Myth busted: China’s status as a developing country gives it few benefits in the World Trade Organisation



President Trump and Australia’s Prime Minister Scott Morrison insist it matters whether China is classified as “developed” or “developing” in the World Trade Organisation matters. It may not.
Shutterstock

Henry Gao, Singapore Management University and Weihuan Zhou, UNSW

Whether China is a “developing” or a “developed” country for the purposes of the World Trade Organisation matters a lot to the US president.

President Donald Trump ignited a new front in the US-China trade war in July by tweeting that the world’s richest nations were masquerading as developing countries to get special treatment.

They were “cheating”, according to Trump.

He directed the US Trade Representative to “use all available means to secure changes” at the WTO.

Then Australia joined in. While in the United States, Prime Minister Scott Morrison referred to China as a “newly developed economy”, and backed Trump, saying that “obviously, as nations progress and develop then the obligations and how the rules apply to them also shift”.

China is digging in. It hasn’t resiled from a statement by its commerce ministry spokesman Gao Feng in April:

China’s position on WTO reform has been very clear. China is the largest developing country in the world.

But what’s at stake? In practical terms, almost nothing. Trump and Morrison are demanding something that would give them little.

What does “developing” even mean?

In the WTO, developing countries are entitled to “special and differential treatment” set out in 155 rules.

However, none of those rules define what a “developing country” is.

Instead, each member is able to “self-designate”, subject to challenges from other members.

Being recognised as a developing country was one of the three key principles China insisted on when negotiating to join the WTO in 2001.

It faced resistance. Several members cited “the significant size, rapid growth and transitional nature of the Chinese economy”.

In response the WTO took what it called a “pragmatic approach,” meaning that China got hardly any of the special treatment that would normally be accorded to a developing country.




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For example, under the Uruguay Round of tariff reductions that applied to developing countries already in the WTO, China would have only needed to cut its average industrial tariff from 42.7% to 31.4%. Instead, it agreed to cut it to 9.5%.

Similarly, it agreed to cut its agricultural tariff from 54% to 15.1%, instead of the 37.9% that would have been required had it already been in the WTO. These put its commitments on par with those of developed rather than developing countries.

On some issues, China’s commitments far exceeded those of even developed countries. For example, it agreed to eliminate all export subsidies on agricultural products, an obligation that developed countries were only able to accept 14 years later.

It also undertook to eliminate all export taxes, which are still allowed under WTO rules and still widely used by many governments.

Many of China’s WTO commitments were imposed only on it or modified the general rules to either impose heavier obligations on it or confer less rights on it.

Contrary to popular belief, China has received hardly any of the benefits that accrue to developing countries when it became a WTO Member, other than the ability to use the title “developing country”.

It’s more about identity than benefits

After its accession, China acted as a member of the developing country group and pushed hard for its interests. In 2003 it joined India and Brazil in pushing developed countries to reform their agricultural trade policies while retaining flexibility for developing countries, a push that has yet to achieve success.

In the meantime, it enjoys little preferential treatment for itself, partly because it has eschewed special benefits, partly because most of the transition benefits that were available to it have expired, partly because some of the provisions available to it are essentially voluntary on the part of the country offering them, and partly because many of the benefits available to developing countries are not available to developing countries with large export shares.




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At times it has actively forgone important benefits, such as by not invoking its right to receive technical assistance under WTO’s Trade Facilitation Agreement.

However, on some other issues, the sheer size of China has made it difficult to accommodate China’s claim for developing country treatment. One example is the negotiation on fisheries subsides, which would not be able to move without substantial commitments from China, which operates one of the largest subsidies in the world.

Identity matters to China

In its position paper on WTO Reform, China says it “will never agree to be deprived of its entitlement to special and differential treatment as a developing member”.

At the same time, it says it “is willing to take up commitments commensurate with its level of development and economic capability”.

It remains far less developed than traditionally developed countries. In purchasing power terms, its standard of living is about one-third of that in the United States.

Although not practically important in terms of its obligations under the WTO, its developing country status is useful to it in other ways, giving it the opportunity to gain meaningful advantages in other international organisations such as the Universal Postal Union.

It costs the rest of the world little to accommodate China’s wish to be described as a developing country. If Trump and Morrison got what they wanted, they would find little had changed.The Conversation

Henry Gao, Associate Professor of Law, Singapore Management University and Weihuan Zhou, Senior Lecturer and member of Herbert Smith Freehills CIBEL Centre, Faculty of Law, UNSW Sydney, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Indians promised benefits of 100 smart cities, but the poor are sidelined again



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Residents of slums like Kamla Nehru Nagar, a kilometre away from Patna Junction, have yet to share in the promised benefits of smart cities.
Sujeet Kumar, Author provided

Sujeet Kumar, Jawaharlal Nehru University

India’s urban population is growing. More than 50% of the country’s population is forecast to be living in cities by 2030. This is a major challenge for government because the country’s cities lack the infrastructure (affordable housing, roads) and basic services (sanitation, water, health care) for existing inhabitants, let alone the influx of people over the next decade.

Globally, one in eight people live in slums where they face issues of durable housing, access to safe drinking water and toilets, and insecure tenure. In India, one in every six city residents lives in a slum.




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Many Indian children are growing up in very disadvantaged circumstances. These two live in Mahmudi Chak slum next to Rajendra Nagar Railway Junction in Patna.
Sujeet Kumar, Author provided

However, estimates of slum populations differ widely in many Indian cities due to differences in the counting criteria. For example, in cities like Mumbai and Delhi, it’s estimated more than 50% of the population live in slums, but the 2011 Indian Census put the figures at 41.3% and 14.6% respectively.

Launching the national Smart Cities Mission in 2016, Indian Prime Minister Narendra Modi said: “… if anything has the potential to mitigate poverty it is our cities”. He said the mission, which has a target of 100 smart cities, aims to ensure access to basic services for the people. This includes houses for the urban poor.

The program aims to fulfil the aspirations and needs of the citizens through comprehensive development of institutional, physical, social and economic infrastructure. This comprehensive development would also ensure increased public participation, Modi said.

Villagers migrated to the Danapur Block slum after the Ganga river flooded.
Sujeet Kumar, Author provided

Smart city plan has a dark side

In one of the 100 cities selected for the Smart City Mission, Patna (Bihar), I witnessed the flip side of the smart city. Patna, the state capital of Bihar, has a rich history, but 63% of its population lives in slums. And 93% of them are from the historically oppressed “scheduled castes” and “other backward castes” (based on data collected in 42 slums).

Demolished homes at Meena Bazar.
Sujeet Kumar, Author provided

The city administration often demolishes slums without following due process of law in order to seize the land in the name of beautification and development of Patna.

In slums like Meena Bazar (near the famous Nalanda Medical College Hospital) and Amu Kuda Basti (near Patna Airport) people have been living there for generations in houses often partially funded by government housing projects. These have been bulldozed.

Riot police are on hand when slum dwellers’ homes are demolished at Amu Kuda Basti.
Sujeet Kumar, Author provided

The city administration usually makes ad-hoc loudspeaker announcements before bulldozing these settlements. A massive police presence and riot vehicles are on hand in case residents protest the demolitions. They use derogatory language and forcefully enter houses and thrash male members, say women in Amu Kuda Basti.

The government could have given them more time or relocated them elsewhere in the city, rather than just bulldozing their houses, which they had built with hard-earned money, the slum dwellers said.

Residents of slums like Amu Kuda Basti say houses they built with their own hard-earned money are being demolished with little notice.
Sujeet Kumar, Author provided

There is apparently reason to smash these homes. There always is. The usual arguments for demolition include: beautification of the city, construction of a government building or enterprise, extension of the airport, crime locations, governance, illegality, encroachment etc. The state says demolitions of such slums are necessary for the development of the city.




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In 2011, the state proposed a slum policy to relocate slum dwellers who had lived in the city for generations to the outskirts in a plan to develop Patna and make it a smart city, says Kishori Das, an advocate for the rights of slum dwellers for years. Faced with widespread protests, the state deferred the policy, but it is silently applying it on the ground, he said.

Who speaks for the marginalised poor?

These two leaders from Meena Bazar are among 84 community representatives, elected and non-elected, interviewed by the author.
Sujeet Kumar, Author provided

Local and mainstream media are not reporting these demolitions and forced evictions, especially when it happens in non-metro cities like Patna. Civil society and advocacy NGOs also take little notice of these frequent demolitions, probably due to threats to life and, if not, then to co-option by the state. The roles of the ruling party and opposition are also dubious.

Bihar has been ruled by leaders who attracted votes by campaigning on issues of poverty, caste and social justice for the past three decades. In the early 1990s, the prominent leader Lalu Prasad Yadav mobilised the poor and the oppressed caste groups under the umbrella of “Vikas nahin, samman chahiye” (we want dignity, not development). The present chief minister, Nitish Kumar, also known as Sushaasan Babu (good governance man), adopted the slogan “Nyay ke saath vikas” (development with justice).

However, the frequent injustices suffered by the urban poor negate the political commitment. These actions are also in conflict with the motto of the Indian Constitution, which frames justice as a balancing wheel between the haves and have-nots.

Promises of social justice ring hollow for residents of bulldozed communities like Amu Kuda Basti.
Sujeet Kumar, Author provided

These challenges are not limited to one city. In the name of smart and developed cities, the government is not only taking over urban land where millions of the poor have lived for decades but is also acquiring fertile land and violating the constitutional rights of farmers, tribes and other indigenous groups in various cities.

These reports of struggle and forced evictions contradict the statements by Modi when he said smart cities development would strictly follow large-scale public participation in preparing these plans.

Such demolitions reveal a dark side to making Indian cities smart and cast serious doubt on claimed government commitment to the urban poor. These actions hardly live up to the idea of the rights of the poor. It became more challenging when the head of the biggest democracy in the world denounces those who speak up for the poor, oppressed and voiceless as “urban Naxals”.

In the words of Abraham Lincoln, democracy is “government of the people, by the people, for the people”. For India, this means the urban poor need help both from political parties and civil society so that their voice finds expression and their demands and concerns are heard and considered in public policy. The Conversation

Children sleep out in the open in a slum area in Harding Park, Patna.
Sujeet Kumar, Author provided

Sujeet Kumar, Senior Research Fellow, Centre for the Study of Law and Governance, Jawaharlal Nehru University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Most of the benefits from the budget tax cuts will help the rich get richer


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Chris Samuel/Flickr, CC BY-SA

Robert Tanton, University of Canberra and Jinjing Li, University of Canberra

In the federal budget, Treasurer Scott Morrison promised tax cuts to all working Australians in the form of an offset and changes to tax income thresholds. But our analysis of Treasury data shows that while the government advertised these as payments to low and middle income Australians, most of the benefits would flow through to high income earners in future years.

If all of the stages of the tax plan passed parliament, there would be a sharp increase in benefits for people earning above A$180,000, due to the reduction of their marginal tax rate from 45% to 32.5%.

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Taxes in most countries are progressive. This means that the more you earn, the higher your marginal rate (the additional amount you pay for each dollar earned).

There are good reasons for this – progressive tax systems mean those on a lower income pay a lower average tax rate, while those on higher incomes pay a higher average tax rate. This reduces income inequality – as you earn more, for each dollar you earn, you will pay more in tax than someone on a lower income.

With the 2018-19 budget, the proposal is for a “simpler” tax system from 2024-25. This means a reduced number of tax brackets, and a lower rate of 32.5% to those earning between A$87,001 and A$200,000.

Treasurer Scott Morrison said following the budget:

Well, you’ve still got a progressive tax system. That hasn’t changed. In fact, the percentage of people at the end of this plan, who are on the top marginal tax rate is actually slightly higher than what it is today.

However this new tax system from 2024-25 is less progressive than the current system. It means higher income inequality – the rich get more of the tax cuts than the poor.

As part of the new proposal, low and middle income earners get a tax offset in 2018-19, with high income earners getting very little. This part of the plan is progressive – more money goes to lower income earners.

However, by 2024-25, the tax cuts means high income earners gain A$7,225 per year, while those earning A$50,000 to A$90,000 gain A$540 per year, and those earning A$30,000 gain A$200 per year.

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Of course, another factor of tax cuts is that they only benefit those who are employed. Tax cuts don’t benefit people like the unemployed, pensioners, students (usually young people) and those on disability support pensions.

The conversation Australians need to have is how we should be spending the revenue boost we are seeing over the next few years. We can either spend this windfall gain on benefits to high income earners, in the hope that this will flow through spending to everyone else; or maybe we should encourage young people into housing through an increase to the first home owners grant, or increased funding for our schools, universities and health system.

The ConversationWe’ve developed a budget calculator so you can see how your family is affected by the 2018 budget.

Robert Tanton, Professor, University of Canberra and Jinjing Li, Associate Professor, NATSEM, University of Canberra

This article was originally published on The Conversation. Read the original article.

Labor benefits from completed draft boundaries, plus South Australian and Tasmanian final results



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As a result of the electoral boundary changes, Labor notionally gained two seats in Victoria and one in the ACT, and the Coalition lost two seats in Victoria.
AAP/Tony McDonough

Adrian Beaumont, University of Melbourne

On April 6, the Electoral Commission announced draft boundaries for Victoria and the ACT, with both jurisdictions gaining a House seat. Victoria went from 37 to 38 seats, and the ACT from two to three.

As a result of these changes, Labor notionally gained two seats in Victoria and one in the ACT, and the Coalition lost two seats in Victoria.




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On Friday, draft boundaries were announced for South Australia, with that state dropping from 11 seats to ten. According to The Poll Bludger, the safe Labor-held seat of Port Adelaide is to be abolished, but the new seat of Spence (formerly Wakefield), Adelaide and Hindmarsh become much safer for Labor.

Margins in Liberal-held seats were not greatly affected by the redistribution. Boothby has been reduced from a 3.5% to a 2.8% Liberal margin, and the SA-BEST-held seat of Mayo goes from a 5.4% to a 3.3% Liberal vs Labor margin. After SA-BEST performed poorly in the South Australian election, Mayo is an opportunity for either major party.

After the next election, there will be 151 seats in the House of Representatives, up from the current 150. The Coalition will notionally hold 74 seats (down two), Labor 71 (up two), and the five current cross-benchers notionally hold their seats. The new Victorian seat of Cox (formerly Corangamite) is too close to call on the new boundaries between the Liberals and Labor.

On the new boundaries, Labor requires just a five-seat gain to win a majority, while the Coalition needs to gain two seats to retain its majority.

The draft boundaries will go through a further consultation process before they are finalised. Final boundaries will be gazetted (become official) by July 20. If an election is called before all boundaries are gazetted, emergency redistributions are used. These emergency redistributions have never been used.

An election of the House and half the Senate could be called in early July, before the new boundaries are gazetted. However, according to the ABC’s Antony Green, the Coalition would lose from the emergency redistributions.

South Australian election final result: 25 Liberals, 19 Labor, 3 Independents

At the South Australian election held on March 17, the Liberals won 25 of the 47 lower house seats (up three since the 2014 election), Labor 19 (down four) and independents three (up one).

The Liberals won the two party vote by a 51.9-48.1 margin, but this represented a 1.1% swing to Labor from 2014, when Labor clung to power despite losing the popular vote 53.0-47.0.

Primary votes were 38.0% Liberal (down 6.8%), 32.8% Labor (down 3.0%), 14.2% SA-BEST, 6.7% Greens (down 2.1%) and 3.0% Conservatives (down 3.2% from Family First’s 2014 vote).

In South Australia, there is a fairness clause that requires boundaries to be drawn so a party with over 50% of the two party vote should win the election. The boundaries used at this election notionally gave the Liberals 26 seats, Labor 20 and one independent (Geoff Brock in Frome).




Read more:
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On the new boundaries, both major parties lost a seat to independents who had defected during the last parliamentary term. The Liberals gained King from Labor, but Labor gained Mawson from the Liberals. In Mawson, sitting Labor member Leon Bignell had a 4.5% swing in his favour, just overcoming a hostile redistribution.




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Conservative commentators such as Graham Richardson have blamed Labor’s loss partly on its renewable energy policies. Between 2011 and 2014, Labor governments that had been in power for 14 to 16 years were smashed in New South Wales, Queensland and Tasmania. In South Australia, Labor had a two party swing in its favour. Renewable energy probably helped Labor, rather than damaged it.

The upper house results have not yet been finalised. In the race for the final seat, Labor has 3.46 quotas and the Conservatives 0.42. With preferences to come from Animal Justice, Dignity, SA-BEST and the Liberal Democrats, it is likely that Labor’s fourth candidate will defeat the Conservatives.

Final Tasmanian result: 13 Liberals, ten Labor, two Greens

At the Tasmanian election held on March 3, the Liberals won 13 of the 25 lower house seats (down two since the 2014 election), Labor won ten (up three) and the Greens two (down one). This is the first time a single party has had a one-seat majority at a Tasmanian election since 1978.




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Liberals romp to emphatic victory in Tasmanian election


There were two seats contested between different parties that were undecided on election night. In Franklin, the Greens won the final seat by 226 votes or 0.02 quotas against the Liberals. Labor gained a seat from the Liberals.

Final primary votes gave the Liberals 2.90 quotas, Labor 2.06, the Greens 0.86 and the Shooters 0.17. As expected, the Liberals greatly benefited from Shooters’ preferences, but were damaged by within-ticket leakage. With only Labor votes left (they had 2.20 quotas at this point), the final Liberal led the final Green by just 81 votes. Labor’s votes then flowed strongly to the Greens.

In Bass, the Liberals had 3.53 quotas, Labor 1.58 and the Greens 0.56. At the three-way crunch point, the Liberals were just behind the Greens and Labor and were excluded. On Liberal preferences, Labor comfortably defeated the Greens by 801 votes or 0.07 quotas, thus gaining a seat from the Greens.

Final statewide vote shares were 50.3% Liberal (down 1.0% since 2014), 32.6% Labor (up 5.3%), 10.3% Greens (down 3.5%) and 3.2% Jacqui Lambie Network. This was the Greens’ lowest Tasmanian vote since 1998, when they received 10.2% – their vote has more than halved since they won 21.6% in 2010.

I believe the Greens’ poor result was mostly because Labor has a young left-wing leader in Rebecca White, and Labor’s anti-pokies policy attracted Greens’ voters.

The upper house was not up for election. The 15 members of the Tasmanian upper house are elected for rotating six-year terms in single-member electorates. Every May, two or three electorates are up. Labor has four upper house seats, and there are four left-wing independents, so the left currently controls the upper house.




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New South Wales March ReachTEL: 52-48 to Coalition

A New South Wales ReachTEL poll for The Sydney Morning Herald, conducted March 15 from a sample of 1,521, gave the Coalition a 52-48 lead, unchanged since October 2017. Excluding 6.2% undecided, primary votes were 44.7% Coalition (up 3.8%), 34.6% Labor (up 0.9%), 10.0% Greens (up 0.1%) and 5.4% One Nation (down 3.5%).

The ConversationIncumbent Gladys Berejiklian led Opposition Leader Luke Foley 52.3-47.7 as better Premier in ReachTEL’s forced choice question. By 59-26, voters opposed the government spending $2.5 billion on constructing new stadiums.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

US shouldn’t give up benefits of ‘green card lottery’ over low risk of terrorism



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The Statue of Liberty casts a wary eye at the bike path that runs along the western edge of Manhattan, where the Oct. 31 attack occurred.
Songquan Deng/Shutterstock.com

Ethan Lewis, Dartmouth College

After a man barreled down a New York City bike path on Oct. 31, killing eight, President Donald Trump reacted by calling for an end to the “green card lottery” program that allowed the attacker to enter the country.

The Diversity Immigrant Visa Program, as it is officially known, has been in the sights of the president for a while. In August, Trump publicly backed a GOP bill that would end the program and replace it with a merit-based system.

Trump and his fellow Republicans have long decried illegal immigration, but they have traditionally favored the legal kind, partly because their business donors demand it.

As someone who researches the impact of immigration on workers, I believe their plans to change who can enter the country legally is a big mistake. We would be giving up a program that benefits American workers with very little chance of a gain in safety.

While the driver reportedly entered the country through a green card, very few Americans have been killed by recipients of such visas.
AP Photo/Bebeto Matthews

Curbing immigration

While Trump’s tweets about the lottery program are based on security concerns, the usual argument supporting curbs on immigration is that new arrivals hurt native-born American workers and the economy at large.

I’ll leave analyzing the security concerns to other experts; suffice it to say that the risk, according to experts, is very small. Green card holders have killed just 16 people – including yesterday – in terror attacks on U.S. soil since 1975.

As for the economic impact on U.S.-born workers, the key thing to bear in mind is that the more homogeneous and similar immigrants are to natives, the greater the odds they’ll in fact have a negative effect.

In contrast, immigrants who come from diverse backgrounds with a range of skills – such as the lottery winners and the so-called “Dreamers” – tend to produce greater economic benefits. That may be one reason at least some Republicans and most Americans are in favor of keeping the Deferred Action for Child Arrivals program that protects the Dreamers from deportation, which Trump recently ended.

A new approach

Currently, the U.S. receives a lot of immigrants without a college degree or with imperfect English. About half of immigrants fit either description.


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Legislation proposed earlier this summer – the Reforming American Immigration for Strong Employment (RAISE) Act – would exclude most such workers and reduce the total number of green cards awarding permanent legal U.S. residence to just over 500,000 from more than one million today.

It would also end the green card lottery, which awards 50,000 green cards a year to people from countries with low rates of immigration to the U.S.

Importantly, it would also change who gets a leg up when applying for a green card. Currently, family of U.S. citizens and legal permanent residents, including siblings and adult children, are able to apply. The new system would limit that to minor children and spouses.

Instead, the bill would create a point-based system like those used in countries such as the U.K. and Australia that use factors such as English ability, education and job offers to rank applicants. However, it would be stricter than point systems used in those countries, which admit immigrants through other programs as well.

In essence, the plan would make the pool of immigrants more homogeneous and dramatically smaller in number, mirroring the misguided origin-based restrictions from the 1920s.

The DACA program’s inherent diversity is what makes it a boon for the U.S. economy.
AP Photo/Pablo Martinez Monsivais

What economists say

Those who wish to restrict immigration often cite what they naïvely call “supply-and-demand economics” to essentially argue that the economy is a fixed pie that gets divided among a country’s residents. Fewer immigrants means “more pie” for the U.S.-born, as the story goes.

I am an economist, and this is not what my colleagues and I say. The commonplace argument that more immigrants, by themselves, lower wages and take jobs from Americans – an argument which Attorney General Jeff Sessions used to defend ending the “Dreamers” program – has neither empirical nor theoretical support in economics. It is just a myth.
Instead, both theory and empirical research show that immigration, including people with few skills and little English, grows the pie and strengthens the American workforce.

The main registry building on Ellis Island is shown in this 1905 photo. It was once the nation’s gateway for millions of immigrants.
AP Photo

Value in diversity

While all the recently proposed changes to our immigration system will make U.S. workers worse off, the English requirement is likely to be particularly harmful to U.S. workers, especially low-skilled ones.

Indeed, I have found the relative fluency of U.S.-born workers is what keeps them from being harmed from labor market competition from immigrants.

The reason for this is the following. Essentially, immigrants with imperfect English skills tend to specialize in jobs that are less “communication-intensive,” such as manual labor. Americans fluent in the language, on the other hand, tend to take on higher-paying, communication-intensive jobs that are out of reach of those without a strong grasp of English. In other words, these groups aren’t likely to compete for the same jobs, making them more complementary than adversarial.

In contrast, when new immigrants are more fluent in English, something the Trump-backed proposal would encourage, the types of occupations they are qualified for are almost identical to those of American workers. Thus, insisting on strong English skills as a condition of coming to America is likely to increase labor market competition and suppress wages.

When Congress in 1964 ended the Bracero program, which allowed large numbers of Mexicans to work on U.S. farms, neither wages nor employment rates of American workers rose.
AP Photo

Immigration that helps

Immigration that emphasizes diversity, rather than merely merit, tends to attract more people who specialize in occupations uncommon among U.S.-born workers. And, in fact, this is the key source of the well-known economic benefits of immigration.

Studies by economists Giovanni Peri and Chad Sparber, for example, show this tendency toward job specialization is a key reason the large volume of low-skill immigration does not drive down incomes of Americans. Other research by Peri and Gianmarco Ottaviano shows that simply encouraging immigration from diverse origins lifts wages.

Put differently, there is direct evidence that the sort of diversity that the green card lottery encourages makes all Americans better off. It would be a shame to give all of that up because of a tiny risk of terrorism.

The ConversationThis is an updated version of an article originally published on Sept. 15, 2017.

Ethan Lewis, Associate Professor of Economics, Dartmouth College

This article was originally published on The Conversation. Read the original article.

The costs of a casual job are now outweighing any pay benefits


Joshua Healy, University of Melbourne and Daniel Nicholson, University of Melbourne

Low wages growth has been a spectre hanging around the Australian economy for some time. In our series What We Earn we unpick the causes for this and why some workers might be feeling it more than others.


Workers aren’t being compensated as much as they should be for precarious work in casual positions.

One in four Australian employees today is a casual worker. Among younger workers (15-24 year olds) the numbers are higher still: more than half of them are casuals.

These jobs come without some of the benefits of permanent employment, such as paid annual holiday leave and sick leave. In exchange for giving up these entitlements, casual workers are supposed to receive a higher hourly rate of pay – known as a casual “loading”.

But the costs of casual work are now outweighing the benefits in wages.

Costs and benefits of casual work

Casual jobs offer flexibility, but also come with costs. For workers, apart from missing out on paid leave, there are other compromises: less predictable working hours and earnings, and the prospect of dismissal without notice. Uncertainty about their future employment can hinder casual workers in other ways, such as making family arrangements, getting a mortgage, and juggling education with work.

Not surprisingly, casual workers have lower expectations about keeping their current job. For example the Australian Bureau of Statistics (ABS) found 19% expect to leave their job within 12 months, compared to 7% of other workers. Casuals are also much less likely to get work-related training, which limits their opportunities for skills development.

The employers of casual workers also face higher costs. High staff turnover adds to recruitment costs. But perhaps the main cost is the “loading” that casual workers are supposed to be paid on top of their ordinary hourly wage.

Australia’s system of minimum wage awards specifies a casual loading of 25%. So, a casual worker paid under an award should get 25% more for each hour than another worker doing the same job on a permanent basis. In enterprise agreements, the casual loading varies by sector, but tends to be between 15 and 25%.

The practice of paying a casual loading developed for two reasons. One was to provide some compensation for workers missing out on paid leave. The other, quite different, motivation was to make casual employment more expensive and discourage excessive use of it. However this disincentive has not prevented the casual sector of the workforce from growing substantially.

Casual jobs aren’t much better paid

One approach in determining whether casual workers are paid more is simply to compare the hourly wages of casual and “non-casual” (permanent and fixed-term) employees in the same occupations. This can be done using data from the 2016 ABS Survey of Employee Earnings and Hours.

We compared median hourly wages for adult non-managerial employees, based on their ordinary earnings and hours of work (i.e. excluding overtime payments). If the median wage for casuals is higher than for non-casuals, there is a casual premium. If the median casual wage is lower, there is a penalty.

The 10 occupations below accounted for over half of all adult casual workers in 2016. In most of these occupations, there is a modest casual wage premium – in the order of 4-5%.

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The size of the typical casual wage premium is much smaller, in most cases, than the loadings written into awards and agreements. Only one occupation (school teachers) has a premium (22%) in line with what might be expected.

Three of the 10 largest casual occupations actually penalise this sort of work. And overall for these 10 occupations there is a casual wage penalty of 5%. This method of analysis suggests that few casual workers enjoy substantially higher wages as a trade-off for paid leave.

Taking a closer look involves controlling for a wider range of differences between casual and non-casual workers. One major Australian study in 2005 compared wages after taking account of many factors other than occupation, including age, education, job location, and employer size.

All else equal, it found that part-time, casual workers do receive an hourly wage premium over full-time, permanent workers. The premium is worth around 10%, on average, for men and between 4 and 7% for women.

These results imply that most casual workers (who are in part-time positions) can expect to receive higher hourly wages than comparable employees in full-time, permanent positions. However, the value of the benefit is again found to be less than would be expected, given the larger casual loadings mentioned in awards and agreements.

It seems that while there is some short-term financial benefit to being a casual worker, this advantage is worth less in practice than on paper.

A recent study, using 14 years of data from the Household, Income and Labour Dynamics in Australia Survey (HILDA), finds no evidence of any long-term pay benefit for casual workers.

The study’s authors estimate that, among men, there is an average casual wage penalty of 10% – the opposite of what we should see if casual loadings fully offset the foregone leave and insecurity of casual jobs. Among female casual workers, there is also a wage penalty, but this is smaller, at around 4%.

This study also finds that the size of the negative casual wage effect tends to reduce over time for individual workers, bringing them closer to equality with permanent workers. But very few casual workers out-earn permanent workers in the long-term.

Inferior jobs, but fewer alternatives

The evidence on hourly wage differences leads us to conclude that casual workers are not being adequately compensated for the lack of paid leave, or for other forms of insecurity they face. This makes casual jobs a less appealing option for workers.

This does not mean that all casual workers dislike their jobs – indeed, many are satisfied. But a clear-eyed look at what these jobs pay suggests their benefits are skewed in favour of employers.

Despite this, the choice for many workers – especially young jobseekers – is increasingly between a casual job or no job at all. Half of employed 15-24 year olds are in casual jobs.

The ConversationIn a labour market characterised by high underemployment and intensifying job competition, young people with little or no work experience are understandably willing to make some sacrifices to get a start in the workforce. The option of “holding out” for a permanent job looks increasingly risky as these opportunities dwindle.

Joshua Healy, Senior Research Fellow, Centre for Workplace Leadership, University of Melbourne and Daniel Nicholson, Research Assistant, Industrial Relations, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Christianity and Social Benefits


The following article reports on a Christianity that is ‘acceptable’ to the world, but yet lacks the true power of the real thing. What do you think?

http://online.worldmag.com/2012/04/11/doughnut-shaped-religion/