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How the Economy Differs for Workers, Consumers, and Savers – Harvard Business Review



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By many measures, the first two decades of the 21st century have been a time of opportunity and abundance — notwithstanding the 2008 global financial crisis. Our world has been transformed by the internet and smartphones. A billion people have come out of poverty. Employment relative to population in OECD countries is now above 70% — a record. And most economies are once again expanding at a steady if not spectacular clip.

Yet while the economic gains for many people in advanced economies are significant in some respects, in others they have been eroded by unexpected challenges. We examined a range of economic indicators, such as employment and wage growth, benefits, prices for basic and discretionary goods and services, and savings for retirement, and found that outcomes for individuals in three roles — as workers, as consumers and as savers — present a more nuanced picture than the aggregate data might suggest.

For individuals as workers, employment is much higher than it was at the turn of the century. In the 22 OECD countries we looked at, there were 45 million more jobs in 2018 than in 2000, 31 million of which went to women. There was also a wider array of alternative income-generating activities and work arrangements, which gave millions newfound flexibility.

But more precarious working arrangements — from zero contract hours (where workers are not guaranteed work yet must be available on demand for employers) to work fissuring (where workers are not employed by the company that benefits from their labor) — have also been gaining ground, undercutting economic security for many. Moreover, wages have stagnated for most people in many of these countries; annual average wage growth since 2000 has been just 0.7%.

For consumers, technology and globalization, along with deregulation, have substantially reduced the cost of many discretionary goods and services, from communications to clothing. Data costs have dropped almost 90%, as usage has surged tenfold.

But house rental prices — often the biggest-ticket item in the household budget, accounting for as much as one-quarter of spending on average — have soared. Healthcare and education costs have also risen in many countries.  Holding all else constant, consumers in advanced economies would have to work an average of four additional weeks per year to be able to consume the same amount of housing, healthcare, and education as they did two decades ago.

For savers, the good news is that mean wealth is back up and above where it was in 2008, although median wealth, perhaps a better measure, is still more than 20% below pre-crisis levels. Some of the biggest shifts of the past 20 years are related to savings. As the working-age population lives longer and retires later — a cause for celebration — the pressure on pension plans has grown dramatically. Moreover, responsibility for retirement savings has shifted from institutions to individuals. Governments in more than half the OECD countries have extended out the retirement age. In the private sector, many defined-benefit pension plans have changed to defined-contribution ones, where the market risk is borne by the recipient.

At the same time, household savings are down in many countries. More than half the people on average in the 22 countries we looked at didn’t save for retirement in 2017, and just over one-quarter didn’t save at all. And this at a time when saving for retirement is more important than ever, as people live longer.

The shift in the role of institutions does not just affect outcomes for savers. Indeed, our analysis shows a decline in market intervention by institutions across all three arenas of work, consumption, and saving, although the extent of this varies by country. For example, employment protections are lower, a higher share of healthcare and education costs is private, and guaranteed pension levels have dropped. At the same time, spending on public-sector wages and various government transfers to individuals rose from an average of 38% of GDP in 2000 to 41% in 2018, largely because of higher aging-related costs. This dual pattern of lower intervention and higher spending prevailed in most of the 22 economies, regardless of differing market and institutional setups.

These outcomes illustrate how important it is for policy makers and business leaders to look beyond the positive aggregate economic data to what is really happening in people’s lives. Polls suggest that the downbeat public mood in many countries is a reflection of the daily realities many are confronting.

If the next two decades are to be better than the last two, we see a need for concerted action on two fronts. First, it will be essential to sustain and expand the gains achieved so far through continued innovation and productivity, economic growth, job growth and opportunity-creation, business dynamism and competitiveness in a rapidly shifting global economy.

The second priority is to tackle the challenges individuals face, especially the most affected people and places. Outcomes have been favorable for about 115 million individuals equipped for high-skill jobs, individuals for whom discretionary consumption is relatively high compared to their spending on basics, and savers able to accumulate capital.

Yet many more with low skills have not seen similar benefits. Wage stagnation, coupled with the rising cost of basic necessities, is eroding the welfare and opportunities of about 60% of the population. Rising housing costs alone have absorbed more than half of income gains for average households in the U.K., U.S., and some other countries. The same 60% of the population are also vulnerable to the scaling-back of mandatory pensions, since they do not or cannot save enough to make up the difference. Sixteen percent of individuals do not have enough wealth to cover three months of basic costs and 20% — one in five — doesn’t have enough to cover six months.

The under-30 generation is also bearing the brunt of the changing economy. They are having a harder time than their elder peers in finding a secure first job — between 2000 and 2018, the employment rate of young people under 30 actually declined, and those in work are more likely to be on temporary contracts. Climbing on the housing ladder is also harder, given soaring real estate prices and rising rents.

Women and minorities have seen some progress in employment, but they still lag in terms of wages and opportunities. Gender parity is still some ways off: Women in the countries we looked at earn just 85 cents for every $1 a man earns. This in spite of the fact that the gender parity agenda dates back to the late ’60s.

Finally, some regions are lagging. Geography is becoming an increasingly important economic determinant of welfare, in our analysis. Most of the job growth in the United States and Europe over the past decade is coming from a small number of thriving metropoles. These cities are attracting the talent and are the hubs of innovation. But this geographic concentration means that regions left behind face a downward spiral unless they can find ways to make themselves more competitive. And they need help from government and the corporate sector. Mobility, which has also declined, is part of the answer. But moving everyone to high-performance urban hubs is not feasible. And footloose globalization is not sustainable politically and socially.

The next decades of the 21st century are already shaping up to be promising, given the onward march of technological progress that is changing our lives. Many are starting to act, including government. Corporations are refocusing on multiple stakeholders, as they grapple with new challenges including those related to sustainability and climate change — an added factor which could impact the economic outcomes for individuals potentially in regressive ways.

However, more needs to be done given the scale of the challenges. Ensuring that the outcomes for individuals get better and more inclusive is the imperative of our time.

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How Saskatchewan's economy is being boosted by summer events – CTV News Regina



As summer events draw crowds of people together again, Saskatchewan’s economy is feeling the benefit.

This year’s Queen City Exhibition (QCX) broke all previous attendance records with 278,306 people walking through the gates.

The Regina Exhibition Association Limited (REAL) said the fair carried a $12.8 million economic impact.

“Any time you bring new dollars to our community such as the ride operators, the food operators and folks from rural Saskatchewan or western Canada that come to join, that drives hotel nights, restaurant nights and bar nights which has a significant impact on our visitor economy,” Tim Reid, the CEO and president of REAL, said.

Reid said organizers focused on a few things to make this year’s fair a bigger success, including investing in higher quality entertainment. The Jason Derulo concert drew the largest crowd ever for a Queen City Ex show.

“We saw airport numbers go up because people were flying in to watch Jason Derulo. We saw travel numbers go up because people were coming here for the rodeo,” Reid said.

“When we do events that draw a market beyond Regina, that means that it helps our economy.”

During the same weekend as the Queen City Ex, the Regina Folk Festival was taking place in Victoria Park.

Final attendance numbers aren’t calculated yet but Amber Goodwyn, the festival’s artistic director, said the turn out was “amazing.”

“People came out. People really missed this festival for three years,” Goodwyn said. “The festival this year was on par with previous festivals.”

Goodwyn said the festival provides a boost to a number of sectors of the local economy.

“We’ve got hundreds of volunteers, stage technicians, crews, suppliers, restaurants, all the companies that build the infrastructure,” she explained.

“It’s really important, especially for the entertainment industry aspect who were on pause for essentially three years. People are just so happy to get back to work.”


According to Tourism Saskatchewan, the province is rebounding from the COVID-19 pandemic.

“We’re continuing to come back from 2020 especially, but last year we saw a small recovery and this year we’re seeing even stronger growth,” Jonathan Potts, the CEO of Tourism Saskatchewan, said.

“Some parts of the industry are seeing really strong numbers, even stronger than pre-pandemic. Others are still trying to catch up to where they were before.”

Hotel occupancy is one area where things are climbing.

“In 2019, our hotel occupancy in the summer was in the 60-65 per cent range. We’re actually, in many parts of the province, doing better than that right now,” Potts said.

Camping numbers are down slightly from last year, but remain strong, according to Potts.

Meanwhile, summer events have been hit or miss for drawing people in.

“It’s been quite uneven,” Potts said. He added that while Queen City Ex saw a record breaking year, not all events have had the same turn out.

“Some other events, they’ve seen a little softer numbers than they would historically but it’s the first full year back for them so they’re rebuilding and it’s great to see them back and generating revenue again.”

Tourism Saskatchewan said American hunters and anglers are starting to return again, providing a boost in cash flow.

“It’s such an important part of the economy, particularly in places like northern Saskatchewan, so it’s just beneficial for a lot of people to see those American visitors come back because they do spend a lot of money,” Potts said.

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Taiwan's Economy Could Take Serious Damage if China Trade Hit Persists – Bloomberg



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Taiwan’s Economy Could Take Serious Damage if China Trade Hit Persists  Bloomberg

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In an Unequal Economy, the Poor Face Inflation Now and Job Loss Later – The New York Times



For Theresa Clarke, a retiree in New Canaan, Conn., the rising cost of living means not buying Goldfish crackers for her disabled daughter because a carton costs $11.99 at her local Stop & Shop. It means showering at the YMCA to save on her hot water bill. And it means watching her bank account dwindle to $50 because, as someone on a fixed income who never made much money to start with, there aren’t many other places she can trim her spending as prices rise.

“There is nothing to cut back on,” she said.

Jordan Trevino, 28, who recently took a better paying job in advertising in Los Angeles with a $100,000 salary, is economizing in little ways — ordering a cheaper entree when out to dinner, for example. But he is still planning a wedding next year and a honeymoon in Italy.

And David Schoenfeld, who made about $250,000 in retirement income and consulting fees last year and has about $5 million in savings, hasn’t pared back his spending. He has just returned from a vacation in Greece, with his daughter and two of his grandchildren.

“People in our group are not seeing this as a period of sacrifice,” said Mr. Schoenfeld, who lives in Sharon, Mass., and is a member of a group called Responsible Wealth, a network of rich people focused on inequality that pushes for higher taxes, among other stances. “We notice it’s expensive, but it’s kind of like: I don’t really care.”

Higher-income households built up savings and wealth during the early stages of the pandemic as they stayed at home and their stocks, houses and other assets rose in value. Between those stockpiles and solid wage growth, many have been able to keep spending even as costs climb. But data and anecdotes suggest that lower-income households, despite the resilient job market, are struggling more profoundly with inflation.

That divergence poses a challenge for the Federal Reserve, which is hoping that higher interest rates will slow consumer spending and ease pressure on prices across the economy. Already, there are signs that poorer families are cutting back. If richer families don’t pull back as much — if they keep going on vacations, dining out and buying new cars and second homes — many prices could keep rising. The Fed might need to raise interest rates even more to bring inflation under control, and that could cause a sharper slowdown.

In that case, poorer families will almost certainly bear the brunt again, because low-wage workers are often the first to lose hours and jobs. The bifurcated economy, and the policy decisions that stem from it, could become a double whammy for them, inflicting higher costs today and unemployment tomorrow.

“That’s the perfect storm, if unemployment increases,” said Mark Brown, chief executive of West Houston Assistance Ministries, which provides food, rental assistance and other forms of aid to people in need. “So many folks are so very close to the edge.”

America’s poor have spent part of the savings they amassed during coronavirus lockdowns, and their wages are increasingly struggling to keep up with — or falling behind — price increases. Because such a big chunk of their budgets is devoted to food and housing, lower-income families have less room to cut back before they have to stop buying necessities. Some are taking on credit card debt, cutting back on shopping and restaurant meals, putting off replacing their cars or even buying fewer groceries.

But while lower-income families spend more of each dollar they earn, the rich and middle classes have so much more money that they account for a much bigger share of spending in the overall economy: The top two-fifths of the income distribution account for about 60 percent of spending in the economy, the bottom two-fifths about 22 percent. That means the rich can continue to fuel the economy even as the poor pull back, a potential difficulty for policymakers.

The Federal Reserve has been lifting interest rates rapidly since March to try to slow consumer spending and raise the cost of borrowing for companies, which will in turn lead to fewer business expansions, less hiring and slower wage growth. The goal is to slow the economy enough to lower inflation but not so much that it causes a painful recession.

Officials at West Houston Assistance Ministries said its food bank served 200 households on Friday.Meridith Kohut for The New York Times

But job growth accelerated unexpectedly in July, with wages climbing rapidly. Consumer spending, adjusted for inflation, has cooled, but Americans continue to open their wallets for vacations, restaurant meals and other services. If solid demand and tight labor market conditions continue, they could help to keep inflation rapid and make it more difficult for the Fed to cool the economy without continuing its string of quick rate increases. That could make widespread layoffs more likely.

“The one, singular worry is the jobs market — if demand is constrained to the point that companies have to start laying off workers, that’s what hits Main Street,” said Nela Richardson, chief economist at the job market data provider ADP. “That’s what hits low-income workers.”

Lower-income people are already hurting. Mr. Brown’s organization has seen more requests for help in recent months, he said, as local families fall behind on their bills. The size of the typical request has gone up, too, from a few hundred dollars to a few thousand. And he has noticed financial pain creeping up the income spectrum.

Mr. Brown’s observations are backed up by government data: About 12 percent of households reported they were struggling to get enough to eat in early July, up from about 10 percent at the beginning of the year, according to the Census Bureau.

Families can’t easily cut back what they spend on rent, gas or electricity as those prices climb, said Brian Greene, chief executive of the Houston Food Bank, which provides food to Mr. Brown’s organization and other charities across the region. So they cut back on food.

“Food insecurity isn’t about food,” Mr. Greene said. “Food insecurity is about income.”

Many poorer families’ incomes held up relatively well early in the pandemic because government aid — expanded unemployment benefits, stimulus checks and other programs — helped offset lost wages when businesses shut down. Then, as the economy reopened, pay soared for restaurant workers, delivery drivers and other low-wage workers.

But pandemic aid programs have ended and wage growth is slowing in many sectors — average hourly earnings in leisure and hospitality, which rose rapidly last year, actually fell in July from a month earlier for rank-and-file workers. Prices have risen so fast that even unusually quick wage growth has failed to keep up.

Travelers at Kennedy International Airport in New York. If richer people keep going on vacations, dining out and buying new cars, many prices could keep rising.
Gus Powell for The New York Times

The gaping divide between the rich and the poor in this inflationary moment is clear in corporate earnings calls. At Boot Barn, a Western wear retailer, sales of men’s Western boots were down in the first quarter, but sales of higher-priced exotic skin boots picked up. At LVMH, which owns luxury brands like Louis Vuitton and Tiffany, American revenues have been growing strongly, while at Walmart, customers are pulling back as they struggle to afford basic necessities, particularly food, which has run up sharply in price.

“This is affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel,” Walmart said in its July 25 guidance.

It’s not just apparel: Consumers across the economy are buying less milk and fewer eggs, as prices for those products rise significantly, according to an analysis of government figures by Michelle Meyer, chief U.S. economist for Mastercard. Yet they are also going out to eat at restaurants more often.

The fissures are clear in the car market. Demand for new cars, which generally sell to higher-income buyers, has remained strong and prices continue to soar amid supply shortages — putting upward pressure on inflation. But used-car demand is ebbing and prices have begun to depreciate again.

“We see bifurcation in many parts of the economy and the auto market,” Jonathan Smoke, chief economist at Cox Automotive, said in an interview. “The new vehicle buyer has shown much less price sensitivity.”

Housing is another realm where fates have diverged. Home costs have run up sharply since the pandemic and mortgages are now more expensive, making buying unaffordable for many families. Because would-be buyers can’t afford homes, they are renting, keeping apartments for lease in short supply and pushing rents ever higher. Those soaring rents hit lower-income households especially hard: Roughly six in 10 people in the bottom quarter of earners rent their homes.

By contrast, homeowners have both seen their houses rise in value and often enjoy a built-in inflation hedge, since many refinanced their mortgages and locked in low monthly payments when rates were low in 2020 and 2021.

“The haves are really comfortable right now,” said Nicole Bachaud, an economist from Zillow, also noting that “we’re going to see this gap getting wider between people who are homeowners and people who are probably never going to be homeowners.”

Jamie Kelter Davis for The New York Times

Ms. Clarke, the New Canaan retiree, recently got off the wait list for an affordable apartment for herself and her 24-year-old daughter, who has autism and cannot work. Their new unit has just one bedroom, but it is clean and has new appliances, and at about $1,350 a month, she can squeeze it into her budget.

The lease lasts only a year, however, and Ms. Clarke is worried about finding somewhere to live if it isn’t renewed. Even now, she is barely making ends meet: She lost her car keys recently and had to spend nearly $500 replacing them, wiping out nearly all her small rainy-day fund and leaving her one crisis away from financial disaster.

“When you don’t have money, you’re on a fixed income, you’re constantly thinking, ‘Well, maybe I shouldn’t have bought that,’” she said. “There’s no cushion. There really never was.”

More financially secure families also face headwinds, of course, which could eventually prompt them to slow down spending. The cash savings they built up during the pandemic won’t last forever, and rising prices could prompt many households to pull back their spending.

And swooning stock markets could prompt richer families, who tend to have more money invested, to spend less than they otherwise would. Some economists think that the people in this demographic have mostly kept spending recently — despite their falling economic confidence — because they are eager to take vacations that they had put off earlier in the pandemic.

“Where I’m budgeting, it’s to make room for travel,” said Mr. Trevino of Los Angeles. “I feel like I’ve missed out on that a little bit.”

Economists have speculated that richer consumers’ resilience could fade as autumn approaches and they take stock of their finances amid a slowing economy. But for now, the reality that America’s wealthier consumers have yet to sharply pull back in the face of rising prices may be setting up a tough road ahead for the nation’s poorer ones.

“We really, in a way, haven’t noticed the inflation very much,” Mr. Schoenfeld said. “This economy is very unfair.”

Jason Karaian contributed reporting.

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