<![CDATA[Latino Economist - L.E. Blogposts]]>Fri, 08 Dec 2017 23:59:00 -0800Weebly<![CDATA[Part 6) Income Inequality: Would People Pretend Capitalism as a Theory Works if the Most Important Benefit doesn't Really Happen?]]>Mon, 29 Aug 2016 22:29:45 GMThttp://latinoeconomist.com/le-blogposts/part-6-income-inequality-would-people-pretend-capitalism-as-a-theory-works-if-the-most-important-benefit-doesnt-really-happen
Article Concepts
  • Incentives & Market Capitalism
  • Economic Downward Spiral
  • Maximum Benefit for FEWEST People?
  • Conclusion

Incentives and Market Capitalism

     It is argued that market capitalism is superior to communism and socialism because market capitalism as a system gives people in the economy incentives to be as productive as possible, because their productivity will allow their wealth to grow and allow people to rise socially.

     So far as people know, this is the advantage of market capitalism. However, the U.S. has the worst income inequality of all of the western developed countries in the world while at the same time having arguably the free-ist market capitalism economy in comparison to the U.S.’s European counterparts who have more expansive social welfare programs like tax funded health care for all people.

     So then, the incentives are lacking considering the economy functions in a manner that allows wealth to be concentrated in the hands of the top 10, or even the top 1, percent of people in the U.S. Therefore, that type of wealth accumulation reveals a flaw in these so-called incentives.

     It would be understandable if the economy was flourishing and expanding even with this extremely large gap in income inequality, but that is not the case. In fact inflation in the U.S. is at historic lows, to the point where the markets and economists alike are not certain that it is a wise idea for the FOMC Chair Janet Yellen to raise the Fed Funds interest rate off of the lower bound. The FOMC inflation target that they cannot even reach is only 2%! People, not even the FOMC it seems, do not appear to be confident that the 2% level of inflation can be reached (Yellen’s News Conference…, Bloomberg).

Economic Concepts Related to Income Inequality

     Before we get into what a Downward Economic Spiral is as a concept, let's start with understanding some definitions of some very simple terms that are contributing factors to this concept, that happen to have annoyingly pretentious names, but which are also concepts we working class people are super familiar with.

Wages

     “Wages are the price that employers pay for labor. Wages not only take the form of direct money payments such as hourly pay, annual salaries, bonuses, commissions, and royalties but also fringe benefits such as paid vacations, health insurance, and pensions”(Economics, 271).

Real Wages

     “A real wage is the quantity of goods and services a worker can obtain with nominal wages; real wages reveal the ‘purchasing power’ of nominal wages”(Economics, 271).

Prices

     Consumers have more buying power when their wages rise. When consumers have more buying power they are likely to spend more. When consumers spend more producers can reinvest profits into creating better products, which increases quality of life for everyone, or the producers can charge higher prices to earn a higher profit because consumers are willing to spend. When consumers are willing to spend, this enables producers to produce more and hire more workers at higher wages, which benefits everyone in the economy when prices rise in this fashion. If prices rise in this fashion we can get inflation.    

Inflation

     Inflation is not intrinsically and always good for an economy. However, a complete lack of inflation is bad for an Economy. Also, the Economy of Japan is proof that inflation can stagnate for decades, and thus should not be taken for granted. Though the Economy of Japan on the whole provides a good quality of life to the Japanese people, we can see in the actions of the Bank of Japan cutting interest rates, even setting negative interest rates in an effort to stimulate its economy, that a steady rate of inflation year over year is desired for a healthy economy.

     Inflation comes with rising wages and prices. However, the U.S. economy has had near stagnant inflation in recent years, and wage increases have also been nearly stagnant. The FOMC anticipates inflation (and inflation is difficult to see), and if inflation comes along without the proper measures being take there can be extreme inflation which is bad for the U.S. economy, the FOMC still does not see inflation rising to its tiny 2% target until 2018 (Yellen…Bloomberg).

Downward Economic Spiral

     A downward economic spiral is when one negative action causes the market to react with another negative reaction. Then, another negative reaction to the latest negative reaction occurs, and this process continues on and on because the market does not know what, or how, to take an action that will stop the spiral. The spiral consists of actions that have negative effects on markets that follow each other.

     For example the consumer will feel uncertain about the future, so the consumer will spend less. Then producers will see consumers spend less, so then producers produce less. Then government officials may think that producers will make less profit if they produce less to sell to consumers, so the government officials may increase taxes on consumers and producers alike in order to balance the budget. Then as a result of the government’s action, consumers can grow still more uncertain about the future and as a result choose to cut back spending again. Then producers may see that consumers will again spend even less, so producers will again react to the actions of consumers by cutting production again. Then the government would repeat coming to the same conclusion, raise taxes to balance the budget, which in turn could scare consumers again who spend even less again, and the cycle you can see can repeat itself over and over again. And every time one of those three actions by the consumer, producer, or the government is taken, the economy would shrink again and again and again, in a vicious never ending cycle.

Capitalism Should Equal Maximum Benefit For Maximum People, Not Maximum Benefit for Fewest People

     Given that the incentive device is not working as well as it is supposed to, which we found in the Brookings Institute study on income inequality, the so-called incentive device of free-market capitalism needs to be re-thought through. The question that must be asked is: Can the lives of most people in the U.S. economy be significantly improved if the government closes the income inequality gap down to match near peak U.S. economic levels (or that of their European Economy counterpart)  – without worsening the economy?

     I am not an economist capable of building models and applying econometrics to such a question, yet, if it is possible, then it should be done, because the sales pitch of free-market capitalism is that in the long-run it will benefit everyone in the economy the most. Since this does not seem to match-up with reality, the course of action that should be followed should be whichever yields the best economic benefit, even if that is social health programs or better income distribution facilitated by the U.S. government.

Conclusion

     I believe that the agent for change in the income inequality problem should be the government. Just as the government has to prevent or regulate natural and unnatural monopolies alike, because monopolies are bad for the economy if left unchecked or unregulated, so too income inequality if allowed to grow out of control or unregulated will impair the U.S. economy so long as it persists in the extreme. This I believe until a study or evidence is presented to the contrary. Let’s also take note that it is hypocritical for any person to say the U.S. government should intervene to save financial markets by leveraging the power of the U.S. tax base, but not leverage the wealth of the top 10, 5, or 1 percent of earners to improve the lives of the mass of the U.S. population.

     The U.S. government leveraged the U.S. taxpayer to prevent financial markets that are integral to the global system from collapsing in on themselves as a result of their own largesse. This bailout of the financial markets by the Government’s leveraging of taxpayers wealth is beyond strict market capitalism. I agree with the actions taken by the government because it was for the good of the entire system, and on the whole the largest amount of people would be better off as a result of the government bailouts. And that is what matters in Economics to me; the most people benefitting overall is what is most important to accomplish when possible. To hell with strict philosophical Economics that seeks to maximize the most profit, even if that profit only goes to 1% of people. With that kind of Economic philosophy, slavery should never have been absolutely abolished, since after all slave labor is the cheapest labor of all if it is used in the most efficient market for slave labor. I am not for slavery, and therefore I am for government interference when it can benefit the most people.

     Now that I have described the good reasons why I am in favor of the government’s interference committed in the midst of the financial crisis of 2008-2011, I will say that I am for government action in solving the problem of income inequality. Most especially because the U.S. taxpayer was leveraged to save the financial market even though it was the financial markets that made the mistakes, so then the least the average taxpayer can receive in return is a smaller and healthier gap in income inequality. The most important reason why it is a good thing if the government intervenes to improve income inequality is because it will help benefit the most of amount of people, and in the end will not hurt Economies in a way that matters. Slave-owners in the U.S. did not want to see slavery abolished because it would make them lose profit, so too the 1% do not want to have a smaller gap in income inequality because it will make them lose a little more of their vast wealth relatively. I do not care for the slave owner’s maximization of his profits because the slave-owner commits evil on masses of people, and for the same reason I do not care if the profits of the top 1% are maximized either.


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Works Cited

Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

Cassidy, John. Piketty's Inequality Story in Six Charts. The New Yorker. Chart 1. Web. 2014. 
http://www.newyorker.com/news/john-cassidy/pikettys-inequality-story-in-six-charts

Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates

Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes

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<![CDATA[Part 5) Income Inequality: Krugman's Data that Refutes Racist Assumptions About Black Poverty by Whites]]>Sun, 31 Jul 2016 15:57:19 GMThttp://latinoeconomist.com/le-blogposts/part-5-income-inequality-krugmans-data-that-refutes-racist-assumptions-about-black-poverty-by-whites
Picture
Baltimore’s Tolerance Double Standard, an OtherWords cartoon by Khailil Bendib

Main Points of this Article

  • Whites Believe Black Poverty & Higher Rates of Drug Use in the Black Community Are Derived From Blackness
  • Now, Whites Experiencing Higher Rates of Poverty Are Using Drugs at Rates Identical to Blacks in Equal Poverty
  • This is a Revelation that White Assumptions Were Based on Racist Bias Against Black People
  • Actual Economics Should Always Know Race or Skin Tone Cannot Cause Different Moral Behavior
  • Poverty Causes Higher Rates Drug Abuse, and Not The Other Way Around

"Return of the Undeserving Poor"

          Now, a staunch free-market economist may start to chafe when hearing talk of finding a way to change current levels of income inequality to better the social welfare of residents of the U.S. Certain people I know start slurring words and flinging accusations of socialism and communism when the topic of income distribution is mentioned as a point of discussion (any person who is familiar with the actual structure of the institution of the U.S. economy will recognize the desire to exclude the concepts of Socialism & Communism as irrational and naive). I know this from first-hand experience. 

          As thinkers we must have integrity and practice intellectual honesty, and to that end we must be data-driven in our conclusions. 

         Thus we must look at all of the effects that are correlated with widening income inequality. We must approach our analysis with keeping in mind that correlation does not automatically equal causation. And when there are direct correlations, we must analyze and look for conclusions, and determine how severe the negative or positive effects are, and weigh all aspects fairly. We must also remember we are human beings, and it is only the circumstances people are born into that has the greatest influence over a person’s life in this world at the current time.

           In an article by economist Paul Krugman for the New York times, Krugman re-hashes the inequalities in African-American communities that were present in his time some decades ago; his time being when legal, U.S. law sanctioned and enforced, racist discrimination against African-Americans in all of America was ending. Krugman is also careful to point out that only U.S. law sanctioned discrimination was coming to an end, but not the de facto discrimination, which is when private “white” citizens and communities conspire as private citizens to create and perpetuate discrimination. Examples of this include red-lining (not selling houses to black people in white communities) and refusing to integrate schools even though they were not legally segregated. So, why would an Economist bring up such issues like racism in America’s past and present? Let’s just say Krugman is not beyond shoving hypocritical racist lies down the throats of those people Krugman views as hypocritical racist liars.

           Krugman brings up that in the past, “whites” in general tried to blame poverty and crime levels in African-American communities on the fact that African-Americans were different racially and culturally than whites. As horrifying as this all is, Krugman has taken the opportunity to collect economic data on current income inequality levels that proves that old racist line of thinking were always false. “There were all kinds of theories, ranging from cultural hand-waving to claims that it was all because of welfare”(Krugman).

Krugman points to an Economist named William Julius Wilson who noted at the time that is was pure economic circumstances that lead, by which he means caused, to the disparity in behavior, and that race and culture were only correlations, “And the social collapse, while real, followed from that underlying cause”(Krugman).

            Krugman takes the implications to the logical conclusion so that there would not be any confusion. Krugman posits this claim, which he later supports with data and a chart. “This story contained a clear prediction — namely, that if whites were to face a similar disappearance of opportunity, they would develop similar behavior patterns”(Krugman). Now in truth, the fact that more people are suffering as a result of income inequality is not something for any person to be happy about, and Krugman does almost seem to revel in the fact that whites are now suffering too. However, this would be a misinterpretation of what Krugman goes on to say. Krugman is not reveling in the economic suffering of others, Krugman is rejoicing and emphasizing as much as possible in the fact that racists of old and today are proven to have been incredibly and egregiously wrong in their racist conclusions that whites would somehow fair better than blacks given similar circumstances. Krugman hopes, though sadly probably in vain, that unconscionable racists can look at this data and finally conclude that their beliefs about differences in humans is caused by what is known as “race;” and therefore we should treat all peoples as equals, and together construct an economic society that seeks to in reality give all people equal opportunities to succeed, instead of the current “American Dream” lie that everyone can equally succeed depending solely on how much effort they decide to give.

            Here is Krugman on current data on income inequality proving racists incorrect and grossly incompetent in their logic in the first place:

“And sure enough, with the hollowing out of the middle class, we saw (via Mark) what Kevin Williamson at National Review describes as ‘the welfare dependency, the drug and alcohol addiction, the family anarchy’.’ Oh, and lots of swipes at food stamps, welfare programs, disability insurance (which conservatives insist is riddled with fraud, despite lots of evidence to the contrary.)”

Solution is Social Welfare: Most Important Information About Krugman’s Article

   There are people, and perhaps many of them are economists, who believe that capitalism and markets are efficient and fair, and that somehow welfare programs of any sort can and will destroy Capitalism, democracy, freedom, and the virtues of virgins everywhere. Okay perhaps not the virtue of virgins, but essentially there is a sort of belief that social health programs are the harbingers of some sort of economic apocalyptic end of days.

   Personally, I think there is zero data on the U.S. economy or any other major or real economy to support that. For example, to think social security should have never happened does not take in to account what would have been a better alternative, or how the problems social security solved would be solved otherwise, and there is certainly no evidence that the U.S. will never be able to devise some sort of solution for the economic problems that we are now facing as a result of having implemented social security during the Roosevelt administration. Not to mention that I have never read an analysis (not that I’ve scoured the research facilities looking for them) on exactly how many people over the course of how many years, that Social Security has benefitted, and how it would have made sense to take all of that benefit away from the millions of Americans that Social Security has thus far benefitted.

   But I digress, and we return to Krugman’s points and data, which so much more succinctly debunks the belief that a more generous welfare state would make the U.S. worse off: “It’s surely worth noting that other advanced countries, with much more generous welfare states, aren’t showing anything like the kind of social collapse we’re seeing in the U.S. heartland.”
Rising Mortality Rates Chart
   This data, this chart, is amazing is it not? Sad too, since that rising red line represents real people in America’s heartland, who are not living as long or as well as the can and should have. Look at those lines for France, for Germany, for Sweden, all of which are more generous welfare states than the U.S. Their people improve, while ours decline. What is the point of holding on to an illusion that ends your life earlier, and causes your health to decline?

   Though it would have been better if people in the U.S. had not been racist against African Americans in the past, and thus earlier identified the effects of wide income inequality (and therefore opportunity), inequality has on every person of every race, then now not only would white Americans not being suffering as much as a result of current income inequality trends, but African-Americans too would not have been suffering worse from the past until now had changes been made through efforts of social welfare and better income distribution.

Works Cited

Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates

Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes

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<![CDATA[Part 4) Income Inequality:  Effects of Income Equality – Why is it a bad thing to have such income inequality within our country?]]>Sat, 16 Jul 2016 04:49:43 GMThttp://latinoeconomist.com/le-blogposts/part-4-income-inequality-effects-of-income-equality-why-is-it-a-bad-thing-to-have-such-income-inequality-within-our-country
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CNN Money

Main Points of this Article

  •  Poverty is Inflicted on Groups by Institutions
  •  Every Race of Person Behaves the Same, All Things Being Equal
  • "Economic Despair"

Brookings Institute Article: How "economic despair" affects high school graduation rates for America’s poorest students

   The Brookings article first familiarizes readers with a commonly known economic theoretical principle, the “aspirational effect.” The aspirational effect more or less claims that poor people will stay in school (also do well in school) because they see people live better lives when staying in school. By this theory the poor will rise because they have the incentive to live better. We can also come to the conclusion that this also means that the poor must be aware of their condition, that in fact their lives are not as good as people with more wealth, or higher income, “students… incentivized to invest in their own human capital — such as investing in their own education.”

   So in essence the theoretical poor people will think “my life is not as good as the lives of people with more money; and the way for me to live a better life is to earn more money; and the way to earn more money is to stay in school in addition to doing well in school.”
 
   Here is the key question of the article which when answered with data, proves the “aspirational” model not only does not work, but has it backward: “But what if that conventional thinking is wrong? What if inequality doesn’t incentivize students at the bottom of the income ladder to work harder, but rather disincentivizes them?” If then being poor causes children to despair and give up on education, then the children who give up on education will enter the labor market with a skill deficiency, and thus be at a major disadvantage when searching for work. Firms too will be at a disadvantage if the labor pool in the firm’s area is made up of a labor force that does not have the basic education that enables workers to be as productive as possible. Sadly, children who live on the poor side of the spectrum of income inequality are more likely to succumb to dropping out of school. Without a high school education, a person’s options for employment are limited for the rest of their life. Kearney and Levine’s finding amounted to this, “low-income children who grow up in states with greater income inequality drop out of high school at higher rates than their peers living in states with less income inequality (that is, states with smaller gaps between the bottom of the income ladder and the rungs above).”


   We must realize too that we are not just reading charts and graphs, and empty statistics. The lines on these graphs, charts, and data, cause human beings to feel hunger, to grow desperate enough to commit crimes or suicide, to end up incarcerated, to not be viewed as a suitable and reliable partner to have children with or marry. These charts represent real suffering, and the real suffering is maximized by current income inequality levels.
Chart One
Chart Two

Social Mobility

   Theoretically, a group of people who will not gain upward social mobility as a result of education, are in economic terms being rationale when they make the choice to drop out of school, because school yields them no economic profit when their social mobility is impaired. Therefore, we must acknowledge this study by Kearney and Levine, because they state that paying attention to the poorest in the income distribution is where everyone can see the direst effects that occur as a result of income inequality upon analysis. Though others suffer too, we can empathize with the poorest in the nation who are being disincentivized because they can perceive that education will not allow many of them passage out of the economic circumstances forced upon them. And we must be intellectually honest with ourselves and accept that we too would succumb to the same fate on average if we were placed in the same circumstances.

Works Cited

Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates

Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes

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<![CDATA[Part 3) Income Inequality: What is Wealth? The Difference of its Definition Our Understanding]]>Mon, 20 Jun 2016 04:11:23 GMThttp://latinoeconomist.com/le-blogposts/part-3-income-inequality-what-is-wealth-the-difference-of-its-definition-our-understandingWhat is Wealth?
   Wealth is having relatively more than others. For example, if every person on earth had one dollar, and all prices for all things were equal everywhere, the wealth of people would be identical (with exception for assets already in possession).

   Wealth is also relative in that it is a of matter how much more or how much less one has than other people, because that determines if you fall in the upper, middle, or lower income class. The class system structure by its definition is relative. For example, if the top 1% of earners earned one-hundred thousand dollars a year, that would be meaningless on its own. But if the ninety-nine percent of earners below the top 1% earned an average of five-hundred dollars a year, that would mean the top 1% of income earners, earns 200 times more income per year than that of the average earner. However, if the top 1% average income remained one-hundred thousand per year, and the average income of the 99% of people below the top 1% earned an average of forty-thousand dollars a year, that would mean that the top 1% of earners would only earn 2.5 times more income per year than the average income earner. 

   So with the same income for the top 1%, there is a dramatic difference in inequality if the rest of the people who earn income earn higher on average relative to the top 1% of earners.

   The above example shows that a person can vary between growing 2.5 times more wealthy on average than all persons, or they can grow more wealthy by 200 times more a year if the average earner’s income is minimized enough. This is to say that the very poor create the very rich, and the very rich create the very poor.

   The relativity is important, because if this is what is happening as a result of the wealthiest people on earth accumulating more and more wealth, then that accumulation of wealth has no reason or benefit to the vast majority of people in the world. Again, the majority who are relatively poor do not benefit if the top earners in the world are concentrating wealth, because the concentration of wealth is nothing more than relative advantage over other human beings.

Wealth Definition from Oxford English Dictionary 

Origin of the word Wealth (from OED)

Works Cited

Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates 

Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes
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<![CDATA[Part 2) Income Inequality: Knowledge of the Experts vs. the Oppressed; Can the Oppressed be Correct if Experts don't Agree? "The rich richer, the poor poorer"]]>Sun, 29 May 2016 22:52:10 GMThttp://latinoeconomist.com/le-blogposts/part-2-income-inequality-knowledge-of-the-experts-vs-the-oppressed-can-the-oppressed-be-correct-if-experts-dont-agree-the-rich-richer-the-poor-poorer

Main Points of this article

  1. Could Oppressed U.S. Groups Know More About Income Inequality than the Experts at Times?
  2. The U.S. has the Highest Level of Income Inequality of All "First World" Economies
  3. Is the Perception of Income Inequality an Illusion Caused by Short-Sighted Analysis?

Skeptics & Their Questions: Their View of Income Inequality & Why They Ask So Many Questions

Skeptics Think, Perhaps the Income Inequality Is Temporary & Nearing an End?       

            Skeptics will ask questions about Income Inequality that they believe presents some sort of strong argument against the existence of a problem by virtue of asking a question. Skeptics believe that asking questions can also simply cause people to doubt their conclusions just enough to rob people of the motivation to take actions, organize, lobby, and overall just try to make difference any way we can. Skeptics think asking questions of how Income Inequality might be true will discourage people from opening up the discussion for fear of looking stupid or unpopular. A tactic skeptics will use to ask questions that primarily accomplish one thing only: the skeptic's goal is to cast doubt on the possibility that any analysis whatsoever can produce a real prediction about what will take place in the economy in the future.
            However, that is not what the collective consciousness of Latino Economist wants its readers, "minorities" and the oppressed to have in mind when thinking about what we ourselves should do about Income Inequality. It is L.E.'s economic philosophy that there is not anything that is too difficult to learn, nor is there any system to difficult to analyze and predict accurately enough how the system will unfold in the future.
            Together we will look at the questions skeptics might ask, but we will not pretend as though the answers are unknowable. Let's look at the questions of skeptics, and understand where the nature of the questions they asked are rooted in.
            When questioned about what to do about Income Inequality, skeptics will ask a series of economic questions in an attempt to pretend as though no real conversation can be had on the subject.         

Here are some examples of rhetorical questions skeptics may ask:

            Perhaps only because the U.S. economy has not had a tight labor market in seven years does it seem that income inequality is at an intolerable level. Could sp-called Income Inequality just be an illusion caused by short-sightedness of sorts?
            Perhaps, now that the labor market is tightening every month, to the point that the FOMC has even lowered its full employment range from 5.1% to 4.9%, wages will increase. 
            Perhaps, when wages increase people will take their newfound wages and spend more which will allow producers to produce more and or charge higher prices. 
            Perhaps, since the savings rate has risen since the recent financial crises, the savings of the U.S. resident population will be put to use in markets that will allow firms to invest capital in equipment and productivity, which will increase the rate of technological advancement or efficiency in the economy, which will in turn increase the productivity of the U.S. 
            Perhaps the income inequality gap is cyclical, and we are at a peak now because the labor force has not yet fully recovered from the recent economic crisis, and now that the U.S. economy is about to reach full-employment once again, the income inequality gap will shrink in correlation as the labor market runs hot and inflation begins to occur once again.
Chart from Bureau of Labor Statistics: U.S. Employment 2006 - 2016

Don't be Discouraged by the Wording of it All, and All the "Experts"

            Something I have learned early on about how much "the common person" can understand, and what "experts" understand: Experts are a bag of assholes. 
            The best example I can use is when the experts come out with information about how bad the "black" community is doing as a result of racist oppression in the U.S. Black people already know how bad it is, and black people have been shouting the injustice they have been receiving since the day they were kidnapped and brought to the Americas. 
             Yet experts are the ones who desire to be the people to confirm this, as though the "black" can't know for itself that it suffers injustice, and only when experts collect, then can the truth be known! Bullshit!

While Rich Experts Have Their Heads in Their Asses, The Oppressed Know the Truth For Decades

             Black people have always known whites do not hire black people only because whites are racist, and yet experts now want to confirm it. Blacks already know the police treat them like shit because the majority of white government and police are racist; yet now experts want to print studies to confirm what black people have known for centuries. Black people already know whites hate educating blacks because whites are racist; yet now experts want to conduct studies to confirm this, as the experts are the ones to first discover the truth. This is why experts are assholes who don't know things until decades and centuries after groups of the oppressed know the facts.
            The same goes for Income Inequality in the U.S: Just because experts can't come to a consensus on on whether or not Income Inequality as it is today has to be this way and can't be changed; Just because experts can't come to a consensus on how to combat the negative effects of Income Inequality in the U.S. Just because experts cannot create charts and graphs that perfectly represent how Income Inequality is wrong and oppressive; Just because the experts tend to be whites who are the group that benefits the most from injustice in the U.S; Just because experts have their heads up their asses while being far removed from us "minorities" who are the most prone to suffering as a result of the oppression Income Inequality causes, does not mean "minorities" can't know the truth before the experts officially sign off on the fact the Income Inequality in the U.S. is caused by the corruption of the U.S. government and Private Sector of the U.S.     

Now that We Have Confidence, Let's Take A Disciplined Approach to Analyzing Income Inequality

              We must look at the consequences of the current large gap in income levels between the richest top 10% and the rest of the 90%, to see if it fosters any negative effects
              We must look for correlations between income inequality and negative effects on human beings in the U.S., and examine if current income inequality levels are the cause. In other words we must examine the correlations and determine if causation can be established.
              We must also look at if it is plausible to reduce income inequality in a way that does not cannibalize the strength of the U.S. economy, if indeed income inequality is causing massive negative effects. 
              We must look to identify these markers, because if current income inequality levels are having negative effects on many people, and if it can be solved without harming the overall economy, then something should be done to change the current levels: because what benefit does it serve society for masses of people to suffer just so the top 5% or 1% of wealthy people in the U.S. can earn just a little more each year?

Works Cited

Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

Childress, Sarah. A Return to School Segregation in America? Frontline. Web. 2014. http://www.pbs.org/wgbh/frontline/article/a-return-to-school-segregation-in-america/

Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates

Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

Sharp, Gwen. Race, Criminal Background, and Employment. The Society Pages. Web. 2016. https://thesocietypages.org/socimages/2015/04/03/race-criminal-background-and-employment/

Sinyangwe, Samuel. Mapping Police Violence. 2016. Web. http://mappingpoliceviolence.org/home

Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes

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<![CDATA[Part 1) Let's Discuss Income Inequality: (It matters to "Minorities") The World's Most Elusive Concept & Best Kept Secret]]>Sat, 14 May 2016 23:42:06 GMThttp://latinoeconomist.com/le-blogposts/part-1-lets-discuss-income-inequality-it-matter-to-minorities-the-worlds-most-mysterious-secretMain Points of this Article PictureSevenPillarsInstitute.org
1.) Outline a Researched-based Discussion on the Topic of Income Inequality

2.) Summary of the Main Points of the Discussion 

3.) List of Articles Latino Economist (L.E) will Use for Research

4.) List of Books and Authors L.E. will Use for Research on the topic.

Summary of the Main Points of the discussion Question: 

1.  Is it a bad thing to have current levels of income inequality within our country?  

2. What constitutes income inequality? 


3. What is your definition of wealthy, poor, and middle class?  


4. How could income inequality be corrected (if possible) if it is a problem?  


5. What message do we need to get to the wealthy and the poor of this country?  

There is a lot of data that people can find on this topic.

Discussion Topic 2: Income Inequality

intro-Blurb from Latino Economist

   No research on a subject is less known about by the masses than on Income Inequality, yet in the U.S. every adult we at L.E. have ever spoken to has a concrete opinion on whether or not Income Inequality is good, bad, or irrelevant. 

  Well, does income inequality truly matter then?
 
   From an Economic standpoint, not only does it matter, but it effects every American's, and every person in the world, lives.

  Bold claim? Well, Economics is a bold concept in terms that it claims to that Economics has power over every person's life that none can resist.

   This could be false. However, Latino Economist invites all minorities to join in on researching how Income Inequality works, with the purpose of reaching definitions and analysis of Income Inequality we as a community can agree upon

Here's a Longer Form Discussion Prompt, from one Professor Chase

   During the past six years, there has been much discussion from the Obama administration about income inequality.  


   In short, the rich keep getting richer while the poor keep getting poorer.  


The Rich & the Poor as Human Beings


   It appears that the middle class is shrinking and may become extinct.  When I watch the top 1% of wage earners on business TV I am absolutely shocked by what I am hearing.  I actually hear some people within the 1% of top wage earners say that the government should not need to provide a safety net for poor people or people who have been temporarily been laid off or those on social security.  


What do People Believe Causes Poverty?


   Some believe that poor people are actually lazy and that is why they are not wealthy.  When I go cross country on my motorcycle every year, I am amazed by the shear amount of poverty especially in the South and Midwest.  My wife and I are in the top 10% of wage earners in this country.  You would think I was really rich being in this category.  Well, you would be wrong.  I live in a modest house, drive a modest car, and most of my needs and some of my wants are easily obtainable.

   Remember, opinions are nice, however, I am looking for a focused response backed up by lots of data.



– Prof. Chase

Here is a List of Articles and Books L.E. will Use for Research

1.) Brookings Institute. Giving up on high school: How income inequality affects drop-out rates for America’s poorest students Interactive Chart. Income Inequality. Web. 2016. http://www.brookings.edu/research/interactives/2016/income-inequality-high-school-dropout-rate

2.) Chart. Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. Web. 2016. http://data.bls.gov/timeseries/LNS14000000

3.) Dews, Fred. How "economic despair" affects high school graduation rates for America’s poorest students. Brookings Institute. Web. 2016. http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates - http://www.brookings.edu/blogs/brookings-now/posts/2016/03/economic-despair-high-school-drop-out-rates

4.) Kearney, Melissa S. How Economic Despair Affects High School Graduation Rates. Brookings Institute. Video. Web. 2016. https://youtu.be/wIHjPRho4A4

5.) Kearney, Melissa S.; Levine, Phillipe. Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. Brookings Institute. Web. 2016. http://www.brookings.edu/about/projects/bpea/papers/2016/kearney-levine-inequality-mobility

6.) Krugman, Paul. Return of the Undeserving Poor. New York Times. Web. 2016. http://mobile.nytimes.com/blogs/krugman/2016/03/15/return-of-the-undeserving-poor/?smid=tw-nytimeskrugman&smtyp=cur&_r=0&referer=

7.) Gates, Bill. Why Inequality Matters (wealth and capital). GatesNotes The blog of Bill Gates.  Web. 2014. https://www.gatesnotes.com/Books/Why-Inequality-Matters-Capital-in-21st-Century-Review

8.) Summer, Lawrence A. A World Stumped by Stubbornly Low Inflation. larrysummers.com. Web. 2016. http://larrysummers.com/2016/03/07/a-world-stumped-by-stubbornly-low-inflation/

9.) Yellen, Janet. Yellen’s News Conference: Fed Policy, U.S. Economy (Q&A). Bloomberg.. Video. Web. 2016. http://www.bloomberg.com/news/videos/2016-03-16/janet-yellen-speaks-in-two-minutes

Books that Will be Used as Sources in the Series of Articles on Income Inequality

Please Join the Discussion, as this Topic is Important to All

You Can Join the Discussion via

1. Commenting on Article Posts in this Series
2. Commenting on this Series of Articles on L.E.'s Twitter
3. Commenting on this Series of Articles on L.E.'s Facebook Page
4. Commenting on this Series of Articles on L.E.'s Youtube Channel
5. Reading the reference Articles and Commenting on them, or critiquing L.E.'s interpretation of the Articles.

Works Cited

Prof. David Chase. N.C.C. Discussion Prompt. March 2016. Web. 

Birdsong, Nicholas. Cartoon of Inequality. The Consequences of Economic Inequality. The Seven Pillars Institute. Web. 2/5/2015
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<![CDATA[Part 5.) Let's Discuss Immigrants: Conclusion]]>Tue, 03 May 2016 04:22:54 GMThttp://latinoeconomist.com/le-blogposts/part-5-lets-discuss-immigrants-conclusionMain Points of This Article
  • Review the Main Points of this Series of Articles on Immigration
  • Give all credit to the Reliable Sources Used

Conclusion

   Through gathering information from Department of Homeland Security (DHS) we have been able to examine that immigration has been normal and consistent for at least 56 years. 
   We have observed from the Economic Letter from the Federal Reserve Bank of San Francisco (FRBSF) that not only does immigrant labor does not cause the negative effect of lost opportunity and wages for U.S. citizens, but in fact the opposite takes place, in that U.S. citizens are bumped up to higher skill jobs because immigrant labor takes on manual labor jobs on average. 

   From the concepts learned in the textbook Economics, we know that firms do not choose labor based on whims, but firms themselves are constrained by limits of budget, production costs, and competition both domestic and international; and that if firms do not optimize production from labor, consumers will maximize their own utility by buying the products from firms who can charge lower prices. And thus, in the long run, firms that do not minimize costs of labor will exit the market in the long-run. 

   In addition to long run effects, Peri illustrates that the short-term negative effects never rise above the statistical number zero, and are well-enough negated by the significant long-term gains to in wages per hour and expansion of the economy for U.S. citizens.

   In conclusion, it is point of historical fact that immigrant labor has improved the position of the U.S. citizen laborer. And thus, unless new data shows that immigrants negatively effect the U.S. citizen in terms of labor, then the U.S. should seek to expand or sustain immigrant labor in the U.S. because it will benefit the country on average, and on net, in economic terms.

"Let's Discuss Immigrants" Series Previous Posts 

Works Cited

Peri, Giovanni. The Effect of Immigrants on U.S. Employment and Productivity. Federal Reserve Bank San Francisco. Web. Aug. 2010. http://www.frbsf.org/economic-research/files/el2010-26.pdf

Rytina, Nancy. Baker, Bryan. Estimates of the Lawful Permanent Resident Population in the United States. Jan. 2013. Web. https://www.dhs.gov/sites/default/files/publications/ois_lpr_pe_2013_0.pdf

Singer, Audrey. Immigrant Workers in the U.S. Labor Force. Brookings Institute. Web. 2012. http://www.brookings.edu/research/papers/2012/03/15-immigrant-workers-singer - 1
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<![CDATA[Part 4) Let's Discuss Immigrants: Reliable Data on U.S. Immigrants & Their Economic Impact from Brookings, Dept. of Homeland Security, & The Fed Bank of San Fran.]]>Sat, 16 Apr 2016 01:27:00 GMThttp://latinoeconomist.com/le-blogposts/part-4-lets-discuss-immigrants-reliable-data-on-us-immigrants-their-economic-impact

Main Points of this Article

  • Three Credible Sources of Information on Immigration
  • Economic Letter (Federal Reserve Bank of San Francisco)
  • Historical Rates of Immigration (Homeland Security Data on Immigrants)
  • Brookings Institute Data & Conclusions on Immigration

The Economic Letter from Federal Reserve Bank of San Francisco on Immigration

   Giovanni Peri, while a visiting scholar at the Federal Reserve Bank of San Francisco (FRBSF) conducted research on the effects of immigrants on the U.S. labor force. With the oversight of the members of the FRBSF, Peri produced an “Economic Letter” for the FRBSF titled, The Effect of Immigrants on U.S. Employment and Productivity.  

   In the article, Peri came to the conclusion that in the medium and long-term, immigrant labor increases the welfare of the U.S. on every level. By pushing U.S. citizen laborers to higher paying positions, and increasing the capital investment of firms, the result are in significant increases (in percentage terms) of benefits for the average U.S. citizen on net (on the whole). However, to benefit our own understanding we must analyze Peri’s data for ourselves, and we must attempt analytically to dissect his conclusions to avoid simply confirming our own biases. In this way we can base our opinion on facts.

   First we inspect if Peri’s criteria of conclusion is satisfactory. This means, if Peri’s criteria for success is simply that Corporations earn higher profits by using immigrant labor, and thus whatever effects immigrant labor has on U.S. citizens would be less important, then we would need to unpack Peri’s reasoning in order to analyze why that would be his criteria, and how and why we would agree or disagree with Peri’s criteria. 

   With that in mind, I think Peri’s criteria is on the mark, in that he seems to make his criteria for his conclusion’s mathematically based; and, because it is U.S. citizens who fear being economically hurt by immigrants, Peri bases his criteria with the primary need being that those who would need to benefit most from immigrant labor, would be the majority of U.S. citizens. 

   Peri lays out well what it is that would need to be analyzed in order to answer that very question,“…we attempt to quantify the aggregate gains and losses for the U.S. economy from immigration. If the average impact on employment and income per worker is positive, this implies an aggregate ‘surplus’ from immigrationIn other words, the total gains accruing to some U.S.-born workers are larger than the total losses suffered by others.” The result that will come from Peri’s analyzation must be understood and taken into account by us when we make our decision. And I think we can all agree with what is Peri’s criteria for success that would need to come as a result from immigrant labor in the U.S.

   Peri lays out three major points, which he feels spells creates a clear structure of logic that communicates that indeed immigrant labor is a net positive to the entire U.S. citizen population.

Peri’s Three Points

   “First … Data on U.S.-born worker employment imply small effects, with estimates never statistically different from zero … The impact on hours per worker … insignificant effects in the short run … positive effect in the long run”(FRDSF, Peri).

   Peri supports his first point with a graph, that is visual representation that not only is there no negative effect on per hour wage for U.S. workers as a result of immigrant labor, but in effect there is a positive effect on per hour wage for U.S. citizen laborers that correlates with rises in rates of immigrant labor, in the long run.
   After Peri establishes that there is a correlation of higher per hour wages for U.S. citizen workers with rates of immigrant labor, Peri points to a specific ten year period where this correlation can be better highlighted to emphasize that in the dual relationship, immigrant labor is the cause of higher per hour wages for U.S. citizen labor, “Second…total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker”(FRBSF, Peri). And in Peri’s third point, he attaches dollar figures to the 6.6% and 9.9% rates, to give the reader yet another solid economic fact to ease the burden of accepting the truth, that immigrant labor is good for the laborer who is a U.S. citizen, “an increase…$5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007”(Peri).

What About People Who Don’t Believe Peri’s Numbers?

   Peri is aware that numbers can be misinterpreted, and so someone reading this increases in percentages and dollars for U.S. citizen labor can choose not to believe Peri based solely on his charts, graphs, and conclusions. More than numbers are needed, because there can always be facts out there that people don’t know – that they don’t know them. So Peri goes further into how the numbers could possibly turn out this way.

   Peri first points out that when firms can rely on affordable labor, firms will invest, and the investing will lead to capital creation that would not have otherwise arisen. And when Capital investment raises, the entire U.S. economy and all of its citizens benefit from the expansion, “adjustments businesses make over time…to take advantage of…new immigrant labor supply…upgrading and expanding capital stock, provide businesses with opportunities to expand in response to hiring immigrants”(Peri).

   In the end Peri points out perhaps the most easily understandable point of his whole paper, which why on earth is it that immigrants wouldn’t steal jobs from Americans, and why on earth wouldn’t business owners screw U.S. citizens by trying to only hire the cheapest immigrant labor for all jobs. Peri notes, and his conclusion is based on research and facts that “U.S.-born workers tend to specialize in different job tasks Because those born in the United States have relatively better English language skills, they tend to specialize in communication tasks. Immigrants tend to specialize in other tasks, such as manual labor”(Peri).

Figure 3
Communication/manual skills among less-educated
   Peri does not simply tells us immigrant labor improves the labor opportunities of U.S. citizen labor, but Peri shows us why it is exactly that U.S. citizen labor has gained historically as a result of immigrants being allowed to work in the U.S.

Homeland Security Data

   This chart shows the number of immigrants that have come into this country from 1960 to the present. It is important to see that there has never been a ceasing of immigration rates for the past 50 plus years. Given that negative effects have not been found to be caused by immigration over this period of time, it would be logical to think that this trend would continue, when forming an opinion on whether or not immigrants will ever have a negative effect on the U.S. population on average or on net.


Brookings Institute Data & Conclusions

   The chart from Brookings researcher Audrey Singer when read alone could be cause for alarm for a U.S. citizen laborer at first, because they would see that a larger percentage of immigrants are working age adults, and thus this fact would imply that since the so many immigrants will automatically need to work, by default U.S. citizens must be losing out on job opportunities to immigrants. But Singer presents this chart with an super important economic fact, which is the fact that the existing U.S. labor force is rapidly aging, and thus other economic factors such as production by U.S. firms, and the tax system need to be supported by a larger labor force than the population of U.S. citizens can provide the U.S. economy.
   Singer says, “The answers matter because our economy is dependent on immigrant labor now and for the future. The U.S. population is aging rapidly as the baby boom cohort enters old age and retirement. As a result, the labor force will increasingly depend upon immigrants and their children to replace current workers and fill new jobs. This analysis puts a spotlight on immigrant workers to examine their basic trends in the labor force and how these workers fit into specific industries and occupations of interest”(Immigrants…U.S. Labor Force, Singer). In essence this Singer is saying that in order for the system to be best supported, immigrant labor is needed because the system will not be sustained as well with only labor that can be provided by current U.S. citizen labor.

Works Cited

Peri, Giovanni. The Effect of Immigrants on U.S. Employment and Productivity. Federal Reserve Bank San Francisco. Web. Aug. 2010. http://www.frbsf.org/economic-research/files/el2010-26.pdf

Rytina, Nancy. Baker, Bryan. Estimates of the Lawful Permanent Resident Population in the United States. Jan. 2013. Web. https://www.dhs.gov/sites/default/files/publications/ois_lpr_pe_2013_0.pdf

Singer, Audrey. Immigrant Workers in the U.S. Labor Force. Brookings Institute. Web. 2012. http://www.brookings.edu/research/papers/2012/03/15-immigrant-workers-singer - 1

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<![CDATA[Part 3)  Let's Discuss Immigrants: What Data Should We Use in Discussing & Why? What do Immigrants Mean to Every U.S. Person?]]>Sat, 02 Apr 2016 01:20:54 GMThttp://latinoeconomist.com/le-blogposts/part-3immigrants-good-bad-neither-more-or-less-what-data-should-we-use-and-why-what-does-this-mean-for-the-everyday-person

Main Points of The Article

  • Recognize What Motivates the Immigration Discussion, on Both Sides of Debate, to Simplify Our Approach on this immigration Debate
  • Choosing Reliable Data Sources, and Why
  • Indentifying the Biases the Humans Who Maintain the Data Sources Have

Simplifying Our Approach: What Kind of Answer Are We Looking For?

Seeking to Take a "Bird's-Eye View"    

   It is important remove ourselves from the ground-level work of analyzing a question for its own sake, take an aerial view from 30,000 feet above the ground, to look at why a question is asked in the first place. Why are we, and U.S. citizens in general, asking political and economic questions about immigrant labor today?

Prospect of Unemployment is Scary for Good Reason

   Put simply, when Americans citizens think about labor, they think about their own jobs, and jobs for the people in their community. Which in economic terms is ultimately the level of employed American citizens; and what is the quality-level on average of that employment the citizens have on average. And when American citizens think of immigrants, they think of immigrant labor, which is the concept of people from other countries coming to live in America to work for firms in America. 

Owners Seeking to Pay the Lowest Price to Labor – Always 

   Different classes of Americans will view the labor provided by immigrants differently. Owners of firms are looking for the best labor for the best price, and thus if that criterion is best met by immigrants, then owners of firms will desire immigrant labor. Firms have that basic relationship with immigrant labor. 

Americans Aren't Owners, Americans are Labor – Including Psychologically  

   On the other hand, the majority of American citizens are not owners of firms and thus seekers of pay for the labor they can provide. So then the majority of Americans on an emotional level (that is to say without awareness of economic facts) would naturally see immigrants that come to America as competition for jobs. As a laborer, seeing immigrants as people who take money from a firm that would rather hire an immigrant than you, would naturally make an American citizen feel as though an immigrant has made the American citizen miss out an opportunity to make money. This is a natural theoretical conclusion to make. By which I mean, in a thought experiment, immigrant labor in the U.S. would seem to be a negative for American citizen laborers, and a positive for American firms who would seek to maximize their profit at the expense of the well-being of the American citizen labor force. 

Worm's vs. Bird's View: Understandably Difficult for All to Look Beyond Immediate Experience

   However, it is always best to look beyond the immediate experience of one’s own life with a deeper perception; one must examine studies conducted that are designed to manifest a system out of the facts, so that we can perceive with stronger tools of perception than are our own eyes. With the tools of mathematics, graphs, statistics, we can greatly expand our limited perceptions as human beings. 

   Allow for an overused metaphor to illustrate the reason why economic analysis is absolutely necessary for a human individual to understand the nature of the impact of immigrant labor on the whole of the U.S. citizen population. The metaphor is “You cannot see the forest for the trees.” When this metaphor is unpacked, it is meant to give a visual conception to an individual, of how the perception of their own eyes can blind them to the reality that is directly before their eyes, because all human senses have extremely limited ability to experience all of the dimensions of reality. The eyes can only see a small number of trees in the person’s immediate field of vision. Thus the person can only confirm that there is in fact a small number of tress in reality around the person. However, if the person could have a bird’s eye view, the person would be able to see tens of thousands of trees that comprise a forest, and not simply a small group of tress. Thus, if two different persons were standing in a forest, and each took opposing views as to whether they were in a forest or not, neither would truly be correct because they could not know by measurement, and in fact each would only be guessing. Thus, a way to distinguish the trees so that the trees could be counted would need to be devised in order to come as close to empirically proving whether there is a forest or not, otherwise all people are only guessing.

What I Will Use and Why: What Sources of Data, How Many Sources of Data

1.     Department of Homeland Security Data

2.     San Francisco Federal Reserve Bank Opinions & Data

3.     Brookings Institute Data

Why These Three Sources?

Department of Homeland Security as a Reputable Data Source

1.     The Department of Homeland Security’s (DHS) data on the number of immigrants in the U.S. should be fairly accurate, because tracking human beings in and out of the U.S. is perhaps the primary component that will allow them to perform their job well. In essence, the reputation and job effectiveness of DHS depends so heavily on its accounting of people, that I believe its staffers are as motivated as any organization to do everything in their considerable power gather the most up to date and accurate data on immigrants in the U.S.

Federal Reserve Bank of San Francisco as a Reputable Data Source (Region 12)

2.     The 12th regional Federal Reserve Bank, is the San Francisco regional bank. Opinions and data from the San Francisco Federal Reserve bank have been chosen because it is a regional federal reserve bank in a state, California, that has particularly unique qualities when it comes to the concept of immigrant labor. California is situated in the most populous state in the Union, the state boarders with another country which is a primary trade partner for the U.S., the state has a high rate of immigrants in a all sectors, the state has one of the widest arrays of industries of any state, the state is home to many legal and illegal immigrants, and it is a state that is particularly prosperous. Though of course the 12th region federal reserve bank is not only focused on California, and no doubt other regional banks have just as accurate and significant analysis as the San Francisco Fed, I still think the symbolism of the FRBSF is the most suitable symbolic choice.

Brookings Institute as a Reputable Data Source

3.      I am using a brief article from the Brookings Institute that has data that supports the data and claims of the Federal Reserve Bank of San Francisco, because Brookings is a reputable source for information, and it is important to have at least one cross-reference date point when reaching conclusions in research. The secondary point of view can either contradict one’s initial conclusion, or, if the source and its research methods are reliable, researching the topic using a second source will only strengthen the original conclusion. The Brooking institute was founded by government reformers, and is constructed so as to be a private organization that analyzes and critiques national public policy issues. Former Chairman of the Federal Reserve Bank of the U.S., Ben Bernanke even writes a bi-weekly blog for the institute. Even if you are a person who does not agree with the decisions made by Chair Bernanke, what better experts can be consulted than people who had the power to make decisions that had real effects on the national economy?

Why the Economics Matter for Minorities in the U.S.

   Immigration is an important topic to understand in the U.S., and because it is a hotly debated issue. Recognize that there are millions of U.S. citizens who desire that no competition come from abroad, and people are capable of great evils in the name of self-interest. And as Latinos we have to recognize that there are other people who face assaults from the same type of people who will do evil things in the name of self-interest.

So let's understand the economics that underly the structure of things,

Latino Economist

Works Cited

Peri, Giovanni. The Effect of Immigrants on U.S. Employment and Productivity. Federal Reserve Bank San Francisco. Web. Aug. 2010. http://www.frbsf.org/economic-research/files/el2010-26.pdf

Rytina, Nancy. Baker, Bryan. Estimates of the Lawful Permanent Resident Population in the United States. Jan. 2013. Web. https://www.dhs.gov/sites/default/files/publications/ois_lpr_pe_2013_0.pdf

Singer, Audrey. Immigrant Workers in the U.S. Labor Force. Brookings Institute. Web. 2012. http://www.brookings.edu/research/papers/2012/03/15-immigrant-workers-singer - 1

Picture. 9 Secondary Data Sources. Slideshare. Web. 2010. http://www.slideshare.net/emolagi/topic-9-secondary-data-sources

Picture. Light-Bulb in Brain. Web. 2010. http://www.monash.edu.au/news/monashmemo/assets/includes/content/20100811/stories-print-version.html
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<![CDATA[Part 2) Let's Discuss Immigrants: How Do We Begin to Think Through This Subject?]]>Tue, 15 Mar 2016 17:42:03 GMThttp://latinoeconomist.com/le-blogposts/part-2-immigrants-good-bad-neither-more-or-less-how-do-we-begin-to-think-through-this-subjectHow do We Begin to Think Through This Subject?
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Main Points of this Article:

  • When We Discuss Immigrants in the U.S.A., What Exactly Are We Talking About, and Why?
  • The Economic Terms to Learn How to Analyze this Topic With Data, and Objectivity and not Emotions: 
  • Labor, Producers, Budget Constraints, Utility Maximization, Competition, International Trade.
  • The Relationship of These Economic Terms with Immigrants
Picturewww.americanprogress.org
   The current debate on immigrants in America is: are they good, bad, or neither for the U.S.A.? Should “we” get rid of them, allow them stay, or increase the rate of immigration? 
   These questions are based on feelings and the pre-conceived perceptions, and thus the reason why some people are on one side or the other of this debate does not always have to do with the economic reality of these actions. 
   When seeking to flesh out the answers to these questions with the discipline of economics in mind, it seems­ that though this issue is not solely related to economics, the economic conclusions reached in answer to these questions should be the primary perspective considered when any person is making a decision on whether or not one of these sides of this debate is correct or incorrect – because the economic perspective is one that impersonalizes the debate and thus can be easier for all sides to understand and accept.

   Based on economic facts and through analysis, immigrant labor in the U.S.A. has not been bad for the country historically. And, if making decisions on whether or not the rate of immigration into the U.S.A should be increased or decreased is informed by economic facts and historical data – then as of now we must conclude that the rate of immigration should remain the same, until economic facts indicate one way or other, that increasing immigration rates will either benefit U.S. citizens on average and on net, or that decreasing the rate of immigration will benefit the U.S. citizens on average or on net.

Introduction of Concepts: What Do We Talk About When We Talk About Immigrant Labor?

   In this paper, we will approach the question of immigrant labor by using five concepts of Microeconomics, and briefly touching on how they relate to one macroeconomic factor, to analyze the relationship between immigrants, and labor in the U.S.A. The six factors are:

Labor

1.     Labor is, the resource that consists of the physical and mental talents of individuals used in producing goods and services”(Economics, 10).

Producers


2.     Producers:  Producers face costs to produce. The producer looks to maximize profit while also satisfying the customer. Producers also will not continue to produce if the costs are too great, or most producers will drop out of the market leaving only a few producers to stay in business, if only a few businesses could produce at a profit.  Producers must always tend to their total costs. “Total cost is the sum of fixed cost and variable cost at each level of output: TC = TFC + TVC (Economics, 161)”

Budget Constraints

3.     Budget constraints are an important factor when discussing immigrant labor. Because producers do not have unlimited resources, producers must choose on what to spend capital on; thus producers face constraints and thus create and use budgets for how resources are allocated over the course of the firms existence, in short term and long term periods. Companies must consider the cost of labor, because a company will lose competitive advantage and profit if the company pays more for labor than necessary. For example, if only college educated people are in the work force, then it seems natural that companies would have to pay a higher wage for jobs that only require manual labor and do not utilize the skills that come with a college education.

Utility Maximization of Consumers

4.     The Effect of Utility Maximization of Consumers on Firms: The reason why firms want to be able to competitively price as well or better than other firms is because of consumer behavior. Consumers will maximize utility as an aggregate, and in the long-run. Which is to say, if a firm is charging higher prices for the same product as that other firm produce, consumers will eventually buy the cheaper products because the utility will be the same., thus running the firm with higher price out of business. The only choice the firm with the higher price has it to match prices with other firms, or go out of business. So then, if a firm has to pay higher rates of pay for labor to produce its products than other firms, then the firm with more expensive labor will still have to match prices with firms who produce with cheaper labor costs. Thus, if firm is the only firm that pays  higher rates for labor, that firm will make less or no profit, and will eventually be squeezed out of the market by other produces who do not have as high of a cost for labor.

Competition

5.     Competition is “the market system that depends on competition among economic units. The basis of this competition is freedom of choice exercised in pursuit of a monetary return”(Economics, 31). Let’s also remember that firms must think of their production needs in the Short-Run and Long-Run, because firm Competition in the Short Run is the time period when not all inputs are variable, and Firm Competition in the Long Run is when all inputs are variable. Thus, if a firm gets the highest profits margins in the beginning of its existence, the firm must plan to allocate capital in a manner that will prepare it for competition in the long-run term, because other firms will charge lower prices and be able to replicate nearly any product. Thus it is wise for any firm to hire the cheapest labor at all times to maximize profits in the long-run, when inevitably competition will tighten profit margins. Thus immigrant labor is desirable if the labor pool available to the firm’s home country does not provide the best labor for the best price.

International Trade & Immigration

6.     How International Trade Factors into U.S. Immigration Rates: The cost of production of the U.S. does not simply have to do with competition between U.S. firms. U.S. firms have to seek the cheapest labor costs that maximize profits in order to stay competitive with products that are produced by other countries. U.S. firms can lose profits or completely go out of business of firms do not seek to always be as competitive as possible with producing firms outside of the U.S.

How These Key Concepts Tie Together to Effect immigrants in the U.S.A

  • All Economies need production because production is good for everyone overall and in the long run.
  • Producers are motivated by profits for themselves, and profits are needed to stay in business in the long run.
  • Producers need capital and labor to produce goods.
  • Producers must gain profit from the mixture of capital and labor to stay in business.
  • If labor is too expensive, Producers will use pure capital if it becomes cheaper than labor.
  • Immigrants either provide high levels of expertise that firms need and is hard to find domestically, or immigrant labor is cheaper and lowers a producer's input cost which results in more profit.
  • Producers have to compete with other producers for profits. 
  • The more profitable a producer is, the more likely it is they will dominate the market and stay in business, while driving other producers out of business.
  • In the long-run of competition, all producers must take minimal profits because consumers will look for the best deals always, in the long run.

Other Posts from Immigrants Series

Works Cited

Chart. 10 Reasons Why Immigration Reform Is Important to Our Fiscal Health. By Angela Maria Kelley and Philip E. Wolgin. Web. 2011.  https://www.americanprogress.org/issues/immigration/news/2011/09/29/10375/10-reasons-why-immigration-reform-is-important-to-our-fiscal-health/

Peri, Giovanni. The Effect of Immigrants on U.S. Employment and Productivity. Federal Reserve Bank San Francisco. Web. Aug. 2010. http://www.frbsf.org/economic-research/files/el2010-26.pdf

Rytina, Nancy. Baker, Bryan. Estimates of the Lawful Permanent Resident Population in the United States. Jan. 2013. Web. https://www.dhs.gov/sites/default/files/publications/ois_lpr_pe_2013_0.pdf

Singer, Audrey. Immigrant Workers in the U.S. Labor Force. Brookings Institute. Web. 2012. http://www.brookings.edu/research/papers/2012/03/15-immigrant-workers-singer - 1

Works Cited

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