Labor

Shenzhen Jasic Technology: Towards a Worker-Student Coalition in China

Published by Anonymous (not verified) on Sat, 01/09/2018 - 8:55am in

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Last month students and recent graduates from more than a dozen mainland Chinese universities stood up in solidarity support with workers of Jasic Technology, a private company listed on the Shenzhen Stock Exchange. The student activists include those from the Peking University, Tsinghua University, Nanjing University, and Sun Yat-sen University. They wore t-shirts with the slogan “unity is power” printed in bold red. They produced videos of public speeches and peaceful demonstrations in front of the Jasic factory in the Pingshan District of Shenzhen City, a key node of globalized production in South China. They tweeted open letters and blogs and photos via social media. In response, Jasic management retaliated against workers who initiated to establish a democratic union since this May and refused immediate re-instatement of dismissed workers, triggering waves of rights defense protests and social justice campaigns. As of writing, 14 workers were currently still being detained by local authorities, and 50 students were forcibly taken by the riot police, crushing the worker-student coalition.

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Workers say no to Vietnam’s ‘Special Exploitation Zones’

Published by Anonymous (not verified) on Sat, 01/09/2018 - 7:10am in

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Labor, China, Vietnam

by By Angie Ngoc Tran

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On Sunday, 10 June 2018, thousands of people took to the streets in major Vietnamese cities—Nha Trang, Binh Thuan, Hanoi, and Ho Chi Minh City, among others. Academics, independent journalists, and overseas Vietnamese signed petitions to join in their protest against the Draft Law on the 99-year lease of the three Special Administrative and Economic coastal zones in Vietnam. Workers, too, went on strike in two industrial zones in Long An and Tien Giang provinces. These collective actions led to a concession from the government: it would delay the National Assembly’s ratification of the Draft Law to its next meeting.

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Anthony Albanese Banned From Every Knife Shop In Australia

Published by Anonymous (not verified) on Tue, 28/08/2018 - 8:15am in

Albo

The Australian Labor party has announced that after witnessing the events of the last week that they have voted unanimously to ban their colleague Anthony Albanese from purchasing or owning a knife for the foreseeable future.

“We think it’s for the best that Albo sticks to chopsticks for the time being,” said Labor Leader Bill Shorten. “I mean you don’t need to tell me the danger that a knife poses to a leader in politics.”

“As well as banning Albo from knives I have also asked all of my front bench to avoid them and all Opposition meetings from now on will only ever feature foods that can be eaten by chopsticks or a spoon.”

When reached for comment Anthony Albanese said of the ban: “Ah look, I’m no Abbott so I can promise you that I will not wreck, undermine or snipe at any future Labor Government.”

“As for knifing, well let’s see what happens.”

Mark Williamson 

www.twitter.com/MWChatShow

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Is the falling wage share simply a statistical phenomenon?

Published by Anonymous (not verified) on Mon, 27/08/2018 - 6:33am in

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Labor

Economists have suggested several competing theories to explain the phenomenon of the declining wage share, as it has been falling globally for several decades. In the case of the US, two specific factors can explain a significant part of the decline:  The increase in economy-wide depreciation and the rise of imputed rents as a share of total GDP.

A number of economic studies in recent years have documented the declining wage share in many countries around the world. The wage share is the part of GDP that can be attributed to labor income (wages) and is usually assumed to fluctuate around 60% while most of the remaining part of GDP is accounted for by capital income, such as rents from housing, income from Intellectual Property Products, capital gains and stock dividends, etc.

The chart below shows that the US wage share has fallen from almost 58% two decades ago to just 53% as of today, a decline of about 5 percentage points. This phenomenon is concerning insofar as the majority of the population derives most of their income from wages whereas capital income only accounts for a small share for most people. The reason is, of course, that capital ownership tends to be highly concentrated: About 75% of the US total wealth being owned by the top 10%. While home ownership tends to be much more dispersed, it can actually vary quite significantly from country to country. In the US, the home ownership rate exceeds 60%, but it is significantly below what it was before the financial crisis when it almost hit 70%.

 


Source:BEA

There are several competing (but not mutually exclusive) hypothesis that have been put forward to explain the trend of the falling wage share. Some authors have focused on the decline of the bargaining power of labor, either as a result of eroding labor unions, or the result of globalization as a number of low-wage countries like China entered the global economy during the late 1980s.

Alternatively, some papers have suggested that monopoly power in many industries has increased, thus putting downward pressure on the wage share as markups are rising. Finally, some post-keynesian economists have emphasized increasing financialization as a possible cause.

In what follows, I will focus on yet another explanation that might explain part of the downward trend of the gross wage share. While GDP is usually defined as the sum of all the income streams in the economy, there are several categories that national statistics offices include in the GDP calculation, but technically there is no income stream flowing at all. There are two items that stand out in particular because they are quantitatively the most important: Depreciation of capital and imputed rents.   

Depreciation of physical assets is included in the GDP calculation because it is counted as a cost of production to firms. From an accounting point of view, depreciation is the allocation of cost of an asset over its useful lifespan. Since depreciation expenses can be offset against a firm’s taxable profits, firms might actually have an incentive to overstate annual depreciation expenses.

US tax law allows firms to depreciate all kinds of assets that are used in the production process, ranging from nonresidential structures to all kinds of industrial equipment, and even Intellectual Property Products (IPP). Over the last few years depreciation as a share of GDP has increased mostly as a result of two factors.

First, more and more companies increasingly rely on modern technologies that tend to depreciate at a fairly rapid pace. Equipment like computers, smartphones, software, etc. tend to become obsolete within just a couple of years: According to the BEA, each of these items has a lifespan of only two to three years when it must be replaced. Compare this with other industrial equipment, which has an average lifespan of half a decade at least, with non-residential structures easily approaching a lifespan of two decades.

Second, US corporations have produced an increasing amount of intangible products in recent decades (IPP). This could be a patent, for example, which is basically a monopoly right granted by the government for a specified time period, usually 20 years in the US. As companies can depreciate all cost expenses of their patent over its useful or legal life, companies might also have an incentive to overstate their expenses because they can be offset against their tax liabilities. As the share of intangible assets has increased significantly over the last few years, so have depreciation expenses caused by the production of IPP.

The chart below shows that depreciation as a share of GDP has increased from about 6% in the postwar period to almost 13% as of today and this significant rise can account to some extent for the decline in the gross wage share. Most of the increase in depreciation can be explained by the rise of modern technologies, which tend to have a significantly lower lifespan and thus become obsolete much more quickly, as well as the increasing importance of IPP in today’s economy.

 


Source:BEA

The second large item that might have put downward pressure on the wage share is the increase in the rent share of GDP. In the case of the US, it is mostly imputed rents, the rent-equivalent a house owner would pay to himself in rent, that have risen significantly.

 


Source:BEA

 

Imputed rents are included in the GDP statistics even though there is technically no income stream flowing to anyone because otherwise a country that consists for the most part of renters (like Germany) would have an “inflated” GDP figure. Consider two countries, A and B, which are equal in every aspect with one single exception. Let’s say that in country A, I live in your house and pay rent to you and you live in my house and pay rent to me, whereas in country B we both live in our own houses. If we exclude imputed rents, country A would have higher GDP than country B simply because we pay rent to each other even though the two countries are equally productive (by assumption). Imputed rents are obviously derived from the value of the underlying dwelling.

As most advanced economies have experienced spectacular house price appreciations over the last couple of decades, mostly a result of supply-side restrictions rather than “speculative bubbles”, imputed rents surely have increased more or less in tandem. In the case of the US, imputed rents have actually surged from about 6% of GDP in the 1960s to about 8% of GDP as of today. The increase in the rent share of GDP, mostly a result of rising house prices being accompanied by increasing imputed rents, thus also puts some downward pressure on the gross wage share.

 

Source: Jorda, Schularick and Taylor (2016) Macrohistory database

 

We have therefore two items, economy-wide depreciation as well as imputed rents, which account for an increasingly large share of total GDP despite the fact that both categories actually do not represent any income streams in the classical sense.

It is exactly for that reason that some economists have argued that from an inequality point of view we should rather focus on the net wage share, meaning net of depreciation. Furthermore, as I have explained above, there is an argument to be made that such a net measure should also net out imputed rents (and potentially other imputed income streams that are included in the GDP calculations), thus focusing entirely on actual income streams instead. Doing so cancels out most but not all of the downward movement of the wage share one can observe across countries in recent decades. For the US, the graph below shows that the “net wage share”, adjusted for depreciation and imputed rents, is not significantly lower today than what it was from the late 1960s onwards.

 


Source:FRED

 

About the Author: Julius Probst is a Phd student at the Economic History department of Lund University in Sweden. His main research area is long-term economic growth with a special focus on economic geography.

 

The post Is the falling wage share simply a statistical phenomenon? appeared first on Economic Questions .

Mexican Independent and Democratic Auto Unions Form a New Federation

Published by Anonymous (not verified) on Wed, 15/08/2018 - 11:03am in

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Mexico’s auto workers are for the first time forming a national federation in what is a very significant development both for Mexican labor and for Mexican society as a whole. Ten organizations representing over 25,000 Mexican workers have committed to the new organization.

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There Is No Such Thing As Low-Wage Competitiveness

Published by Anonymous (not verified) on Tue, 07/08/2018 - 12:17am in

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kaldor, Labor, policy

By Daniel Olah and Viktor Varpalotai. 

An old myth

Moderate labor costs serve as the basis for the international economic success of a country – this has been the approach favored by policymakers and academicians since the eighties. Still today, most analyses and definitions of competitiveness refer primarily to cost and price factors since these are easy to measure. If you keep your wages down, foreign capital will find you – as the overly simplistic approach suggests, which is a very dangerous narrative.

Countries on the peripheries of the richer Western economies often tried to follow this path and it may indeed have been a crucial step towards attracting the much needed capital inflow into developing economies. Think of post-socialist countries which had to achieve what no one managed to do before: to transform their economies from a centrally planned one into a well-functioning market economy in just a few years without an adequate amount of capital, savings, technology, and know-how. A typical win-win situation: developing countries were offered a chance to integrate into global value chains, while companies outsourced production processes with low added value into these economies.

But there is a crucial problem with that: this is just the first period of childhood. To say so, the role of a low-wage model in an economy is similar to that of parents in human life: it is difficult to grow up without them in a healthy way, but once you are an adult you have to realize that you need to live your own life. This means commitment and efforts to move out from the parental nest. Although the low-wage model may be needed to grow up and acquire the potential for an own future life, every economy should move on. But this depends on willingness and ability as well since nothing comes for free. Becoming a successful adult is the most challenging transformation of our lives.

This story is exactly about being able to overcome the low-wage model. When the economy is growing in its childhood period it is key for economic development, but once it turns 18 it suddenly becomes an obstacle to it. The low-wage model conserves inefficient production methods and means no incentive for companies to innovate and invest in the future. A low-wage model is never truly competitive in the long-term: it is a necessary evil in the development process. Nicholas Kaldor already showed this decades ago.

It’s nothing new: Nicholas Kaldor already said that

Kaldor, the famous Hungarian economist of Cambridge University, claimed in 1978 that countries with the most dynamic economic growth tended to record the fastest growth in labor costs as well. The renown “Kaldor-paradox” may be confusing for policymakers influenced by the neoclassical mainstream. It tells us that keeping costs low may not lead to competitive advantages and faster economic growth. So let’s resurrect the Kaldorian ideas and see whether the relationship has changed at all (hint: it has not).

An Econ 101 course would tell us that there is no causality here, and it’s true. But another thing is valid as well: that average annual real GDP growth and the annual growth of unit labor costs per person employed are not negatively related in developed countries.

But let’s examine an even better measure, the export share of an economy, which is the best indicator to grasp export competitiveness in an international context. It shows us that in the case of OECD countries it is hard to find a negative relationship between unit labor costs and export market shares. (If we created two groups of OECD countries based on GDP per capita in international dollars we would find no relationship in case of the richer but strong positive relationship for the poorer countries.)

Increasing labor costs: a sign of economic success?

In fact, outside the pure neoclassical framework, the Kaldor-paradox is not a paradox anymore. A wide literature suggests that increasing real wages result in higher productivity: better quality of customer service, lower incidence of absences and higher discipline inside companies. Corporations gain on increasing labor productivity thanks to better housing, nutrition and education opportunities for workers. It is no coincidence that increasing wages improve mental performance and self-discipline as well (Wolfers & Zilinsky, 2015).

As for the companies, a main mechanism for adapting to increasing wages is to improve management and production processes and bring forward new investments. What is more: the often extremely large costs of fluctuation and that of recruiting workers may also be greatly reduced. And finally, the most important aspect: the increase of wages result in greater capacity utilization on the supply side, which results in growing capital stock in the economy (Palley, 2017). Could the Kaldor-paradox imply that most of the examined countries are wage-led (or demand-led) economies?

Several empirical results validate that export-competitiveness is nothing to do with depressed labor costs. Fagerberg (1988) analyzed 15 OECD countries between 1961 and 1983 – more thoroughly than this article does – and found the same results. He states that technological and capacity factors are the primary determinants of export competitiveness instead of prices. Fagerberg (1988) argues that the Japanese export successes are due to technology, capacity, and investments while the US and the UK lost market shares because they allocated resources from investing into production capabilities towards the military.

Storm and Nasteepad (2014) argues that the German recovery from the crisis is not primarily due to depressed wages but to corporatist economic policy, the key reason which focuses shared attention of capital, labor and government towards the development of industry and technology. As for Central-Europe, the case is the same: Bierut and Kuziemska-Pawlak (2016) finds that the doubling of Central-European export share is due to technology and institutions, and not due the cost of labor. In fact, unprecedented wage growth and dynamic export increases go hand in hand in many Central European countries nowadays.

And if we consider the new approach to competitiveness by Harvard-researchers then we come to the conclusion that economic complexity instead of wages is the key driver of future economic and export growth. Their competitiveness ranking seems much different from the traditional measure of the World Economic Forum, having the Czech Republic, Slovenia, Hungary and the Slovak Republic among the first 15 countries in the world. This shows that peripheric countries of the developed West may become deeply embedded in global value chains, becoming more and more organically complex and this complexity of their economic ecosystem has the potential for future growth – even despite forty years of communism.

This evidence shows that policymakers should be careful and conscious. Economic relationships or the adequate economic policy approaches may change faster than we think. Economies are just like children: they grow up so fast that we hardly notice it. That is what the stickiness of theories is about.

 

About the authors:

Daniel Olah is an Economics editor, writer and PhD student.

Viktor Varpalotai is the Deputy Head of Macroeconomic Policy Department at the Ministry of Finance, Hungary.

The post There Is No Such Thing As Low-Wage Competitiveness appeared first on Economic Questions .

What I Saw at the (Political) Revolution

Published by Anonymous (not verified) on Wed, 01/08/2018 - 12:46am in



Vol. XVII, No. 1, Summer 2018
Review of

ImageThis memoir of sorts by Fordham University sociology professor Heather Gautney, who became a policy fellow in Bernie Sanders’ Washington DC office and a volunteer researcher and organizer for his unexpectedly popular 2016 presidential campaign, has a very specific focus: to “offer insights from up-close work with Bernie, mixed in with historical and sociological analysis, to perform an autopsy of the 2016 election” (2). Given the sheer number of insightless (to put it mildly) autopsies that have been proffered across the political spectrum—perhaps none more useless than Hillary Clinton’s own What Happened (Simon & Schuster, 2017)—Gautney’s book is more than welcome and even slightly overdue.

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Labor and the South

Published by Anonymous (not verified) on Tue, 31/07/2018 - 11:27pm in



Vol. XVII, No. 1, Summer 2018
Review of

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More than a hundred years ago, the muckraking journalist Upton Sinclair worked undercover for several weeks in the cattle slaughterhouses of Chicago. The result was his melodramatic but revelatory novel The Jungle, a work Jack London called the “Uncle Tom’s Cabin of wage slavery.” Sinclair’s narrative depicted the brutal working conditions endured by East European immigrants on the killing floor, engaging in back-breaking, dangerous, and tedious labor for subsistence wages.

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Class DOES Matter

Published by Anonymous (not verified) on Tue, 31/07/2018 - 11:21pm in



Vol. XVII, No. 1, Summer 2018
Review of

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Steve Fraser is a weathered veteran of the New Left and many subsequent movements, author of shrewd books on the acquisitive ruling class and also of the outstanding biography of famed left-leaning labor giant Sidney Hillman, among other works. Here he once again ranges far, but also comes close to home, his own personal home space. 

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What’s Left of the Brazilian Left?

Published by Anonymous (not verified) on Mon, 30/07/2018 - 12:04am in

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In May 2017, Left politics in Brazil were pretty bleak. It was almost a year after the impeachment of President Dilma Rousseff of the Brazilian Workers Party (PT), whose ousting from power brought along with it an onslaught of austerity policies.2

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