I-Phone4 and the cost of its component parts---Very nice breakdown!!

A very nice, if incomplete, breakdown of the component costs for the I-Phone4, and where those parts come from. It is quite amazing how the parts make their way around the world and into a finished product. It is hard to say how much Apple makes in profit from each phone because many other costs (fixed and variable), in addition to the ones shown here, are not included. However, it is instructive to look at the various component costs because those do include fixed and variable costs (accounting costs which are JUST explicit costs of production). The article contains many fascinating Microeconomics concepts, but the main point is that labor, which is the largest variable cost of producing MOST goods, is increasing at the assembly point of the world-wide production chain. This visual will be helpful in AP Microeconomics when we discuss cost of producing/normal vs. economic profit, international trade, etc.

From NYTIMES: Supply Chain for iPhone Highlight Costs in China

Food Prices at Historical LOWS...Stop complaining and eat your Veggies!

All societies, one way or the other and to differing degrees, pursue the social goal of meeting peoples "needs and wants". Needs are things that have no viable substitute and are universal in nature regardless of where you live on the planet, such as food, water, air, shelter. Everything after that is up for debate and enters the realm of "wants". Even within a need, like food, there are embedded "wants". We need food to live BUT the kind of food we eat is a want. I can subsist on a cup or two of rice a day (millions do) and live, BUT I "want" pizza, burgers, pasta, etc.

There is a strange paradox afoot when we look at needs relative to wants. The things we identify as needs are life-giving/sustaining, BUT we (by "we" I mean Americans, and perhaps citizens of other developed countries) feel entitled to pay the LEAST for them and demand the best quality. Seems as though the market has responded over time in delivering better food (certainly room for debate there) in much greater quantities through mechanization of farming equipment, technological advancement in food engineering/fertilization, transportation, food packaging to avoid spoilage, domestic competition, and free (freer) trade with the rest of the world. If we pay less for a pesky need like food, then we have more income left over to purchase "wants", which after all, make life worth living, right? The graphs below help illustrate these historical developments.

The first one shows food (as a broad category) as a share of one's disposable income (income leftover after paying taxes). You can see there is a steady decrease over time. The second graph shows the vital commodity milk, as a direct consumption good or input into making a myriad of other goods, and its price change over time.

Via Carpe Diem...

Looking at these two graphs, primarily the first one, you could deduce that:
(1) Food prices are not cheaper, but that income has dramatically increased (many do not believe this) so food expense has become smaller relative to incomes.
(2) Food has indeed become cheaper, in real terms, even though incomes have not increased
(3) A combination of both

What do you think? Am I missing something? Fill me in, please!

Leaders of the fee world

How much a country's leader is paid compared to GDP per person

Jul 5th 2010

ON MONDAY July 5th Raila Odinga, Kenya's prime minister, rejected the pay increase he was awarded by the country's parliament last week. MPs had granted Mr Odinga a rise to nearly $430,000 a year, while giving themselves a 25% increase to $161,000. This boost would place Mr Odinga among the highest-paid political leaders in the world. More worryingly, his salary would be some 240 times greater than the country's GDP per person (measured on a purchasing-power parity basis). Lee Hsien Loong, the prime minister of Singapore, tops our list of selected leaders' salaries. He is paid more than 40 times the city-state’s GDP per person. At the other end of the scale, Manmohan Singh, the prime minister of India, reaffirms his reputation for saintliness by taking a modest sum from Indian taxpayers.

source

Factory Jobs Return, but Employers Find Skills Shortage

NY TIMES: Factory Jobs Return, but Employers Find Skills Shortage

This article is more confirmation (to me) that employment recovery will be a very slow process NOT because jobs will be scarce, but because there will be a major mis-match of skills-to-jobs available (see previous blog entry HERE). Workers laid off 1 to 2 years ago will find most big and many small companies have changed because of the adoption of emerging technologies. These longer-term unemployed, who are the fastest growing part of the unemployed, will find that their skills are obsolete or they have been replaced by technology.

""Factory owners have been adding jobs slowly but steadily since the beginning of the year, giving a lift to the fragile economic recovery. And because they laid off so many workers — more than two million since the end of 2007 — manufacturers now have a vast pool of people to choose from. Yet some of these employers complain that they cannot fill their opening. Plenty of people are applying for the jobs. The problem, the companies say, is a mismatch between the kind of skilled workers needed and the ranks of the unemployed. ""

""Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker. Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills. “That’s where you’re seeing the pain point,” said Baiju R. Shah, chief executive of BioEnterprise, a nonprofit group in Cleveland trying to turn the region into a center for medical innovation. “The people that are out of work just don’t match the types of jobs that are here, open and growing.” The increasing emphasis on more advanced skills raises policy questions about how to help low-skilled job seekers who are being turned away at the factory door and increasingly becoming the long-term unemployed.""

I hear almost NO talk from policy makers about addressing this problem (or am I just not listening?). The only immediate policy is extending unemployment benefits well beyond the normal time (27 weeks up to 99 weeks). More money for trade schools, community colleges, tax credits for individuals and businesses to get/give training, etc? People must update skills or risk falling further behind. What can we do to solve this? Any suggestions?

Addendum: I found this graph HERE and re-inforces the notion that long-term unemployment is more serious than in the past (track the RED line)...It would be interesting to explore how technology plays into this as a substitute for labor.

More people are losing jobs but the unemployment rate is DECREASING? Must be a mistake...or is it??

LATIMES: Unemployment rate dips as more workers leave labor force


Bloomburg: June Job Losses at 125,000, But Jobless Rate Falls to 9.5%

HUH? How can that be? Lose jobs and unemployment rate decreases? Must be a mistake, right?

Here is a simplified explanation of why the unemployment rate DECREASED in June even though there were significant job LOSSES. It is a function of how the unemployment rate is calculated and the presence of what the Bureau of Labor Statistics calls "discouraged workers".
Let's use a simple example. First we need to calculate our labor force, which is the number of EMployed people PLUS our number of UNemployed people. The govt considers you unemployed if you are 16 years of age and ACTIVELY(very subjective word) seeking employment. If you cannot find a job after 27 weeks (6 months) to a year, and this is VERY important, the BLS does NOT count you anymore as unemployed. You are considered a "discouraged worker" and you are NOT included in the ranks of the unemployed when the unemployment rate is calculated. You still exist, but are not counted.
Assume our labor force is 100 people. Of those 100, 90 are employed and 10 are unemployed. Our unemployment rate therefore is 10% ( the number of unemployed divided by the labor force times 100). Let's say that in June, 5 of the employed people lose their jobs. We would expect the unemployment rate to INCREASE, right? Now we have 15 unemployed and 85 employed so that makes the unemployment rate 15%% (15 divided by 100 times 100)!! Not so fast.
What if in June, all 10 of our people already unemployed prior to June believe there is no job for them and they give up looking. They become classified as a "discouraged worker"? NOW our labor force is only 90 people (the 5 who had jobs prior to June lost their jobs and are officially unemployed are counted BUT 10 moved OUT of the labor force completely.
When we calculate our new unemployment rate we have a labor force of 90 (85 still with jobs, 5 without jobs) divided into our currently classified as unemployed (5) times 100 and we have a rate of 5.55%!!! THAT DOES NOT SEEM RIGHT, does it?
Key point: If the number of people leaving the labor force because they believe their is no job available to them ("discouraged") EXCEEDS the number of people LOSING their jobs, then the unemployment rate actually goes DOWN! This creates a misleading picture of the employment situation.
This also works in reverse---if and when the economy recovers and people believe there are jobs available, they will re-enter the job market. In this case if previously classified discouraged worker re-enter the workforce in EXCESS of the number of people actually getting jobs, then the unemployment rate will actually INCREASE!! Again, giving a misleading read on the employment picture.
This is why economics is frustrating to people and why I love it!!! :)

For a professional point of view on the current unemployment report click HERE(Ezra Klein)

"Sit UP straight, young man!!"--turns our this was really bad advice from your teachers...

From BBC: Sitting straight 'bad for backs'

""Sitting up straight is not the best position for office workers, a study has suggested.
Scottish and Canadian researchers used a new form of magnetic resonance imaging (MRI) to show it places an unnecessary strain on your back. They told the Radiological Society of North America that the best position in which to sit at your desk is leaning back, at about 135 degrees. Experts said sitting was known to contribute to lower back pain. Data from the British Chiropractic Association says 32% of the population spends more than 10 hours a day seated....""

Don' t ban plastic bags!! They are GOOD for the environment...

From LA TIMES: The unintended consequences of a plastic bag ban

This opinion piece comes from an admittedly biased source. However, it is a good example of government policy-making and the tendency to act without considering the full scope of costs relative to benefits (there appears to be no benefits in California). I would not say the policy is wrong or incorrect, because politicians, being politicians, respond to constituencies and not necessarily to cost/benefit analysis (two different things in my mind). Besides, this issue raises my contrarian-self when it comes to policies that are presented and implemented as "slam-dunk/no-brainers"---my inner Bastiat is aroused and I immediately look for the negative consequences that may arise out of such policies.

The issue is a proposed ban in California of plastic bags provided at retail establishments. We ALL know the reasons (as we are often reminded) why they are bad for the environment, wildlife, litter, etc. The explicit COSTS are easy to see in terms of the plastic bags themselves (resources to make the bag, production, disposal, etc) if you look ONLY at the bags themselves.

But to get an accurate counting of costs, you have to ask "plastic bags are costly RELATIVE to what alternative?" Paper bags? The writer suggests that 85% of people would use paper bags if plastic were banned. Whether recylced or made from new/farm-raised trees it would entail the use of resources, albeit different resources than making plastic bags, that would be consumed by society. The "seen" is we are not using resources to make plastic bags if they are banned but shifting resources from the production of plastic to paper. Is the net effect "conservation" of societal resources or just moving the burden from one place to another? This is the "unseen" question I would like to see answered, or at least addressed, when policy-makers implement something as definitive as a ban.
Tell me where I am wrong? (Full disclosure: I get plastic bags at the grocery store. I re-use them as lunch bags, to put weeds in when doing yard work, and for cleaning the cat box). Does multiple use reduce my carbon footprint?? ..Also, see THIS BLOG ENTRY on the "costs" of canvas bags...

National Debt Graphic---How much we owe and to whom...

Source: Chicago Tribune

How Does Your Income Stack Up To U.S. Government Salaries?

Is it "Yuan" or "Renimbi"?? Inquiring minds want to know....

From BBC: Why China's currency has two names

China has indicated that it will allow its currency to appreciate - following months of pressure from the US. Some refer to the currency as the yuan, others call it the renminbi. Who is right?
Both names are perfectly good, but in slightly different ways.
"Renminbi" is the official name of the currency introduced by the Communist People's Republic of China at the time of its foundation in 1949. It means "the people's currency".
"Yuan" is the name of a unit of the renminbi currency. Something may cost one yuan or 10 yuan. It would not be correct to say that it cost 10 renminbi.An analogy can be drawn with "pound sterling" (the official name of the British currency) and "pound" - a denomination of the pound sterling. Something may cost £1 or £10. It would not be correct to say that it cost 10 sterling.Nor can you talk about the number of renminbi - or the number of sterling - to the dollar....(read more here).