12/8/20: Beware of Longing for Pre-COVID19 Days

 

We tend to focus on shorter-term and sharper shocks than on longer-term trends, a sort of 'boiling a frog' conundrum in our behavioural biases. Hence, with the development of the current pandemic, we seem to have forgotten a simple fact of pre-COVID19 reality: things weren't going all too happily for the global economy in 2019 before the pandemic struck.

Here is a reminder: look at the economic policy uncertainty measures from the late 1990s through today

As it says in the chart comment box, economic uncertainty was running at elevated levels well before the pandemic struck. 

Here is another way to see this point:

There is a 'problem', folks, even though there is no Houston to page about it. The legacy of the Global Financial Crisis did not dissipate when non-performing loans were finally (largely) wiped out from the banks balance sheets. Since the 'recovery' from the Great Recession, we have been living in a state of perpetual precariat all the way into the current pandemic shock. This state of precariat has been evident in the world data and the European data, so the problem is not 'demographic' or at least not that of ageing. May be it is generational? 

Here is an interesting view on generational changes via Pew Research: https://www.pewsocialtrends.org/essay/on-the-cusp-of-adulthood-and-facing-an-uncertain-future-what-we-know-about-gen-z-so-far/.  As education levels rose across generations, state of insecurity rose as well. Quote; "There are already signs that the oldest Gen Zers have been particularly hard hit in the early weeks and months of the coronavirus crisis. In a March 2020 Pew Research Center survey, half of the oldest Gen Zers (ages 18 to 23) reported that they or someone in their household had lost a job or taken a cut in pay because of the outbreak. This was significantly higher than the shares of Millennials (40%), Gen Xers (36%) and Baby Boomers (25%) who said the same. In addition, an analysis of jobs data showed that young workers were particularly vulnerable to job loss before the coronavirus outbreak, as they were overrepresented in high-risk service sector industries." Note that GenZ has higher levels of educational attainment of any generation. And yet, they are more susceptible to labour market shocks. 

The younger generations are also progressively more attuned to news flows and more anxious about key structural (non-COVID shock) problems we face. 

Have the mid-2010s been a pivoting point toward the new Age of Anxiety? Did COVID19 pandemic exacerbate this onset of the new age? In the long run, these are more important questions than the coronavirus threat alone.

13/7/20: COVID19, Self-Employed and Contingent Workforce

Self-employed workers rarely get any systemic/analytical attention from policymakers and business analysts. Despite their huge importance in modern economies. This especially applies to the current environment, impacted by COVID19, in which policy tools used to offer some security of income and jobs tenure as an insurance against the pandemic have been focused almost exclusively on protections and supports to regular employees and employers, leaving the self-employed outside the safety nets.

Germany's ifo Institute did some interesting research on the topic of self-employed and the impact of COVID19 on them. ifo's study found that 66% of the self-employed "recorded declines in sales" during the pandemic, as opposed to just 20% of those in more secure workforce positions. Per ifo: "...the vast majority of blue- and white-collar workers and civil servants (80 percent) have not suffered any loss of salary as a result of the coronavirus crisis". Furthermore, "More than half (61 percent) of the self-employed were unable to work at all or worked only to a limited extent during the pandemic. ... Among the self-employed, it has particularly affected women who are single parents, 85 percent of whom had to reduce or completely stop their activities. Among dependent employees, meanwhile, it is low earners, secondary school graduates, and blue-collar workers who have suffered the most."

28/1/20: The Precariat of America's Workampers

Precariat is defined as "a social class formed by people suffering from precarity, which is a condition of existence without predictability or security, affecting material or psychological welfare. The term is a portmanteau obtained by merging precarious with proletariat." [Source]

Here is a very interesting article chronicling journalist's experience with the "Workampers", or a large number of Americans living in the world of campers, RVs and seasonal jobs: https://www.marketwatch.com/story/many-older-americans-are-living-a-desperate-nomadic-life-2017-11-06. Many are undoubtedly victims to the age discrimination that adversely impacts Americans after the age of 50, despite the pro forma legal bans against discrimination on the grounds of age.

12/12/19: Ireland's Jobs Creation Track Record: Raising Some Questions

Doing some research on the state of precariat in modern labor markets, I came across some interesting data from the 'poster country' of the post-GFC recovery: Ireland.

Ireland's economy and its recovery from the crisis are both characterised by the huge role played by the internationally-trading multinational corporations. In recent years, these companies have been gearing up for the upcoming OECD-led BEPS reforms (more on this coming up next month in my usual contribution to the Manning Financial publication, but you can read academic-level analysis o the BEPS here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3406260). The strategic shift this entails involves MNCs domiciling into Ireland intangible property and new business functions to create a larger 'footprint' in the economy. With this, employment in MNCs operations in Dublin and elsewhere boomed.

Why is this important? Because the main story of the Celtic Tiger revival has been about the aforementioned jobs creation and accompanying dramatic drop in official unemployment. Less covered in the media and politicians' statements, over the same period of time as 'jobs creation' was allegedly booming, Irish labour force participation remained well below pre-crisis levels (meaning there were more discouraged unemployed who stopped being counted as unemployed). Even less attention has been paid to the quality of jobs creation.

The above chart partially reflects the latter concern. It shows that full-time employment as a a share of total working age population has improved from the bottom of the series at the peak of the recession, but the rebound has been largely incomplete. Similarly (not shown in the chart) the percentage of those in part-time employment as a share of total number of those in employment has remained above pre-crisis levels. Over 1998 through the first half of 2008 (the pre-crisis period), that share averaged 17.5 percent. This rose to above 23 percent in the years of the crisis (2H 2008 - 2013). It remained at around 23 percent through 4Q 2016, and has declined to around 20.3-20.5 percent since then. This too signals that the quality of jobs being added even in the mature stage of the recovery is still lagging the quality of jobs in the pre-crisis period.

Now, imagine what these figures would have been were it not for the MNCs latest tax shenanigans...