Tuesday, July 3, 2018

Owning Houses Makes You Richer

Statistics New Zealand just released the change in physical and financial assets component of the National Accounts.  The national accounts (change in assets) explains movements in assets and liabilities from one balance sheet to the next for each of New Zealand’s institutional sectors. The accounts show the accumulation of physical assets (eg houses), financial assets (eg bank deposits), and financial liabilities (eg loans).

Rising property prices between 2013 to 2016 contributed 51 percent of the $364 billion increase household net worth over those 4 years.

https://www.stats.govt.nz/news/rising-property-prices-boost-household-assets

When house ownership is the channel for how 51% of household wealth increased over four years, then house ownership becomes the method for households to increase their wealth. .

From here:  https://rbutler.sdsu.edu/gurely2.htm
Marx insisted that "capital" is not a thing but a definite social relation which belonged to a specific historical formation of society. "The means of production become capital," Marx wrote, "only insofar as they have become separated from the laborer and confront labor as an independent power." Means of production are capital when they have become monopolized by a certain sector of society and used by that class to produce surplus value that is, the income of the capitalist class (generally profits, interest, and rent) that comes from the exploitation of another class. Consequently, capital, for Marx, is not only part of the forces of production but it is also a particular employment of those forces, a social relation.
Its difficult not to see concentrated home ownership, the increase in wealth it creates, and the creation of a structural renting class in Marxian terms.

Friday, June 22, 2018

Nursing Pay Demands Are Bad News for Graduates

New Zealand nurses want more money, or purely and simply, they will strike (http://www.radionz.co.nz/news/national/360103/nurses-want-more-money-or-strike-to-go-ahead).  More money is the only thing that will stop a planned nurses strike from going ahead.  In an economy with 1.1% annual inflation, and annual national wage inflation at 1.8%, the nurses union has rejected a 9% pay increase over a 15 month period.  Pointing to an 11% difference between the top end teacher and nurses salaries, the suggestion is that occupational pay-parity issues is why 9% was  rejected, with 11% being "too low" (http://www.radionz.co.nz/news/national/359810/nurses-strike-action-on-the-cards-over-dhb-dispute).

I did my Masters of Commerce in Economics looking at the role of unions in the health sector labour market, with the results here: www.wiltshirehogan.co.nz.

Cutting to the chase, back in 2014, unions had severely distorted the health sector's labour and output markets, making DHBs unproductive, blocking nursing graduate entry, and extracting higher-than-competitive rewards for their labour.

Because of the health sector unions, DHBs were:
  • Employing overall fewer workers than they want to, 
  • Paying more for each worker than they should have been, 
  • Unable to afford the mix of workers that actually wanted and preferred,
  • Were forced to "make do" with the workforce mix they could actually afford,
  • Delivering less health services because their affordable workforce mix was wrong,
  • Delivering lower quality health services because their affordable workforce mix was wrong.
New Zealand taxpayers coped a double whammy:  they paid more in taxes from the higher labour costs, and they received less and poorer quality health care in return.

Not really "good-o" for Joe New-Zealander...

So, how successful will this round of nursing union demands actually be?  The results from the economic modelling are the suite of own-price and cross-price elasticities derived from my work in Table 1 in my thesis (http://www.wiltshirehogan.co.nz/thesis/Thesis_for_Upload_to_Library.pdf)

Row 5 of Table 1 measures how the quantity of employed nurses relates to the price of nursing and other non-nursing labour prices.  If the price of nursing labour increases 10%, the quantity of employed nurses actually falls 4.9%, everything else being equal (the negatively signed nursing own-price elasticity from row 5, column 4 of Table 1).  If the nurses union is successful at getting a more than 9% pay increase, then they stand to loose about 5% of their employed workforce.

Who Benefits From Nursing Pay Demands?  
First off, the 95% of the remaining workforce who remain employed and receive a 10% pay increase...

But after that, from the Table 1, if the quantity of nurses falls 5% because of their demands, then medical salaries increase 1.5%, allied health workers salaries increase 7.5%, and administrator salaries increase 2.3%.  The demand for these workforces increase and pushes up their salaries, as DHBs substitute away from the overall more expensive nursing labour.

What Would Get Nurses a Better Deal?  
The only workforce change that gets nurses a consistently better off is scale affects - more health services means more nurses employed.  Overall as the health service pot grows bigger, more nurses are needed, and more are employed.

But unions protect the interests of paying members, not those who could be employed...

Tuesday, June 13, 2017

What movies I'd like to make

There are some professions that are gritty and glamorous: doctors, lawyers, cops.  Think of all of the tv dramas, and it will involve one of these.  The doctor saves the patient's life, but their own life is terribly conflicted.  Or the cop chases the bad guy, but is borderline criminal themselves.

I'd like to see dramas made over normal people's lives.  Like the retail assistant who delivers exceptional service, but struggles to balance her home life commitments to the time frame of the job. Or the rubbish collector who pumps out house music as he works and then one day before the next Eminem.

I just think we can be more creative and celebrate normal lives.

Wednesday, January 13, 2016

A Tribute to the Exceptional

Most people lead dull and uninteresting lives:  I'm no different from the majority.  But every so often, when someone exceptional dies, you see what an exceptional life is.  David Bowie died on Monday:  http://www.bbc.com/news/entertainment-arts-35278872, one of the world's true exceptional individuals.  The Master of Change and Reinvention, a musical artist who could express so much emotion so masterfully.  His work shaped a generation.

Steve Jobs, David Bowie, Paul Callaghan... exceptional people.


Thursday, December 31, 2015

I'm back! Lets make New Things :)

Well Hello!

Its been a long time, OffWorkEconomist.  I've been busy - its been a busy couple of years.  I'm back now.  And I've got things to say!

2016 will be the strategic year - lets focus on strategic direction issues:  what's happening, where's it going and why or why not should things go there.  Also, lets take a look at creativity.  I'm going to make some creative things, and I'm going to do them in data.  For the last couple of years, I've been making beautiful things in Economics using R.  Now, I'm going to open these ideas and learnings to the masses and the world.

Its a great world out there, and in 2016, I want to add my two cents to it.

I'm back :D

James Hogan

Saturday, May 18, 2013

International Transmission Mechanism and Tourism

I've started a new job!  I'm now a Principal Analyst within the Sector Performance team within the Ministry of Business, Innovation and Employment (MBIE).  What a rush!  This has been my third week and I feel like I'm starting to get my feet under the table and hang of the role. 

The Sector Performance team, as its name suggests, has responsibility for analyzing the economic performance of different economic sectors within the economy.  Its focus is sectors - not necessarily industries - for example, we look at the Tourism sector, and the Science and Innovation sector.  Those sector's economic activity span different industry definitions.  We look across industries and at the performance of an economic activity as a whole.

Tourism is one of our foci.  This week, MBIE released this:
http://www.mbie.govt.nz/news-and-media/news-from-around-mbie/chinese-visitor-spend-continues-to-grow

International Trade Flows
Take a look at the picture on that webpage and think about what is happening. 

One of the lessons from Open Economy economics is the role trade plays in transmitting economic shocks around the globe.  Back in the days of the Gold Standard, gold underpinned the monetary base of countries.  Changes in the volume of gold held by a country expanded or contracted their banking and monetary base, leading to expansions or contractions in aggregate demand.  The economic prospects of countries were intimately entwined.  Prosperity in one country lead to an increase in import demand from that country.  Gold would move from the prosperous country out to other countries, in the process, reducing the monetary base of the prosperous country, and expanding the monetary base of foreign countries.  As gold flowed according to trade patterns, changes in gold base between different countries "transmitted" economic fortunes between countries.

Moving on neigh on 100 years to now (World War 1 saw countries depart form the Gold Standard - it stuttered and stammered back into life after the war until World War 2 when it was dropped again) international trade flows continue to be one of the main mechanisms for changing economic fortunes between countries.  Upturns and downturns in domestic conditions between different countries continue to play out as increases and decreases in imports demanded from other countries.  One countries imports is another's exports, and another's economic production and source of incomes.  Changes in imports impact and influence economic conditions in other countries.

So ... with that little story under your belt, have another look at the graph on that web page and read it again.  Here it is below:



One of the most notable trends is the long term decline in tourist expenditure from USA and UK tourists.  Since 2001, USA tourist spending in New Zealand has generally declined.  Since 2006, UK tourist spending in New Zealand has approximately halved.   Japanese tourists have decreased their spending.  On the flipside, China's tourists spend, since 2006, has more that doubled.

And the domestic fortunes of the USA, UK, Japan and China?  From here and here:

Until recently Japan's economic growth has been significantly lower than the OECD average.  The UK economic growth bobbed along at about 3 percent between 1999 and 2007.  But since 2007, its economic fortunes have drastically declined and its economic growth rate has been significantly below the OECD average.  And the USA has been on a long run slow economic growth decline since 1999.

China, however, according to the OECD, has mostly experienced double digit economic growth, without growth only slightly falling over the Global Financial Crisis period.

These tourism spend measures turn out to be quite cute thermometer and example of the international economic transmission mechanism.