent financial crisis. The income gap narrowed slightly in 2008, according to the most recent data available, but it remains unclear if it will continue shrinking.

This time, after all, the system did not collapse as it did in 1929. The status quo on income inequality looks like it was essentially maintained. Mr. Moss said he supported the government intervention in 2008, though he noted, “Financial elites made off rather well.”

By LOUISE STORY Published: August 21, 2010 NYTimes

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Interactive Map: The Economy Where You Live

The fallout from the recession has cut deeply into the housing security, employment and income of many Americans. But some parts of the country are clearly faring better than others. Here, three interactive maps show foreclosure and jobless rates as well as household income by county.

NPR.org

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