Monday, December 29, 2014

[NJFAC] McKinsey: Automation, jobs, and the future of work

Interview| McKinsey Global Institute

Automation, jobs, and the future of work  December 2014

A group of economists, tech entrepreneurs, and academics discuss whether technological advances will automate tasks more quickly than the United States can create jobs.

The topic of job displacement has, throughout US history, ignited frustration over technological advances and their tendency to make traditional jobs obsolete; artisans protested textile mills in the early 19th century, for example. In recent years, start-ups and the high-tech industry have become the focus of this discussion. A recent Pew Research Center study found that technology experts are almost evenly split on whether robots and artificial intelligence will displace a significant number of jobs over the next decade, so there is plenty of room for debate.
.....

Matt Slaughter:....It's quite clear, in the US in recent years, that we're not creating enough good jobs. People care a lot about their W-2s—what incomes are they earning? If you segment this by educational attainment, 96.2 percent of the US workforce since 2000 is in an educational cohort whose total money earnings, inflation adjusted, have been falling, not rising.

That includes even people with four-year-college degrees and nonprofessional advanced degrees. The only ones that have been rising are the PhDs, on average, and then the professional degrees: the doctors, the lawyers, and the MBAs. So that's a little sobering if you think about whether we are going to create good jobs. And a big open question that we'll probably talk about—and our panelists already rightly pointed to—is public policies.

Laura Tyson: I am with Matt on this. We live in a market economy. Supply and demand ultimately determine the level of employment. So a number of jobs will be created, but the quality of jobs is a huge question, I think. What's happening with the technology, which is skill biased and labor saving, is that it's eliminating middle-income jobs but is complementary to high skills. The jobs are high-income jobs because some smart people have to work with the technology. But there's a very large number of people who are being pushed down into lower-income jobs.

The second thing that's really important—it's been with us for a long time—is the growing gap between productivity and wages. And you can see this in the gap between productivity, a measure of the bounty of brilliant machines, and how it's being distributed in terms of wages.

If we had an inflation-adjusted, productivity-adjusted minimum wage today, it would be something like $25 [an hour]. We would not be arguing about $10. Public policy is, if anything, moving backward. It's certainly not moving forward at the level of the race. So the policy makers lose the race, and a lot of displaced workers, a lot of American families, lose the race. And that is my concern.

We're talking about machines—machines displacing people, machines changing the ways in which people work. Who owns the machines? Who should own the machines? Perhaps what we need to think about is the way in which the workers who are working with the machines are part owners of the machines.

....

Job quality and fiscal policy

Martin Baily: I was struck recently by learning that in one of our largest banks, the turnover rate for bank tellers is 50 percent a year. So, being a bank teller now is no longer a sort of skilled job; it's no longer really a well-paid job. We've had this change in technology, obviously. We've put a lot of the intelligence into the IT systems, so we don't need such skilled bank tellers. But if you ever go inside a bank, you sort of long for the days when the bank teller was more skilled.

The banks obviously have decided, as have Walmart and many, many other companies, that it's more cost effective to use workers that don't have much training, that probably don't have a lot of education—although I think training is more important—but instead to build productivity into the production system. They're very good at that. But it does create a huge number of not-very-good jobs, together with a set of jobs for the conceptualizers, the people that can take advantage of the technology, that have high incomes.

So this has obviously created a problem of inequality in our society. But also we're seeing that people who cannot get or don't have the gumption to get—you can go both ways on this—a good job are actually deciding not to work at all. So they're ending up unemployed. They're ending up on disability. They're ending up leaving the labor force.

.....

Watch the extended version of this roundtable discussion at Silicon Valley's Churchill Club on YouTube.

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Thursday, December 18, 2014

[NJFAC] safety net helps people to take a job

A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia. Neil Irwin, NY Times, Dec 18, 2014

It is a simple idea supported by both economic theory and most people's intuition: If welfare benefits are generous and taxes high, fewer people will work. Why bother being industrious, after all, if you can get a check from the government for sitting around — and if your choice to work means that much of your income will end up in the tax collectors' coffers?

Here's the rub, though: The idea may be backward. Some of the highest employment rates in the advanced world are in places with the highest taxes and most generous welfare systems, namely Scandinavian countries. The United States and many other nations with relatively low taxes and a smaller social safety net actually have substantially lower rates of employment.

Continue reading the main story

More People Work in Countries With High Taxes and Generous Welfare

Contrary to what theory might predict, the countries with the highest rates of participation in the labor force tend to have higher taxes and more extensive social welfare spending.

30%
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85%
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Effective tax rate
Employment rate
Denmark
Germany
Japan
U.K.
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Sweden
Norway
In Denmark, someone who enters the labor force at an average salary loses 86 percent of earnings to a combination of taxes and lost eligibility for welfare benefits; that number is only 37 percent in the United States. Yet the percentage of Danes between the ages of 20 and 59 with a job is 10 percentage points higher than in the United States.

In short, more people may work when countries offer public services that directly make working easier, such as subsidized care for children and the old; generous sick leave policies; and cheap and accessible transportation. If the goal is to get more people working, what's important about a social welfare plan may be more about what the money is spent on than how much is spent.

That is the argument that Henrik Jacobsen Kleven, a professor at the London School of Economics, offers to explain the exceptional rates of participation in the work force among citizens of Sweden, Norway and his native Denmark.....
 

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Tuesday, December 16, 2014

[NJFAC] The top .1% and the disappearance of good jobs, Lazonick

ABSTRACT

The ongoing explosion of the incomes of the richest households and the erosion of
middle-class employment opportunities for most of the rest have become
integrally related in the now-normal operation of the U.S. economy.
Since the beginning of the1980s, employment relations in U.S. industrial corporations have undergone three major
structural changes–summarized as "rationalization," "marketization," and "globalization"–
that have permanently eliminated middle-class jobs in the United States. From the
early 1980s, rationalization, characterized by plant closings, terminated the jobs of high-
school educated blue-collar workers, most of them well-paid union members.
From the early 1990s, marketization, characterized by the end of a career with one company as
an employment norm, placed the job security of middle-aged white-collar workers, many
of them college educated, in jeopardy.

From the early 2000s, globalization, characterized by the movement of employment offshore to
lower-wage nations, left all members of the U.S. labor force, whatever their educational credentials and work
experience, vulnerable to displacement. Initially, these structural changes in employment
could be justified as business responses to changes in technologies, markets, and
competition. Once U.S. corporations transformed their employment relations, however,
they often pursued rationalization, marketization, and globalization to cut current costs
rather than to reposition themselves to produce competitive products. Defining
superior corporate performance as ever-higher quarterly earnings per share, companies turned to
massive stock repurchases to "manage" their own corporations' stock prices. Trillions of
dollars that could have been spent on innovation and job creation in the U.S. economy
over the past three decades have instead been used to buy back stock for the purpose
of manipulating stock prices. Legitimizing this financialized mode of corporate resource
allocation has been the ideology, itself a product of the 1980s and 1990s, that a
business corporation should be run to "maximize shareholder value."

Through their stock options and stock awards, corporate executives who make these
resource-allocation decisions are themselves prime beneficiaries of the focus on rising stock
prices as the sole measure of corporate performance. While rationalization,
marketization, and globalization undermined stable and remunerative employment
structures, the "financialization" of the U.S. corporation entailed the distribution of
corporate cash to shareholders through stock repurchases, often in addition to
generous cash dividends, and, incentivizing these distributions, the stock-based
remuneration of top corporate executives.

In this essay, I review evidence on the fundamental structural  changes
related to rationalization, marketization, and globalization that, since the early
1980s, have eroded U.S. middle-class employment opportunities. Then,
I analyze how, in many different ways and in many different industries, this financialized mode of
corporate resource allocation has undermined the prosperity of the U.S. economy.
I go on to show how justified by the ideology that companies should be run
to "maximize shareholder value", this financialized behavior boosts the remuneration of top corporate
executives, providing a major explanation for the increasing concentration of income
among the top 0.1% of U.S. households that is, through the very way it is achieved,
based on the systemic destruction of middle-class employment opportunities
available to Americans.


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Wednesday, December 10, 2014

[NJFAC] ILO: Global Wage Report

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Wednesday, December 3, 2014

[NJFAC] The Answer to the Unemployment Problem Is More Jobs

The Answer to the Unemployment Problem Is More Jobs

  December 2, 2014 by L. Randall Wray

Dean Baker, everyone's favorite progressive economist (mine, too), has an interesting take on our unemployment problem.

Give more paid vacations.

The idea is that if all the employed work less, employers will need to hire the unemployed to produce what the already employed won't be producing while sunning themselves on Florida's beaches.

Look, I'm all for shorter work weeks. It is ridiculous that labor's push somehow got stuck a century ago at the 40 hour work week in the USA. Employed Americans work more hours per year than just about any other workforce on the planet.

But, as Joan Robinson once declared, the only thing worse than working as a wage slave is to be unemployed. Just ask the Italians, who now have the highest unemployment rate since they started keeping records. Thanks to the EMU and German fiscal rectitude!

I see shorter work days and more paid vacations as a progressive goal to humanize the work place. More time to enjoy one's family, recreation, and the arts. More time for self-improvement and community involvement. More time for our wage slaves to enjoy the life of leisure long pursued by the leisure classes.

However, last on my list of arguments for a shorter work week would be the claim that it will create more jobs for the unemployed.

"Job sharing" as a cure for employment makes as much sense as "sandwich sharing" as a cure for the problem of hunger.

As my colleague Pavlina Tcherneva points out, for every social problem except unemployment, progressives advocate a direct solution.

How do you solve the problem of lack of access to healthcare? The progressive advocates single payer.

(Not, of course, Obamacare, which is just a scheme to turn more of your income over to Wall Street's insurance industry.)

Hunger? Food stamps.

Homelessness? Public housing.

Old age poverty? Social Security.

But Unemployment?

More vacations. Pay the employed not to work.

Unemployment compensation. Pay the unemployed not to work.

Or, more ludicrously, BIG (basic income guarantee). Pay everyone not to work.

What is missing? Jobs. The unemployed want jobs. But progressives will not give them jobs.

Progressives offer hand-outs to the unemployed. Or paid vacations to the employed. Or BIG to everyone!

But no jobs for the unemployed.

Why not? Progressives offer up a variety of excuses. The most common argument against creating jobs for everyone who wants to work is that this is not politically feasible in the USA.

Why? Oh, it would cost too much. Estimates put the cost of a job guarantee with a living wage at 1% to 3% of GDP. Progressives argue you'd never get that much spending through Congress.

Of course, the federal government alone already spends about 3.4% of GDP on anti-poverty programs—mostly to deal with poverty that is in large measure caused by unemployment, involuntary part-time unemployment, and poverty-level wages paid by the nation's undertakers like Wal-Mart.

Why? Because we are too afraid to push for jobs-for-all.

Instead, our progressives dismiss job creation and push instead for the supposedly more politically palatable paid vacations, unemployment compensation, and BIG.

Call me crazy, but I think that Americans are far more likely to line up behind paying people to work, than behind a scheme to pay people for more vacations.

Especially if a job at a living wage would eliminate the need for most social spending plus huge subsidies and tax breaks already paid to businesses–trying to coax them to create a job or two.

In one stroke, a job guarantee at a living wage not only eliminates the need for most anti-poverty spending, but it also ensures private sector jobs will pay decent wages. And it eliminates the myriad of public policies that impoverish our local governments as they give tax breaks and subsidies trying to bribe corporations to relocate their factories and warehouses.....

Do read the rest at http://neweconomicperspectives.org/2014/12/answer-unemployment-problem-jobs.html


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Friday, November 28, 2014

[NJFAC] The inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery.

Mounting evidence points to the scary reality that the wealth divide harms the job market.

Some of our recent work suggests that by 2012 the top 5 percent was consuming almost as much, in total, as the bottom 80 percent! ....
Mainstream economists hold that even if most people end up with less money to spend because of inequality, that's ok because other sources of spending, like business investment, will come to the rescue and we'll end up with plenty of jobs.

Our works shows that this is not so. We find that high and rising inequality is now holding back the U.S. recovery from the Great Recession and the lack of purchasing power faced by most people is a job killer not just for a few quarters but also over a number of years. Unemployment may cause wages and prices to fall (or at least rise more slowly), but disinflation and, especially, deflation are not likely to raise total spending. Of course, consumers appreciate lower prices for the things they buy, but lower wages are bad for spending, especially if the household has a fixed mortgage or car payment to meet.

Another important problem is that falling interest rates will not be effective in pushing spending up, at least in a sustainable way. Short-term rates cannot fall much below the near-zero level where they are now. Also empirical evidence implies that low interest rates are not particularly effective at stimulating demand, outside of speculative bubbles like the one we saw in housing prior to the Great Recession.

When prices don't adjust, and monetary policy doesn't cure the demand problem caused by income inequality, we have the potential for persistent, or "secular," demand stagnation — in plain English, a lackluster economy. We argue that this is the current situation in the U.S.....

Here is the paper:

Inequality, the Great Recession, and Slow Recovery
   Barry Cynamon & Steven Fazzari

Rising inequality reduced income growth for the bottom 95 percent of the income distribution beginning about 1980, but that group's consumption growth did not fall proportionally. Instead, lower saving led to increasing balance sheet fragility for the bottom 95 percent, eventually triggering the Great Recession. We decompose consumption and saving across income groups. The consumption- income ratio of the bottom 95 percent fell sharply in the recession, consistent with tighter borrowing constraints. The top 5 percent ratio rose, consistent with consumption smoothing. The inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery.


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Wednesday, November 26, 2014

[NJFAC] Declining Wages in the [Manufacturing] Jobs That Built America’s Middle Class

MANUFACTURING LOW PAY:
Declining Wages in the Jobs That Built America's Middle Class 

Manufacturing jobs were once a ticket to the American middle class, but today these jobs are adding to the nation's low-wage crisis. NELP's latest report, Manufacturing Low Pay: Declining Wages in the Jobs That Built America's Middle Class, tells the story of a rebounding manufacturing sector where jobs are growing again but wages are rapidly shrinking.

Manufacturing workers used to earn wages well above the U.S. average. In the mid-1980s, they earned 50 percent more than the average private-sector worker, but by 2013, they were earning 7.7 percent less. Today, one in four manufacturing workers is paid less than $11.91 per hour. The wage declines are exacerbated by manufacturing firms' increasing reliance on staffing and "temp" agencies to fill factory jobs.

Read more about NELP's report in The New York Times.

from the summary:
"Manufacturing wages now rank in the bottom half of all jobs in the United States.
While in the past, manufacturing workers earned a wage significantly higher than the U.S. average,
by 2013 the average factory worker made 7.7 percent below the median wage for all occupations."

from the National Employment Law Project

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Tuesday, November 18, 2014

[NJFAC] Does it pay for firms to invest in their workers’ wellbeing?

Does it pay for firms to invest in their workers' wellbeing?

Alex Bryson, John Forth, Lucy Stokes 17 November 2014

It is generally agreed that firms can improve their employees' wellbeing through improvements in job quality – but is it in their economic interests to do so? This column reports research showing that satisfied employees and higher productivity go together. Analysis of the British Workplace Employment Relations Survey finds that employee job satisfaction is positively associated with workplace financial performance, labour productivity, and the quality of output and service.

....

Psychologists, economists, and others know a great deal about the determinants of individuals' wellbeing, and one key element is what they do in their working life. One recent study found that work was among the worst activities for people's momentary happiness – just above being sick in bed, in fact (Bryson and MacKerron 2013). But other studies indicate much depends on what type of job you do and how that job is designed by the employer.

....

The link between wellbeing and performance

There is empirical evidence linking employees' wellbeing to their individual performance. For example, greater subjective wellbeing feeds through to individuals' performance in the labour market (Judge et al. 2001, Lyubmirsky et al. 2005). There is also recent evidence of a causal link between increased wellbeing and improved worker productivity, at least in a laboratory experiment setting (Oswald et al. 2014). But the empirical evidence at the organisation level is extremely sparse.

Perhaps the most compelling evidence of a link comes from a survey of manufacturing in Finland, which found that mean workplace job satisfaction was independently associated with subsequent value-added per employee. A one point increase (on a six-point scale) in the average level of job satisfaction among workers at the plant increased the level of value-added per hour worked two years later by 3.6 percentage points, after controlling for other factors. This estimate rose to 9 percentage points in a two-stage estimation approach designed to account for unobserved establishment-level heterogeneity (Bockerman and Ilmakunnas 2012).

Our BIS report is the first study for Britain of the link between employee wellbeing and firm performance. Analysing the nationally representative 2011 Workplace Employment Relations Survey (WERS), we find that those workplaces with rising employee job satisfaction also experience improvements in workplace performance, while deteriorating employee job satisfaction is detrimental to workplace performance.

Employee job satisfaction is positively associated with workplace financial performance, labour productivity, the quality of output and service, and an additive scale combining all three aspects of performance. Workplaces experiencing an improvement in non-pecuniary job satisfaction – whether measured in terms of the average level of satisfaction in the workforce, or measured in terms of an increase in the proportion 'very satisfied' or a reduction in the proportion 'very dissatisfied' – also experience an improvement in performance.

These findings are consistent with the proposition that employers who are able to raise employees' job satisfaction may see improvements in workplace profitability (financial performance), labour productivity, and the quality of output or service.....

Concluding remarks

These are encouraging findings, but the scope of the analyses has not allowed us to explore the processes that could have been instrumental in forging the link between employee wellbeing and workplace performance. Further work is required to develop insights into how employers can facilitate the positive outcomes revealed in this study.

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Wednesday, November 12, 2014

[NJFAC] Number of billionaires doubled since financial crisis; inequality spirals out of control--Oxfam

Failure to tackle inequality will leave hundreds of millions trapped in poverty unnecessarily

Rising inequality could set the fight against poverty back by decades, Oxfam warned today as it published a new report showing that the number of billionaires worldwide has more than doubled since the financial crisis. 

The report, Even it Up: Time to End Extreme Inequality, details how the richest people in the world have more money than they could spend in several lifetimes while hundreds of millions live in abject poverty. The richest 85 people - who Oxfam revealed in January have the same wealth as the poorest half of the world's population - saw their collective wealth increase by $668 million every day over the last year. That's almost half a million dollars every minute.

Oxfam is calling on governments around the world to Even it Up by taking action to level the playing field by implementing policies that redistribute money and power to ensure the poor benefit more directly. Governments should follow a seven point plan to stem the rising tide of inequality - including clamping down on tax dodging and investing in universal, free health and education.

The report, endorsed by the Bank of England Chief Economist Andrew Haldane, Gra├ža Machel, Professor Jeffrey Sachs and Nobel prize- winning economist Joseph Stiglitz among others, is the opening salvo of a new Oxfam campaign, also called Even it Up, to push world leaders to turn rhetoric into reality and close the gap between rich and poor.

Mark Goldring, Oxfam's Chief Executive, said: "Inequality is one of the defining problems of our age. In a world where hundreds of millions of people are living without access to clean drinking water and without enough food to feed their families, a small elite have more money than they could spend in several lifetimes.

"The consequences of extreme inequality are harmful to everyone - it robs millions of people of better life chances and fuels crime, corruption and even violent conflict. Put simply, it is holding back efforts to end poverty.

"Governments around the world have been guilty of a naive faith that wealth going to those at the top will automatically benefit everyone. That's not true - it is their responsibility to ensure the poorest are not left behind."

In addition to tackling tax dodging and investing in public services, Oxfam is calling on governments to:

-     Introduce equal pay legislation and promote economic policies to give women a fair deal

-     Agree a global goal to tackle inequality

-     Introduce minimum wages and move towards a living wage for all workers

-     Share the tax burden fairly, shifting taxation from labour and consumption towards capital and wealth

-     Ensure adequate safety-nets for the poorest, including a minimum income guarantee.


Oxfam's report says that the number of billionaires in the world more than doubled to 1,645 between 2009 and 2014; evidence that whilst those at the top have recovered quickly from the financial crisis, the benefits of economic growth are not being shared with the vast majority.

As an illustration of the extent of extreme inequality in the world today, Oxfam calculated that if you were to tax billionaires just 1.5% of their wealth over $1bn it could raise $74bn a year, enough to fill the annual gaps in funding needed to get every child into school and to deliver health services in the world's poorest countries. Since 2009, at least one million women have died in childbirth due to a lack of basic health services and around the world 57 million children are currently missing out on school.

There are 16 billionaires in Sub-Saharan Africa living alongside the 358 million people in extreme poverty, and in South Africa inequality is now greater than it was at the end of apartheid. If African countries continue on their current growth trajectory with no change in levels of income inequality, then it is estimated that the continent's poverty rate won't fall below 3 percent - the World Bank's definition of ending poverty - until 2075.

.....

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Tuesday, November 4, 2014

[NJFAC] 7 countries where Americans can study at universities, in English, for free (or almost free)

David Swanson says in Counterpunch, "The Washington Post is advising people on which foreign nations to go to college in for free — nations that both tax wealth and invest between 0 and 4 percent of the U.S. level in militarism." Here is the article he mentions::

7 countries where Americans can study at universities, in English, for free (or almost free)

By Rick Noack October 29 Washington Post

Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they've done the opposite.

The country's universities have been tuition-free since the beginning of October, when Lower Saxony became the last state to scrap the fees. Tuition rates were always low in Germany, but now the German government fully funds the education of its citizens -- and even of foreigners.

Explaining the change, Dorothee Stapelfeldt, a senator in the northern city of Hamburg, said tuition fees "discourage young people who do not have a traditional academic family background from taking up study.  It is a core task of politics to ensure that young women and men can study with a high quality standard free of charge in Germany."

What might interest potential university students in the United States is that Germany offers some programs in English -- and it's not the only country. Let's take a look at the surprising -- and very cheap -- alternatives to pricey American college degrees.

Germany

Germany's higher education landscape primarily consists of internationally well-ranked public universities, some of which receive special funding because the government deems them "excellent institutions." What's more, Americans can earn a German undergraduate or graduate degree without speaking a word of German and without having to pay a single dollar of tuition fees: About 900 undergraduate or graduate degrees are offered exclusively in English, with courses ranging from engineering to social sciences. For some German degrees, you don't even have to formally apply.

In fact, the German government would be happy if you decided to make use of its higher education system. The vast degree offerings in English are intended to prepare German students to communicate in a foreign language, but also to attract foreign students, because the country needs more skilled workers.

Finland

This northern European country charges no tuition fees, and it offers a large number of university programs in English. However, the Finnish government amiably reminds interested foreigners that they "are expected to independently cover all everyday living expenses." In other words: Finland will finance your education, but not your afternoon coffee break.

France

There are at least 76 English-language undergraduate programs in France, but many are offered by private universities and are expensive. Many more graduate-level courses, however, are designed for English-speaking students, and one out of every three French doctoral degrees is awarded to a foreign student.

"It is no longer needed to be fluent in French to study in France," according to the government agency Campus France. The website studyportals.eu provides a comprehensive list of the available courses in France and other European countries.

Public university programs charge only a small tuition fee of about 200 dollars for most programs. Other, more elite institutions have adopted a model that requires students to pay fees that are based on the income of their parents. Children of unemployed parents can study for free, while more privileged families have to pay more. This rule is only valid for citizens of the European Union, but even the maximum fees (about $14,000 per year) are often much lower than U.S. tuition fees. Some universities, such as Sciences Po Paris, offer dual degrees with U.S. colleges.

Sweden

This Scandinavian country is among the world's wealthiest, and its beautiful landscape beckons. It also offers some of the world's most cost-efficient college degrees. More than 900 listed programs in 35 universities are taught in English. However, only Ph.D programs are tuition-free.

Norway

Norwegian universities do not charge tuition fees for international students. The Norwegian higher education system is similar to the one in the United States: Class sizes are small and professors are easily approachable. Many Norwegian universities offer programs taught in English. American students, for example, could choose "Advanced Studies for Solo Instrumentalists or Chamber Music Ensembles" or "Development Geography."

But don't expect to save money in Norway, which has one of the world's highest costs of living for expats.  And be careful where you decide to study. "Winters in general are quite different in different parts of the country, with the north having hard, arctic winters, and the southwest mostly having mild, wet average European winters," the Norwegian Center for International Cooperation in Education notes.

Slovenia

About 150 English programs are available, and foreign nationals only pay an insignificant registration fee when they enroll. Slovenia borders Italy and Croatia, among Europe's most popular vacation destinations. However, Times Higher Education, a weekly magazine based in London, did not list one Slovenian university in its recent World University Ranking.

Brazil

Buildings line Copacabana beach where Christ the Redeemer towers the city in Rio de Janeiro, Brazil, Friday, May 16, 2014. (AP Photo/Hassan Ammar)

Some Brazilian courses are taught in English, and state universities charge only minor registration fees. Times Higher Education ranks two Brazilian universities among the world's top 400: the University of Sao Paulo and the State University of Campinas. However, Brazil might be better suited for exchange students seeking a cultural experience rather than a degree.

"It is worth remembering that most of USP activities are carried out in Portuguese," the University of Sao Paulo reminds applicants on its website.

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Tuesday, October 28, 2014

[NJFAC] How Fed Policy Contributed to Inequality

How Quantitative Easing Contributed to the Nation's Inequality Problem

By William D. Cohan October 22, 2014 Yellen Issues a Warning on the Risks of Rising Inequality (Oct. 18, 2014)

Janet L. Yellen, the chairwoman of the Federal Reserve, is regarded as a person of the highest integrity. And that is what's so utterly confounding about the speech she gave in Boston last week about inequality. She did a wonderful job highlighting the growing disparity between rich and poor and how it is beginning to impinge upon what it means to be an American, but she ignored the fact that, in many ways, the Fed's policies have compounded the problem.

There is no question that her remarks were a real shocker. We have been conditioned not to expect anything so honest, and in such clear and unequivocal language, from any top government official, let alone from the sitting head of the Federal Reserve.

That's why it's worth repeating a few of Ms. Yellen's conclusions. "The extent of and continuing increase in inequality in the United States greatly concern me," she said. "The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression. By some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then. It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity."

Ms. Yellen's speech seemed heartfelt. Yet, she has endorsed the Fed's policies, started by her two immediate predecessors, Alan Greenspan and Ben S. Bernanke, that drove down interest rates to historically low levels – policies that have actually exacerbated the problem that she says she wants to correct.

She is failing to appreciate how Mr. Bernanke's extraordinary quantitative easing program, started in the wake of the financial crisis, has only widened the gulf between the haves and have-nots. ....

Quantitative easing adds to the problem of income inequality by making the rich richer and the poor poorer. By intentionally driving down interest rates to low levels, it allows people who can get access to cheap money on a regular basis to benefit in extraordinary ways.

The first beneficiaries are the big Wall Street banks, the so-called group of 22 primary dealers, which can borrow directly from the Fed, essentially free. Because banks are in the business of making money from money, they use the Fed's money to make more money by trading with it, investing it in government debt and pocketing the profit or by lending it out at wide spreads. Thanks to the Fed's low-interest rate policy, the big banks also make a lot of money by taking our deposits, which they also pay us virtually nothing for – my savings account pays me an annual interest rate of 10 basis points, or one-tenth of one percent — and lending them out at wide spreads. No other business on the face of the earth gets its raw material so cheaply. No wonder bank profits have soared.

Then there is the gift the Fed has given to Wall Street's traders and investment bankers. The traders benefit because they know – and have known for years, thanks to the Fed's telegraphing of its quantitative easing program – that the Fed will be a continuing buyer of their risky securities at (ever-rising) market prices. Since the onset of Mr. Bernanke and Ms. Yellen's policy, the Fed's balance sheet has grown to $4.5 trillion, from around $800 billion before the crisis. That's a whole lot of securities bought at high, profitable prices and paid directly to Wall Street traders. The Fed might as well have been paying the traders' seven-figure bonuses directly.

The Fed's low-interest rate policies have also been a bonanza for Wall Street's investment bankers – and their bonuses — as companies around the world race to raise debt capital at low rates. Wall Street, of course, takes a cut of every dollar of debt raised. The steadfastly low interest rates have also propelled the stock market to new highs. That, in turn, has also led to a bonanza of new equity being raised and more fees being paid to Wall Street.

Private equity firms also have benefited wildly from the low-interest rate environment. That allows them to borrow money cheaply and leverage the billions of dollars in equity – said to be $3.5 trillion these days — to buy and sell companies. The buyout firms, and of course Wall Street, also get fees from all this deal activity. The investors in private equity funds have benefited too, and this often includes state-employee and teacher pension funds. The endowment funds of colleges and universities have also benefited from the low-interest rate environment. But it is the fund managers, not the pensioners, who really rake in the money from this arrangement.

What if you are one of the millions of Americans trying to get by on a fixed income? Or is trying to live off savings? Ms. Yellen claimed in her Boston speech to understand the problem these Americans face.

"The lower half of households by wealth held just 3 percent of wealth in 1989 and only 1 percent in 2013," she said. "To put that in perspective…the average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013. About one-fourth of these families reported zero wealth or negative net worth, and a significant fraction of those said they were 'underwater' on their home mortgages, owing more than the value of the home."

And yet in the past five years or so, the Fed's low-interest rate policies have buried savers and those on a fixed income because they can't get a return without taking an inordinate amount of risk, by either investing in the stock market, which as we were reminded again last week can also go down, or by "reaching for yield" by investing in risky debt securities that are increasingly overpriced. Either way, Ms. Yellen's policies are crushing these 62 million American households.

You might think that low interest rates might help those looking to get a mortgage to buy a new home, or those who want to borrow money to start a new business or expand an existing one. Unfortunately, as Ms. Yellen pointed out in her speech, this dream remains elusive for many Americans.

Thanks to the credit pendulum swinging back in the wake of the financial crisis, both home mortgages and small business loans are harder to get than ever. If you're General Electric or Kohlberg Kravis Roberts, getting a loan from a bank is no problem; if you want to buy a new house in Peoria, good luck to you.

....

Let's face it, until the Fed acknowledges the role it has played – and continues to play – in widening the gulf between rich and poor in this country, you'll forgive me if I find speeches like the one Ms. Yellen gave in Boston last week to be more than just a little bit ironic.

William D. Cohan is a former senior mergers and acquisitions banker who has written three books about Wall Street. His latest book is "The Price of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of Our Great Universities."

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Tuesday, October 21, 2014

[NJFAC] How Human-Robot Teamwork Will Upend Manufacturing

How Human-Robot Teamwork Will Upend Manufacturing

Robots are starting to collaborate with human workers in factories, offering greater efficiency and flexibility.

Sometime in the next couple of years, if everything goes to plan, workers at BMW's manufacturing plant in Spartanburg, South Carolina, will be introduced to an unusual new teammate—a robot arm that will roll around handing them tools and parts as they assemble the German carmaker's luxury vehicles.

Once isolated behind safety fences, robots have already become safe and smart enough to work alongside people on a few manufacturing production lines. By taking over tiresome and repetitive tasks, these robots are replacing some people. But in many situations they are augmenting the abilities of human workers—freeing them to do tasks that require manual dexterity and ingenuity rather than extreme precision and stamina. These robots are also increasing productivity for manufacturers and giving them new flexibility.

BMW introduced robots to its human production line at Spartanburg in September 2013. The robots, made by a Danish company called Universal Robots, are relatively slow and lightweight, which makes them safer to work around. On the production line they roll a layer of protective foil over electronics on the inside of a door, a task that could cause workers repetitive strain injury when done by hand, says Richard Morris, vice president of assembly at the Spartanburg plant. Existing industrial robots could perform this work, and do it much more quickly, but they could not easily be slotted into a human production line because they are complicated to program and set up, and they are dangerous to be around.

While the prospect of increased automation will inevitably cause worries about disappearing jobs, BMW's Morris can't foresee a day when robots will replace humans entirely on the factory floor. "Ideas come from people, and a robot is never going to replace that," he says.

85%
Reduction in workers' idle time when they collaborate with robots

Still, robots on human production lines at BMW and other manufacturers promise to transform the division of labor between people and machines as it has existed for the past 50 years. The more traditional robots that apply paint to cars, for example, work with awesome speed, precision, and power, but they aren't meant to operate with anyone nearby. The cost of setting up and programming these robots has helped ensure that plenty of small-batch manufacturing work is still done by hand. The new robots, with their ability to work safely next to human coworkers, let manufacturers automate parts of the production process that otherwise would be too expensive. And eventually, by collaborating with human workers, the robots will provide a way to combine the benefits of automation with those of human ingenuity and handcraft.....


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Saturday, October 11, 2014

[NJFAC] Unemployment and one effect: Lost Output [see clock]

The Magical Shrinking Unemployment Rate

  on October 3, 2014

The September current population survey unemployment report dropped to 5.9% and all sing hallelujah the job crisis is over.  The unemployment rate hasn't been this low since July 2008.  The unemployment rate dropped two tenths of a percentage point in a month, but why it dropped is more interesting.  The main reason is the decline in those participating in the jobs market.  The labor participation rate is the lowest rate in 36 years, not seen snce February 1978.  The ranks of the employed has increased 2.3 million in the last year while those not in the labor force has swelled by almost 2 million. 

This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS.  This survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of error.  Yet, it is our only real insight into what the overall population is doing for work, or not.

The ranks of the employed increased by 232 thousand this month which is a great showing.  From a year ago, the employed has increased by 2.33 million and now tallies 146,600,000 as shown in the below graph.  These figures are good signs people really are getting jobs.....

The most frightening statistic of the household survey is the labor participation rate.  The labor participation rate is at 62.7%, a record low, and is shown in the below graph.


labor participation rate

These are not all baby boomers and people entering into retirement.  Below is a graph of the labor participation rate for those between the ages of 25 to 54.  These are the prime working years, so once cannot blame retirement and college on the declining participation rate.  As we can see, this 80.7% rate has dropped and is at lows not seen since the 1980's recession.

 

labor participation rate ages 25 to 54

.....

This month's household survey, makes it seems like the job market is perfectly fine.  Yet if we look at labor participation rates, that is the reason the unemployment rate has dropped so much.   It is also true the job market has improved and more people are finding work.

NOTE: See also NJFAC report: Is the Decline in the Labor Force Participation Rate During This Recession Permanent?

United States Lost Output Clock

$5,994,539,791,160 [as of Oct11, 2014]

Lost National Income since the Financial Crisis of 2008.


Blue line = Potential GDP (if capital and labor are fully employed with adequate demand)
Red line = Actual GDP

GDP = Government Spending + Private Spending + Exports - Imports
GDP & Labor Employment => Positive Correlation (Okun's Law)


The Problem   We have a modern epidemic of unemployed and underemployed workers in the United States.

Since the 2008 financial crisis, the labor market has reached a tipping point, and the middle class has received its final blow.
Every time there's a business with machines or facilities idle due to low sales, or a worker unable to find a way to contribute, it's money being lost and wasted in our economy.
This untapped production from unemployed workers and unused facilities will never come back.
You can't go into a time machine and fix the misery caused over the years by unaddressed economic strife.
You can't put together families torn apart by broken careers and home foreclosures.
The pain can't be undone.

The Reason

If you are unemployed, seeking work and unable to find adequate fulfillment, or you're a business owner with sluggish sales and idle capital, it is not your fault.
Deregulatory policies and dismantling of public isntitutions under Ronald Reagan and Bill Clinton paved the way for a series of financial crises.
Bankers got drunk off cheap money from Fed chair Alan Greenspan, until they couldn't handle the debt load and risk and collapsed.
And once it popped, they used tax payer money to bail out the large financial institutions, with trillions in guarantees, loans, and equity purchases.
All this in the backdrop of decades of working Americans being shafted by free trade agreements and destruction of collective bargaining.
The result was a credit market and economy in shambles, and a government unwilling to plug the aggregate demand hole adequately with New Deal style public expenditures.

The Solution But we can reverse the bad policy which led to the crisis and do something about the unnecessary future pain. We need a large, $1.1 Trillion government stimulus jobs-directed spending program NOW.

For a detailed 20-page run-down of the nature of our current woes and the fix, click here.

This missed production/income, if spread evenly across all working Americans, amounts to lost accumulation of wealth per working American of: $38,550

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Saturday, October 4, 2014

[NJFAC] War On Poverty, Or War On the Poor?

The following is a contribution by Frank Stricker, a member of our Advisory Board.

War On Poverty, Or War On the Poor?

The 1960s War on Poverty (WP) involved three approaches. The most publicized and least effective at lifting people out of poverty included Head Start, legal aid and other services. It emphasized training and psychological uplift through the Job Corps and Community Action Agencies. Evaluations showed that Job Corps graduates did no better than others. Community Action Agencies got mixed reviews. They involved poor people in community organizations and they supervised Head Start and other programs. Although some had naively pushed them as a way for poor people to take control of their communities and challenge local political machines, that did not happen, nor did poor people control business decisions to create jobs in their communities.

A second, often soft-peddled, approach worked better. The American safety net began with Social Security, welfare and unemployment insurance in 1935. In the '60s, old programs were improved and new ones (food stamps, Medicaid and Medicare) added. In the '70s, the Earned Income Tax Credit was created for the working poor. These programs counteracted market forces that created more poverty. Today, cash (such as Social Security) and near-cash benefits (food stamps) lift 40 million people out of poverty. In the pit of the recession in 2009, unemployment benefits kept 5 million people from slipping into poverty. 

Americans should celebrate these welfare state successes, but they should also support improvements. Fifty million people are still poor. The poorest fifth of black households have only $9,800 in cash per year. Social Darwinists, led by the Koch brothers, Republican Paul Ryan and Tea Partiers talk economic nonsense and want to eliminate social programs. Liberals sometimes make it easy for them. In the '60s, safety net programs were kept in the background and WP training and uplift programs were sold as a hand up, not a hand out. American attitudes trail collectivist reality. We live in a web of interdependencies but are still drawn to archaic forms of economic individualism.

Nor are most Americans comfortable with the third WP approach: deficit spending. In 1964 President Johnson won support for Keynesian tax cuts by promising to balance the budget for one year. Soon, due in part to the murderous war in Vietnam, spending and deficits soared. The economic impact at home was huge. Unemployment averaged 3.7% over four years, and the poverty rate fell from 22% to 12%.

In 1971-1972 President Richard Nixon used deficits to boom the economy and assure his re-election. That added to inflationary pressures coming from higher oil and grain prices around the world. Inflation soon seemed out of control. There weren't enough socialist economists to defend the working class. Mainstream economists urged high unemployment to cut inflation. In the early '80s, the brutal Volcker-Reagan recession cut prices and beat up on workers. The Reaganites cut income supports, attacked unions and re-enthroned the royalty of money. The WP was becoming the war on the poor. Imprisoning young people of color was the tool. Democrats moved to the right, and President Bill Clinton approved big welfare cuts.

Over time, conservatives made Republican social policies even more hostile to poor people. In our time, Republican governors deny Medicaid to millions of people. North Carolina's Thom Tillis wants people to look down on those "who choose to get into a condition" that requires government aid.

Yet despite the spread of poisonous ideas, in many places it is easier to talk about economic poverty. The anti-poverty paradigm has shifted. In the 1960s, the poor were imagined as outside the working class, a distinct underclass with bad values. They were often viewed ethnically or culturally: poor blacks and poor Appalachians were the poster people for the WP. But that kind of liberalism could slide into blaming the poor. Daniel Moynihan's 1965 Labor Department report, The Negro Family, emphasized unemployment but also the idea that black family structures were deranged. By the '80s, right-wing writers had pushed the poverty debate from attacking poverty to attacking poor black people as criminals and welfare cheats.

But now the working poor are at the center of the conversation, thanks to Occupy Wall Street; militant workers at McDonald=s, Amazon and Wal-Mart; and unions like SEIU and UFCW. And, thanks to terrible economic conditions:

  • the average real wage is still lower than in the early 1970s;
  • the income inequality gap is huge;
  • there's always sleaze and criminality in capitalist operations, but now there's not much trickle-down.

Bush tax cuts favored the rich but did little for job creation, even before the recession. Businesses routinely steal wages from employees. Apple stashes $100 billion abroad to avoid taxation. Wal-Mart donates to school privatization but advises underpaid employees to use Medicaid and the Earned Income Tax Credit.

These factors had a bigger impact because of the Great Recession of 2008-2014. The crash pushed millions into poverty and weakened confidence in the rule of the Robber Barons. But the power and vast wealth of capital, the conservatism of many Democrats, the resentments of white people and the absence of a vibrant Left promoting socialist values helps explain why our second worst depression did not generate a second New Deal.

What would a second New Deal on jobs and poverty look like? We need to improve the safety net, but we must also fix job markets by raising the minimum wage and by direct federal job creation. How do we pay for new jobs? [see Note] Tax the rich more; tax financial transactions. And borrow. Almost every job boom since the Great Depression has been fueled by federal deficits (often for war). Also, full employment with more good jobs means more tax revenues and fewer people needing food stamps and other benefits. That means the deficit can fall. And millions of people will be less insecure and, we hope, happier.

Frank Stricker, Emeritus Professor of History at California State University, Dominguez Hills and member of the National Jobs for All Coalition, wrote Why America Lost the War on Poverty (2007) and is completing a book: American Unemployment: Why We Have It and What To Do About It.

Note: NJFAC  member Philip Harvey has shown that jobs programs nearly pay for themselves, and that using the stimulus funds for direct job creation could have employed all the unemployed.  See also Harvey, Learning from the New Deal[Jobs Programs]
"A direct public jobs program is cost effective. $100 billion spent to directly hire American workers would create 2.6 million fulltime jobs over two years, compared to just 136,000 jobs for $100 billion in tax cuts or 714,000 jobs for $100 billion in benefit increases."
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