My life is full of non-single use, non-disposable bags...

One of the first things 2017's Labour / Greens / New Zealand First coalition government did was strongly signal its "green credentials".  First cab off the ranks was stopping new offshore drilling oil permits.

The second cab off the ranks was, oddly, single use disposable plastic bags....

Rejoicing in the collective kumbiya of the Green mantra of "Reduce, Reuse and Recycle", and thrusting the Circular Economy philosophy all over the place and into everyone's faces (https://www.mfe.govt.nz/waste/single-use-plastic-shopping-bags-banned-new-zealand) the Government responded to the urgent need to ban the scourge of the environment, the supermarket plastic grocery bag.

It didn't seem to matter that, in themselves, the bags were friendly little useful things. In fact, quite a few of the single use plastic bags I'd shared a brief relationship in the past didn't have a mean bone in their body. Nor did they intend to throttle the snot out of some poor unsuspecting turtle.

Most single use disposable plastic bags only wanted to be useful for getting your groceries home.  Once home, they were more than happy to be used as free freezer bags to wrap the meat up with.

Subsequently, once aforesaid meat was thawed, all the single use disposable bags I'd known (who incidentially had now been reused) were all perfectingly happy to be scrunched down and disposed in an appropriately issued council rubbish bag.

So the big beefy environmental issue wasn't with the bags at all.  These things weren't pure raw evil made of cloroflorocarbons, all bent on environmental destruction and turtle snot-throttling.

The big beefy issue was how people disposed of them...  .. "other people"...

And, to that Prime Minister Jacinda Ardern and Associate Environment Minister Eugenie Sage - responding to the children (https://www.beehive.govt.nz/release/single-use-plastic-bags-be-phased-out) took an axe to the poor old sweet innocent grocery bag.

... and now, I find myself wallowing in a sea of angry non-single use, non-disposable grocery bags that seem to breed at the rate of a Tribble (TheTrouble with Tribbles)

I'm going to have to drive to the tip (in my diesel utu), because I've got too many of them, and they don't compress down easy and fit into my council rubbish bag..

*sigh*

:(

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.

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...

If it's got tits or wheels...

It's going to cause you pain and cost you money.

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.

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.

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

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.

And on a sadder note...

Bit unhappy today World.  One of my all time favourite rockers died on the 21 April 2013.  As a 16 year old, I and some mates jumped the fence at the 1988 Brisbane Ekka Show to see her and the Divinyls play live.

Rock on Chrissy Amphlett 

Thinking about Regions: Updated with R Code

Regional Industry Employment

The blogs have been slow this month - sorry people.  Things have been quite busy in my neck of the woods.  One of the things I am looking at at the moment though are three employment related questions based on Statistics New Zealand's Business Demographics data:

1. What does the regional patten of industry employment and business size "look like" between the different geographic regions?
2. Is there a story of "regional comparative advantage" in the data?
3. How has the regional patter of employment and business size varied over time, especially in response to the Global Financial Crisis period of downturn?

Here's what I've got at the moment - its a work in progress thing :)  I'll keep updating this blog until I'm happy with it.  Also, I'd like New Zealand Economists to use more R in their lives.  As a result, I'm posting the R code and the source data at the bottom of this post.

Fig1. Regional Employment by Industry and Year

Fig2.  Regional Employment by Industry and Year - Selected Regional Councils

From question 1, I'm looking at what proportion of the workforce employed within geographical regional council area are employed within the different industries. For example, looking at Fig 2 first, Public Services stands out as a large industry source of employment for Wellington - no surprises there (and that's what I want).

My goal is to be able to express each of these regionals in terms of 'similarity to' and 'difference from' other regions.  For example, Auckland and Wellington are similar to each other in Agriculture, Forestry and Fishing and Retail Trade, but different from Canterbury and Waikato.  Auckland, Christchurch and Waikato are similar to each other in Manufacturing, but different from Wellington.

Which leads to the second question: do Canterbury and Waikato have a comparative advantage in the production of Agriculture, Forestry and Fishing and Retail Trade industry commodities over the production of those same commodities in Auckland and Wellington?  If they do have a comparative advantage, which has revealed itself in different employment shares regionally within each industry, then what does this mean for their sensitivity to factors outside of their control and world market related?  For example, in Fig 1, in Mining, that top line is the West Coast, which according to Tony Ryall has its coal production currently being hit by the 'perfect storm' from international coal price decline.

Thirdly, how has each industry in each region fared over the long term, especially since the Global Financial Crisis (GFC) era of economic decline.  The start of the GFC is usually attributed to September 2008, with the fall of Leyman Brothers leading to a credit shortage which ultimately slowed economic production.  However, in New Zealand's case, the decline in economic growth started much earlier, with economic growth decline and increases in the unemployment rate evident from December 2007 on.

What I'm hoping to see in the Fig1 above is how regionally and industrially the economic decline from December 2007 on manifested within the regions.

Principal Components on Regional Industry Breakdown

First off, which regions are "similar" and which are not?  Given the different industry employment profiles, principal component analysis (PCA) might be one way to simplify the different regional industry employment compositions into measures which reflect regional similarity.

PCA is a statistical technical which decomposes the variations in multiple measures on something into its 'principal' 'components'.  It is a variable reduction technique which reduces a large number of variables down into a few key variables which, when the technique works well, describe the bulk of the variation occurring within the multiple measured variables.  For example, if there are 20 variables reflecting some separate aspect of the thing measured and which are highly correlated, then PCA might reduce the information content of those 20 variables into 2 -3 'principal components' which explain the bulk of the variations within the data.

The 'principal components' are weights given to each measured variable which  together discriminate between the measured variables according to some dimension within the data. The technique works best when the multiple measurements made on the single thing are highly correlated.  For highly correlated measurement data, large sources of variation within the multiple measure data can normally be described by the first/second principal components.  The beauty of PCA is each component is 'orthogonal' to each other: it captures some source of variation within the data which is completely and utterly separate from the sources of variation captured within other principal components.  Usually, the variation captured by each PCA can be given 'meaning' and interpretative content, although the technique never identifies what dimension it is actually capturing.  There's an element of interpretion in figuring out what each component means.

Principal Components Analysis:  Results

I've run PCA over the regional industry employment breakdowns for the 2000 year.  The thing measured is each region.  The multiple different measures are the industry employment proportions.  There are as many components as there are regions (16).

Table 1:  Principal Components Results

	PC1	PC2	PC3	PC4	PC5	PC6	PC7	PC8	PC9	PC10	PC11	PC12	PC13	PC14	PC15	PC16
Trans_Warehousing	-0.24	0.07	-0.43	-0.01	0.05	0.26	-0.02	0.16	-0.19	-0.07	-0.44	0.42	-0.15	0.19	0.01	-0.16
Hire_RealEstate	0.00	-0.34	0.10	0.13	0.54	-0.01	0.35	0.13	-0.01	0.03	-0.02	-0.09	0.00	0.54	-0.04	0.31
Wholesale	-0.30	-0.14	-0.07	0.13	0.25	0.23	-0.38	-0.13	0.31	-0.16	-0.04	-0.05	0.37	-0.08	0.50	0.16
Other_Services	-0.33	0.14	0.08	0.14	-0.07	0.20	0.08	0.06	-0.50	0.20	-0.04	-0.40	0.34	0.18	0.00	-0.22
Arts_Rec	-0.12	0.32	0.19	-0.30	0.26	-0.10	-0.04	-0.41	-0.33	-0.04	-0.26	-0.27	-0.18	-0.17	0.10	0.26
Mining	0.12	0.32	-0.16	-0.32	0.07	-0.23	-0.37	0.07	0.27	0.51	-0.02	-0.10	0.07	0.44	0.03	0.02
Accom_Food	0.08	0.31	-0.22	-0.35	0.26	-0.10	0.26	-0.05	-0.15	-0.41	0.38	0.20	0.16	0.12	0.09	-0.05
Admin_Support	-0.32	-0.12	0.07	-0.19	0.32	0.02	0.09	-0.20	0.38	-0.02	0.05	-0.11	-0.30	-0.11	-0.17	-0.32
Health_Social	-0.07	0.33	-0.23	0.24	-0.24	0.34	0.30	-0.21	0.17	0.15	0.21	-0.05	-0.35	0.09	0.22	0.41
Retail	0.05	0.34	-0.16	0.29	0.37	-0.06	0.28	0.21	0.18	0.27	-0.08	-0.04	0.28	-0.47	-0.22	0.02
Agri_Forest_Fishing	0.30	-0.25	0.20	-0.14	-0.04	0.14	-0.01	0.07	-0.15	0.16	0.07	0.03	0.04	-0.13	0.07	0.31
Professional_Science	-0.39	-0.05	0.09	0.00	0.00	0.04	-0.11	0.10	-0.01	0.15	0.15	-0.05	-0.34	0.03	-0.30	0.03
Construction	0.16	0.31	0.16	0.07	0.16	0.25	-0.32	0.56	0.03	-0.41	-0.03	-0.25	-0.25	0.00	-0.08	0.11
Financial_Insurance	-0.37	-0.01	0.09	-0.20	-0.01	-0.15	-0.07	0.19	-0.10	0.12	-0.08	0.43	0.09	-0.18	-0.13	0.50
Manufacturing	0.07	-0.11	-0.41	0.34	-0.03	-0.47	-0.17	-0.21	-0.09	-0.24	-0.24	-0.22	-0.09	0.04	-0.21	0.22
Info_Telecom	-0.36	0.01	-0.13	0.08	-0.13	-0.21	-0.14	0.12	-0.06	-0.15	0.56	-0.10	0.13	0.04	-0.14	0.12
Public_Services	-0.23	0.08	0.19	-0.16	-0.37	-0.30	0.39	0.28	0.33	-0.22	-0.33	-0.19	0.09	0.09	0.21	0.05
Education	0.02	0.29	0.42	0.22	-0.08	0.14	-0.08	-0.36	0.19	-0.19	-0.10	0.28	0.27	0.29	-0.43	0.06
Utilities	-0.05	0.18	0.34	0.44	0.15	-0.41	-0.07	0.06	-0.14	0.11	0.10	0.31	-0.26	0.05	0.43	-0.20
Importance of components
Standard deviation	2.51	2.00	1.59	1.33	1.13	0.95	0.86	0.71	0.63	0.51	0.44	0.28	0.22	0.18	0.07	0.00
Proportion of Variance	33%	21%	13%	9%	7%	5%	4%	3%	2%	1%	1%	0.4%	0.2%	0.2%	0.0%	0.0%
Cumulative Proportion	33%	54%	67%	77%	83%	88%	92%	95%	97%	98%	99%	100%	100%	100%	100%	100%

The first principal component explains 33% of the variation in regional industry employment.  The second principal component explains 21% of the variation in regional industry employment.  Over 92% of the regional employment variation between industries is explained by the first 7 principal components.

Interpreting the Principal Components

There's a bit of art in figuring out what intepretation ought to be given to the variation captured within each component.  One approach is to evaluate both the weighing size and directions and see if, in their totality, they have some interpretation.  For example, in the PC1 Agriculture followed distantly by construction and mining hav the highest positive weighting (in bold red).  On the flipside, Professional Science / Finance_Insurance, and Information and Telecommunication industries are highly negative (in bold blue).

Conceivably, the first principal component dimension distinguishes regions of differing "market depth" and "industry complexity".

As regional markets grow, they increase in complexity. Small regions are predominately primary industry and agriculture.  Telecom and Telstra-clear have few offices in downtown Ashburton.  As regions develop, manufacturing and light industry develops and manufacturing employment grows.  As regionals develop into metropolitarian areas, professional services develop, service industries mature, and hardly anyone is employed in agriculture any more.  PG Wrightsons have few offices in Wellington.  This dynamic seems to be captured in the PC1.

The second principal component strongly negative weights agriculture and real estate industry employment proportions.  On the positive side, PC2 strongly weights Retail, Health,  Arts and Recreation, Mining, Construction and Education.  The second principal component interpretation is more tricky, but it looks to distinguishes regions differing between "prodominately service" and "prodominately agriculture".

This one's more complex, and I'd welcome some comments on this, but check out what happens when you graph the regions by principal components 1 and 2.  PC2 strongly differentiates Tasman from the West Coast regions. From Table 2 below, the West Coast/Otago and Northland regions have larger proportions of service industry employment, but I can't explain why Auckland features highly negative on PC2.

Fig 5:  Principal Components Analysis

Table 2:  Regional Industry Employment - Coloured by Second Principal Component Dimensions

	West Coast	Otago	Northland	Tasman	Hawke's Bay	Auckland
Trans_Warehousing	5%	4%	4%	2%	4%	6%
Hire_RealEstate	1%	1%	2%	2%	1%	2%
Wholesale	2%	3%	3%	3%	4%	9%
Other_Services	3%	3%	3%	2%	2%	3%
Arts_Rec	2%	2%	2%	1%	1%	1%
Mining	4%	0%	0%	0%	0%	0%
Accom_Food	12%	10%	7%	6%	5%	6%
Admin_Support	3%	3%	3%	4%	3%	6%
Health_Social	12%	12%	12%	4%	10%	8%
Retail	12%	11%	13%	10%	10%	11%
Agri_Forest_Fishing	9%	9%	10%	36%	19%	1%
Professional_Science	2%	4%	4%	3%	3%	7%
Construction	6%	5%	5%	4%	4%	5%
Financial_Insurance	1%	2%	2%	1%	1%	4%
Manufacturing	12%	14%	13%	13%	17%	16%
Info_Telecom	1%	2%	2%	0%	1%	4%
Public_Services	4%	4%	4%	2%	4%	4%
Education	8%	11%	11%	7%	8%	7%
Utilities	0%	1%	1%	0%	0%	1%

SOURCE CODE AND DATA FROM HERE DOWN

Fun With Business Demographics by jameshogan40

The following data is derived from Statistics New Zealand Business Demographics data.

http://www.stats.govt.nz/infoshare/  => Businesses =>  Business Demographic Statistics - BUD  =>  Employee count by Region 2011, ANZSIC and Size Group (ANZSIC06) (Annual-Feb)  => select all variables, all time periods, everything and re-arrange variable order like below.

BUD398301_20130323_014931_76