“It is estimated that Australian women born in 2012 will, on average, live for 94.4 years, and their male counterparts will live for 91.6 years. Over the next 15 years, the number of people aged 65 and older will increase by 85%, from 3.1 million in 2011 (14% of the population) to 5.7 million in 2031 (19% of the population); by 2050, it is expected that almost a quarter of the population will be aged 65 or over.

“While in 1901, there were 15 people of traditional “working age” (15–64 years) to support each Australian aged 65 and over, this potential support ratio dropped continuously over time to 7.5 in 1970, 5 in 2010, and it is projected to be 2.7 in 2050. These demographic developments will have a noticeable impact on the country’s society, economy, and government budgets over the next decades.”

From Work, Aging and Retirement in Australia: Introduction to the Special Issue. You can browse the freely available special issue for more articles on this topic.

Image: Australian Continent Aerial View. Public Domain via Pixabay.

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Does the Minimum Wage Hurt Workers?

Have we heard the first pop in a bursting student-loan bubble? After Santa Ana, California-based Corinthian Colleges this month filed for bankruptcy and announced the closure of its remaining for-profit college campuses, talk in Congress and the Legislature has revolved around proposals to bail out student debt for as many as 16,000 students.

Financial analysts have for years warned about the parallels between easy student loan debt and the easy mortgages that led to anartificially inflated housing market in the mid-2000s, and the resulting price drops and foreclosure bonanza. Maybe it’s time to reignite those discussions.

“Corinthian’s meltdown began last year after the U.S. Education Department reduced its access to federal student aid,” reported Bloomberg News. It sold half of its 107 campuses “amid allegations that it falsified grades, attendance and job-placement rates.” The company denies allegations and blames state attorneys general — including California’s — for legal action that made it tough to sell the other campuses.

Under federal loan rules, some students may be eligible for loan forgiveness — at a possible cost of more than $200 million to taxpayers. But the attorneys general, some U.S. senators and a group of protesting Corinthian students dubbed the “Corinthian 100” are pushing for a broader loan-forgiveness package that could cost as much as $1.5 billion.

Democratic and Republican leaders of the California Assembly in late April announced legislation that would waive community college fees for these students, provide them with legal assistance, offer “tuition recovery” to many online students, and create a “Closed Schools Task Force” to help them get back on their feet.

Some critics blame the for-profit nature of these colleges, but in other parts of the country some for-profit colleges are simply turning themselves into nonprofit colleges — and that allows them to get an even higher percentage of their revenues from the government (100 percent rather than 90 percent, according to a Miami Herald report).

The basic allegations: Many schools would use the hard sell to sign up students — often lower-income people, minorities, veterans and vulnerable people — and make dubious promises. The students would be in debt for iffy degrees, and the schools would rake in billions in profits.

No question, the students in the Corinthian situation in particular are left in a bad situation. Their credits are not easily transferable and they are stuck with questionable or unfinished degrees. But loan forgiveness could create a wave of bailouts that ripples across the nation’s educational system. Economist Richard Vedder argued in The New York Times that such a policy only “encourages students to borrow excessively, thinking they will not have to repay loans.”

If bailouts are problematic, what are other solutions? Some critics want tougher standards for the accreditation agencies. (That, too, offers echoes of the housing bubble given allegations that rating agencies failed to adequately warn about the condition of some of the nation’s mortgage lenders.)

Others blame federal education officials for taking so long to clamp down on Corinthian. The problem might even work itself out. Money/CNN reported that enrollment at the University of Phoenix, the nation’s largest for-profit college chain, dropped by more than 50 percent in the last five years amid bad press about for-profit colleges.

President Barack Obama argues community colleges, the obvious alternative for students pursuing career training, should offer free tuition to pick up the slack. But one reason for past growth in for-profit career colleges is community colleges are priced so low they are overrun with students, who often cannot get classes they need in a reasonable time.

These ideas miss the core problem. Corinthian collapsed after federal officials turned off the loan spigot, given that its business model was based on free-flowing federal loan money. Even the nation’s most prestigious university systems are ultimately funded by student loan debt, which may be why many of them have massive bureaucracies.

Debt-related problems have emerged first at these controversial for-profit institutions, but how long before a deflating loan bubble affects the nation’s entire higher-education system?

3 Ways To End Chinatown’s Gentrification

What’s been happening in Chinatown has hardly been silent, even if outsiders have been quiet about it. While neighborhoods like Williamsburg, Crown Heights, and Harlem have all become synonymous with encroaching gentrification, Chinatown probably elicits little more than an acknowledged existence in most New Yorker’s minds. We know something has been changing there, we may have even seen a headline once talking about it, but the large neighborhood covering parts of the Lower East Side and Two Bridges hardly gets its deserved attention.

Many are failing to recognize that if the gentrification happening in Chinatown can be stopped, and neighborhood development managed in a way that benefits all community members, the same can probably be done elsewhere…

Think journalism like this is hard to find? Well, supporting it starts with seeing the whole story.

A higher tax rate increases reinvestment into a company and upkeep of factory/fleet/salaries as a way to decrease taxable income. Conversely, a low tax rate is a green light to skim profits solely for CEOs and shareholders. 

The 1950s/1960s had a robust economy and great state/public benefits. All ships were rising. 

BGF Congratulations Class of 2015 :: “20 years old. Graduated Syracuse University with a BA in Economics with a concentration in Retail in 3.5 years. Young. Happy. Blessed.” - @IvyCoco23
#BlackGirlFly #BlackGirlFlyMag #Magazine #Tuesday #Black #Girl #Fly #Congratulations #Class #2015 #SyracuseUniversity #Economics #Retail #Graduation #Graduate #Scholar #Queen #Goals #Potd #Ootd #CapandGown #Celebration #BGFGrads

Reviewing Christopher Beauchamp’s book Invented by Law: Alexander Graham Bell and the Patent That Changed America, Graeme Gooday discusses “how the patent became a key weapon of market power and the cornerstone of a new legal-industrial complex.” Here’s an excerpt:

Bell’s lawyers, who brought around 600 infringement cases, tailored an interpretation of his patent to suit standards of legal proof and maximize the scope of his claims—an interpretation often at odds with Bell’s own. It was not Bell but his lawyers, Beauchamp stresses, who “prepared the contending positions, marshaled evidence, and argued publicly and bitterly over the origins and nature of the technology.”…Beauchamp’s title—Invented by Law—is thus to be taken literally: it was the practice of law that defined the identity and status of the telephone as a novel invention and crafted a patent robust enough to survive courtroom challenges.

And challenges there were. Bell had not been alone, after all, in experimenting with the aural possibilities of the electrical telegraph. [Elisha] Gray, Daniel Drawbaugh, Amos Dolbear, Peter Dowd, Antonio Meucci, and others defended rival claims to priority.

The Bell team’s legal victories produced “one of industrial world’s most lucrative patent-based companies,” signalling “the rise of a great new corporate power that used the full force of law to ruthlessly eliminate direct competition.” Meanwhile, events progressed differently overseas:

There had been significant doubts across Europe about both the public benefit and industrial necessity of patents. In July 1877, Germany finally introduced patent legislation, but before Bell’s lawyers could obtain rights, the technical press had already circulated designs of the telephone, rendering it part of the public domain. Thus Germany saw the productive development of diverse telephonic equipment under conditions of open competition, without patent rights restricting the innovating activities of Bell’s rivals, such as Siemens. Even within the United States, the railroad industry had seen vigorous growth without using patents to underwrite single-company monopolies. Those who would argue for the economic necessity of patenting will not find support in either the telephone or the railroad, two key inventions in America’s growth to industrial supremacy.

Read the rest here.

“Solar distillation systems have been found economically feasible in desalination of saline water […]Free of cost, non-polluting, non-exhaustible solar energy is used to produce distilled water inside a solar still.”

— K.R. Ranjan and S.C. Kaushik on the feasibility of solar distillation systems 

Image Credit: “SODIS Water Disinfection in Indonesia” by SODIS Eawag. CC BY 3.0 via Wikimedia Commons.

The worker becomes all the poorer the more wealth he produced, the more his production increases in power and range. The worker becomes an ever cheaper commodity the more commodities he creates. With the increasing value of the world of things proceeds in direct proportion the devaluation of the world of men. Labor produces not only commodities: it produces itself and the worker as a commodity—and does so in the proportion in which it produces commodities generally.

This fact expresses merely the object which labor produces—labor’s product—it confronts it as something alien, as a power independent of the producer. The product of labor is labor which has been congealed in an object, which has become material: it is the objectification of labor. Labor’s realization is its objectification. In the conditions dealt with by political economy this realization of labor appears as loss of reality for the workers; objectification as loss of the object and object-bondage; appropriation as estrangement, as alienation*.

So much does labor’s realization appear as loss of reality that the worker loses reality to the point of starving to death. So much does objectification appear as loss of the object that the worker is robbed of the objects most necessary not only for his life but for his work. Indeed, labor itself becomes an object which he can get hold of only with the greatest effort and with the most irregular interruptions. So much does the appropriation of the object appear as estrangement that the more objects the worker produces the fewer can he possess and the more he falls under the dominion of his product, capital.

All these consequences are contained in the definition that the worker is related to the product of his labor as to an alien object. For on this premise it is clear that the more the worker spends himself, the more powerful the alien objective world becomes which he creates over-against himself, the poorer he himself—his inner world—becomes, the less belongs to him as his own. It is the same in religion. The more man puts into God, the less he retains in himself. The worker puts his life into the object; but now his life no longer belongs to him but to the object. Hence, the greater this activity, the greater is the worker’s lack of objects. Whatever the product of his labor is, he is not. Therefore the greater this product, the less he is himself. The alienation of the worker in his product means not only that his labor becomes an object, an external existence, but that it exists outside him, independently, as something alien to him, and that it becomes a power on its own confronting him; it means that the life which he has conferred on the object confronts him as something hostile and alien.

—  “Estranged Labor,” from Economic and Philosophic Manuscripts of 1844, by Karl Marx

*Alienation — Entäusserung

A little-debated provision of the Los Angeles minimum wage hike — future increases tied to inflation — may produce its most profound and controversial consequences over the long term.

In a single vote, the City Council backed a plan that would raise the minimum wage not just once but forever, with automatic annual hikes starting in 2022, after phasing in a $15 hourly wage by 2020.

The requirement aims to ensure that wages keep pace with cost-of-living increases, but business advocates say it could cripple entrepreneurs’ ability to adjust wages to unpredictable economic conditions — effectively enshrining automatic annual layoffs when times get tough.

Ruben Gonzalez, policy chief for the Los Angeles Area Chamber of Commerce, called it the “most insidious” portion of the law.

“This is just putting it on a runaway train without anyone steering,” he said.

Rand Paul Uses Modern Technology to Reach Out to Youth!

Most high schoolers and college students see these quite often, TI-84 calculators. Whether you’re sporting the Plus or the Silver Edition, Rand Paul’s reaching out to YOU. That’s right, if you press the math button on your calculator and scroll all the way to the right, you’ll see an ad for Rand. Why there, in the problem section? Because Rand Paul is the solution to your problems, and he’s number 1 too. So next time you’re on your calculator, check out his new ad! He’s just gonna get as creative as he can to reach out to you, because he cares about YOU America.

Stand With Rand 2016

The only economic case for raising the minimum wage that is even potentiallytheoretically sound is the case built upon the belief that employers of low-skilled workers possess monopsony power in the market for low-skilled workers.  (As argued here before, monopsony power is a necessary condition for a higher minimum wage not to reduce the employment prospects of low-skilled workers;it is not a sufficient condition.)

So what are we to make of the City of Los Angeles’s move to raise the hourly minimum wage there to $15 by 2020?  Why wait until 2020?  Why not immediately or, say, June 1st 2015?

If this minimum-wage hike is truly justified by employer monopsony power, there’s no reason for any delay in hiking the wage.  If employers of low-skilled Angelenos truly have monopsony power of the sort that the best pro-minimum-wage economists assert is prevalent enough in reality to justify government-imposd minimum wages – and if government-imposed minimum wages really are ‘scientific’ responses to the prevalence of such monopsony power – then raising the minimum wage in Los Angeles from its current rate of $9 per hour all the way up to its ‘desired’ rate of $15 per hour should be done immediately.  Why the gradualism?  Why wait five years to raise the wage to its appropriate height?  The monopsony power that justifies raising the minimum wage, if it is real, exists today in full.  And if $15 per hour is the ‘right’ minimum wage to offset the baneful consequences of employers’ monopsony power, then economic theory is clear that there is nothing to be gained, and only gains for low-skilled workers to be foregone, by any delay in raising the minimum wage to $15 per hour.

Most readers of this blog know – not because they read this blog, but because they exercise economically informed common sense (of the sort, sadly, that is schooled out of too many non-GMU-type academic economists!) – that employers of low-skilled workers (especially those in large cities such as L.A.) have no monopsony power to speak of.  Employers certainly don’t have monopsony power in such magnitudes and so generally as to justify a government-imposed minimum wage.  So it’s unsurprising to me and, I’m sure, to most of this blog’s readership that L.A.’s massive minimum-wage hike is phased in.  The phasing-in not only helps to mute and, hence, to help hide, the ill-effects of the minimum wage; more significantly, this phasing-in is solid evidence that minimum-wage hikes are in fact not scientific responses by government to the prevalence of employer monopsony power.

It’s high time that tweedy academic economists stop lending their professional and scientific creds to politicians who in reality seek only applause and votes from the economically uninformed masses (who too readily cheer policies with lovely titles) and kudos and campaign contributions from labor unions and other rent-seekers (who gain financially from government policies that price many of the lowest-skilled workers out of jobs).

A facebook acquaintance posted this image after the City Council’s decision.

I explained then: 

“Speaking of “time” - if you and the city council think this is so good, then why wasn’t it put into effect immediately? It’s pushed to 2020 so businesses have the ability to slowly adjust. This helps obscure the fact that some poor people will be losing jobs. That way people can keep supporting such legislation while staying oblivious to the fact that it most harms those they wish to help.”

Bryan Caplan explained a couple of years ago why these minimum wage phase-ins exist:

If the minimum wage unexpectedly jumped to $12 today, the effect on employment, though relatively small, would be blatant.  Employers would wake up with a bunch of unprofitable workers on their hands.  Over the next month or two, we would blame virtually all low-skilled lay-offs on the minimum wage hike - and we’d probably be right to do so.  

If everyone knew the minimum wage was going to be $12 in 2015, however, even a large effect on employment could be virtually invisible.  Employers wouldn’t need to lay any workers off.  They could get to their new optimum via reduced hiring and attrition.  When the law finally kicked in, you might find zero extra layoffs, because employers saw the writing on the wall and quietly downsize their workforce in advance.

If you sincerely cared about workers’ well-being, of course, it wouldn’t make any difference whether the negative side effects of the minimum wage were blatant or subtle.  You’d certainly prefer small but blatant job losses to large but subtle job losses.  

But what if you’re a ruthless demagogue, pandering to the public’s economic illiteracy in a quest for power?  Then you have a clear reason to prefer the subtle to the blatant.  If you raise the minimum wage to $12 today and low-skilled unemployment doubles overnight, even the benighted masses might connect the dots.  A gradual phase-in is a great insurance policy against a public relations disaster.  As long as the minimum wage takes years to kick in, any half-competent demagogue can find dozens of appealing scapegoats for unemployment of low-skilled workers.

Most non-economists never even consider the possibility that the minimum wage could reduce employment.  Before I studied economics, I was one of these oblivious non-economists.  But if minimum wage activists were as clueless as the typical non-economist, they wouldn’t bother with phase-in.  They’d go full speed ahead.  The fact that activists’ proposals include phase-in provisions therefore suggests that for all their bluster, they know that negative effects on employment are a serious possibility.  If they really cared about low-skilled workers, they’d struggle to figure out the magnitude of the effect.  Instead, they cleverly make the disemployment effect of the minimum wage too gradual to detect.

More on the minimum wage