econlife - The Problem With Emissions Outsourcing by Elaine Schwartz

When California’s Bay Bridge was built in 2011, the uproar was about jobs. U.S. steelworkers protested when sections of the bridge as big as half a football field were made in China and then shipped to the U.S. They said the bridge should have been made here.

Below you can (almost) see workers welding a section of the Bay Bridge in Shanghai: 



Now the protests have changed.

Outsourcing Emissions

The Buy Clean California Act requires state agencies and universities to consider greenhouse gas emissions when selecting firms for public works projects.  Called “global warming potential,” the emissions created from fabricating certain types of steel, glass, and wool board will be required in the bidding process. Enforcement starts during 2019, after lawmakers have quantified their criteria.

A California congressmen explained that he proposed the law “to support clean manufacturing.” He might have added “everywhere” to the end of his sentence. After all, the Bay Bridge used steel from a heavy polluter in China. So buying steel from them increased “global warming potential.”

The goal is to limit this emissions outsourcing. Called a carbon “loophole,” (mostly) developed countries are sidestepping their emissions admissions. The California law makes them responsible for what other nations emit. A new paper calls it “embodied emissions” in globally traded goods.

Recognizing the surprising proportion of emissions in traded goods could help us reduce them:



These are the carbon emissions importing and exporting nations:

 

Our Bottom Line: Negative Externalities

Polluters create a negative externality. If there is no penalty, they incur no cost for the harm they impose on the environment. Instead, uninvolved third parties experience the illnesses their emissions create.

To graph the problem, an economist would draw a supply curve that should shift to the left:



British economist Arthur Pigou (1877-1959), proposed that a tax be levied on a good or service that creates a negative externality. California has a different solution. Still though, they too create less supply.

My sources and more: You might find it fascinating (as did I) to compare the 2011 NY Times article on the Bay Bridge with this one. Then, if you want to read some analysis, do look at this paper on outsourcing emissions. And finally, for more legislative insight, here is the goal of the California law and its content.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - (Mc)Wages Around the U.S. by Elaine Schwartz

At 162 million (or so), the U.S. labor force is large and diverse. So, when we say that wages are 2.9% higher than last August, it sounds simple. But it really is not.

Where you live can determine what you earn.

McWages

It’s tough to compare wages around the United States. Yes, lots of people could be called auto workers or potato and computer chip makers. However, depending on the region, we would find that similar sounding jobs can be rather different.

But not for McDonald’s.

Looking at McDonald’s “basic crew” employees, we can compare “apples to apples.”  At a Hamburger University campus, you can get a similar education. And, at your local McDonald’s, no matter where, you follow the same operations manual. Or as Princeton professor Orley Ashenfelter and his co-author Štěpán Jurajda explained, you have “standardized capital.”

Wages

Because those McDonald’s jobs are so similar, we can get a more accurate picture of wage differences. In 2016, 29 states and 41 cities deviated from the federal hourly minimum of $7.25. Ohio had a minimum wage of $8.10 then (now it’s $8.15) while Pennsylvania was at the federal minimum (and still is) for its privately employed work force. The impact on the McWage was evident. In Ohio, it was $8.35 and Pennsylvania, $7.81.

Similarly, across the nation, people’s McWage rates differ for almost identical work. In the following map, the darkest blue areas take us between $8.75 and 13.00 an hour while the next lighter blue is $8.05-$8.75. At the bottom, in very light blue and almost white, we go from an hourly wage of $8.05-$7.50 to $7.50-$7.25:



Purchasing Power

Correspondingly,  McDonald’s workers’ purchasing power is not the same. With one hour of wages, an Ohio employee can buy 2.05 Big Macs while a Pennsylvania employee could get 1.81. But for the highest purchasing power, we have to go to Nebraska, Minnesota, and North Dakota where one hour of work gets them 2.3 Big Macs. At the other end are Maine and Louisiana where workers can buy approximately 1.7.



As for Big Mac prices, there is a whopper of a difference. Big Macs varied in 2016 from a (median) high of $8.36 down to $2.76.

Our Bottom Line: The Zigzags in the British Coastline

The authors of the Princeton paper point out that much of our labor force information is from surveys that are general. While they let us compare workers with a similar education and occupation, they don’t convey the massive differences among these workers.

Instead, because the Princeton paper looks more closely at the McWage worker, it can show us (for example) the “negative employment impact of Chinese imports.” Their point is that a close look not only unveils a correlation but also the potential for greater insight. If we know precisely who is affected by changes in trade, we can design programs that target them.

So, while our focus has been McDonald’s basic crew employees, we are really talking about an immensely varied labor force. When the Labor Department tells us that wages have increased by 2.9% ($.77) during the past year, they are referring to a current national hourly average of $27.16. But you can see that the average, while important, can obscure a much more complex situation.

In the same way, Benoit Mandelbrot, the father of fractal geometry, told us that the closer you look at Great Britain’s coastline the more you see. From a distance, it is a curved line. However, looking closely, we see countless indents and zigzags.

So too with the U.S. labor force.

My sources and more: While reading the McWage paper was a slog, its ideas were fascinating. Similarly, for a firsthand look at the statistics, the August employment report had the wage data and a link to wages in different industries. The one article I recommend is from CNBC about why fast food workers in North Dakota “bring home the Bakken.” It conveys ideally why McDonald’s pays a high wage rate there.

Please note that this post was slightly edited after publication to improve clarity.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Book Review – The Persecutor by Sergei Kourdakov by Colleen Hroncich

Last year marked the 100th anniversary of the Bolshevik revolution in Russia, which launched the beginning of one of the most brutal regimes in human history. Beginning with Vladimir Lenin and continuing with Joseph Stalin and beyond, tens of millions of people were killed as a result of political purges, man-made “famines,” slave labor camps, and more. Despite these appalling facts, most of the students in your classroom are probably largely ignorant of the horrors of communism. 

One very effective way to illustrate the brutality of the Soviet Union for your students is to have them read The Persecutor by Sergei Kourdakov. This powerful autobiography was written by a KGB agent whose job was to hunt down and kill “Believers” – the government’s name for Christians. It details his life growing up in Russia: being orphaned at a young age; practically raising himself as he bounced from the streets to group homes and back to the streets; and eventually finding a “family” in the Communist party. I don’t want to give away too much here, so I’ll leave it at that.

Not surprisingly, The Persecutor is incredibly brutal and sometimes contains graphic violence. You would definitely want to preview it to ensure it is age appropriate for your class. However, I can almost guarantee that you and your students will be forever impacted by Sergei’s story. I was introduced to it by my then 14 year old daughter, who read it as part of her English curriculum. She has a much deeper understanding of totalitarianism and the importance of freedom than do most kids her age, and much of that stems from this book. 

Colleen Hroncich loves that homeschooling allows her to learn right alongside her children. A published author and former policy analyst, Colleen’s favorite subjects are economics/public policy and history. She has been active in several homeschool co-ops and is a speech and debate coach.

econlife - Six Facts We Need To Know About the U.S. Federal Debt by Elaine Schwartz

The U.S. Treasury tells us that the national debt was in the vicinity of $71 million in 1790. Used to fight the Revolutionary War, the money from abroad mostly came from Dutch and French bankers. Meanwhile, at home, people like you and me bought government securities.

We all expected a payback and Alexander Hamilton made it happen.

Still though, since then (except during 1835) the U.S. has been in debt. But not to worry. We’ve always paid it back and then borrowed some more.

Now, however we could have some problems. Here are the basics…

1. The deficit is different from the debt.

When federal expenditures exceed federal revenue during one year, we have a deficit. Then, to pay for that deficit, we borrow. All that we’ve borrowed to cover years of deficits minus what has been paid back is the nation’s debt.

2. We judge the size of the debt by comparing it to the GDP.

If you hear that someone owes $100,000, it’s tough to know whether the loan is large or small. It all depends on the borrower’s affluence. For someone who earns $500,000 a year, a $100,000 loan can be manageable. However, if you take home a much smaller wage, then borrowing $100,000 is a massive and risky obligation.

Similarly, we compare the U.S. debt to the size of the U.S. GDP (the dollar value of goods and services produced annually).

Below, you can see that like WW II, the current debt to GDP ratio is higher than 100%. Most say that the current ratio is not as worrisome as our increasing tendency to borrow more and more:

3. To fund the debt, the U.S. borrows money by selling securities.

We owe more than half of the debt to ourselves. The U.S. government lends to itself, for example, when the Social Security trust fund swaps its extra cash for bonds. In addition, individuals, businesses, state governments, local governments, pension funds–the list is long–buy U.S. Treasury securities.

The rest of the U.S. debt is held by foreign governments, businesses and citizens.

4. Foreign governments own 44% of the  U.S. debt.

In the list of countries that own the U.S. debt, China is at the top and Japan is next. China has the dollars to buy our securities from its trade surplus with us. (When we buy their goods, we pay with dollars.) So, if the trade surplus goes down, China might not be a handy way to finance our growing debt.

Ranging from China to the Cayman Islands, large and small nations are our top 10 lenders:

5. Interest payments on the debt are a category of federal spending (as are Medicare and Social Security, defense, highways….you get the picture.)

With federal outlays on the rise and interest rates relatively low, interest payments have been a smaller part of the federal budget.

Although it is not up-to-date, the following graph conveys an accurate message about interest payments:

6. The debt ceiling was supposed to control the growth of the debt.

We have a debt ceiling because of a 1917 law. At the time, the Congress decided it was losing control of the volume of borrowing. To regain power over the federal purse and fiscal policy, they said the Congress would decide the maximum amount the U.S. can borrow. And, from that day onward, whenever borrowing touched its statutory limit,  they voted to raise the debt ceiling.

But not quite.

Right now, we have no debt ceiling. Suspended during February 2018 until March 1, 2019, there is no limit to how much the U.S. can borrow.

Our Bottom Line: The Future

With tax cuts diminishing government revenue and more spending from entitlement programs like Social Security and Medicare, there is pressure for the debt to grow.

My sources and more: For starters, this CBO report, and a WSJ summary provide insight about the national debt. Then, for the global perspective, Bloomberg had a Q&A about China and Japan. However, if you go to just one article, do read about the history of the debt until 2012 in The Atlantic.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Pink It, Shrink It, and Gender Design Discrimination by Elaine Schwartz

For years, women have needed sweaters, jackets, even snuggies at work. The reason takes us to some solid science…for men.

Our story starts with a 154 pound man in a business suit. Decades ago, the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) needed guidelines for indoor climate control. To get some answers, they quantified the thermal protection from a man’s clothing (the clo scale) and a man’s activity (his MET).

What they wound up with is great for most men. But not for women. And not for a political candidate. I added the arrow:



Because women like and need it warmer–75 degrees rather than the male 70 degrees–much less cooling is necessary in commercial buildings.

This thermal comfort gender discrimination is only the beginning…

Design Discrimination

Outdoor Gear

According to the “Shrunk and Punk’d” podcast from New Hampshire Public Radio, women who want serious gear head for the men’s section in most stores.

When you look in the men’s department for backpacks, the usual choice is dark gray or black. Described as sleek and rather urban, men’s backpacks have metal loops and a generous supply of pockets. The women’s version is typically smaller and purple, pink, or light gray. It has fewer pockets, loops that are less durably made, and even a totally useless fringe. It is supposed to be “pretty.”

Seatbelts

For seatbelts also, the men have been favored. A 2011 study concluded that women wearing seatbelts had a 71% higher chance of moderate injury than a man in a seatbelt. One possible reason? According to CBS News, seatbelts are designed for the average 40-year old man.

We should add though that the National Highway Administration started using female crash dummies in 2003 and GM, way before that, during the 1980s. However, the 2016 safety data still indicate the male is safer because of seatbelt design.

Our Bottom Line: Gender Design Discrimination

While there is gender design discrimination, we can end on a hopeful note.

Citing thermal sexism, New York’s Cynthia Nixon requested that a 76-degree room temperature for her debate with Governor Andrew Cuomo. Wired Magazine tells us that a female VP for merchandising was one reason that that REI is designing equipment and clothing for many body shapes and sizes. As for seatbelts, I can cite one female Swedish researcher at the Swedish National Road and Transport Institute. In 2016, she was working (2016) with Volvo on a female crash dummy.

You can see where I am going.

Breaking through glass ceilings, women have entered the rooms where men have been making political, design, and car safety decisions.

My sources and more: Thanks to Outside/In for making one of my walks a delight by telling me about “Shrunk and Punk’d.” Hearing that, I went to the Wired, the NY Times, this study, and this Medium article. Finally, for more on seatbelts, CBS and Driving had some facts while here is Cynthia Nixon’s 76 degree protest.

Our featured image is a Nest thermostat.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.