Thursday, February 26, 2015

Lower unionization associated with increased inequality: IMF F&D

Florence Jaumotte and Carolina Buitrom report “strong evidence that lower unionization is associated with an increase in top income shares in advanced countries during the period 1980-2010”. Read all about it in this issue of Finance & Development, the IMF’s quarterly magazine.

Jobs & Inequality: Special Feature in Finance & Development

  • Declines in unionization have been associated with increases in inequality. The conjecture that the rise in inequality is not just due to trade & technology but to changes in bargaining structures has often been made, including in a very recent NYT column by Nick Kristof. My colleagues Florence Jaumotte and Carolina Buitron present systematic cross-country evidence to show that declines in unionization are associated with increases in the share of income going to the top 10 percent.

  • The installation of ATMs did not lead to a decline in the number of bank tellers. At a time when we are told robots may replace us all, Jim Bessen’s article offers this concrete example of hope that technology does not lead to widespread unemployment. Technology however can be associated with increased inequality.

  • “Wages are set to grow faster than productivity, at least over the medium term”. That’s the bold prediction from the ILO’s Ekkehard Ernst. But again, inequality’s the rub: “the bulk of that [wage] increase will accrue only to a small group of skilled workers, no more than 20 percent of the global workforce.” 

  • The share of immigrants has been quite stable at about 3 percent of the world population since 1960. The World Bank’s Caglar Ozden offers an excellent reminder of the benefits of immigration to society. He contrasts this with the fact that, despite the perception, immigration has remained stable. The result is wage differentials for fairly similar work: “Nurses make seven times more in Australia than in the Philippines; accountants six times more in the United Kingdom than in Sri Lanka; and doctors five times more in the United States than in Egypt—in purchasing power parity terms”.

Near-term outlook:

  • The global unemployment rate has returned to its pre-crisis level of 5.6%. But employment growth remains sluggish—about 1.5 percent a year instead of over 2 percent a year before the crisis. See “Picture This” and my article “Seven Lean Years” for details on the global labor market outlook. The labor market outlook for Europe remains dismal. 

  • “Without strong growth, it will be difficult to make a sizable dent in (European youth) unemployment.” My colleague Angana Banerji shows that “changes in economic activity explain on average about 50 percent of the increase in youth unemployment; in the case of Spain, poor growth accounts for 90 percent of the increase in the youth unemployment rate during the crisis. Also read the poignant stories of four young people from Bosnia, Egypt, Japan, and the United States.

  • Sharan Burrow, General Secretary of the ITUC: “It is time to get the global agenda back on track, making job creation the foremost priority. Another six years of global employment stagnation, accompanied by outright depression in some countries, is unacceptable.”

Wednesday, February 25, 2015

Global Housing Watch Newsletter

The February issue includes:
  1. IMF's latest assessment on Canada's housing market and a new working paper on differences in house price behavior across advanced and emerging markets.
  2. Experts views on how diverging monetary policy rates and currency volatility will affect housing markets.
  3. Was fraud a cause of the U.S. housing crash of seven years ago? Yes and no, says new research.
  4. Other views and analysis on housing markets:
    • Cross-country work: two reports from a World Economic Forum initiative on detecting when and why housing bubbles emerge and how consequences can be mitigated. Another report from McKinsey Global Institute that examines the evolution of debt across countries and assesses the implications of higher leverage in the global economy. Also, a tool that map the institutional components of property markets and evaluate their effectiveness, developed by Center for International Private Enterprise and the International Real Property Foundation. Finally, the latest house price developments by the BIS.
    • A new book: Zillow Talk: The New Rules of Real Estate by Spencer Rascoff and Stan Humphries
    • Country specific: Australia, Belgium, Canada, China, Denmark, Germany, Hong Kong, India, Israel, New Zealand, Peru, Sweden, Singapore, Spain, Switzerland, United Kingdom, and United Sates.
Read the full newsletter here

Tuesday, February 24, 2015

Uncertainty and U.S. Unemployment

My new paper with Sam Choi updates (through 2014:Q3) estimates of how much uncertainty has contributed to U.S. unemployment (particularly long-term unemployment) during the Great Recession. Our measures of aggregate and sectoral uncertainty are both back to pre-crisis levels. Consequently, the contribution to uncertainty to long-term unemployment has diminished considerably since 2010.

Our aggregate uncertainty measure is the realized volatility of S&P 500 index returns, similar to Bloom (2009). We find that aggregate uncertainty contributed to long-term unemployment in 2009 and again in 2012. Our sectoral uncertainty measure is the cross-section dispersion in industry excess returns. We show in the paper that this measure of uncertainty tends to have more persistent impacts on unemployment than aggregate uncertainty. The contribution of sectoral uncertainty to U.S. long-term unemployment peaked in mid-2010 and has declined steadily ever since. The main reason for the decline in long-term unemployment form 4 percent in mid-2010 to 2 percent in 2014 is the resumption of growth (the contribution of growth is shown as part of the other factors in the chart above).

Friday, February 20, 2015

New Results on Capital Account Liberalization and Inequality

My talk at the New School today included an update of results on the impact of capital account liberalization on inequality (with Davide Furceri and Florence Jaumotte). In past work, we had shown that liberalization leads to an increase in inequality in advanced economies -- see this F&D article and VoxEU blog and the discussion of these results by Paul Krugman. The results for a broader group of countries are given in this paper; a Cliff's Notes version of the paper is given here, with an associated PPT.