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G-20 Backs Plan to Curb Tax Evasion by Large Corporations

July 19, 2013 by Leave a Comment

In one widely cited example, Starbucks has managed to post a profit of nothing in Britain even after selling untold millions of beverages and baked goods. Apple drew scrutiny for leaving billions of dollars in profits overseas and instead passing along the fruits of its commercial success to shareholders by taking out loans.

In light of such practices – which are entirely legal, but take advantage of differing tax rules around the world – the Organization for Economic Cooperation and Development is proposing that all nations adopt a list of 15 new tax principles for corporations. The plan focuses only on corporations and would, if adopted widely, shift some of the global tax burden toward large companies and away from small businesses and individuals.

The list, presented Friday at a meeting of finance ministers of the Group of 20 countries in Moscow, includes ideas to prevent corporations from so-called “treaty shopping” for the best pair of countries to do business in – presumably, one with good infrastructure, education and defense, the other with low taxes.

The group recommended strict rules for defining where a company has a permanent presence. It also proposed three measures to limit the practice of transfer pricing: the shunting of profits and losses between subsidiaries disguised as internal corporate payments for goods or, increasingly common, copyright or patent royalties.

If accepted, the countries in the Group of 20 would commit to the reform at a gathering of heads of state in St. Petersburg, Russia, in September.

“It’s a matter of justice and fairness,” Angel Gurría, the secretary general of the O.E.C.D., said at the presentation of the new plan with the finance ministers of France, Britain, Germany and Russia.

Pierre Moscovici, the minister of economy and finance of France, said some multinational corporations manage to pay an income tax of 3 percent or so. “This is unbelievable to our fellow citizens, who pay their fair share,” he said.

Shifting profits to low-tax countries and costs to high-tax countries is less an option for small businesses and individuals, who inevitably wind up carrying more of the tax burden as a result.

In the United States, for example, corporate profit taxes contributed 40 percent of all income tax to the United States Treasury 50 years ago. Today, corporations contribute less than 20 percent, with the slack taken up by small companies and those paying individual income tax.

The instance with Starbucks in Britain is telling. It legally reported profits close to nothing after paying high prices for coffee and for brand royalties to other subsidiaries of the coffee giant that were domiciled outside the jurisdiction of British tax authorities.

In contrast, the owners of a small coffee shop would probably not be able to pay royalty fees to an overseas company owning the rights to the name of their cafe, thus increasing their costs and lowering their tax liability. That multinationals can quite easily do so, however, creates an uneven playing field for small restaurant owners, critics contend – even if they provide better coffee at a better price.

The reform is intended to address such inequities, the minsters said.

Starbucks violated no laws in Britain. All the same, the company volunteered to pay about $16 million in additional taxes to the British government in future years, saying it understood its British customers were upset by the outcome of the tax rules the company was following.

Though the United States did not have a representative at the presentation, the Obama administration has endorsed the international reform and signed an initial commitment earlier this year.

Article source: http://www.nytimes.com/2013/07/20/business/global/g-20-nations-back-plan-to-curb-corporate-tax-evasion.html?partner=rss&emc=rss

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Economic Scene: Dropping Out of College, and Paying the Price

June 25, 2013 by Leave a Comment

And yet Mr. Beltrán says he probably wouldn’t have gone to college full time if he hadn’t received a Pell grant and financial aid from New York State to defray the costs. He has also heard too many stories about people struggling under an unbearable burden of student loans to even consider going into debt. “Honestly, I don’t think I would have gone,” he said. “I couldn’t have done four years.”

And that would have been the wrong decision.

His reasoning is not unusual. The rising cost of college looms like an insurmountable obstacle for many low-income Americans hoping to get a higher education. The notion of a college education becoming a financial albatross around the neck of the nation’s youth is a growing meme across the culture. Some education experts now advise high school graduates that a college education may not be such a good investment after all. “Sticker price matters a lot,” said Lawrence Katz, a professor of Harvard University. “It is a deterrent.”

College graduation rates in the United States are continuing to slip behind, according to a report published on Tuesday by the Organization for Economic Cooperation and Development, failing to keep pace with other advanced nations.

In 2000, 38 percent of Americans age 25 to 34 had a degree from a community college or a four-year institution, putting the nation in fourth place among its peers in the O.E.C.D. By 2011, the graduation rate had inched up to 43 percent, but the nation’s ranking had slipped to 11th place.

This from perhaps the first nation to try mass college education, graduating more students from college than anybody else. Graduation rates in the United States among 55- to 64-year-olds are higher than in any industrial country except Canada and Israel — reflecting the nation’s head start.

What’s most troubling, perhaps, is that Americans are actually enrolling in college and then dropping out halfway through — when they’ve probably already incurred a bunch of debt and won’t benefit from the better job prospects that come with a degree.

More than 70 percent of Americans matriculate at a four-year college — the seventh-highest rate among 23 developed nations for which the O.E.C.D. compiles such statistics. But less than two-thirds end up graduating. Including community colleges, the graduation rate drops to 53 percent. Only Hungary does worse.

And the most perplexing part of this accounting is that regardless of cost, getting a degree is the best financial decision a young American can make.

According to the O.E.C.D.’s report, a college degree is worth $365,000 for the average American man after subtracting all its direct and indirect costs over a lifetime. For women — who still tend to earn less than men — it’s worth $185,000.

College graduates have higher employment rates and make more money. According to the O.E.C.D., a typical graduate from a four-year college earns 84 percent more than a high school graduate. A graduate from a community college makes 16 percent more.

A college education is more profitable in the United States than in pretty much every other advanced nation. Only Irish women get more for the investment: $185,960 net.

What’s to be done?

Democratizing higher education is an urgent challenge. A study published Wednesday by the Hamilton Project at the Brookings Institution in Washington underscores how inequities in education are hampering social and economic mobility, contributing to entrenched income inequality.

The study points out that half of Americans in the top fourth of the income distribution have a college degree. Among the poorest fourth of Americans, fewer than one in 10 graduated from college. And the gap is growing. The college graduation rate of high-income Americans born in the 1980s was 20 percentage points higher than in the 1960s. Among low-income Americans, it advanced only 4 percent.

Every year federal, state and municipal governments spend a total of more than $9,200 per student in college, the O.E.C.D. estimates. Perhaps they could do more. According to the O.E.C.D., they make a profit of $231,000 on each American who graduates from college — mostly through higher income taxes and lower unemployment payments.

Increasing financial aid can increase the odds of keeping a student in college. But it can be expensive and not very cost-effective. Some students getting aid wouldn’t graduate anyway, and others would have graduated without it.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

Article source: http://www.nytimes.com/2013/06/26/business/economy/dropping-out-of-college-and-paying-the-price.html?partner=rss&emc=rss

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I.M.F. Concedes Major Missteps in Bailout of Greece

June 5, 2013 by Leave a Comment

The 50-page report, titled “Greece: Ex Post Evaluation of Exceptional Access Under the 2010 Stand-By Arrangement,” acknowledges major mistakes in Greece’s first bailout, which totaled about $143 billion and came into effect in 2010. The fund bent or broke three out of four of its own rules with the lending program, the report concludes. It also seriously underestimated the severity of Greece’s downturn.

The first bailout failed to set Greece on a sustainable path. “Market confidence was not restored, the banking system lost 30 percent of its deposits, and the economy encountered a much deeper-than-expected recession with exceptionally high unemployment,” the report said. In 2012, the I.M.F. and its partners, the European Commission and the European Central Bank, agreed to a bigger second program, totaling about $170 billion and requiring Greece’s private sector bondholders to accept losses of at least 50 percent. The Greek economy has been shrinking for six consecutive years, with no end in sight, erasing a full decade of growth. The unemployment rate has hit 27 percent.

The report said that the fund miscalculated the so-called multiplier, or the effect that adding or subtracting a dollar of government spending would have on the broader economy during the downturn. It underestimated the scale of what has proved to be a devastating Greek depression, fueled in part by sharp government spending cuts and tax increases.

Over the last year, the fund has performed a broader reassessment of the fiscal multiplier during the downturn, to help explain why it underestimated some countries’ growth and overestimated others.

Multipliers at that time were actually multipliers that were in line with estimates by the Organization for Economic Cooperation and Development, said Poul Thomsen, the fund’s mission chief for Greece, in a conference call with reporters. He said other, unexpected factors had contributed to Greece’s collapse: among them the country’s internal political crisis, concern within the European Union that the country would abandon the euro currency and worries among investors that the Europeans did not have an adequate crisis response.

The initial program for Greece was “necessary” and “appropriate,” the report concludes. But it also bent the I.M.F.’s own rules for lending to bankrupt countries. In particular, the fund’s experts were “unable to vouch” that Greece would be able to repay its loans in the medium term. “Staff favored going ahead with exceptional access because of the fear that spillovers from Greece would threaten the euro area and the global economy,” the report said.

The I.M.F. released the document after The Wall Street Journal reported some of its conclusions online.

In hindsight, the fund arguably missed two other internal criteria as well, the report concludes: ascertaining that Greece had “good prospects of regaining access to private capital markets” and ensuring that it had a “reasonably strong prospect of the programs’ success taking into account institutional and political capacity to deliver adjustment.”

The report suggests that the so-called troika responsible for the bailout program — the I.M.F., the European Commission and the European Central Bank — might have forced Greek bondholders to take a haircut on their bonds sooner, while noting the political opposition to that step. “Not tackling the public debt problem decisively at the outset or early in the program created uncertainty about the euro area’s capacity to resolve the crisis and likely aggravated the contraction in output,” the report states.

The report also said Greece might have benefited from less stringent fiscal targets, or targets spread out over a longer time frame. But that would have required billions more euros in support, the fund said, and that support clearly did not exist. Indeed, “the fiscal targets became even more ambitious once the downturn exceeded expectations,” the report said.

The initial Greek program ended up acting as a “holding operation,” buying time for Europe to try to limit the fallout, the report concludes.

The I.M.F. also expressed misgivings about the troika that financed and ran the bailout program.

“None of the partners seemed to view the arrangement as ideal,” it said, and they failed to establish a proper division of labor. Still, “the view of everybody involved on the inside is that given that these are three institutions that have not had a history of working in that way together, it worked surprisingly well,” Mr. Thomsen, the Greek mission chief, said. “It doesn’t mean it couldn’t work better.”

Article source: http://www.nytimes.com/2013/06/06/business/global/imf-concedes-major-missteps-in-bailout-of-greece.html?partner=rss&emc=rss

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German Officials Welcome Offshore Tax Havens Leak

April 6, 2013 by Leave a Comment

“I am pleased about these reports,” Finance Minister Wolfgang Schäuble said on German radio.

Berlin is hoping the disclosures will provide some leverage in the country’s efforts to drum up support for its long-running fight against international financial systems that make it easy for the wealthy to hide their money.

Germany has lobbied for years within international organizations, including the Group of 20 and the Organization for Economic Cooperation and Development, to clearly define tax havens in an effort to pressure such jurisdictions to fight tax avoidance and comply with money-laundering statutes and other measures aimed at dirty money. But the efforts have been hampered by reluctance among some of its international partners, including some within the European Union, that do not share the German sense of outrage.

“I think that such things as have been made known will increase the pressure internationally, and we will be able to increase the cooperation with those who have been more reticent,” Mr. Schäuble said in an interview with Deutschlandfunk radio.

He was among those who made sure that Cyprus, the tax haven that received a bailout last month, would impose levies on its largest depositors in exchange for the European Union’s support. “We don’t like this business model, and we hope it is not successful,” Mr. Schäuble said. “And when it becomes insolvent, as in Cyprus, they can’t expect it to keep being financed.”

But the information that has trickled out has also tarnished German banks, and clearly the German authorities hoped to use the leak to gain ground in their own struggle to bring tax evaders to justice. Many Germans are listed among the wealthy in the data dump that was obtained by the International Consortium of Investigative Journalists, based in Washington, and shared with select news media outlets around the globe, including two in Germany.

Economic justice has been a hot topic in Germany. The nation’s sense of social justice is strong, and the government has gone to great lengths to obtain information about its wealthiest residents who sneak money into Switzerland or Liechtenstein in order to avoid the country’s hefty income tax, which can be as high as 45 percent.

German banks, too, may feel the pressure from the release of the information, which states that international financial institutions have “aggressively worked” to help wealthy clients use offshore banking facilities in places like the British Virgin Islands. Deutsche Bank, Germany’s largest lender, vigorously defended the legality of its management services and insisted that clients were advised to properly report all of their taxes.

Mr. Schäuble conceded that the information in the report was not necessarily evidence of wrongdoing. He nevertheless called for the German news outlets with access to the information to make it available to the authorities.

The leaked records reported on Thursday include data mainly from the British Virgin Islands, the Cook Islands and Singapore. Not all of those named necessarily have secret bank accounts. Some only conducted business through companies they control that are registered offshore.

Article source: http://www.nytimes.com/2013/04/06/world/europe/german-officials-welcome-offshore-tax-havens-leak.html?partner=rss&emc=rss

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Economic Scene: Studies Highlight Benefits of Early Education

April 2, 2013 by Leave a Comment

The chart showed the results of cognitive tests that were first performed in the 1980s on several hundred low-birthweight 3-year-olds, who were then retested at ages 5, 8 and 18.

Children of mothers who had graduated from college scored much higher at age 3 than those whose mothers had dropped out of high school, proof of the advantage for young children of living in rich, stimulating environments.

More surprising is that the difference in cognitive performance was just as big at age 18 as it had been at age 3.

“The gap is there before kids walk into kindergarten,” Mr. Heckman told me. “School neither increases nor reduces it.”

If education is supposed to help redress inequities at birth and improve the lot of disadvantaged children as they grow up, it is not doing its job.

It is not an isolated finding. Another study by Mr. Heckman and Flavio Cunha of the University of Pennsylvania found that the gap in math abilities between rich and poor children was not much different at age 12 than it was at age 6.

The gap is enormous, one of the widest among the 65 countries taking part in the Program for International Student Achievement run by the Organization for Economic Cooperation and Development.

American students from prosperous backgrounds scored on average 110 points higher on reading tests than disadvantaged students, about the same disparity that exists between the average scores in the United States and Tunisia. It is perhaps the main reason income inequality in the United States is passed down the generations at a much higher rate than in most advanced nations.

That’s a scandal, considering how much the government spends on education: about 5.5 percent of the nation’s economic output in total, from preschool through college.

And it suggests that the angry, worried debate over how to improve the nation’s mediocre education — pitting the teachers’ unions and the advocates of more money for public schools against the champions of school vouchers and standardized tests — is missing the most important part: infants and toddlers.

Research by Mr. Heckman and others confirms that investment in the early education of disadvantaged children pays extremely high returns down the road. It improves not only their cognitive abilities but also crucial behavioral traits like sociability, motivation and self-esteem.

Studies that have followed children through their adult lives confirm enormous payoffs for these investments, whether measured in improved success in college, higher income or even lower incarceration rates.

The costs of not making these investments are also clear. Julia Isaacs, an expert in child policy at the Urban Institute in Washington, finds that more than half of poor 5-year-olds don’t have the math, reading or behavioral skills needed to profitably start kindergarten. If children keep arriving in school with these deficits, no amount of money or teacher evaluations may be enough to improve their lot later in life.

Much attention has focused lately on access to higher education.

A typical worker with a bachelor’s degree earns 80 percent more than a high school graduate. That’s a premium of more than $500 a week, a not insubstantial incentive to stay in school. It is bigger than ever before. Yet the growth of college graduation rates has slowed for women and completely stalled for men.

The Economic Report of the President released last month bemoaned how the nation’s college completion rate had tumbled down the international rankings, where it now sits in 14th place among O.E.C.D. countries.

The report restated the president’s vow to increase the number of college graduates by 50 percent by 2020, and laid out how the federal government has spent billions in grants and tax breaks to help ease the effects of rising tuition and fees. Last year the government spent almost $40 billion on Pell grants, more than twice as much as when President Obama came to office.

Mr. Heckman’s chart suggests that by the time most 5-year-olds from disadvantaged backgrounds reach college age, Pell grants are going to do them little good.

“Augmenting family income or reducing college tuition at the stage of the life cycle when a child goes to college does not go far in compensating for low levels of previous investment,” Mr. Heckman and Mr. Cunha wrote.

Mr. Heckman and Mr. Cunha estimated that raising high school graduation rates of the most disadvantaged children to 64 percent from 41 percent would cost 35 to 50 percent more if the assistance arrived in their teens rather than before they turned 6.

Erick Hanushek, an expert on the economics of education at Stanford, put it more directly: “We are subsidizing the wrong people and the wrong way.”

To its credit, the Obama administration understands the importance of early investments in children. The president has glowingly cited Mr. Heckman’s research. In his State of the Union address, the president called for universal preschool education.

“Study after study shows that the earlier a child begins learning, the better he or she does down the road,” Mr. Obama said at a speech in Decatur, Ga., in February.

But the fresh attention has not translated into money or a shift in priorities. Public spending on higher education is more than three times as large as spending on preschool, according to O.E.C.D. data from 2009. A study by Ms. Isaacs found that in 2008 federal and state governments spent somewhat more than $10,000 per child in kindergarten through 12th grade. By contrast, 3- to 5-year-olds got less than $5,000 for their education and care. Children under 3 got $300.

Mr. Heckman’s proposals are not without critics. They argue that his conclusions about the stupendous returns to early education are mostly based on a limited number of expensive experiments in the 1960s and 1970s that provided rich early education and care to limited numbers of disadvantaged children. They were much more intensive endeavors than universal preschool. It may be overoptimistic to assume these programs could be ratcheted up effectively to a national scale at a reasonable cost.

Yet the critique appears overly harsh in light of the meager improvements bought by the nation’s investments in education today. A study by Mr. Hanushek found that scores in math tests improved only marginally from 1970 to 2000, even after spending per pupil doubled. Scores in reading and science declined.

“Early education is an essential piece if we are going to have a better education system,” Barbara Bowman, an expert on early childhood education in Chicago who has advised the Education Department. “We’re inching in that direction.”

Education is always portrayed in the American narrative as the great leveler. But it can’t do its job if it leaves so many behind so early.

E-mail: eporter@nytimes.com;

Twitter: @portereduardo

Article source: http://www.nytimes.com/2013/04/03/business/studies-highlight-benefits-of-early-education.html?partner=rss&emc=rss

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French Tax Proposal Tackles Data Harvest by Google and Facebook

February 24, 2013 by Leave a Comment

PARIS — When it comes to taxes, the French are pioneers. In 1954, they introduced the world’s first value-added tax. Since then, they have proposed or championed duties on all manner of other things, like online advertising, pollution, financial transactions and vacation homes.

Only a few weeks after the French Supreme Court rejected one new tax proposal — a 75 percent levy on incomes of more than €1 million, or $1.3 million, a year — an even more novel idea began percolating through the halls of the finance ministry last month: a proposal to tax the collection of personal data on the Internet.

Google and Facebook know that John Doe “likes” wine, is shopping for a Volkswagen and often e-mails Jane Doe. Soon, they might have to pay for gathering that information.

Does France really need another tax? As of 2009, French tax revenue was equivalent to 42 percent of gross domestic product, one of the highest burdens in the world, according to the Organization for Economic Cooperation and Development, the coalition of free-market democracies. The U.S. figure was 24 percent.

But Nicolas Colin, one of the authors of a report in which the idea of taxing data collection was floated in January, insists that the proposal serves an important purpose. Like other European countries, France has been frustrated by its inability to raise significant tax revenue from the billions of dollars worth of sales and profits that Internet companies, many of them American, generate in Europe every year. Meanwhile, despite so-called austerity measures, budget deficits remain large.

“Every government needs revenues,” Mr. Colin, a government auditor and technology entrepreneur, said in an interview. “If they can’t get them from the most profitable companies, then they have to get them from the rest of us — individual taxpayers and smaller, struggling companies.”

Internet companies like Amazon.com, Facebook and Google, along with a number of other multinationals, stay largely out of reach of tax collectors in large European countries like Britain, France and Germany by routing their sales through smaller countries, like Ireland and Luxembourg, where corporate tax rates are lower. The companies insist that such practices are permitted under E.U. law and international taxation treaties.

France and other countries have initiated talks aimed at changing those conventions, so Internet companies could be taxed in the country where a sale takes place, rather than in the location where the transaction is recorded. But that could take many years, with no guarantee of any change.

France, on the other hand, could impose a tax on data collection unilaterally and quickly, Mr. Colin said. Yet the prospects for his proposal are unclear. While the report was commissioned by the government, it is not an official policy document, and the finance ministry has yet to take a position on the idea.

On other issues involving the digital economy, the administration of President François Hollande has sent mixed signals. After threatening Google with a law that would have authorized publishers to charge the search engine for links to their Web sites, for example, the government backed down and accepted a negotiated deal that maintains Google’s existing business model, under which links are free.

The French data protection agency — which is known by its French initials, C.N.I.L. and is independent from the government — has been more forthcoming about the taxation proposal.

“Personal data are the fuel of the digital economy,” Edouard Geffray, secretary-general of C.N.I.L., told the French version of the online magazine Slate. “Given that, it would seem like a natural idea to envision taxing the use of them.”

While business models built on the promise of “Big Data” are proliferating, with established giants like Google and Facebook and a growing number of startups hoping to mine ever more detailed personal information to sell advertising or other services, so are concerns about the use of those data.

Article source: http://www.nytimes.com/2013/02/25/technology/french-tax-proposal-zeroes-in-on-web-giants-data-harvest.html?partner=rss&emc=rss

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Economix Blog: Immigration and Innovation

February 12, 2013 by Leave a Comment

A. Mushfiq Mobarak is an associate professor of economics at the Yale School of Management.

The United States economy has a comparative advantage in science and innovation. The country of Apple, Google, Facebook, Ford, General Motors, Boeing, Microsoft and FedEx thrives by creating new products and introducing entirely new markets. The American economy is innovation-driven, and such innovation requires, first and foremost, people with good ideas and skilled workers who can transform those ideas into marketable products. Where does all this talent that our economy is built on originate? Are we the innovation leaders because we have a monopoly on talent in the world?

The basic data suggest otherwise. American secondary school students consistently rank toward the bottom among their counterparts in other countries of the Organization for Economic Cooperation and Development in tests measuring science and mathematics aptitude. The United States has sustained its primary position as developer of new scientific knowledge and product innovations, despite the deficiencies in math and science training, with the immigration of skilled workers.

Talented people across the world are attracted to the institutions that the United States has carefully cultivated to support innovation. By any reasonable assessment, a clear majority of the world’s top universities are in the United States. These universities attract talent from all over the globe. Most engineering Ph.D.’s granted at American universities now go to people born abroad. In a recently published paper, my colleagues and I show that these foreign-born doctoral students create new scientific knowledge and fuel innovation at science and engineering labs at American universities. In that paper, increases in the supply of foreign students subsequently result in significantly greater publications and citations from science and engineering departments in the United States. Many of those students remain in the country after graduation and contribute to the innovations produced by American companies.

Such data on the contributions of foreign students to American innovation strongly support the spirit and the central provisions of immigration reform proposals offered by the White House and by Senators Orrin Hatch, Marco Rubio, Amy Klobuchar and Chris Coons. (Three of the senators are members of the Senate Judiciary Committee, which will take up the issue of comprehensive immigration reform at a hearing on Wednesday.) If talented foreigners want to study and work in the United States, economic logic and the data suggest that we should welcome them. American companies working in the very sectors where our comparative advantage lies benefit from their presence. Such a policy also creates other rare but significant benefits for the future of the nation. A typical profile of a recent Nobel laureate is a United States citizen or someone trained or teaching at an American university, but who was born in a foreign country.

One might be tempted to conclude from this narrative that our immigration system is working well, but this conclusion is premature and dangerous for two reasons. First, the United States is not the only country in the market for that talent. Three of the five most recent Nobel laureates from Britain were not born there. Australian and British educators were overjoyed with the quality of their international student applicant pool when the United States instituted restrictions on student visas after 9/11. Other countries deliberately pursue immigration policies to spur innovation.

Second, it’s impossible to know the counterfactual: how much better off we would have been had our immigration policies been more welcoming to skilled people? American citizens like Bill Gates, Sergey Brin and Mark Zuckerberg made brave decisions to drop out of school and start some of the most successful companies in the history of the planet. As a former foreign doctoral student, I can attest that under current immigration policies, such decisions are not easy to make for foreign students. For noncitizens trying to create a foothold in this country, it is virtually impossible to take the risks that these remarkable people took. With no clear path to citizenship, talented entrepreneurs who are foreign-born find it very risky to start businesses. Their options are limited to taking a salaried position with an employer who could sponsor their visa, or to marry an American. Our policies could be revised to promote entrepreneurial risk-taking by the top talent regardless of their country of origin, because just one Microsoft, or a Google or a Facebook, can change the world.

The blueprint offered by Senator Hatch and colleagues is full of sensible provisions, including work permits for spouses of H-1B workers. Talented people often meet and marry other educated, talented people, and having those productive spouses sit at home is a dead-weight loss to the United States economy. Residents at any major university town in the country will recognize ads from over-qualified babysitters “informally” willing to look after your children.

This bill will receive predictable pushback with simplistic arguments from special interest groups worried about skilled migrants undercutting American wages. But as other research has shown, immigrants make a net positive contribution to the United States economy, as they create more jobs than they take away, and their presence increases income per worker in the United States. Arguments that skilled immigrants will displace American workers, and thereby prevent young Americans from pursuing degrees in science, fail to recognize that entrepreneurs and innovators start new companies and invent new products that employ more skilled workers. Do we really believe that people like Sergey Brin or Albert Einstein took away more jobs than they created? Or that Facebook, Instagram or exciting new product lines from Google or Microsoft do not attract more young Americans to science

If skilled foreigners getting stuck to their visa sponsors in indentured low-wage work is a concern, then visa policies should be reformed to allow foreign-born entrepreneurs the flexibility to start their own businesses, not to pursue policies that keep them from our shores. Indeed, the White House’s proposal for immigration reform includes such a provision for a “start-up visa” for foreign-born entrepreneurs.

Another counterargument to high-skilled immigration involves the concept of “brain drain” – worries that by attracting talent here, we are taking away the best and the brightest from other countries that have greater need for that talent. The fact is, these immigrants typically contribute more to their countries of origin than people who are prevented from leaving at all. This is because of the tremendously higher productivity of workers educated in the United States. Labor is the second largest export from Bangladesh, the country where I was born, and remittances account for over 10 percent of our gross domestic product. I, like many other first-generation immigrants, have continued contributing to the development of my country of birth, by combining the skills I acquired in the United States with my context-specific knowledge to pursue research and policies that address some of the key public health and development challenges in Bangladesh. One project demonstrates, for example, that promoting internal (rural to urban) seasonal migration is a very cost-effective way to counter a recurring pre-harvest famine.

The internal migration strategy works because it creates a better match between where people are and where the complementary inputs (capital, jobs) are during certain seasons, and this leads to enhanced efficiency and productivity. Attracting talented people to the United States and allowing them to interact with the innovative universities and companies creates similar efficiency gains that can be a win-win for the source countries and for the United States.

Article source: http://economix.blogs.nytimes.com/2013/02/12/immigration-and-innovation/?partner=rss&emc=rss

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Asian Cities’ Air Quality Getting Worse, Experts Warn

December 6, 2012 by Leave a Comment

Clean Air Asia, a regional network on air-quality management, aggregated data from more than 300 cities in 16 Asian countries and found that levels of fine particulate matter — a key pollutant in terms of its impact on human health — were below targets recommended by the World Health Organization in just 16 cities, most of them in Japan.

Pollution levels in 70 percent of the cities, mostly in fast-growing, less developed countries like China, India, Bangladesh and Mongolia, exceed even the most lenient of several targets recommended by the W.H.O., the organization said.

“The economic rebound in Asia following the global economic crisis of 2008 has accelerated sales of both passenger and freight vehicles as well as power generation,” Sophie Punte, Clean Air Asia’s executive director, said in a statement. This “is putting pressure on urban air quality in the region,” she said.

The number of people living in cities in developing Asian nations is expected to swell by 1.1 billion over the next 20 years, making urban air pollution a particularly relevant issue for the region.

A study by the World Health Organization published in 2008 estimated that outdoor air pollution caused 1.3 million premature deaths worldwide per year, 800,000 of them in Asia.

Similarly, a report by the Organization for Economic Cooperation and Development this year warned that air pollution could become the biggest environmental cause of premature death by 2050 if action is not taken to improve air quality. The number of premature deaths from exposure to particulate matter is projected to reach 3.6 million a year globally by then, with most of the deaths occurring in China and India, the report said.

Article source: http://www.nytimes.com/2012/12/06/world/asia/asian-cities-air-quality-getting-worse-experts-warn.html?partner=rss&emc=rss

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O.E.C.D., Slashing Growth Outlook, Warns of Global Recession

November 27, 2012 by Leave a Comment

LONDON — The Organization for Economic Cooperation and Development sharply cut its forecast for the world economy on Tuesday, warning that failure to resolve the euro crisis and to avert a fiscal impasse in the United States could trigger a global recession.

The Paris-based O.E.C.D. predicted that gross domestic product in its 34 member nations, all developed economies, would expand by 1.4 percent in 2013, a significant downward revision from its forecast of 2.2 percent made just six months ago.

That assumes that the United States agrees on a budget deal in January, averting billions of dollars in tax increases and automatic spending cuts.

If that so-called fiscal cliff is not avoided, “a large negative shock could bring the U.S. and the global economy into recession,” according to the forecast, written by Pier Carlo Padoan, the organization’s deputy secretary-general and chief economist.

Even leaving that possibility aside, the O.E.C.D. report makes grim reading, particularly with regard to the 17-nation euro area — which, still mired in recession, is where the “greatest threats to the world economy remain.”

“Challenging fiscal sustainability conditions in some countries risk sparking a chain of events that could considerably harm activity in the monetary union and push the global economy into recession,” the report said.

Highlighting the continuing lack of economic confidence, the report urged European policymakers to accelerate efforts to bolster their single currency through the creation of a banking union.

“Temporary fiscal stimulus should be provided by countries with robust fiscal positions (including Germany and China),” it added.

“Over the recent past, signs of emergence from the crisis have more than once given way to a renewed slowdown or even a double-dip recession in some countries,” the document said, adding that “the risk of a new major contraction cannot be ruled out.”

According to the O.E.C.D., provided the “fiscal cliff” is avoided, the U.S. economy should grow by 2 percent in 2013 and 2.8 percent in 2014. In Japan, G.D.P. is expected to expand by 0.7 percent in 2013 and 0.8 percent in 2014.

The euro area probably will remain in recession until early 2013, leading to a mild contraction in G.D.P. of 0.1 percent next year before growth accelerates to 1.3 percent in 2014.

Labor markets, meanwhile, remain weak, with around 50 million jobless people in the O.E.C.D. area. Unemployment is expected to remain high, or even rise further, in many countries unless structural measures are used to lift employment growth, the report said.

“The world economy is far from being out of the woods,” the O.E.C.D’s secretary-general, Angel Gurría, said in a statement. “Governments must act decisively, using all the tools at their disposal to turn confidence around and boost growth and jobs, in the United States, in Europe, and elsewhere.”

Tom Rogers, a senior economic adviser at Ernst Young, said the report was “consistent with our view that the euro zone faces another year of stagnating economic output and rising unemployment, and that the medium-term recovery is likely to be weaker than from previous recessions.”

Although much has been achieved in stabilizing the euro area, “more needs to be done to deepen the fiscal and banking unions, to improve medium term growth prospects through reform, and to broaden the single market to include trade in services,” Mr. Rogers wrote in a note.

Article source: http://www.nytimes.com/2012/11/28/business/global/oecd-slashing-growth-outlook-warns-of-global-recession.html?partner=rss&emc=rss

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Changing of the Guard: Wary of Future, Professionals Leave China in Record Numbers

November 1, 2012 by Leave a Comment

Like hundreds of thousands of Chinese who leave each year, she was driven by an overriding sense that she could do better outside China. Despite China’s tremendous economic successes in recent years, she was lured by Australia’s healthier environment, robust social services and the freedom to start a family in a country that guarantees religious freedoms.

“It’s very stressful in China — sometimes I was working 128 hours a week for my auditing company,” Ms. Chen said in her Beijing apartment a few hours before leaving. “And it will be easier raising my children as Christians abroad. It is more free in Australia.”

As China’s Communist Party prepares a momentous leadership change in early November, it is losing skilled professionals like Ms. Chen in record numbers. In 2010, the last year for which complete statistics are available, 508,000 Chinese left for the 34 developed countries that make up the Organization for Economic Cooperation and Development. That is a 45 percent increase over 2000.

Individual countries report the trend continuing. In 2011, the United States received 87,000 permanent residents from China, up from 70,000 the year before. Chinese immigrants are driving real estate booms in places as varied as Midtown Manhattan, where some enterprising agents are learning Mandarin, to the Mediterranean island of Cyprus, which offers a route to a European Union passport.

Few emigrants from China cite politics, but it underlies many of their concerns. They talk about a development-at-all-costs strategy that has ruined the environment, as well as a deteriorating social and moral fabric that makes China feel like a chillier place than when they were growing up. Over all, there is a sense that despite all the gains in recent decades, China’s political and social trajectory is still highly uncertain.

“People who are middle class in China don’t feel secure for their future and especially for their children’s future,” said Cao Cong, an associate professor at the University of Nottingham who has studied Chinese migration. “They don’t think the political situation is stable.”

Most migrants seem to see a foreign passport as insurance against the worst-case scenario rather than as a complete abandonment of China.

A manager based in Shanghai at an engineering company, who asked not to be named, said he invested earlier this year in a New York City real estate project in hopes of eventually securing a green card. A sharp-tongued blogger on current events as well, he said he has been visited by local public security officials, hastening his desire for a United States passport.

“A green card is a feeling of safety,” the manager said. “The system here isn’t stable and you don’t know what’s going to happen next. I want to see how things turn out here over the next few years.”

Political turmoil has reinforced this feeling. Since early this year, the country has been shocked by revelations that Bo Xilai, one of the Communist Party’s most senior leaders, ran a fief that by official accounts engaged in murder, torture and corruption.

“There continues to be a lot of uncertainty and risk, even at the highest level — even at the Bo Xilai level,” said Liang Zai, a migration expert at the University at Albany. “People wonder what’s going to happen two, three years down the road.”

The sense of uncertainty affects poorer Chinese, too. According to the Chinese Ministry of Commerce, 800,000 Chinese were working abroad at the end of last year, versus 60,000 in 1990. Many are in small-scale businesses — taxi driving, fishing or farming — and worried that their class has missed out on China’s 30-year boom. Even though hundreds of millions of Chinese have been lifted from poverty during this period, the rich-poor gap in China is among the world’s widest and the economy is increasingly dominated by large corporations, many of them state-run.

“It’s driven by a fear of losing out in China,” said Biao Xiang, a demographer at Oxford University. “Going abroad has become a kind of gambling that may bring you some opportunities.”

Zhang Ling, the owner of a restaurant in the coastal city of Wenzhou, is one such worrier. His extended family of farmers and tradesmen pooled its money to send his son to high school in Vancouver, Canada. The family hopes he will get into a Canadian university and one day gain permanent residency, perhaps allowing them all to move overseas. “It’s like a chair with different legs,” Mr. Zhang said. “We want one leg in Canada just in case a leg breaks here.”

Amy Qin and Patrick Zuo contributed research.

Article source: http://www.nytimes.com/2012/11/01/world/asia/wary-of-future-many-professionals-leave-china.html?partner=rss&emc=rss

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