Eight Major Fashion Brands back Minimum Wage Hikes in Cambodia

Source: Bloomberg Businessweek

http://www.businessweek.com/articles/2014-09-22/h-and-m-other-fashion-brands-back-minimum-wage-hike-in-cambodia

A number of fashion brands including Swedish H&M have backed a minimum wage hike for workers in Cambodia.  Garment workers in the Asian country have been protesting for a hike in minimum wage for a significant amount of time. In January of last year, a police crackdown left several dead in said protests.  Recently, the protests have not been in the form of strikes but as protests during factory lunch breaks. The strategy seemed to work as eight major fashion brands submitted a letter to the Cambodian deputy prime minister backing a minimum wage hike. The letter addressed fair living wage, changing purchase practices and prices to account for this hike. The letter did not address specific figures but is a big step in creating fair wages for outsourced jobs.

The College Majors Most and Least Likely to Lead to Underemployment

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/26/the-college-majors-most-and-least-likely-to-lead-to-underemployment/

            The above article details the findings of a recent survey on underemployment, specifically which college majors are most and least likely to lead to this situation. STEM fields produced graduates with the least likelihood of underemployment, liberal arts degrees the greatest.  

From the study, we can see that young adults, more so than middle-aged or older adults, are experiencing the greatest difficulty in today’s economy. Underemployment, a situation involving the under-utilization of labor, is just as serious an issue as unemployment. College graduates today are more likely to take jobs in which they are overqualified, and increasingly will settle for a part-time job despite desiring full-time work. In filling jobs that do not require a postsecondary education, the benefits of their college degrees go unused and they produce at a level below their full potential. From this trend, we can see that the choices young adults make earlier in life (i.e. where to attend college, what to study, how to pay for it) have long-arc financial implications. Graduates today need practical vocational skills in order to get hired.

More young adults are enrolled in college today than at any time in recorded history. The increase in enrollment is just one reason for the current high underemployment. Not enough jobs have been created to accommodate them, resulting in falling wages for young college graduates, as well as increasing underemployment. In the past, when there were fewer graduates, a college degree was a coveted prize. The market now flooded, diplomas are worth less, and specific skills are worth more. It is important to recognize that not all degrees are created equal. For education to have value and cachet in the new millennium, it must impart skills that translate to the labor market. 

When it comes to the job market, a college major can make all the difference. Ultimately, we do not have a simple answer to the question “is college worth it?” Some degrees pay for themselves while others do not. Oftentimes, individuals can earn a lot more by mastering a trade than they might with an art history degree. 

How immigrant entrepreneurs are making it

http://money.cnn.com/2014/09/18/smallbusiness/immigrant-entrepreneurs-exports/index.html?iid=SF_SB_River

Immigrant entrepreneurs have greater advantages in the export market because of their first hand knowledge and stronger connections abroad. Royce Leather that was founded by Harold Bauer in 1974, just a year after he moved to the U.S. from Austria. Today, the company exports to fifteen countries, which is up from 45% just five years ago. Even though not all immigrant-owned-business have these same kinds of advantages, they still have a "much higher propensity for participating in transnational activities." Because they are more comfortable being around with customers from different cultures. Nearly half of the small and medium sized business who are involved with international trading have grown exports over the past year, according to a survey done by Western Union Business Solutions.
Immigrants had greatly impacted the U.S. economy positively. I think the government should encourage potential younger immigrants to start business and use their advantages in hands by giving them fair amount of more funding. U.S, is not doing great with exporting to other countries, so the need of keeping and encouraging these immigrant entrepreneurs is necessary for bringing benefits to the economy.  

The Fed's Right to Focus on Jobs

        Fed reserve policy makers said that they expect to keep interest rates low for a some time after the end of quantitative easing. With the weakness in our job market, this seems to be the right decision. Janet Yellen, the fed chair, said that since the recovery that began in 2009, the economy continues to progress towards their goal of fully sustainable maximum unemployment, but is still not quite there just yet. Yellen also stated that there is still too much unemployment and underemployment despite the recent improvement in the job market. The fed focuses on keeping the inflation rate near their goal of 2%, which currently is well below their goal, but Yellen expects the inflation rate to creep closer to the 2% mark as our economy continues to improve. The decision of choosing between keeping interest rates low for a longer period of time, or to raise interest rates is one the fed had no trouble deciding on. They believe that keeping interest rates low will continue to help the labor market which seems to be the right decision. 

       This article is a good read for anyone who is interested or curious in what the fed reserve policy makers plan on doing to try and continue our economies growth. There are quotes from the fed chair, Janet Yellen, which help clarify what our current situation is and what their plans are in the near future that will have an affect on our economy, which is important to stay up to date on. 

http://www.usnews.com/opinion/economic-intelligence/2014/09/19/janet-yellen-and-the-federal-reserve-are-right-to-focus-on-jobs 

Age Invaders

http://www.economist.com/news/briefing/21601248-generation-old-people-about-change-global-economy-they-will-not-all-do-so#mm_hash

In the article Age Invaders, the author describes some of the changes that are expected to take place in the global economy as the global population gets older. He also proposes some solutions that can help to combat some of the problems that this change is expected to bring.

The world's population is getting older. People are living longer, and our population growth is flattening because in most developed nations, people do not have as many children as they used to. This is concerning for several reasons. The first is a concern with the funding for Social Security. When people collect Social Security, they are not collecting on an investment, but rather on the tax dollars of the current workforce. If the workforce in the United States was growing and the average man or woman only lived a few years into their retirement as has happened until this point in history, this would not be a problem. However, the opposite is true, leading to valid concerns with the program. Additionally, the trend toward a higher percentage of elderly people without a huge rise in population size leads to a decreasing potential growth rate, which has serious negative implications on any economy. At least, this has been the traditional way of thinking about the aging population.

The author of this article makes some good points and paints the future as grey, as opposed to black and white. Traditionally, the retirement age has been thought to be age 65. This is not necessarily the case any longer, especially for people with highly skilled jobs. For these people, due in part to advances in technology, productivity increases with age due to the experience, managerial skills, and intrinsic motivation that they have gained from years in the workforce. Additionally, although our population may not be increasing, our workforce is. More women work today than ever before, and this percentage may continue to rise. And with immigration policy changes, our workforce can be further increased.

In addition to a reform of the immigration policies in the United States, the author puts forth another suggestion for improving the productivity of our workforce in order to prevent a reduction of the potential growth rate. He notes that, among people with blue collar jobs, retirement comes early. This is the case for several reasons. The first is that these type of physically demanding jobs become increasingly difficult as one gets older, and productivity decreases. The second is that, as these jobs are generally poorly paid, the opportunity cost of continuing to work as opposed to drawing from ones retirement fund (if they have one) or beginning to collect Social Security is very small. The solution that the author proposes is investing in these workers, teaching them the skills to be productive in other professions later in life. Doing this will both benefit the workers and strengthen the labor force in the United States in the years to come.

French Economy In Trouble

  The new 36 year-old French Economic Minister Emmanuel Macron, during his speech at the transition of power ceremony referred to the French economy as "sick". The unemployment rate is at a record high of 10% and there has been no growth in GDP over the last 2 quarters. This is worrying not only for the French but for the European Union too as France is Europe's second largest economy.

  Other than the unimpressive economic performance, the French have to reduce their public deficit from 4.4% of GDP to 3% by 2015 as promised to the European Union. According to the current situation in the country economically and politically, France has gone back on its promise and the deadline has now been extended to 2017.

  The policies that have been put forward in response to the economic crisis include tax breaks to businesses worth 40 Billion Euros to encourage investment and 50 Billion Euros in Public Spending cuts to reduce the GDP to debt ratio.

Click here for the full article at Business Insider : http://ow.ly/BKJ5v

http://www.bloomberg.com/news/2014-09-19/asian-currencies-in-longest-losing-streak-since-january-on-fed.html

Asian currencies in longest losing streak since January on Fed

In this article, it’s stated that Asian currencies has been dropping since January as the U.S. Interest rate is believed to increase, which dimmed the appeal of emerging- market asset.

Malaysia, would be vulnerable to outflows from emerging market as 32% of Malaysian government’s debt held by oversea investors.

Korean’s won felt 0.5 percent to 1,047.85, the weakest level since April

Chinese’s Yuan felt 0.1% to 6.1415 per dollar. Taiwan’s dollar depreciated 0.6 percent from Sept. 12 to NT$30.258.

India’s rupee fell 0.3 percent to 60.8275. Thailand’s baht gained 0.1 percent to 32.20, while Vietnam’s dong was little changed at 21,205.

U.S. Poverty Rate is Declining

      Being an American Citizen trying to bounce back after the recession has been difficult and not much positive news has been presented to them until now.  The poverty rate in the United States is finally showing signs of decline.  Although it hasn’t been a major decline, even the slightest decrease is a step in a positive direction.  The rate is now at 14.5% which is .5% down from the previous year.  This has been the first significant drop since it was 12.3% in 2006.  This drop is due to people beginning to find full time jobs and being able to earn a higher income to support themselves and their families.  This is a positive sign but the number of Americans still living under the poverty line is at a staggering 45.3 million.  We can only hope that this number continues to decline and American citizens can find full time work and pull themselves above the poverty line.

Scottish Currency Issues and the Referendum

More questions than answers

  The article I read is about the economic considerations behind a Scottish exit from the U.K. and how it will affect the economies of Britain, Scotland and the European Union. The article opens with discussing how the value of the pound has reached a 10 month low compared to the U.S. dollar and a 3 month low with the Euro and how shares in Scottish companies were falling which leads to even more questions on Scotland's capabilities to deal with the impending fiscal situation if the referendum were to pass. 

  A major issue brought by Scotland's possible independence is what type of currency they would use; sterling, euro or the pound. The issue with using the pound is that currency unions should not be made in the European Union without total political and fiscal union, according to U.S. economist Paul Krugman. This leads into the major obstacle that is the resulting U.K. debt situation with a separate Scotland and U.K. The possibility that Scotland forgoes all liabilities from leaving is very slim, which then prompts the conversation as to how much debt they assume and how they will pay it off. The banking sector of Scotland is relatively large compared to other countries going through similar situations, but the projected financial situation for Scotland by Blackrock (world's largest fund manager) is “likely high debt, fiscal deficit, weak economic growth, lack of institutional frameworks and low foreign exchange reserves”. This suggests Scotland would pay a higher interest rate than the British government; brokers estimate an extra 1-1.5 percentage points a year. This all comes back to the currency issue, Scotland's liabilities and assets would be in different currencies if it were to utilize sterling and Britain used pounds. The increasing interest rates would make investors more likely to remove British assets thus making Britain's financial situation more confusing. One long term situation proposed is that a Scottish exit would make a British exit from the European Union likely, thus furthering the ripple effect. However I feel this to be a bit of a stretch. One question that I came across while reading this article is how informed the average Scottish voter on these issues/conversations.

Link:http://www.economist.com/news/britain/21617032-investors-hate-uncertainty-scotland-supplying-plenty-it-more-questions-answers

John Wainwright

America's Economy - How long will the expansion last?

http://www.economist.com/news/united-states/21612168-weighing-evidence-how-long-will-expansion-last

Some economists are worried that another recession may be right around the corner. This article states that our current expansion is 5 years old which is "longer than the post-war average of 58 months".

Later in the article, it is noted that recessions have become rarer in recent memory. The three previous expansions prior to the 2008 economic collapse lasted for an average of 95 months. Rudi Dornbusch, an economist, said "post-war expansions didn't die in their beds; they were murdered by the Federal Reserve." By saying this, Dornbusch is stating that through inflation, profits in the economy as a whole deteriorated, prices and wage rose as well, which was followed by the Fed raising interest rates. This process leads to recessions.

Although interest rates have been drastically low since the beginning of the recovery because of low inflation as well as slow growth in the economy. Because of this, the Fed has "little firepower to respond to another shock."

One of the main points of the article was to highlight the fact that the Fed can only do so much to protect against recessions. Processes that have worked in the past sometimes fail to work in the present and the economy is unpredictable - Our guesses can be based off the past, but every now and then something changes course which unpredictably causes a recession.

How Immigrant Entrepreneurs are Making It

http://money.cnn.com/2014/09/18/smallbusiness/immigrant-entrepreneurs-exports/index.html?iid=H_E_News

In this article presented by CNN Money, it offers an in depth perspective on how immigrant entrepreneurs have a significant leg up on North American entrepreneurs when it comes to international business. Some of the advantages that they have are due to family ties, culture familiarity, knowing the market as well as the environment.

The article touches on how these immigrant entrepreneurs have a much higher propensity for participating in transnational activities given their roots in foreign territories. International clients have more confidence in their partners overseas if they have ties to a different country. The ability to export internationally has a great deal of influence on ones knowledge of that given area, and given that many of these new entrepreneurs have a great ability to speak many languages, it gives them a leg up on North American businesses because of the barrier presented by language and familiarity. The network of international business is far more substantial for those from foreign countries, and because of this, it allows for a greater ability for international distribution partners, which is a huge business asset. 

Overall the main emphasis of this article was to elaborate on how current international business is fueled by immigrant entrepreneurs, and given that, they have a significant leg up on other entrepreneurs without ties to foreign countries.Those looking to start exporting or expand their international base can learn from immigrant entrepreneurs to get a leg up on their competitors.  

http://www.economist.com/news/business/21618815-death-chaos-destruction-theyre-not-bad-companies-you-might-think-profits-time


This article gives a rundown of how firms are generally influenced by geopolitical destabilization, generally the firms that have invested largely in rigid inflexible supply chains in areas of destabilization are hurt the most, while the larger firms can reallocate their resources and supply chains around the trouble while making a reasonable increase in business.

In addition the western market generally has the majority of technological investment based in the west itself and not in volatile regions, actually most investment is seperated from the unstable regions, which are of large political value but make a reasonably unsure market falter from investing near them, leading to the areas of instability being less economically important than other more profitable avenues of business.

Inequality and the Narrowing Tax Base: Too Reliant on the Few

http://www.economist.com/news/leaders/21618784-taxes-are-best-raised-broad-base-many-countries-it-worryingly-narrow-too-reliant

        As much as we all say we hate taxes, they are a necessary part of any civilized society. While we can all (mostly) agree on this statement, the resentment towards taxes comes from the extremely high rates many of Americans, and others around the world, are required to pay each year. This leads to an environment in which the richest of the rich do anything they can to avoid sending large chunks of their money to the government while lower socioeconomic individuals aren't even required to pay an income tax. Economists argue that we could change this hesitance and hostility towards taxes by taxing a broader base, allowing rates to fall which would increase tax revenue.
       This idea is directly opposite of what America, and other first world countries, are doing. Instead, the trend is a smaller proportion of the nation contributing the highest amount of income taxes. In 1979, the top 1% of Americans paid 18% of the income tax. Currently, they are responsible for 46%. There is a similar trend in the corporate world. While part of this is the fault of increasing economic inequality, bad tax policies are also to blame. There are two solutions to the issue at hand.
       The first fix is tightening up the tax code to reduce the amount of deductions and exemptions that are given each year. This would increase the tax base and add 7% to our GDP. The second solution is focused primarily at corporations and closing the loopholes that allow them to dodge the taxes they should be paying. By updating tax law, companies will have a harder time avoiding taxes thus leading to more revenue and a wider tax base. While implementing both of these policies would be ideal, any step taken towards widening the tax base would be extremely beneficial to both the individual/ corporations as well as the government.

China and Asia Winners and losers in the great Chinese rebalancing Slowing investment and resilient consumption in China are changing Asia’s economic order

The article goes into great detail regarding the effect china has in terms of being a regional economic power house. It gives an in depth comparison of how in five year China has gone from a nation growing at an annual rate of 10% on average for the past 30 years to 7.5% in the previous two years. Even though 7.5% annual growth is very good compared to other countries, but; still a downgrade for China. Its coal imports have gone down drastically. Low growth has had a negative effect on Asian Economies that have relied on China for higher exports. Major examples of these are Taiwanese machine tool makers who have seen a drop in exports to China by more than 20% since 2012. Australian iron has hit its lowest price in around 21 months. Jewelry sales have gone down in Hong Kong by 40% this year.

In terms of the Chinese economy, consumption is finally edging out investment as the main element. Household consumption has grown from 34.9% in 2010 to 36.2% of the GDP last year. Even after the mini-stimulus introduced by the government this year, consumption has accounted for more than half of the Chinese growth.

This rebalancing has had an effect on various other economies. With 1.95$ trillion in imports in 2013 China became the second largest importing nation. For example Taiwan’s exports to china went up by 15% in June for a year earlier. However; more at risk are countries that export commodities and capital goods such as heavy machinery to China. Such as Australia will lose about 0.8% points if Chinese investment goes down any further. Which goes to show the impact of economic fluctuations in China as a regional power house.  

http://www.economist.com/news/finance-and-economics/21608749-slowing-investment-and-resilient-consumption-china-are-changing-asias-economic

Nation Experiencing Wider Gap in Retirement Savings

The gap in retirement savings between the rich and poor has been growing significantly.  Households in the lowest income bracket (those earning less than $39,000/yr) have a median savings balance of $13,000.  However, those in the highest income bracket (those earning $138,000/yr or more) have a median savings balance of $452,000.  Between 2004 and 2013 these numbers are a 24% increase for the high income bracket and almost a 20% decrease for the low income bracket. Even worse, only 9% of the lower income class households even have a retirement savings account, whereas 90% of the higher income class households have such an account.  Also, around 50% of middle class income households have a retirement savings account.

Some people will say that this is a problem the government needs to address quickly.  Others will argue that it’s the fault of the individuals, who need to maintain smarter saving behavior and manage their income more efficiently. 

http://money.cnn.com/2014/09/18/retirement/retirement-savings-income-inequality/index.html?iid=HP_River

South Dakota: Quietly Booming

http://www.economist.com/news/united-states/21614223-how-neglected-state-succeeding-quietly-booming

South Dakota has been quietly on the rise in the past few years.  Even though South Dakota doesn't have an oil industry, military base or an influential university, it still has a 3.7% jobless rate which is third lowest in the country and it has Sioux Falls which is the fourth fastest growing economy in the country.

The state's economy used to depend mainly on farming but now many financial companies and hospitals are the main forces for the state.  Citi-bank moved its credit card business there and many other banks have followed.  The state has $2.76 trillion in bank assets which is the more than any other state including New York.  What also makes South Dakota an attractive place to live or start a business, is the taxes.  South Dakota has no state income tax, personal property tax, inventory tax, or inheritance tax.

However not everyone in the state is prospering as South Dakota has some of the poorest spots in the nation, mostly Indian reservations.  For example there's Shannon County which has the lowest income per head in the country.  But for now South Dakota's economy looks like it's still on the rise.

Europe’s Big Airlines No Longer Want to Fly in Europe (Bloomberg Businessweek)

With numerous short-haul budget airlines around the world, the major airliners in Europe are starting to feel the effects of fare competition. The three biggest airlines in Europe, KLM, British Airways and Lufthansa are all changing their strategy to deal with this increased competition. This strategy change is seen in either acquisitions or use of already owned budget airlines.  United States’ airlines have already almost completely eliminated flight in Europe that does not involve one of their hubs. The costs are way to high for the low revenue associated with short-haul non-hub destination flights in Europe. 

            With the new move towards the use of budget airliners that the major European airlines have acquired, a number of issues have occurred. Many of the major airliner pilots have become irate over the decrease in wages for flying for the short-haul budget companies. The disparity in wages between the short-haul and long haul pilots is large. In fact three pilot strikes have occurred against Lufthansa in the last week.  Air France is preparing itself for a weeklong pilot strike that is likely to start this week. This is a major issue for travelers as there is going to be a lack of pilots in Europe causing delays and cancellations, which will disrupt business within the continent.  Air France has urged customers to reschedule their trips due to the instability in their labor forces.

Source: http://www.businessweek.com/printer/articles/225164-europe-s-big-airlines-no-longer-want-to-fly-in-europe