Economics & Finance

USA Today reports that college students have responded to massive technology sector layoffs by studying something besides Computer Science. This apparently comes as a surprise to the author, but not to the Chicago Boyz.

The article also points out that while the low-level tech jobs have been sent offshore to India, there is still a need for experienced people with both technology and business skills (business systems analysts, project leaders, etc.). The problem, which the author misses, is that the offshored jobs used to be the entry points into technology careers. Most of the accomplished techies I’ve met have spent time on the help desk, doing network maintenance, testing software, grinding out code, or doing some other necessary but “low-level” jobs. With these jobs scarce, there is no chance of getting the experience that the market wants. The pipeline is cut off.

We all know that HR’s ideal candidate is 22 years old with 15 years of industry experience. Good luck finding one.

The Administration is again trying to jawbone the Chinese into revaluing their currency, i.e., floating it in the expectation that it will rise against the US dollar and make our exports to China more attractive. So on the one hand we have this giant communist country, growing rapidly, very nationalistic and whose leadership is not uninclined to gin up external conflict (in part to deflect domestic attention from its own authoritarianism); and on the other hand we have some short-sighted American pols trying to buy votes from stakeholders in US manufacturing companies. (Our recent boosting of textile tariffs is part of the same pattern.)

Politicians and exporters always want to run a weak-dollar policy, but it’s bad for importers, investors (remember who buys our bonds?) and most everyone else. We are attempting to contain China militarily and diplomatically while provoking it economically. That’s just stupid.

UPDATE: Larry Kudlow reprints an excellent NY Sun editorial on this topic.

UPDATE 2: Austin Bay puts the Chinese-currency controversy into geopolitical context, arguing that our anti-China economic moves are payback for China’s easing of pressure on North Korea in the context of the multi-party talks there. He may well be correct about the Administration’s motives, but I am skeptical that it is wise for us to respond by economic means. Indeed it may have been unwise of us all along to assume that China shares our interest in restraining NK, and to depend on China to do our work there for us (as Arthur Waldron argued in part in his article in Commentary a couple of years ago).

UPDATE 3: Brad Setster’s post on this topic is excellent, as are many of the comments on his post. (via Tyler Cowen via Chris Masse)

Glenn Reynolds notes a new book by Matthew Simmons that argues that Saudi oil reserves are closer to being depleted than is commonly believed, and that we are all in trouble if this happens. I don’t buy it.

The world has huge non-Saudi oil reserves. What keeps most of them unexploited is the extremely low Saudi marginal cost of production: SA can at any time increase its production, and by so doing lower prices and make expensive investments in new extraction technologies worthless. Peter Huber made this argument well here.

So what happens if the estimates of Saudi oil reserves are indeed overstated and Simmons’s oil-shock scenario comes to pass? It seems likely that a lot of oil-extraction ventures that aren’t worth the risk now, with the Saudi marginal cost of production at just a few dollars a barrel, would become worthwhile. And once the investments in those projects are made there is little reason not to continue producing oil from them. That wouldn’t be good for the Saudis but it would be fine for consumers. I doubt that the end of Saudi oil, unless it occurred precipitously, which is unlikely, would raise long-term prices very much if at all.

UPDATE: Glenn Reynolds has updated his post to include links to a couple of other critics of Simmons’s argument.

My home state of Minnesota has raised the minimum wage, from $5.15 an hour to $6.15/hr. While chief sponsor of the bill Sen. Ellen Anderson, D-St. Paul said “$6.15 is still a barebones pay rate.“, she feels it shows that “[w]e support you. We believe everyone who works hard in our state should have the opportunity to succeed.”

The article notes criticism by Republicans that this is merely a “feel-good” vote. A local business man complained, “it’s going to make a substantial impact to our cost of doing business. What we’ll have to do is pass that along to our customers. People can only afford to pay so much for your product. You’re going to price yourself out of business.”

On May 2nd, Florida similarly increased the minimum wage to $6.15 per hour. Florida’s new minimum wage is indexed to inflation, so the state will readjust the minimum every fall. A a spokesman for the Florida Chamber of Commerce said that “such increases will result in higher prices for Floridians, which will hurt elderly people living on fixed incomes.” Apparently, the socialist group ACORN had pushed for the state’s minimum-wage law, which was enacted last year as a constitutional amendment.

That’s the background.

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I was just reading this news item, which discusses the provisions that various emergency agencies have set up in order to take care of animals during disasters.

This is certainly nothing new, and it’s eminently practical since livestock are a major form of agricultural assets. Protecting farm animals against needless death is a way for the state governments to protect their tax base.

But people are taking steps beyond moving cows or horses out of harms way. Emergency shelters for people are now preparing to meet the needs of pets as well as their owners.

Megan McArdle says that it’s very difficult to declare yourself wealthy because the goalposts keep retreating as you move up the income ladder. That’s certainly true, but I think that I’ve found an indicator of the relative wealth of the nation as a whole.