Wednesday, May 30, 2012

The Global Skills Shortage

There were a couple of good, somewhat interrelated articles on Bloomberg this morning. First up, the global talent shortage (extract, emphasis added):

The Surprising Global Shortage of Skilled Workers

…Even as economists and politicians fret about the problem of global unemployment, those with the right résumés are in hot demand. That’s leading to talent shortages around the world, according to a survey released on May 29 by Milwaukee-based Manpower Group (MAN), one of the world’s largest temporary workers agencies.

All told, over one-third of the 38,000 companies Manpower surveyed earlier this year in 41 countries and territories reported that they were unable to find the workers they needed. That is 4 percentage points higher than it was in 2009, during the global financial crisis. The figure is still well below the 41 percent that reported shortages in 2007, before the crisis…

Monday, May 28, 2012

Minimum Wage Around The World

Reading this article this morning, I have to wonder just how people get their information (extract; emphasis added):

Unfair to implement minimum wage policy in Terengganu, say groups

KUALA TERENGGANU: Trade organisations in Terengganu have asked to be exempted from the planned minimum wage ruling.

They argue that the cost of living in the state is comparatively lower than in the more advanced states like the Federal Territory and Johor and so, the RM900 minimum wage would not be justified here…

…Speaking at a press conference here yesterday on behalf of the organisations, Terengganu Chinese Chamber of Commerce president Datuk Low Kian Chuan urged the Government to review the policy and study its effects on small traders and companies…

He added that in China, only selected regions had implemented such a policy while in European countries, minimum wage was unheard of.

China operates a local level not national implementation of a minimum wage – you can check the list of provinces and their minimum wage rates through Wikipedia. By my count (cross checked against the list of provinces here), that’s pretty much all of them, not a select few.

In the European Union, 18 out 27 countries have a minimum wage law. The rest typically set wages through collective bargaining agreements, making a minimum wage regulation largely unnecessary. I think on the whole, they might have heard of a minimum wage policy in Europe.

It’s actually much harder to find a country that doesn’t have some form of minimum wage regulation, than to find one that does. Again, Wikipedia to the rescue.

Thursday, May 24, 2012

1Q 2012 National Accounts: Steady Growth

With the change in the base year to 2005, GDP numbers for the last 6 years have been substantially revised. Since I lack the time to do a comprehensive analysis of the data as before, this post will be a quick and dirty look at the salient numbers for 1Q 2012. Further analysis will have to wait on when I can reconcile the 2005 and 2000 numbers.

Be that as it may, the growth figures haven’t changed much, even if the absolute figures have (annual log changes versus quarterly log changes, seasonally adjusted and annualised):


Quick Note On The GDP Numbers

I had a feeling this would happen, when I saw that DOS had published the second volume of the 2005 Input-Output Tables a couple of months back. The IO tables form the basis for the national accounts, so when the IO table changes, you’re looking at a possible change in the base year.

So indeed, that’s what happened – starting with yesterday’s GDP release, real GDP will now be computed based on 2005 prices, as compared to the 2000 prices used since 2007. More complicated still, the national accounts will be a mix of the 1993 SNA and 2008 SNA methodologies. In fact, DOS will be conducting a briefing today to go over the changes in the accounts.

March 2012 Consumer Prices

I’m not going to spend much time on this post, as I’m still looking at yesterday’s GDP release.

Suffice to say that there’s not been much movement in the price level this year – in fact, the CPI level has been absolutely flat for the last four months (index numbers; 2010=100):


Wednesday, May 23, 2012

Capital Inflows Across Asia

A new IMF working paper looks at capital inflows and what can be done about them (abstract):

Surging Capital Flows to Emerging Asia: Facts, Impacts, and Responses
Balakrishnan, Ravi and Sylwia Nowak; Sanjaya Panth & Wu Yiqun

Summary: Net capital flows to emerging Asia rebounded at a record pace following the global financial crisis, raising concerns about overheating and financial stability. This paper documents the size and composition of the most recent surge to Asian emerging markets from a historical perspective and compares developments in the broader economy, asset prices, and corporate variables across the different episodes of strong inflows. We find little evidence of a significant build-up of imbalances and resource misallocation during the most recent surge. We also review country experiences in managing the risks associated with inflows and argue that Asian countries have used regulatory measures during past surges, although there is not strong evidence of their efficacy without supporting monetary and fiscal policies.

Tuesday, May 22, 2012

Transforming Education

DS Idris Jala is singing the education blues (excerpt):

Everyone should participate in education

If there is one area where there is a never-ending stream of complaints it is in education. Critics of our education system argue that the quality of education in schools and universities has dropped. We hear this plaintive cry, over and over again...

...Yes, there are deficiencies in our education system – we recognise that. We often won’t be able to fix these overnight but rest assured we are taking concrete steps to deal with each and every one of them...

Monday, May 21, 2012

March 2012 Employment

March employment numbers show little change as far as the unemployment ratio is concerned. 221k jobs were added in March, reducing the unemployment to 2.9% from February’s 3.2%:



Wednesday, May 16, 2012

The Nexus of Corruption and Income Part V

[Warning: this post is highly graphics intensive]

Last month, I did a series on the relationship between corruption measures and income levels and growth which you might want to revisit before reading through this post (Links: Part I, Part II, Part III, and Part IV). Reader Shihong asked if there’s any differences to the relationships if we subdivide the dataset by income levels. The short answer is, yes there is, and the differences are pretty interesting too.

To recap, the corruption measure used here is from Transparency International’s Corruption Perception Index (CPI) from 1995 to 2011, which captures through surveys the perception of corruption in each country on a scale ranging from zero (totally corrupt) to 10 (corruption free). GDP data is sourced from the IMF September 2011 World Economic Outlook database, in PPP adjusted current international dollars.

Tuesday, May 15, 2012

Subsidy Reform: Same Problems Worldwide, Same Solutions?

File under the to-do list for after the election (whenever that happens to be):

Costly Mideast Subsidies Need Better Targeting
IMF Survey online

  • Generalized price subsidies are often costly, inefficient
  • Targeted social safety nets give better support, allow more priority spending
  • Subsidy reform should be among steps to cut poverty, boost inclusive growth

Many governments across the Middle East and North Africa (MENA) provide substantial energy and food price subsidies to their populations to offer some relief from high commodity prices or to share the wealth from natural resources.

These well-intended social protection policies are increasingly weighing on government budgets and debt levels and are not necessarily the most efficient way to channel aid to the most vulnerable, participants at a recent IMF seminar said…

Industrial Policy: Picking Winners Works, Provided…

One of the interesting things about development in East Asia over the past half a century is the degree of government involvement in promoting certain sectors of the economy, notably export-oriented manufacturing. That’s been the guiding principle of Japan’s and Korea’s development for instance, and Singapore and Taiwan haven’t been far behind.

In Malaysia’s case, attempts at directing industrial policy has been a bit hit and miss – some industries (palm oil for instance) have been pretty successful, but others (heavy industry) much less so.

This new working paper published by the NBER helps to explain the reasons why (abstract; emphasis added):

Industrial Policy and Competition
Philippe Aghion, Mathias Dewatripont, Luosha Du, Ann Harrison, Patrick Legros

This paper argues that sectoral policy aimed at targeting production activities to one particular sector, can enhance growth and efficiency if it made competition-friendly. First, we develop a model in which two firms can operate either in the same (higher growth) sector or in different sectors. To escape competition, firms can either innovate vertically or differentiate by chosing a different sector from its competitor. By forcing firms to operate in the same sector, sectoral policy induces them to innovate "vertically" rather than differentiate in order to escape competition with the other firm. The model predicts that sectoral targeting enhances average growth and productivity more when competition is more intense within a sector and when competition is preserved by the policy. In the second part of the paper, we test these predictions using a panel of medium and large Chinese enterprises for the period 1998 through 2007. Our empirical results suggest that if subsidies are allocated to competitive sectors (as measured by the Lerner index) and allocated in such a way as to preserve or increase competition, then the net impacts of subsidies, tax holidays, and tariffs on total factor productivity levels or growth become positive and significant. We address the potential endogeneity of targeting and competition by using variations in targeting across Chinese cities that are exogenous to the individual firm.

Monday, May 14, 2012

The Shadow Economy: Estimates For Malaysia

From an article on VoxEU last week:

Shadow economies all around the world: Model-based estimates
Ceyhun Elgin & Oguz Oztunali

Even though informality is a widespread phenomenon and poses serious social, economic, cultural, and political challenges across the world, many issues about its nature and consequences still remain largely under-explored or unresolved. For example, the evidence presented in the existing literature has failed to generate a consensus among researchers around the measurement of the informal sector…

Gold, Quantitative Easing, And Property Prices In Malaysia

I read this over the weekend:

Applying the brakes – made for the short term – can be dangerous

...Recently there has been a proposal to raise the floor price of properties for foreigners from RM500,000 to RM1mil to curb or control the prices of houses from increasing too fast. This proposal is on top of the other “cooling off” measures such as the 70% housing loan policy for purchase of a third property, the increase of real property gains tax from 5% to 10% imposed on properties sold within two years of the sale and purchase agreement, and the new ruling on housing loan limits based on net income rather than gross.

There is no doubt that the introduced “cooling off” measures have reduced the buying spree of properties. However, the intended objective of these measures to control the price of properties has yet to be seen. Introducing measures without critically identifying the root cause of the increasing property prices may instead create situations that would not be beneficial to the industry as explained by the theory of Risk Homeostasis.

So, what determines rising prices?

Friday, May 11, 2012

BNM Watch: MPC (Non)-Meeting Today

If there’s anybody who honestly expects any change in the monetary policy stance today, there’s a bridge I’d like to sell him.

There’s been no substantial changes in the outlook for inflation or output over the past couple of months – the incoming data is volatile, with production disappointing but loan growth holding up (despite new prudential lending guidelines). Externally, China’s not expected to suffer a hard landing, the US recovery is still there though weakening, Europe’s firmly in recession, Greece is on the brink of leaving the Eurozone (again) and the rest of the East Asian region is…doing ok. Commodity prices have softened a bit, but financial markets are holding up.

All that adds up to no compelling reason to shift the OPR up or down. Today’s meeting will be another non-event. Things might get a mite more interesting later on in the year, but for now – no change.

Thursday, May 10, 2012

March 2012 Industrial Production: Surprise, Surprise

The industrial production numbers that came out today weren’t much more encouraging than yesterday’s trade numbers. But what they say about 1Q2012 GDP is a bit startling.

Before getting into that, the IPI, like exports, showed a bit of a setback (log annual and monthly changes; seasonally adjusted; 2000=100):


The Wealth Gap: The View From London

This is a few months old, but still worth a listen:

The Wealth Gap: The View from London

As protests around the world now regularly remind us, the gap between the super-rich and the rest of us has been growing sharply.

Whether in developed nations such as Britain and America, or newly-emerging powers such as China, Brazil and South Africa, statistics show an increasing share of income and wealth to be held by an ever-narrower elite.

Michael Robinson examines this global phenomenon through its effects on London - one of the world’s most-international cities and a magnet for many of the wealthiest people.

As the rich have got richer, there have been many London beneficiaries.

While in most of Britain, property prices have been falling, the owners of prime London property have seen the value of their homes soar as the new elite spends billions buying themselves homes in the city.

And, while most of Britain struggles to survive in the economic downturn, the professional advisers, top restaurants, and sellers of luxury goods serving the new super-class, have been enjoying a bonanza.

But, as the wealth gap has gone on widening, plenty of Londoners see themselves as losers, increasingly excluded from the basics of life: a good job, an affordable place to live, and a chance to make their own way in the world.

Are they right to blame the super-rich for their plight?

The link above goes to Episode 1; you can download or stream Episode 2 via this link.

March 2012 External Trade: Down To Earth

I’ve been out of commission for much of the past week or so due to an infection, hence the lack of posts. But since I’m hopefully on the mend, I should be resuming blogging more regularly from today. There’s a lot to catch up on, so I’ll be spacing out the posts over the next few days.

Now on to the latest data release. March 2012 external trade numbers shows that the February trade was an aberration or largely a factor of CNY. They're certainly well below what I predicted last month (log annual and monthly changes; seasonally adjusted):


Friday, May 4, 2012

A Foreign Perspective On The Minimum Wage

On the Beeb:

Concern from Asian businesses over minimum wage

Many countries across the globe are celebrating International Workers' Day on 1 May.

In many parts of Asia, governments, workers and unions are using the day to ask what is a fair day's wage for a fair day's work?

Malaysia has just announced its first minimum wage for private sector workers. Thailand, China and Indonesia are also mulling minimum wage plans.

But whilst this is good news for workers, there are fears that a compulsory minimum wage could lead to Asia losing its competitive edge.

Rahul Bajoria, an economist at Barclays Capital explained the motivation behind Malaysia's wage initiative to the BBC's Rico Hizon.

The video can’t be embedded, so hit the link above to view the interview. Here’s a couple more article links from the BBC:

  1. Malaysia introduces minimum wage for the first time
  2. Malaysian business' labour dilemma

Tuesday, May 1, 2012

February 2012 Employment Report

There’s some mixed news to report on the employment front, with last week’s employment report showing a slight uptick in the headline unemployment rate caused by a reduction of 107k jobs:



That looks more like statistical “noise” to me, especially since DOS’ seasonally adjusted unemployment rate is well below the unadjusted rate as is my own seasonally adjusted estimate:


So as far as employment is concerned, despite the yo-yo movements in trade and industrial production, the economy is still humming along a little above potential.

On a side note, the DOS report still reads like it was generated by Google translator. Surely they can get somebody to do proper translations – it’s not that expensive.

Technical Notes:

February 2012 Employment Report from the Department of Statistics (warning: pdf link)

Minimum Wage: It’s Finally Done

Announced last night:

PM: Minimum monthly wage is RM900

PUTRAJAYA: The minimum monthly wage for private sector employees in the Peninsular has been set at RM900 and RM800 for those in Sarawak, Sabah and Labuan, said Prime Minister Datuk Seri Najib Tun Razak on Monday.

It covers employees in all economic sectors except those in the domestic service sector, such as maids and gardeners.

It works out to RM4.33 per hour for those in the Peninsular while employees in Sarawak, Sabah and Federal Territory of Labuan are to be paid a minimum of RM3.85 per hour...