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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Bleg: Is this due to capitalism?

I hear this sort of thing a lot – and want to hear your views.  I will give a view in the future.

Also we used to just play Sim City 2000 in economics class at high school and I thought it would be cool if the individuals in the city followed rules – something they talked about for the latest Sim City but didn’t really do.  So remember any model we build to explain this is sort of like that, just maybe less entertaining with a dearth of colourful sounds.

10 years after Lehman

I have been enjoying the live tweeting of the Lehman Brothers failure – with a 10 year delay.

On the day I had this to say.

Then 10 years ago today I tried to provide some predictions.  The terms of trade fell a little more than I expected (to their 2005 levels rather than to their 2007 level), but otherwise they weren’t that bad – credit rationing was predominantly in the construction sector, mortgage rates fell, and in NZ the crisis was nothing like the Great Depression.  But this:

As long as the information transfer between market participants begins to improve again this crisis will be a historical point of interest in a years time – rather than the beginning of the end.

Glad I conditioned it on the idea that there were be a recognition of loss between debtors and creditors – because once that didn’t happen in Europe the crisis just kept on trucking.  With everything calming down by mid-2009 the world was recovering.  Then Greece in May 2010.  Then my goodness just look at this this cluster.  Finally in 2012 there was a recognition of the need for a lender of last resort in Europe.

If you want a retrospective I did one back in 2014 😉

On school spending and teachers pay

Interesting.  Education, and schooling attainment, seems to be a big issue over here in NZ as well – with a political consensus that we care about this issue, but conflict about “how” school quality relates to this (or is even measured).  So lets have a chat.

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