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What We Read Today 10 April 2015

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Every day most of this column ("What We Read Today") is available only to GEI members.

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Top 10 communities for the highest well-being (Employee Benefit Adviser)  This slide show has three states with 2 communities each.  And only one community is not south of the Mason-Dixon line.


Middle Class, but Feeling Economically Insecure (The New York Times)  Nearly 9 oout od 10 Americans consider themselves to be middle class.  This article says that middle class is not only about status but, almost as importantly, also about aspirations.  And aspirations today are increasingly problematic, leading to increased stress and anxiety.  Research on this topic is discussed today in the members only section.  Register for free newsletter to become a member.


Articles about events, conflicts and disease around the world

Global

  • The Anthropocene Myth (Jacobini)  Author Andreas Malm says blaming all humanity for climate change lets capitalism off the hook.  Econintersect:  So, if we has 7 billion people still living subsistence lives there would be less global warming?  Probably true but so what?  This seems a distinction without a purpose.

U.S.

Greece

  • Dangerous Days Ahead (Jacobini)  Hat tip to Roger Erickson.  Is a radical breakout from the Eurozone even possible?

Russia

China

Pakistan

Indonesia



Most Say Government Policies Since Recession Have Done Little to Help Middle Class, Poor (Pew Research Center)  See following articles for more on income and wealth studies.  The second graph below shows the extreme asymmetry of class self-perception.  Approximately 89% of Americans perceive themselves to be at some level of middle class. Lower class is self-perceived by 10%, which is less than the number living below the poverty line (14.5% in 2013, according to the U.S. Census Bureau).  By subtraction, nearly 1/3 of those living below the poverty level consider themselves to be middle class.

gov.helps.who.pew

selfperceivedmiddle.class.pew


How the middle class got screwed: College costs, globalization and our new Insecurity Economy (Marianne Cooper, Salon)  This August 2014 article reviews major changes over the most recent decades which have created economic problems for what used to be the "great American middle class".  The author cites decline of unions and social safety nets, globalization and the inflation in college costs as three of the factors most impacting the security and prosperity of America's economic anchor.  For some data review, see the next two articles.


The Middle Class Is Worse Off Than You Think (Mark Whitehouse, Bloomberg View)  When the middle class is defined as a demographic entity rather than an income group some results emerge that show more economic degradation in America than found with in other studies.  The demographic "middle class" is:

... families whose breadwinner was at least 40 years old and had achieved a level of education that would typically allow a middle-class standard of living. Whites and Asians needed exactly a high-school diploma to qualify. For blacks and Hispanics, it took a two-year or four-year college degree -- a stark recognition of persistent racial inequality.

Whitehouse compares the demographic middle class to the economic middle class and shows the differences vis a vis both income and wealth.  This essay is based on a study published by the St. Louis Fed - see next article.

middle.class.income.1989.2013

middle.class.wealth.1989.2013

To summarize:  The demographic middle class defined here is that group of people here household breadwinner was born before 1974 and has the educational attainment traditionally associated with middle class.  Three obvious conclusions from the graphs:

  • The demographic middle class was more negatively affected by the 2001 recession and from 1989-1992 and 2004-2013 than was the entire economic middle class.  (This was not pointed out by Whitehorse.)
  • A corallary to (1):  The demographic middle class was comparable to the economic middle class from 1992-2000.  That was a tide strong enough to lift all ships. 
  • The demographic middle class wealth lost ground to the economic middle class only during the years 1989-1995 and 2007-2013.  For the twelve years 1995-2007 the two classifications advanced similarly with the exception of an advantage for the demographic group during 1998-2001.

The Middle Class May be Under More Pressure Than You Think (William R. Emmons and Bryan J. Noeth, Federal Reserve Bank of St. Louis)  See previous article for background.  These authors describe the reason for conducting this study with a demographic frame of reference:

Purely income- or wealth-based definitions of the middle class are ambiguous and unstable. Identifying the median—that is, the family exactly in the middle of a ranking—of income or wealth at a point in time has the virtue of simplicity. Unfortunately, it tells us nothing about the characteristics of the median family or any other family at that moment or over time. It, therefore, can obscure underlying forces affecting individual families and groups. The first major problem in defining the middle class with an income or wealth ranking is its ambiguity. A family may rank in the middle class in an income based definition but not in a ranking by wealth. Does this family belong to the middle class? If a family ranked in the middle 50 percent on both income and wealth in 2013, but it did not in 2010 or some earlier year, it has moved to a different class under our definition, but do we believe the family has changed fundamentally? What if that family qualifies again on both definitions in a future year? If we define the middle class as families between the 25th and 75th percentiles, how different do we really think families are who appear at the 24th and 76th percentiles?

The authors essentially are saying that using a population median for income (or wealth) fails to capture the change of an identified group of people over time because the people in the population median group change over time.  See further comment below.

Econintersect:  The deficiency in the demographic study is that it compares a changing population group to the entire population.  This make interpretation difficult.  Here is an example of what we mean:  The demographic group studied was born before 1950 in the 1989 data, before 1960 in the 1999 data, before 1965 in the 2004 data and before 1974 in the 2013 data.  Every year the demographic group content is changing by including an addition group of breadwinners turning 40 and by losing some geriatric population component which was educationally qualified for the group from (approximately) 20 to 40 years earlier than the new group entering the data set.  So this data review is quite interesting but how it should be interpreted is not at all clear.  Perhaps the data simply does not exist to do better, but that should not induce us to make the analysis more significant than is warranted.

The word "may" in the title was especially wisely chosen. 


 

Other Economics and Business Items of Note and Miscellanea

Fundamental Disconnect -- Oil Stocks Outrunning Oil Prices (TheStreet)  Watch the embedded video in the article.

U.S. Economy Has Lot of Jobs, But Americans Can't Do Them (Reuters, Newsweek)  "We interpret the combination of rising job openings and slower hiring as a potential sign of increased mismatch between the needs of employers and the skills of available workers."

The Fed's Complete Misunderstanding of Economics and the Impact of QE (Zero Hedge)  The assertion is that zero interest rates are highly deflationary.

The Regulator's Calculation Problem (Library of Economics and Liberty)  The author says the regulator cannot know the market as well as the banker who is in it and, since the market is the ultimate arbiter of everything, the regulator cannot regulate effectively.  Econintersect:  More product of distressingly linear thinking.

5 Second Slow Mo Video Shows What REALLY Happened With Policeman Who Shot Fleeing Man In Back (Washington's BlogWashington's Blog has contributed to GEI.  Author says the cop was simply doing what he had been trained to do and got caught on video or it would have been like many other similar incidents.



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