Nice Graphic showing the results of a recent poll on Americans attitude about cutting Federal Govt spending in light of the upcoming mandatory budget cuts. Interesting results!!!

Here are the results of a very recent Pew Research Poll on Americans attitude toward cutting Federal Spending in light of the looming "sequester".

While not a perfect correlation, Americans want to cut spending on the things we spend the least amount on and want to increase spending on the things where we already spend the most.

The 4 major areas that consume a preponderance of the Federal budget (Social Security, Medicare and Healthcare (Medicaid) and Defense) and really overwhelm the other spending categories show the public has little stomach for reducing those programs.

Pretty amazing that 30% or more people want to increase spending in just about all the categories. 


Pew Research Poll February 2013

Nice map showing State by State comparison of Minimum Wages. Why does it vary from State to State? Find out why HERE.

I think there is some confusion regarding the way the minimum wage is set in the US.

The Federal Government, through the Federal Fair Labor Standards Act, sets a uniform minimum wage which applies to all 50 US States.   Currently that is $7.25 per hour. It is lower for some other classes of workers (see excerpts below the map for examples).

However, each individual State has the discretion to set it ABOVE the Federal mandate if they so desire.  This map shows a State by State comparison of the prevailing minimum wage.

There are LOTS of interesting exceptions to the minimum wage law.  Here is a link to the Dept of Labor FAQ page that explains these exceptions.

Source: MinimunWage.org

There are LOTS of interesting exceptions to the minimum wage law. Here is a link to the Dept of Labor FAQ page that explains these exceptions.

Here is the most common one I hear from students:

What is the minimum wage for workers who receive tips?
An employer may pay a tipped employee not less than $2.13 an hour in direct wages if that amount plus the tips received equal at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.
Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, the employee is entitled to the provisions of each law which provide the greater benefits.

What minimum wage exceptions apply to full-time students?
The Full-time Student Program is for full-time students employed in retail or service stores, agriculture, or colleges and universities. The employer that hires students can obtain a certificate from the Department of Labor which allows the student to be paid not less than 85% of the minimum wage. The certificate also limits the hours that the student may work to 8 hours in a day and no more than 20 hours a week when school is in session and 40 hours when school is out, and requires the employer to follow all child labor laws. Once students graduate or leave school for good, they must be paid $7.25 per hour effective July 24, 2009.

Must young workers be paid the minimum wage?
A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $7.25 per hour effective July 24, 2009.

Other programs that allow for payment of less than the full federal minimum wage apply to workers with disabilities, full-time students, and student-learners employed pursuant to sub-minimum wage certificates. These programs are not limited to the employment of young workers.

Hans Rosling as a "Myth Buster" on the issue of Child Mortality Rates. Worth a couple of minutes of your time.

Here is Hans Rosling "clarifying" the issue of historical Child Mortality Rates around the world. 

This is really terrific!  Watch and Learn.  The world is getting BETTER in so many categories of quality of life. Yes, even for the most poorest amoung us.

One easy graph that illustrates all you need to know about the future of Retail Stores and Employment in that sector.

Here is a bar chart showing the decline in jobs in various "brick and mortar" retail stores.  "Brick and mortar" is a metaphor for physical stores that you can walk into and buy stuff.

Keep in mind, this is the decrease JUST SINCE 2001!


Source: EMSI

What is the cause of this decline?

Almost everything sold in a physcal stores represented by the above retail categories (some more than others) can be found in one of these devices you can hold in the palm of your hand.

Take a moment to look at your phone and list the things it can do (while in the palm of your hand) that in a prior and relatively recent time you had to have a separate and distinct device to perform that same task.

This is an example of an economic game-changer that is the result of "distruptive technology" (also known as disruptive innovation):

""A disruptive innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.""

This comes at a cost.  "Brick and Mortar" stores produce jobs locally.  The Smartphones produce DIFFERENT jobs and don't have the local, physical retail impact that the Best Buys, Barnes and Nobles, Office Depots, Virgin Record Stores, of the world do.

Luddites of the World are weeping...

For Students and Teachers--my PPT on Consumer and Producer Surplus AND Incidence of Taxation. Fun Stuff!!

Consumer and Producer SURPLUS---Determining Social Welfare

Uploaded by Gene on WizIQ Tutorials

My defense for an increase in the Minimum Wage to $9.00. I speak of one element of the labor market I don't hear ANYONE refer to and I think it is important to understand...

There is lots of talk, for and against, regarding the recent proposal by the President to increase the minimum wage from $7.25 to $9.00 per hour.

Economic theory suggest that when you increase the price of something (wages) the quantity demanded (workers) decreases, hence unemployment increases and if the price (wages) decreases the quantity demanded (workers) increases, hence unemployment decreases. 

Even with an increase in the minimum wage I believe I can make the case that employment will INCREASE rather than decrease using the principles of Price Elasticity of Demand and the Total Revenue (Income) Test for Elasticity of Demand.

It might be a "stretch" but I think Elasticity of Demand for Labor factors into the equation.

I will use a series of graphs to illustrate my case.

The first graph shows a labor market in equilibrium at an hourly wage of $7.25 and the current level of employment at that wage 100 workers (obviously a made up number for simplicity).  $7.25 is the current minimum wage in the US. I will use this wage rate as my base and compare it to the new minimum wage of $9.00 proposed by President Obama in his State of the Union Address.  It also shows the TOTAL amount of income earned by these workers at that wage rate--$725.00 PER HOUR

Graph #2 shows the imposition of a new $9.00 per hour minimum wage ABOVE the current wage.  This would establish a new PRICE FLOOR. This is a 24% increase in the wage rate. The quantity demanded for labor DECREASED to 75 workers. This is a 25% decrease in Quantity Demand for Labor.  Using our formula for Price Elasticity of Demand (%chg in Qd/%chg in P) this suggests the Demand for Labor in this market is slightly ELASTIC, just over 1.  If we apply the Total Revenue Test (in this case Total Income), we find that as the wage increased the Total Revenue (Income) DECREASED to $675.00. This suggests the Elasticity of Demand is ELASTIC—as the price increases the Quantity Demanded decreases by a greater amount.

The policy implication of this increase in the minimum wage is we have REDUCED the income of these workers overall.  Less income, less spending in the economy overall, less GDP, hence less employment.

However, I think we have to look closer at the Elasticity of Demand (even for low income workers) in the SHORT RUN. The Short Run is the operative 2 words.  

I don’t believe businesses will significantly change their hiring or lay-off decisions in the immediate after-math of the increase in the minimum wage.  They must serve current customers and fill current and future orders.

Given this condition, In Graph #3 I suggest the Demand for Labor is relatively INELASTIC.  Business will NOT reduce their Quantity Demanded for Labor by more than the Increase in the Price of Labor. 

If Demand for Labor is relatively INELASTIC, then an increase in the Minimum Wage (+24%) will reduce employment to 90 workers from 100, or 10% LESS than before.  Using the formula for Price Elasticity of Demand (%chgQd/%chgP)  will yield a number LESS than 1 (-10%/+24%= -.41).  Performing the Total Revenue (Income) test, we find total income earned by these workers is $810.00, $85.00 MORE than before.  Fewer workers, higher overall income, in spite of the decrease in employment.

Assuming Demand for Labor is relatively INELASTIC, even for low skilled workers in the short run, by increasing the minimum wage will increase total income earned by these workers.

If total income increases these workers have more money to spend.  An increase in income will tend to move them to buy more “normal” goods and fewer “inferior” goods.  Normal goods tend to be higher value goods purchased as income increases.  Spending more money will create an increase in demand for new “normal” goods and services.  Hence, businesses will sell and produce more goods and services.  They will likely need to hire additional workers (at the margins) to produce and sell those additional goods and services.

As illustrated in the graph below, the Demand for Labor will INCREASE. The Demand Curve (D2 for Labor) will shift to the RIGHT.  As represented by Point “D”, at $9.00 the Quantity Demanded for Labor is 110 workers, a level of employment HIGHER than before.

Elasticity of Demand for low-skilled minimum wage workers seems to me mirrors the condition of the economy.  If the economy is doing well and unemployment is relatively low, then an increase in the minimum wage may actually be productive for the economy, as the demand for that labor will be relatively inelastic.

However, in an economic downturn it seems to me the demand for low-skilled labor becomes relatively elastic and an increase in the wage rate will have a higher negative impact on employment.

Bottom line for me:  Gotta pay attention to Elasticities and less to politics when it comes to this issue.

Price Floor Powerpoint---You can bet the Farm on this one!!!

Price Floors are another example of government intervention into the "free" market. It is an effort to set a price for a good or service ABOVE what the marketplace dictates/suggests the price should be.

The two prominent examples are the Minimum Wage and prices received by farmers for their commodity in the market. 

Here is my Powerpoint presentation trying to illustrate this concept in the simplest terms possible.

I use an agricultural commodity as an example---Corn.

Let me know what you think, and more importantly, any egregious errors I might have made. THANKS!

Price Floor as seen applied to an Agricultural Product

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Price Ceilings explained as simply as possible. Must know info for when the Mayhem Guy from AllState comes to visit your community...

When disaster looms or when it strikes there can be a significant disruption in the delivery of goods to that area.  We have learned about this from the recent natural disasters in the Northeast US (Hurricane in the Summer and Snow just recently).

When this happens there are usually price increases on vital goods, such as water, basic food staples, gasoline, batteries, etc.  When the prices rise there is the inevitable cry of "PRICE GOUGING!!" and people demand the government do something about it.

The obvious action would be for the government to impose Price Ceilings.  A Price Ceiling prevents sellers of goods from raising prices above "reasonable" levels---whatever that means exactly.

The imposition of Price Ceilings do have consequences.  I put this powerpoint presentation to help you (or your students) understand how they work to serve AND under serve the marketplace.

Let me know what you think. Thanks!

Price Ceilings Explained Step by Step

Uploaded by Gene on WizIQ Tutorials

My Powerpoints to teach the Foreign Exchange Market in AP Macroeconomics.

My Powerpoints to teach the Foreign Exchange Market in AP Macroeconomics.

The first one is a long version to teach the "nuts and bolts". The second is a quick(er) review of the first.  The third is an explanation of the Interest Rate Effect on in the FOREX (very important for the AP Macroeconomics test).

Graph of Demand and Supply in the Foreign Exchange Market

Uploaded by Gene on WizIQ Tutorials

FOREX---Summary of what shifts the Supply and Demand Curves

Uploaded by Gene on WizIQ Tutorials

Interest Rate effect on the FOREX

Uploaded by Gene on WizIQ Tutorials

Can you see me (Powerpoint) now?

My detailed powerpoint on curve shifting in a Basic Supply and Demand graph.  This is a test to see if it embeds properly and people can see it without having to sign up at the site where it is posted.

Let me know in the comments if you can view it freely. Thanks!
 

Demand Increasing and Decreasing---How and Why the Curves Shift.

Uploaded by Gene on WizIQ Tutorials

Supply Increasing or Decreasing---How and why the curves shift

Uploaded by Gene on WizIQ Tutorials

Nice Infographic showing why Chinese consumers pay more for imports of certain foreign goods. See here how I link it to the Foreign Exchange Market. Gives an interesting perspective.

Here is a comparison of the price differential of certain "luxury goods" sold in China and the US.

The items below give the prices in the Chinese currency Yuan.  This shows, at the prevailing exchange rate (more on that a minute) how much the good is locally in China and how much that same good would cost the Chinese if they could exchange their currency and buy it in the US. In other words, how much Yuan are they giving up to buy the good in each place.

The current exchange rate between the US Dollar and the Yuan (CNY) is $1.00 = 6.23 CNY or the reciprocal 1 CNY = $.16.  ($1.00 "buys" 6.23 CNY or 1 CNY "buys" $.16).

To put each of the CNY numbers below in perspective, divided each of the numbers you see below by 6.23 CNY. This will give you the US Dollar equivalent.   Note: you can also multiply 22 CNY by $.16 and get the same result.

Example: In China 22 CNY for a Starbucks coffee would be (22CNY/6.23CNY) $3.53. In the US it would be (12 CNY/6.23 CNY)  $1.95.

Do the same math for the other goods to get a dollar to dollar comparison.  This is too much fun not to share! Hope you liked it.  :)

[Infographic by East-West-Connect.com] [Original Chinese version by Sohu.com]

Nice and Concise article on the concept of Opportunity Cost. I encourage you to read it. Besides, what else do you have to do today?

See what I did there??? :)

Thinking in terms of Opportunity Cost can change how you make decisions.  I believe for the better.  It provides a framework to filter your choices through and may (or may not) help you arrive at a more beneficial outcome.  If nothing else, it causes you to pause and think about a decision from many angles and prevents rash decisions you might regret later.

Here is an excellent (and short) article on this important but lightly stressed concept in Economics by are "real" economist, Emily Oster.

She suggests understanding Opportunity Cost will help you not just in personal decision making, but in how others make decisions regarding THIER opportunity costs relative to YOURS.

""Applying opportunity-cost theory won’t always change your behavior but can simply be a useful tool to understand why things are the way they are. When I was pregnant and visiting my OB every few weeks, I waited for the doctor every single time. Sometimes for as long as an hour. I was furious. Didn’t they know my time was valuable? But consider this: Because of the way appointments like this work—because they are unpredictable in length—someone will have to wait. Either the doctor schedules long appointments and sometimes she waits for you, or she schedules short appointments and sometimes you wait for her. Doctors are very highly paid, and, therefore their opportunity cost is very high. For most of the rest of us, our opportunity cost is lower. If someone has to wait, it’s efficient for it to be the person with the lower opportunity cost. In other words, you.""

 The article has several other example of Opportuntiy Cost(s).  I encourage you to read the whole thing. 

Nice, short video primer on what the Debt Ceiling is. An informed citizenry is, well, rare...

If you are not sure what the Debt Ceiling is all about, here is a good place to start.  As always, the devil is in the details and the issue gets way more complicated.  However, this will give you a jumping off point (by that I don't mean the nearest bridge) to learn more. :) 

David Wessel, Wall Street Journal

Interesting chart showing the Gender Gap in obtaining College Degrees and the disciplines those degrees are in. Eye-opening!!

Numerically, women earn significantly more college degrees than men do.  However, there is some disparity in the nature of those degrees.  Below this graphic is a brief analysis from Mark Perry at Carpe Diem.

From Carpe Diem:

The table above is based on the most recent data from the Department of Education on bachelor’s degrees by academic discipline and the sex of the graduating students for the college class of 2011 (most recent year available). Here are some observations:


1. Women earned 57.2% of all bachelor’s degrees in 2011, which also means that there were almost 134 women in that year’s graduating class for every 100 men.

2. For the College Class of 2011, women significantly outnumbered men in 15 academic disciplines, men outnumbered women in nine academic fields, and there was approximate gender parity in five disciplines.

3. For bachelor’s degrees in health professions (primarily registered nursing), 566 women graduated in 2011 for every 100 men, for public administration there were 446 female graduates for every 100 men, for education there were 391 women for every 100 men, and for psychology there were 334 women for every 100 men.

4. In the most unbalanced academic fields favoring males, 481 men graduated in 2011 with a bachelor’s degree in engineering for every 100 female graduates, and 467 men earned a degree in computer science for every 100 women.

5. As much as we hear about female under-representation in STEM (science, technology, engineering and math), women outnumbered men for bachelor’s degrees in biological and biomedical sciences by a ratio of 144 females for every 100 males. Women also earned more than 43% of all bachelor’s degrees awarded in mathematics in 2011, and more than 44% of the degrees in general mathematics (the most popular of the 12 sub-disciplines in math). For general chemistry (another STEM field), women earned almost half (48.8%) of the bachelor’s degrees awarded in 2011.

Is student debt a new form of birth control? Maybe this is the only one that is truely effective!!

Behind the falling US birthrate: too much student debt to afford kids?

Karen Hu of Oakton, Va., is 28, married, graduated from law school – and thinking about babies. But that's as far as she and her husband, a software programmer, have gotten: just thinking. What's holding them back?

For one, Ms. Hu is finding it a challenge to land a good job in the post-recession economy.

For another, her student debt – some $164,000, with a monthly payment of $818 – is forcing the couple to think hard about taking on the additional expenses that come with having a child. "Children just don't fit into that scenario," Hu says.