Migration and wages: A model that is wrong but useful

The link between migration and wages is complex and confusing – especially when it is often communicated about in different ways (eg are we talking about wage growth now with regards to monetary policy, wages in specific industries due to the changing make-up of the economy, or long-run real wages?).  And I can’t be much help here.

However, I think this is one place where carefully using the macroeconomic model taught in ECON101 can help us to think about the issues a little bit – especially if we are narrowing the question to only “what is the monetary policy consequences of changes in migration flows“.  Now this model is wrong, assumptions in it are wrong, the outcomes it describes aren’t forecasts – but it clearly articulates tendencies we observe following a change in economic circumstances which will hold in more realistic models, and clarifies assumptions that may make these tendencies false.  We have pointed at this before for monetary policy – but lets outline a bit more now.

It is a model for thinking about the potential consequences of something in a critical way – not something that we accept uncritically as truth.  To me this is pretty damned useful as a way to start thinking about something, so let’s do it!

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Are real wages lower than 40 years ago

While rolling around the internet I found the following:

Lets have a look shall we.

Interesting!  But something seems a bit off – surely this can’t be true!?  Let us investigate.

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Can we blame universities for inequality in educational attainment?

I can see where this article is coming from.  Inequality in educational attainment can translate into inequality in incomes.  If people from poor households have lower educational attainment then we have a generational link between low incomes, which implies lower income mobility.  This is something that we may find unjust.

Why do I say “may”, well this depends on the cause doesn’t it – why does this inequality exist.

Now I don’t disagree that educational attainment is associated with income inequality, and the narrowing of gaps in educational attainment has been associated with lower income inequality.  I also don’t disagree that, looking at a person in isolation, lower mobility can be associated with lower opportunity.

But I am from a low income area and I am not sure we can blame universities for the fact that they primarily have students from higher deciles.

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Wellbeing conference

Via Motu on Facebook I saw the following.

I had no idea this was going on … even though I saw the flyers all around university advertising it.  I’m working quite long days at the moment so my mind isn’t really all there 😛

However, this looks cool – I’m going to see if I can find some of the related literature and write about it at some point.  I really enjoyed the summary piece by Arthur Grimes in that link, so go take a look at that!  So much to unpack in that, so I’ll leave it for another time 😉

Geoff Simmons, Politics and “career suicide for an economist”

Disclaimer:  I used to work in the same space as Geoff, and I know him as a guy who is genuine, wants to improve social outcomes, is a mad good communicator, and who works hard on the issues.  But none of this would prevent me from disagreeing with him if I did (such as my comments on food here and here and here and here), so I swear there is no bias involved 😉

In a cool interview over at interest.co.nz Geoff Simmons outlines what is going on with the TOP party, which he has just become leader of.  For the sake of clarity I think he’ll be an excellent leader for this party.  What I want to concentrate on is this quote though:

How can the public know I am serious about the long haul? When Cortez took on the Aztecs, he trashed his ships to make sure his men had no choice but to fight with everything they had. The reason I bring up that story is what I am doing right now is pretty much career suicide for an economist. There’s no going back.

Haha, this is good – I like the nifty description of a commitment mechanism.  But I’d like to ask a couple of questions about it.

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Top 10: What has been happening in NZ?

I have spent most of the last four years trapped in a small space, pouring over legislation and microdata to figure out details of the New Zealand tax-transfer system prior to 2014 – with short breaks to deliver some lectures at Victoria University.  I learnt a lot, but I had no chance to keep up with the New Zealand economy.

So now I’m back, and I have questions.  This is what I bring up in my Top 10 over at interest.co.nz that went up this weekend.

So what are the key issues I’m struggling with:

  1. Why is the participation rate so high – this helps to describe it, but why? [Related facts:  It has been full time work climbing, with increasing participation by those over 65 AND rising female participation]
  2. Why has the NIIP liability position improved to the degree it has – this helps to describe it, but why?
  3. How are we seeing “late cycle” without input price pressures? [Note:  The RBNZ does not see this as late-cycle judging by this]
  4. The OCR looks low for “late cycle” – what is this due to?  I’m going to split this in two:  What part is due to real economy issues, and what part is due to changes in bank regulation/macroprudential policy?

Related questions – which are likely answered by the answers to the questions above are:

  1. Why is labour productivity so low?
  2. Why is the part-time employment as a percentage of employment so low?
  3. Why are house prices so high?
  4. Why is there no product price pressure – especially non-tradable prices?  This describes some – but why are non-tradables doing this now?
  5. Why is the terms of trade rising to the degree it is?

As you can tell reading this, I genuinely don’t know anything … but as someone who has a pretty clear view on macroeconomics and a good grasp on the NZ data and data history prior to 2014, I haven’t found any accessible answers to these questions easily.  So I am hoping you can help me here 😀