Economics Degree = Higher Salary

June 28, 2015 Leave a comment

Michael Cameron recently blogged on this topic. Research out of the UK has revealed the most lucrative subjects to study at university in order to get the highest paying salaries.

Economics graduates fair the best with earnings in the region of £45,000 five years after university. This is closely followed by law graduates who can expect to earn £42,000 and Maths or Statistics graduates who earn on average £39,000. All of the subjects in the top ten are either business or science related – see table below.

Salaries by degree

Categories: Labour Market

Global Trade graphic

June 25, 2015 Leave a comment

Below is a very informative graphic from The Economist outlining global trade. Interesting to note the dependence on trade of Singapore and Hong Kong.

They make the point that the number of regional trade agreements has risen from 70 in 1990 to just under 300 today. The Trans-Pacific Partnership (TPP) would link 11 economies of the Pacific rim—including Japan and Singapore—with America. These 12 countries together account for 40% of world GDP and one-third of trade. Meanwhile, the Transatlantic Trade and Investment Partnership (TTIP) is an ambitious planned trade deal between America and the EU.

Trade Flows 2014

Categories: Trade Tags:

Is poverty about money or friends?

June 23, 2015 Leave a comment

Social Interaction solutionIn the World Bank survey one stated that “I like money and nice things, but it’s not money that makes me happy. It’s people”. Research has suggested that social integration is more important for well-being than income and it also decreases poverty. By contrast loneliness can be deadly – one study found that it did more damage to health than smoking.

Income can be a misleading measure of need as:
1. Lower income groups end up living in different degrees of hardship depending on their intangible resources.
2. Having strong social integration reduce money hardship.
3. Friends and relatives can lend money, pool risk, mind children and bring news of job openings.

However a lot depends on having the right friends as if this does not eventuate hardship prevails. The more concentrated the poverty, the less helpful social networks tend to be.
A global survey conducted in 2014 by Gallup, a polling firm, found that 30% of people in the poorest fifth of their country’s population had nobody to rely on in times of need, compared to 16% of the richest fifth.

Several countries have experimented with schemes that connect lonely old people and deprived youth. Germany, for instance, has built “multi-generational” community centres where older visitors get computer coaching from teenagers.

Source: The Economist

Danish Mortgages – Levelheads v Woodheads

June 20, 2015 Leave a comment

An interesting paper* by the Harvard Economics Department looked at the Danish mortgage market and the fact that people tend to ignore the chance to save money when they can refinance their mortgage at any time without incurring a penalty. They identify those that are attentive to mortgage market changes and refinance their mortgage as ‘levelheads’. On the contrary those that are inattentive and experience inertia are seen as ‘woodheads’

The researchers found that many household characteristics move inertia and inattention in the same direction, so these attributes are positively correlated across households. Younger, better educated, and higher-income households have less inertia and less inattention. Almost three times as many homeowners refinanced in 2010, after rates had fallen sharply, than in 2011 when interest rates briefly spiked higher again. But woodheads were prevalent in 2010 as only 44% of those with a mortgage rate of more than 6% refinanced their loans even though rates of nearly 4% were available. On average woodsheds paid an extra 1.5% of interest as a result of their lethargic attitude.

The figure below illustrates the history of refinancing activity in our sample of Danish fixed-rate mortgages. In each plot, the bars (left vertical axis) represent the number of refinancing households, while the solid line (right vertical axis) shows the history of the mortgage interest rate. The top panel shades each of the bars according to the coupon rate on the old mortgage from which households refinance. The bottom panel shades each of the bars according to the coupon rate on the new mortgage into which households refinance.

*“Inattention and Inertia in Household Finance: Evidence from the Danish Mortgage Market” by Andersen S, Campbell JY, Meisner-Nielsen K, Ramadorai T. 2015

Danish Mortgage Refinancing

Behavioural Economics – iTunesU course for school students

June 18, 2015 Leave a comment

Previously I did a post on the Behavioural Economics course for school students. Below is link to that course as part of the iTunesU courses offered by King’s College. Please click the link below to subscribe to the course.

Behavioural Economics iTunesU course

BE iTunes

Categories: Behavioural Economics

What do the Shanghai Stock Exchange and the Yangtze River have in common?

June 15, 2015 Leave a comment

One of my A2 students alerted me to the fact that the Yangtze River and the Shanghai Stock Exchange Composite Index (SSEC) in the post GFC period are quite similar in shape. Maybe the building of the three gorges dam led to a drop in the SSEC index.

Yangste and China Stock Market

Trade Union lobbies for LOWER wages?

June 14, 2015 Leave a comment

Union Min WageMichael Cameron senior lecturer in the Department of Economics at the University of Waikato wrote an interesting piece on his excellent blog “Sex, Drugs and Economics.” The Los Angeles city council voted in May to raise the city’s minimum wage from $9 to $15 per hour. Initially trade unions fought hard for the increase in the minimum wage but they now want a change to the law that would exempt unionised firms from the new proposals – trade unions wanting lower wages? The Economist said:

Indeed, by exempting unionised businesses from the minimum wage, unions are creating more incentives for employers to favour unionised workers over the non-unionised sort. Such exemptions strengthen their power. This is useful because for all the effort unions throw at raising the minimum wage, laws for better pay have an awkward habit of undermining union clout. Britain’s minimum-wage law in 1998, for example, precipitated a decline in union membership. Once employers are obliged to pay the same minimum wage to both unionised and non-unionised labour, workers often see less reason to pay the dues to join a union.

In this case we have members of trade unions pushing up the wages of non-members but not their own wages. What are the benefits for the employer, union worker and non-union worker:
* Unionised employers will find that they labour costs will be lower than non-unionised employers
* Workers will be more likely to join the union if unionised employees are likely to be offered employment.
* Non-union employees receive the higher minimum wage.

As Michael Cameron said:
So, if there are so many winners, who loses from this proposal? While some non-union employees may be better off initially (from the higher minimum wage), available jobs for these employees are likely to reduce substantially. Why would employers employ a non-union employee for $15 per hour, when they can employ a union employee for much less? So, non-unionised workers are going to be made worse off.

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