Tuesday, January 21, 2014

Bits and Pieces: Bill Gates and Unemployment

This morning on MSNBC's "Morning Joe", host Joe Scarboroug blasted the tax code and how the ultra-rich paid so little in taxes—calling it "obscene". And he also railed against their offshore banks accounts to dodge taxes, saying, "If they want to keep their money offshore, then they should move offshore with their money... We don't want you here anymore."

A little later on in the program the MSNBC hosts had Bill Gates on as a guest, to discuss his 2014 annual letter. They asked Gates about the new wealth report, showing the world's top one percent had 50% of the world's wealth. But rather than waiting for a definitive answer, they asked him about raising the minimum wage, and Gates was lukewarm on the subject, saying raising the minimum wage would cause wage substitutions, and that the issue was "complicated", and that a lot more thinking was needed on the idea.

Bill Gates also said the poor were not becoming poorer, then he immediately used China as an example. He wants more foreign aid to help the poor overseas. (Bill Gates had been a co-founder of MSNBC, but pulled out in 2012 because he thought MSNBC was becoming too "left wing". )

None of the MSNBC hosts had asked Bill Gates about the low tax rates on the top one percent or about offshoring jobs—they just mostly showered the multi-billionaire with platitudes for all the good work his foundation does to fight poverty (in other countries).

And speaking of Bill Gates: Why do ultra-rich people use computers to put people out of work, creating more poor people, just to become richer? And then they blame the poor and unemployed for being poor and unemployed! And at the same time, they lobby to cut the safety net for the poor and unemployed—while also at the same time, continue to offshore more jobs overseas and use more H-1B visas to put even more people out of work (thereby creating more poor people, just to become richer still).

And these ultra-rich people are already are hoarding trillions of idle dollars. Maybe they are paying too little in taxes. As it is now, the world's top one percent already has 50% of the world's wealth. Is that not enough?

In an article by Bret Stephens in the Wall Street Journal titled Obama's Envy Problem he claims, "Inequality is a problem when the rich get richer at the expense of the poor. That's not happening in America." Bret Stephens claimed incomes for the bottom fifth of the U.S. population have risen 186 percent since 1979.

But Paul Krugman disputes him in a post at the New York Times: The Undeserving Rich. "That's a nominal number, not corrected for inflation...it shows incomes for the bottom fifth actually falling."

Bret Stephens then contacted the New York Times to protest Paul Krugman's counter-argument. So in another post by Paul Krugman at the New York Times titled Department of Corrections, and Not, he calls out Bret Stephens for not correcting his misinformation.

In another article at the Wall Street Journal titled Three Myths on the World's Poor, Bill and Melinda Gates make a very good argument for not cutting off foreign aid to the world's poorest countries—an argument that can (ironically) also be applied to case for not cutting off extended unemployment benefits—benefits that might go to an IT worker displaced by an H-1B worker or a manufacturer who had their job offshored to China by a company like Microsoft.

At Mother Jones: The Gates Foundation's Hypocritical Investments: "ExxonMobil, Walmart, and McDonald's are just a few of the companies that the mega-charity supports." Like a game of Monopoly, Bill Gates recently recaptured the title of world's richest person from the Mexican investor Carlos Slim and now has a net worth of $78 Billion.

Economist Bruce Bartlett at the New York Times show how companies owned by Bill Gates force sales in tax havens, all to avoid hiring American workers and pay U.S. taxes:

"The major role of R.&D. in large cash holdings may reflect the greater opportunities for tax avoidance among businesses that can easily transfer intangible property abroad without having to move production operations or jobs to other countries. It is a simple matter for companies holding patents, copyrights or trademarks to transfer them to foreign subsidiaries and realize the profits accruing to them in lower-taxed jurisdictions. I had an experience with this phenomenon just recently. I needed a copy of Microsoft Word for a new computer and went to www.microsoft.com to buy it. But when I tried to pay for it, my credit card was rejected. When I checked with my credit-card company I was told that the charge appeared suspicious because it went to a company based in Luxembourg – a well-known tax haven. This technique is used by many technology-based companies."

Federal Reserve economists Sánchez & Yurdagul tell us corporations were sitting on over $5 trillion in cash and short term investments. The industries who led the charge to offshore jobs (I.T., technology and pharmaceuticals) are at the top of the cash hoarding list—companies like Apple and Microsoft.

The chart below (from Bloomberg) shows the percentage of 25- to 54-year-olds (prime working-age adults) in the U.S. who have a full- or part-time job. As you can see, it fell off a cliff during the Great Recession. And five years later it has barely budged. This is one reason why it’s still too early to end federal emergency unemployment compensation.

Too many Americans unemployed!

In an article at BusinessWeek they asked, "Why would jobless workers quit looking for work when their unemployment benefits run out? Well, one benefit of federal EUC is that it requires recipients to be actively looking for work. When it is cut off, many give up because the labor market is still very weak and there aren’t jobs available."

I quit looking for working after my benefits ran out because, after I couldn't find a job, I could no longer pay my rent and car payment (or electric, gas, food, and other things). So, especially for a dummy like me, it helps to have food, shelter and a car when one is trying to look for work.

But computers can also make "smart people" unemployed. Computers, robots and automation are putting more and more people out of work—and higher education alone won't be enough to employee everyone.

Excerpts from an article titled: There Could be Trouble Ahead:

Exponential progress in computing power has reached a critical point, and machine capabilities are suddenly growing very rapidly. That, in turn, is likely to facilitate a wave of disruptive change around rich economies as entrepreneurs develop much more productive ways to do everything from moving goods around cities, to diagnosing and treating common diseases, to educating workers.

Industrialization led to sweeping changes in labor demand and large sectoral shifts, and it took a very long time for the benefits of industrialization to begin to accrue to workers in a meaningful way. Real wage growth was imperceptible for the first 60 years of the industrial era, and it was about a century before the big improvements in living standards that we associated with the modern era began to emerge.

It took a long time for society to adjust and an awful lot of intense political fighting to deliver the social reforms needed to make industrialization work for most people.

Technology (and offshoring and outsourcing made possible by technology) are leading to a polarisation of work similar to that observed in the 18th and 19th century. That can help explain wage stagnation for those outside the top of the income spectrum across the past decade or so.

If the rich world can't rely nearly as heavily on education to facilitate adjustment [as it once could]—an adjustment that was, in the 19th century, pretty hairy even with the boost from education—then much more pressure will be placed on the social safety net and other social institutions. Given the intensity of the debates that are already occurring surrounding things like the burden of income taxation, the availability of unemployment and disability benefits, the generosity of social security, and so on, it probably won't take much of an acceleration in labor-market change to turn things pretty ugly.

A powerful wave of innovation creates the opportunity for everyone to benefit handsomely. But history suggests that if and when that broad-based prosperity arrives, it will come on the heels of a long negotiation between political institutions, cultural norms, and unpleasant economic realities.

But others believe the U.S. needs more high-skilled immigrants (H-1B workers)—to invent better computers, to put more people out of work—computers that will be built overseas by people like Bill Gates, who already has more money than he knows what to do with.

While on one hand, it might be admirable that people like Bill Gates would want to help humanity in general (such as curing diseases, etc.). But on the other hand, putting his fellow Americans out of work (while lifting others out poverty overseas) might be considered a moral trade-off for people like Mister Gates; but playing "God" with American lives might also be considered unpatriotic. So it seems that the very least he could do is to pay more in taxes—to help fund food stamps for all the Americans that he and his computers are putting out of work.

Maybe Joe Scarboroug was right: "If they want to keep their money offshore, then they should move offshore with their money... We don't want you here anymore."


  1. If the minimum wage had grown at the same rate as the earnings of the top one percent of Americans the federal wage floor would be more than triple the current hourly minimum of $7.25. Instead, the minimum wage has been lower than a poverty wage ever since 1982. Bill Gates must think these people earn too much as is---or why did he waffle on the question of raising it?


  2. Back in 1996, as a former corporate librarian, I had the chance to actually talk to Bill Gates at our SLA annual meeting in Seattle. After hearing his horse shit ideas to train India's impoverished labor force with computer skills I asked him why he wasn't concerned how this would take away American jobs. He grimaced and walked away w/o answering my question. He's an opportunist among other things.

    1. The real time money counter of Bill Gates: