Are Top Incomes Risky?

On Wednesday Greg Mankiw, a professor of economics at Harvard published a post on his blog entitled “The Rich Get Poorer.” In it he explained how in 2008 and 2009 the incomes of the top one-percent of Americans dropped more as a percentage than the median income, and concluded that the well-to-do’s earnings are exceptionally risky.

He also subtly ridiculed the ‘Occupy Wall Street crowd’ for not recognizing this data.

But a discussion of income trends and their volatility should examine a wider window. Fortunately, also on Wednesday, another member of my blog list commented about the movement amongst various income brackets. In"Why Has Income Gone Up So Much For The Top 1 Percent?” Planet Money fills in the data for the 28 years before 2008. Here they illustrate how ‘real after tax income’ increased about 275 percent for workers at the top.

And for those in the 'Occupy Wall Street crowd' whose incomes are in the bottom fifth?

Over a period of unprecedented expansion in the US economy, they saw their real earnings go up 18 percentage points, or less than one-fifteenth the increase experienced by those at the pinnacle of all salaries.

Viaduct Demolition Provides Jobs But....

Construction sector job prospects should improve in the Seattle area as demolition of the old Alaskan Way Viaduct began a week ago and the preliminary excavation for boring a tunnel to replace it will commence next year.

Mirroring the employment situation nationally, almost one-third of Seattle’s job losses during the recession occurred in the construction industry. Consequently,despite the funding problems with the project (particularly the potentially crippling plan for cost overruns), this is a positive development. More people working means a more assured and confident society.

But after viewing pictures of wrecking equipment smashing through this crumbling highway structure yesterday, it’s tough not to feel a bit glum for this 60 year-old staple of Seattle’s waterfront.

It was a freeway with a view. You didn’t need a window office in a downtown skyscraper to get a pretty spectacular sight of the ships in Eliot Bay or the Olympic mountains across Puget Sound, you could just head north on the top deck of highway 99.

So, as it often goes with progress, a piece of the old-times becomes a memory.

The Gambles of Jeff Bezos

Here's another post originating from my news writing class. Although it's not about jobs and unemployment directly, the continued success of the US high-tech sector and those employed there will hinge on the possibly bold or foolish decisions of companies like Amazon. 

“How affordable is Kindle Fire?” Jeff Bezos asked at a press conference in Manhattan last month for the release of Amazon.com’s incursion into the tablet market.

Looking to stun his audience with the answer itself, he flatly answered, “it’s a hundred and ninety-nine dollars.”   

This announcement raised eyebrows amongst some industry followers who believe the online retailer will lose money each time a customer places a Fire in their digital cart.

Dan Geiman, an analyst for the brokerage firm McAdams Wright Ragen, predicted a fifty-dollar loss per unit, while IHS forecasted a less-extreme ten-dollar loss.  At least one authority, however, thinks Amazon will end up in the black. UBM TechInsights sees Fire’s production costs at one hundred and fifty dollars.

But gambling on big ideas and low margins is nothing new for Bezos, the CEO and chairman, who turned away from a promising career on Wall Street to start the internet retailer at a time when most consumers didn’t understand what the world-wide-web was

Unpredictably Rational

For my news writing class, I read a book on behavioral economics titled, Predictably Irrational, by Dan Ariely.  It explained how individuals will often make irrational decisions because of seemingly insignificant factors.  For example, Ariely, argued that people often don't know how to value goods and, consequently, will choose an item whose price is at the midpoint of all the others.  He illustrated how restaurants can persuade diners to spend more by adding a few exceptionally expensive items to the menu not necessarily to sell but, instead, to increase the value of the median priced dish.  

Following the themes presented in his book I created my own predictably irrational experiment. Here it is. 

Students at the Stern School of Business are taught the basics of economics, including monetary policy.  Therefore I chose this group to test my hypothesis of whether people who are generally knowledgeable about a policy proposal (in this case a switch to the gold standard) will alter their opinion if they are told that it is supported by a highly respected individual.

Over two days I questioned 40 Stern students in and around the Kaufman Management Center on the topic of the gold standard.  I chose this theme because it generally maintains little support amongst business people and economists and, consequently, my first round of questioning would provide a baseline with plenty of room for change in opinion.  

As it turned out, that is what happened.  The first day I asked twenty people at random the following question.

“Should the US revert back to the gold standard, that is should every dollar be backed by a specific amount of gold?”

Wall Street Protesters Respond to Oakland Police

In response to police actions at the Occupy Oakland protest, Occupy Wall Street participants marched from Zuccotti Park to Union Square last night, chanting, “let’s go Oakland.” 

Police in that California city reportedly shot projectiles at demonstrators injuring one man who was hit above the eye.   

“They shot a guy who turned out to be an Iraq War veteran and he’s now in critical condition,” said Lawrence, a student from Montreal who asked me not to his report his last name.   

“I still have to get a corporate job in the future,” he added.  

The marchers followed a mostly sidewalk only course but at times were allowed to absorb the entire roadway such as on Broadway near NYU.   

Additionally, according to multiple protesters, homeless individuals, some with drinking problems, have moved into Occupy Wall Street’s encampment at Zuccotti Park creating a challenge to the image demonstrators are attempting to portray.   

But Josh Mochamer, a student from Manhattan, explains the demonstration's general policy . “Since it’s open to all, no one’s going to kick anybody out unless they’re hurting someone,” he said.     

Don't Sacrifice Clean Energy Availability

A generation after Jimmy Carter installed solar panels on the White House roof in an effort to promote alternative energies, solar power is back.   

Costs are finally going down and, despite the recent bankruptcy of Solyndra, US jobs in this sector grew 6.8 percent last year and are expected to expand another 24 percent next year according to The Solar Foundation, a research and advocacy organization.

One obstacle to growth for some American solar producers, however, is Chinese competition.  They claim China is selling solar panels below the cost of production and, as a result, have an unfair advantage in the world marketplace.  On Wednesday, seven solar panel producers took this claim to the US Department of Commerce and called for new tariffs of more than 100 percent against Chinese panels.

An analysis by Keith Bradsher in the New York Times yesterday stated that this move, if adopted, might have unintended consequences.  He compared today’s US solar sector to the Detroit auto industry of the 1970’s and ’80.  At that time American car companies were similarly calling for tariffs on Japanese autos. 

Toyata, Nissan, and Honda’s response? 

60 Years of Too-High Unemployment?

“I found that the men and women who got to the top were those who did the jobs they had in hand, with everything they had of energy and enthusiasm and hard work.” 
-Harry Truman

Show up, work hard, and you will get ahead.  That was the mantra championed by the leaders of our society for at least two generations. This message, despite its inconsistencies with reality in many communities, nevertheless retained followers. 

But times have changed and the veracity of this idea has eroded. New innovations in manufacturing and the expansion of worldwide trade have eliminated many jobs that US workers ‘had in hand.'  While jobs went away, a housing bubble – created by perverse incentives in the financial sector – was able to take up the slack for a while.  But as we all know by now that phenomenon was simply unsustainable. 

Now individuals who spent decades gaining knowledge and skills in one sector are forced to start anew.  But, of course, that isn’t easy.  Economists call this difficulty, ‘labor market friction,’ and it’s a hotly debated topic.

Idle Politicians Today Make Idle Workers Tomorrow

I happened upon an astute insight regarding our jobs problem and the debate over structural and cyclical unemployment – an insight that is not often considered by policy-makers.

Economists and politicians go back-and-forth over why businesses aren’t hiring.  Some say it is mostly due to low consumer spending (cyclical unemployment), and can be solved through public projects to bridge this void in demand until buyers regain their confidence.

Others counter that companies want to hire but simply can’t find enough skilled workers (structural unemployment).  Solving this sort of challenge can take years because it involves either worker retraining programs, or a large-scale migration by those with job-skills to areas with job-openings.

Stark Recession-Era Rise in Unemployment

So I'm reading a bunch of material – on structural versus cyclical unemployment, labor mismatches, and long-term job growth potential – and I happen upon this graph in a Reuters blog by Felix Salmon.

It shows that the change in the United States unemployment rate during the Great Recession was twice that of any European country. It’s astonishing for both the data it illustrates, and the lack of attention it’s drawn from policy makers.

Salmon explains this change in job seekers is likely due to the US’s previously low structural unemployment rate adjusting to European levels.

I have to learn more before commenting on this contentious economic and political issue, but this graph is too good not to post now.

Wall Street Protests Gain Visibility

Now in its third week, the Occupy Wall Street protest is steadily growing by both its amount of supporters and number of sound bites in the media.

An estimated 5000 people participated in the rally on Saturday, and the events that day on the Brooklyn Bridge were described on every major news network in the United States.

On Monday, the White House expressed tepid sympathy for the protesters. “We understand,” stated Press Secretary Jay Carney when asked about the Wall Street demonstration. “And that’s why we’re so urgently trying to focus Congress’s attention on the need to take action on the economy and job creation.”

If this movement continues to gather steam, the White House will, likely, solicit support from the Occupy Wall Street participants for initiatives like President Obama’s Jobs Act. It is unclear, however, if this mostly left-leaning movement would help or hurt Mr. Obama. While many protesters have supported him since his presidential campaign, some believe the system needs to be changed at a more fundamental level.

“I fell, just from the general conversations that have taken place, the intention is to dismantle the system,” said Charmaine Bee, a photographer from Brooklyn.

Advice for NYPD and Occupy Wall St

Norm Stamper is a 34-year veteran of the San Diego and Seattle police departments. He was chief of the Seattle police during the 1999 World Trade Center protests – a demonstration that, by some estimates, numbered 100,000 people.

Over the past decade he has spoken candidly about his career, police culture, and the decisions he made during that protest. He regularly contributes to the Huffington Post, and is the author of Breaking Rank: A Top Cop's Exposé of the Dark Side of American Policing.

I contacted him Sunday and asked if he could comment on the Occupy Wall Street demonstration.

Here is his response.

Wall Street Protests in their 15th Day

Three Saturdays ago, I stumbled upon the opening march and rally of the Occupy Wall Street protests. This past week I returned to New York City’s financial center to examine whether the intensity of these demonstrations had diminished after two humid weeks of rallies, sleeping in parks, and confrontations with police.

To my surprise, it hadn’t. On Friday and Saturday, for example, I witnessed significantly larger crowds than at the start.

My next blog entry will examine the potential effects this movement may have on the political process if it continues to gain steam. Will a populist anti-Wall Street movement, for example, help or hurt Obama? What about his initiatives like the jobs bill?

I will write more in-depth on this soon. But for now, I'd like to briefly comment on the demonstrations I witnessed yesterday.

There was a lot of commotion as the protest veered onto the Brooklyn Bridge. I was slow to catch up to the scene and, as a result, I was merely a faraway spectator as the police blocked off access to both sides of the expanse after demonstrators proceeded across.

At this point the story is disputed. The police claim protesters moved off the sidewalks and into vehicle traffic despite official warnings, while protesters counter the police officers led them onto the lanes of the bridge. The New York Times City Room did a complete report of this event.

Observers – many of them tourists – began to congregate at my vantage point in City Hall Park near the entrance to the Brooklyn Bridge subway station. Slowly individual protesters were seen returning toward Manhattan from the bridge.

Monica Bethelwood, a musician from Albany, New York, was one. “Some people are getting out, I don’t how they would take us all away. There’s, like, hundreds of people there.”

As more passersby amassed at City Hall Park, police officers began to approach various individuals in the crowd, ordering them to leave. One came up to me while I was taking notes. He scrutinized my notebook and, without looking up, said, “keep walking.”

The NYPD needs to reevaluate these tactics. Ordering bystanders to vacate a public park, not only alienates the police force, but also hurts citizens’ ability to observe a potentially important political event.

For a more detailed, albeit somewhat chaotic, report check out this audio commentary from Democracy Now’s Ryan Devereaux who was on the bridge.