If educated people marry other educated people and it makes income inequality worse is it a problem that needs a solution? Nice graph here that illustrates one piece of the income inequality puzzle

When the government collects and reports data on "Household Income" it includes the income of all the people living in a particular household.  Two people living separately will be counted as two household units and their income counted separately.

However, if they marry (or co-habitat) then they will have one combined household income. Half the households, double the income on a per household basis (no more total income, however).

As households are formed over time their characteristics based on several factors will affect total household income.

Education is one such variable that has been identified as one of the primary drivers of income inequality. Not the only one but significant enough to note

New data provided by the Census Bureau and interpreted by the Pew Research Center (graph below) shows that the rate of household formation by marriage has decreased overall since 2008 by an average of 11.4%.  However, the decrease is not evenly spread over educational attainment levels.

As you can see, those with a college degree get married at a higher rate than people with lower levels of educational attainment, and even though they have decreased they have decreased at a slower rate than the other categories (7.8% is significantly below the average).

Additionally, those with a degree have seen an uptick from 2011 to 2012 (brown bars to the extreme right) in family formation by marriage.

If income gains are going to those with more education and educated people are pairing up at a higher rate than other groups, then income inequality as measured by "Household Income" can only get wider.

I don't know how to fix this.  I just thought it was interesting and I don't think it is something that is talked enough about at a policy making level.

Should it???

My encounter with a "Snow Roller". You won't believe what happened next.

I live just north of Columbus, Ohio.  We had a unique weather event the night before last that produced a "Snow Roller". These are "natural" snowballs of various sizes that were formed with just the right conditions, temperature and wind.  I have never seen them before and apparently they are a rare occurrence.   A large soccer complex I live near has hundreds of them.  They have a very unique "swirl" pattern to them in the center.

Here is my daughter holding one just to give you a idea of the scale and scope of one.

Here is me holding one AND wearing it as a hat.  The kid in me required I do this.

It is difficult to see but this is the soccer field that is covered with them.  It is amazing to see these.  Glad I got the opportunity.  :)

Incentives: How much the Long Term unemployed used to earn when they worked and how much they now receive in cash benefits. This is difficult but numbers don't lie (or do they?)

I used this graph in a prior posting to ask why are the bulk of the long term unemployed in industries that have been employing the MOST people since the official end of the recession in June of 2009 (except manufacturing and construction)

I was curious as to what might be lost wages from work were and how much in cash (unemployment compensation) and near cash (SNAP, or "food stamps" benefits).

I used BLS data (see that below) for the average weekly wages, which I inserted in the graphic for the appropriate job category.

I used the national average for unemployment compensation and SNAP Benefits. Note there will be differences State by State in terms of unemployment compensation amounts--some higher, some lower.

The total in cash and near cash benefits an eligible unemployed worker is eligible for is $832.00 per week.
That is combing the two benefits and assuming for SNAP benefits a family of 4. So, the total could be more or less depending on the number of family members.

Compare the total in eligible weekly benefits to the total in average weekly earnings in each job category.

I believe economists would look at this and see---Incentive(s).

I am neutral on this. What do you think?

Source: NPR

Note: Here is where I found the average weekly wages. I used Dec 2013 weekly wage.

Source: BLS

The President spoke of the Long Term unemployed in the SOTU address but did he tell you what these people used to do for work? No? Ok, I will here...

What particular part of the economy did the currently Long Term Unemployed separate from when they lost their job?

I have to tell you I am VERY shocked by this. I assumed they would be part of an industry segment that was lagging in new job creation so there would be little opportunity to find work doing what they did before.

I would have expected Manufacturing and Construction to have much higher rates of long term unemployed as these industries have been disproportionately negatively impacted by the recession and are still lagging.

Source: NPR

The Top 3 and the 4th one are areas where job growth has been notably strong since the US officially exited the recession in June of 2010.

These job categories, except for "Professional and Business Services"(for the most part) are predominantly lower wage, lower skilled positions.

How do these people with no significant long term skills (just being honest) get absorbed back into the economy in a meaningful way?

What possible SPECIFIC policies can target these folks for gainful employment?

I am guessing the Minimum Wage will be mentioned as well.

So, we have lots of low skilled, low wage workers (don't look at me, look at the graph) on long term unemployment and the solution is to increase the cost of hiring these people (if they can get hired)?

Help me out with this, please...

Video (with sound inserted) of San Francisco 4 Days before the earthquake of 1906. So many historical, sociological, economic, and cultural observations one can glean from this.

Here is a great video that is chocked full of learning possibilities.  It is actual video footage taken 4 days before the 1906 Earthquake that leveled San Francisco.  Of course it did not originally have sound BUT someone edited it and insert sounds that would be typical of the activity taking place.

So cool. Not to be missed!!

You MUST watch to the end when they insert photos of the SAME street in the aftermath of the quake. Chilling.

Source: Gizmodo

My take on the Big Mac Index---the Big Mac Inflation Index. Am I onto something???

The Economist is out with its latest update on the Big Mac Index.  It is a playful illustration of the exchange rates and Purchasing Power Parity given just one commodity--McDonald's Big Mac.  Find out more about it HERE.

When I looked at the historical data available with the index I noticed in some countries the price of a Big Mac had changed quite a bit.

So I took the posted prices in the countries own currency from January 2012 (3rd column) and January 2014 (2nd column) and calculated the percent change in price of Big Mac (4th column).

The numbers are in descending order, from highest to lowest change in price.

I highlighted in RED the countries where the percentage price change was higher than the world wide average change in price of 9.28%.

Here is an assignment for you.  Check a few of the countries ACTUAL inflation rates and see how they correlate to the change in prices of Big Macs.   Maybe we have discovered a new fun measure of inflation---The Big Mac Inflation Index.  Just  send me some royalties. That's all I ask for.  :)

I compare the cost of a cook-out in 2013 with one in 1968 at average hourly wages and minimum wages for the two time periods. You won't believe the results!

I came across this grocery store advertisement from 1968 and decided to use it for a lesson on purchasing power. It is nice to have actual prices from a primary source.

In the red square I isolate the meat products.  Let's assume we are stocking up for a killer cook-out!

To simplify assume we will purchase 5 pounds of each meat (a 20 pound turkey is the exception AND I won't buy oysters as they are not a meat).

Now I shop...I buy all the other items and put them in my "market basket" and pay for them. You are going to have to take my word that I did the math correctly OR feel free to double check me.

Total:  $61.95 in nominal dollars in 1968.

Source HERE

According to the Bureau of Labor Statistics and its measure of the Consumer Price Index, the broad category of meat has increased in price by 6.3 times.

That means to purchase the same meat items today would cost about ($61.95 X 6.3) $390.00.

In 1968 the average hourly wage for a production worker in December 1968 was $3.11.

That means it took that worker 19.9 hours at $3.11 (pre-tax) to earn enough to purchase the market basket.

In December 2013 the average hourly wage for a production worker was $20.35.

That means it took a 19.16 hours at $20.35 (pre-tax) to earn enough to purchase the market basket.

Conclusion?  I suppose we can say that in terms of the purchase of meat for a cook-out, the purchasing power of a worker earning the average wage in 1968 and in 2013 was roughly the same.

How about applying the same analysis to the respective minimum wages?

In 1968 the minimum wage was $1.60. It would take a minimum wage worker 38.72 hours to earn enough for the meat.

In 2013 the minimum wage is $7.25.  It would take a minimum wage worker 53.79 hours to earn enough.

WOW!  That is pretty dramatic.  At least in terms of purchasing power, the minimum wage worker in 1968 was better off than his or her counterpart in 2013.

Maybe that is why I remember having so many more cook outs in the neighborhood when I was a young lad (born in 1960).

Note: Here are the price index information for 1968 and 2013 that I used.  I divided 237.576 by 37.8 to get the 6.3 times increase in the price of meats.

My small contribution: Something to make you think about "Privilege" as we mark MLK Day...

At church yesterday we had a visiting pastor and his topic was Injustice.  Apropos on this day we reflect on the life of MLK Jr.

He quoted some passages for a book by Andy Crouch: Playing God: Redeeming the Gift of Power.

The two passages below are secular and define the concept of "privilege" in terms even I could understand. I have been thinking about them since yesterday.  So I bought the book on Kindle and re-read the passages the pastor quoted and then some.

"Privilege is a special kind of power. It is a form of power that requires no effort. Indeed, only in unusual circumstances do we become conscious of it at all. Most of the time, privilege just works on behalf of those who have it, never making the slightest demands of them. The best way I know to define privilege is the ongoing benefits of past successful exercises of power. Privilege is the name for all the good things we do not need to try to acquire, because they simply flow to us as a result of past exercises of power.' (underlining mine)

This next one relates to an incident Mr Crouch had at the airport in Mumbai. where an airport worker moved him to the front of the line ahead of a group of men who were going to Saudi Arabia to work as laborers. It explicitly put the esoterica of privilege in front of him and required him ponder how much of his life, by virtue of who he is and what he looks like, is predicated on a privilege never earned.

"And privilege is dangerous because of how easily it becomes invisible. The incident in the Mumbai airport has haunted me ever since. There was nothing I had ever done to deserve to be put in line in front of these hard-working men. If anything, quite the reverse. I was simply the beneficiary of privilege, of rent— a free pass in excess of anything I deserved or even wanted. But what really has haunted me is this question: How many times have I been put at the front of the line without even knowing there was a line? How many times have I walked through a door that opened, invisibly and silently, for me, but slammed shut for others ? How many lines have I cut in a life of privilege?"

What was interesting about this encounter is the reaction of the men in line.  This is what they expected to happen.

"But as I walked off toward the boarding gate, flushed with surprise and embarrassment, I could not detect the slightest surprise or discomfort in that line of men. It gradually dawned on me that not only were they not surprised that I had been ushered to the front of the line— they had expected it the moment I arrived. They had understood what was happening long before I did. They knew about something I was only beginning to understand: the power of privilege."

As you go about your day look for explicit and implicit examples of the power of privilege and whether you (or others) are the grantee or the grantor of that privilege.

Book source:   Crouch, Andy (2013-09-09). Playing God: Redeeming the Gift of Power (p. 154). InterVarsity Press. Kindle Edition.

Inequality down on the farm. This explain a lot regarding the power of Big Agriculture.

Big versus Small Agriculture in one graph.

Look at the 2 left most dark and light blue bars.  Approximately 50% of US farms are between 1 and 49 acres in size, representing about 4% of cropland in the US.

Look at the 2 right most dark and light blue bars. Approximately 5.6% of US farms are 1,000 acres or more in size, representing 53.7% of US cropland.

Source: USDA ERS

The data below from the US Census puts a broader face on the graph above even though it is from 2007.  The numbers are different but that could be because of the way each agency measures the data or from 2007 to 2011 the market could have changed.  Probably a little of both explains the different numbers.

However, the point remains the same:  There is a huge gap between small(ish) and Big Agriculture.

Source: US Census

US government pays-off Brazilian Cotton Farmers so they don't complain about subsidies the US govt pays to wealthy US farmers. Got that? See here how much...

Your government at work.  This is how easy it is to spend other peoples money.

In order to keep Brazil from retaliating with trade sanctions over subsidies to US cotton farmers,  the US Dept of Agriculture paid them $174 million dollars to, well, not do that.

From NPR:

Why U.S. Taxpayers Started — And Stopped — Paying Brazilian Cotton Farmers

When he says "the rules," he means the rules of the World Trade Organization, which govern global trade. Back in 2002, Camargo went to the WTO with his complaint, arguing that the U.S. was illegally subsidizing its cotton farmers. He won. The U.S. appealed the decision, and lost again.

As the fight went on, Brazil threatened to retaliate with trade sanctions if the U.S. didn't stop subsidizing cotton.

And finally, in 2010, U.S. representatives made Brazil an unusual offer. They said: The subsidies to U.S. cotton farmers are part of U.S. law, and will continue for as long as the current Farm Bill is in place. So, the negotiators said, until the next Farm Bill passes, the U.S. will pay Brazilian cotton farmers $147 million a year.

"For Brazilian farmers, it's a lot of money," Camargo says. The Brazilians took the deal. And, every month, the U.S. sent over $12 million to Haroldo Cunha, president of the Brazilian Cotton Institute.

See video of a skateboarder stealing a 32" flat screen from Target. I found a picture of the one his Dad stole 20 years ago. Kids have is SOOO much easier today...

Here is a video of a young man stealing a 32" flat screen t.v. from Target and making his getaway via skateboard.  You see a crime, well I do too, but I also see the marvel of technological advancement that made this crime likely unsolvable.

He could easily tuck that television under his arm.

My question is, could his Dad have done the same thing 20 years ago around the time his son was born?
(yes, I am casting an aspersion).

Here is a 32" Sony Trinitron from 1994.  I had one of these.  Must have weighed 50-60 pounds, at least. Maybe more.  One most certainly could not ride a skate board with it in your arms.

Today's Big Screen TV:  Better quality, less expensive, fewer resources needed to build it, more efficient...oh, and MUCH easier to steal on your own...

Nice graph showing how college students get poorer and colleges get richer through subsidies.

Everyone knows the cost of college has increased dramatically in the last 30 years. But by how much?

The graph below is from a study at the Mercatus Center at George Washington University.  It show the difference in the publicly posted LIST TUITION PRICE that colleges charge and the NET TUITION PRICE that students actually pay after grants (Federal and/or State), scholarships, and other aid provided to students by various entities.

I doctored the original graph and put some numbers to it.  The BLACK line to the left indicates the year 1993/94 and the RED lines to the right indicated 2012/13.  I wanted to show a 20 year change.

All prices you see below are in 2012 dollars.

In 1993/94 the average list price for in-State tuition for a US Public college was $4,000 but students only ended up paying $2,000.  That is a subsidy of $2,000 or 50% of the list price.

In 2012/13 the average list price for in-State tuition was approx  $8,800 but students only paid $3,000. That is a subsidy of $5,800 or 66% of the list price.

The list price of tuition increase by 120% in 20 years but the net price paid by students increased by only 50% (from $2,000 to $3,000).

While students are paying more, the subsidies they receive (or I should say received by the colleges on the students behalf), is increasing at a faster rate.

Sacrifice: Americans decreased the number of meals eaten out in order to buy pet food for their pets during the recession. OR DID THEY? The Gumment' says yes, but I am not so sure. Tell me where I am going wrong...

Here is a quick lesson on elasticity AND how deceptive data can be.

From 2007 to 2011, spending on pets stayed close to 1 percent of total expenditures per household, despite the recession that occurred during this time. Spending on pet food stayed constant or increased during the recession, even while spending at restaurants fell.

OR DID IT??

The chart below (from BLS) the average yearly spending on Pet Food (Left Axis) and "food away from home"(Right Axis).  The yellow area represents the time span of the recession (Dec 2007 to June 2009)

It appears spending on our pets dietary needs stayed relatively constant throughout the recession, whereas spending on meals away from home took a nosedive.  One could conclude that the income elasticity of demand for pet food is relatively INELASTIC (quantity demanded did not change much relative to the decrease in income during the recession) and the income elasticity of demand for meals away from home is relatively ELASTIC (quantity demanded changed A LOT  relative to the decrease in income during the recession).  In other words, people did not buy less pet food but bought fewer meals out of the house.

But is this TRUE??

Source: Bureau of Labor Statistics

Look at this chart  below from economist Justin Wolfers via Twitter.  It shows how much the price of Pet Food as a category in the Consumer Price Index (CPI) changed over time.  Notice the even during the recession the price of pet food increased dramatically.

The chart above does not say it adjusts for inflation.  So, it is possible (likely) that the quantity of pet food purchased DID actually decrease but the higher price for the smaller quantity makes it appear that the same amount of pet food was sold.  The numbers in the chart are nominal. To adjust for inflation to find the real value we would have to know the quantity of pet food.

I think it is safe to say that Americans bought less of BOTH goods during the recession.

Do I have it right???

Nice graphic showing all the items in the Consumer Price Index. Lots of numbers but I see something else...

Here is a graphic (Business Insider) that presents the latest Consumer Price Index (CPI) for November (2013) in a very helpful way. It orders the change in prices of the items in the "market basket" of goods and services the Bureau of Labor Statics tracks on a monthly basis from high to low.  There are 175 items listed below.  The numbers are small because they represent the percentage change from a year earlier (November 2012).

If you were to add up all the positive numbers that extend to the right and subtract all the negative numbers that extend to the left  you would come up with a year over year percentage change of 1.2%.

Relatively low inflation, indeed.

Observation:  What you see is a bunch of numbers.  What I see is globalization.  Compare the change in prices of the top and bottom 10 items. The goods and services at the top of the list are considered "Non-Tradable" items. They are produced domestically and are virtually impossible to "off- shore". They are not so much subject to global competitive price pressure. These prices tend to increase consistently.

The goods at the bottom are "Tradable" and subject to the competitive price pressure of being produced off-shore.  These prices tend to decrease, or at least remain stable, over time.

Source Business Insider (go here for larger image)

A scene from "Wolf of Wall Street" plays out in real life (sort of). See the daily chart of the penny stock that went through the roof because of mistaken identity.

Opps! Here is a nice example of "Animal Spirits" on steroids.

Google recently announced it was going to purchase a company called Nest,  that makes high tech thermostats and fire equipment, for $3.2 billion dollars

However, it looks like the biggest (in the short term anyway) beneficiary is a company called NESTOR that is traded in the stock market under the tracking name "NEST".  See the confusion?  However, Nestor makes and sells traffic control equipment to cities.

Prior to Google's purchase NEST was traded on the stock market for, get this, $.0020 cents PER SHARE. Yes you read that right.

Below is a screen shot of the stock from Yahoo Finance I took a few minutes ago.  You can see the price is invisible until yesterday afternoon.  It had a meteoric ride up to $.10 cents.

So, if you bought $1,000 dollars of NEST at $.0020 per share you would own 500,000 shares.  If you were able to sell at the high point you would have ($.10 X 500,000 shares) $50,000.

That is quite a rate of return.

Note: you can see the price I snapped on is $.0021 (in blue near the time and date).  I could not get the cursor to settle on the low point of $.0020)