WHAT DOES THE OECD ALPHABET SOUP SAY? WOUT ULTEE UNIVERSITY OF HAIFA NOVEMBER 18, 2012

1. WHAT DOES THE OECD ALPHABET SOUP SAY? WOUT ULTEE UNIVERSITY OF HAIFA NOVEMBER 18, 2012

2. THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT WAS FOUNDED IN 1961 IT WAS THE FOLLOW-UP TO THE AGENCY RESPONSIBLE FOR THE DISTRIBUTION AND SURVEILLANCE OF THE MARSHALL AID THE MEMBER STATES AT FIRST WERE THE RICH WESTERN COUNTRIES OF THE WORLD NOT LONG AGO ISRAEL BECAME A MEMBER

3. THE OECD DID NOT HAVE ANY FORMAL RESPONSIBILITIES IT BECAME SOMETHING LIKE A THINK TANK AND IT AT FIRST TESTED THEORIES OF RIGHT-WING US ECONOMISTS SOMETIMES IT STILL DOES SO

4. UNEMPLOYMENT RATES AND LONG TERM UNEMPLOYMENT RATES ARE HIGHER IN THE EUROPEAN COUNTRIES THAN IN THE USA BECAUSE UNEMPLOYMENT BENEFITS LAST LONGER IN THE EUROPEAN COUNTRIES BUT DID THE UNEMPLOYMENT RATE IN SOME EUROPEAN COUNTRY MAINLY RISE BECAUSE UNEMPLOYMENT BENEFITS BECAME EXTENDED? MONEY FOR RETRAINING OF UNEMPLOYED PERSONS LOWERS UNEMPLOYMENT RATES MONEY FOR RETRAINING PERSONS ABOVE THE AGE OF 50 YEARS DOES SO?

5. WHY IS NOT THE WHOLE WORLD LIKE THE USA? QUESTIONS VERSUS WHY ARE THERE DIFFERENCES BETWEEN EUROPEAN COUNTRIES? QUESTIONS

6. THE OECD WAS PROBABLY THE FIRST INTERNATIONAL ORGANIZATION TO PUBLISH FOR ITS MEMBER COUNTRIES TIME SERIES FOR GROSS DOMESTIC PRODUCT PER CAPITA IN CONSTANT DOLLARS THE OECD WAS CRITICIZED FOR THIS BECAUSE MONEY DOES NOT BUY HAPPINESS AND BECAUSE VARIOUS STATE MEASURES LIKE SCHOOLS AND HOSPITALS CONTRIBUTE TO THE LEVEL OF LIVING

7. IN THE 1980S THE UN (UNITED NATIONS) STARTED PUBLISHING THE HUMAN DEVELOPMENT INDEX THIS INDEX WEIGHS FOR COUNTRIES MEASURES FOR PER CAPITA GDP WITH MEASURES FOR EDUCATION, SCHOOLING, HOSPITALS, PIPED WATER ETC THE RANKING OF THE COUNTRIES DOES NOT DIFFER MUCH BUT CUBA IS MUCH HIGHER

8. THE OECD AND THE ILO (INTERNATIONAL LABOR ORGANIZATION) PUBLISHED TIME SERIES ON THE PERCENT OF NATIONAL INCOME GOING TO SOCIAL SECURITY EXPENDITURES THIS MEASURE WAS HEAVILY CRITICIZED BY THE SWEDISH SCHOOL ON WELFARE STATE RESEARCH RUN BY AT FIRST WALTER KORPI AND LATER JOACHIM PALME EXPENDITURES ON UNEMPLOYMENT BENEFITS IN A COUNTRY MAY RISE, NOT BECAUSE UNEMPLOYMENT BENEIFTS BECOME MORE GENEROUS BUT BECAUSE THE UNEMPLOYMENT RATE ROSE WHILE INDIVIDUAL UMEPLOYMENT BENEFITS WENT DOWN THE SWEDISH SCHOOL CAME UP WITH SUCH INDIVIDUAL MEASURES FOR THE OECD COUNTRIES

9. THE BEST CRITICISM OF MEASURES LIKE GROSS DOMESTIC PRODUCT PER CAPITA IS THAT IT PERTAINS TO AN AVERAGE INHABITANT OF A COUNTRY BUT THAT THE DISPERSION AROUND THE MEAN IS NEGLECTED IT MAY WELL BE THE CASE THAT A COUNTRY WITH A HIGHER PER CAPITA GDP HAS A HIGHER PERCENTAGE OF INHABITANTS BELOW SOME LOW INCOME LEVEL

10. THE INTERNATIONAL ORGANIZATION DOING THE MOST AT FIRST FOR MAKING MEASURES ON INCOME INEQUALITY AND POVERTY RATES AVAILABLE WAS THE WORLD BANK LATER THE OECD CAUGHT ON POVERTY RATES ARE RATHER ARBITRARY YET THE RANKING OF COUNTRIES AFTER POVERTY RATES PROBABLY IS NOT AFFECTED BY DECISIONS ABOUT WHERE EXACTLY TO PLACE THE POVERTY LINE

11. THE TWO PRIME MEASURES FOR INCOME INEQUALITY ARE THE GINI AND THE QUINTILE RATIO THE GINI RUNS FROM ZERO TO 1, WITH ZERO STANDING FOR FULL EQUALITY AND 1 FOR ONE UNIT GETTING ALL THE INCOME THE QUINTILE RATIO DIVIDES THE INCOME SHARE OF THE RICHEST 20% BY THE INCOME SHARE OF THE POOREST 20% OF UNITS

12. INCOME INEQUALITY USUALLY IS NOT MEASURED AT THE INDIVIDUAL LEVEL (A LOT OF INDIVIDUALS DO NOT HAVE INCOME) BUT AT THE LEVEL OF HOUSEHOLDS, TAKING THE INCOME OF ALL HOUSEHOLD MEMBERS INTO ACCOUNT, EVEN IF THAT IS NILL SO, IF BOTH THE HUSBAND AND THE WIFE WORK, THEIR INCOMES ARE ADDED UP TO DETERMINE THE INCOME OF A HOUSEHOLD MEMBER, ALSO THE NUMBER OF NON-WORKING CHILDREN IS TAKEN INTO ACCOUNT (A CHILD OFTEN IS TAKEN FOR 0,4 ADULTS)

13. INCOME INEQUALITY PER HOUSEHOLD MEMBER USUALLY IS NOT MEASURED AS TAXABLE (PRE-TAX) INCOME BUT AS POST-TAX (DISPOSABLE )INCOME PER HOUSEHOLD MEMBER

14. SINCE THE 1980S THE STATISTICAL OFFICES OF MOST OF THE RICH COUNTRIES IN THE WORLD ON A YEARLY BASIS PRODUCE DIGITAL FILES FOR THE INCOME OF THE HOUSEHOLDS IN THEIR COUNTRY THIS OFTEN IS DONE FROM TAX REGISTERS, BUT SOMETIMES SURVEY DATA ARE USED LIS (THE LUXEMBURG INCOME STUDY) WAS THE FIRST UNIVERSITY INSTITUTE TO USE THESE FILES AND PRODUCE COMPARABLE INCOME INEQUALITY DATA FOR RICH COUNTRIES IN SOME COUNTRIES INTEREST ON MORTGAGES ARE DEDUCTED FROM TAXABLE INCOME, IN OTHERS NOT LIS AND NOW THE OECD DEAL WITH SUCH MATTERS

15. IN ONE OF ITS RECENT STUDIES THE OECD SHOWED THAT, MEASURED BY GINIS AND QUINTILE RATIOS, INCOME INEQUALITY ROSE IN MOST OF THE OECD COUNTRIES BETWEEN 1985 AND 2005 ACCORDING TO THE OECD, THE RISE WAS PARTICULARLY STRONG IN THE UNITED STATES AND THE UNITED KINGDOM ACCORDING TO THE OECD, INCOME INEQUALITY ROSE A BIT IN THE NETHERLANDS AND MORE IN ISRAEL

16. WHY DID INCOME INEQUALITY RISE IN MOST OECD COUNTRIES? THE OECD TESTED IN ONE OF ITS REPORTS EXPLANATIONS INVOKING DEMOGRAPHIC CHANGE IF RETIRED PEOPLE HAVE LOWER INCOME, AND IF THE RETIRED INCREASE AS A PERCENTAGE OF THE POPPULATION, INCOME INEQUALITY WILL INCREASE WITHOUT ANY OF THE DEMOGRAHIC GROUPS OF A COUNTRY’S POPULATION HAVING A CHANGE IN INCOME

17. THE MOST INTERESTING DEMOGRAPHIC EXPLANATION INVOKES INCREASED FEMALE LABOR FORCE PARTICIPATION AND WAS PROPOSED BY THE SOCIOLOGIST GOSTA ESPING-ANDERSEN IF MARRIED WOMEN WITH A HIGHER LEVEL OF EDUCATION ARE LESS LIKELY TO QUIT THEIR JOB WHEN GIVING BIRTH TO A CHILD THAN MARRIED WOMEN WITH A LOWER LEVEL OF EDUCATION HOUSEHOLD INCOME INEQUALITY WILL RISE AND IT WILL RISE EVEN MORE IF WOMEN WITH A HIGHER LEVEL OF EDUCATION ARE MARRIED TO MEN WITH A HIGHER LEVEL OF EDUCATION (EDUCATIONAL HOMOGAMY)

18. HOWEVER, ALL THESE DEMOGRAPHIC EXPLANATIONS TAKEN TOGETHER DO NOT FULLY EXPLAIN THE RISE IN INCOME INEQUALITY WAGE DIFFERENTIALS HAVE BECAME LARGER NOT ONLY WAGE DIFFERENTIAL BETWEEN PERSONS WITH A HIGHER AND A LOWER LEVEL OF EDUCATION BUT ALSO WAGE DIFFERENTIALS BETWEEN ECONOMIC SECTORS SUCH AS FINANCE PLUS BANKING VERSUS ALL OTHER SECTORS WHAT ARE THE WAGE DIFFERENTIALS IN ISRAEL BETWEEN THE HIGH TECH SECTOR AND THE OTHER SECTORS?

19. THE MOST COMMON THEORY IN SOCIOLOGY EXPLAINING INCOME INEQUALITIES BETWEEN COUNTRIES IS GERHARD LENSKI’S SOCIAL-DEMOCRACY HYPOTHESIS: IN COUNTRIES GOVERNED FOR A LONGER TIME BY SOCIAL DEMOCRATIC GOVERNMENTS INCOME INEQUALITIES, EVEN AFTER TAKING PROGRESSIVE TAXATION INTO ACCOUNT, ARE SMALLER THAN IN COUNTIRES GOVERNED FOR A LONGER TIME BY CONSERVATIVE GOVERNMENTS DOES THE OECD ADDRESS THIS EXPLANATION? NOT REALLY!

20. THERE IS ONE THEORY DOWNPLAYING THE FINDING THAT INCOME INEQUALITY, OF ALL THE RICH COUNTRIES, IS LARGEST IN THE USA THE USA MAY HAVE LARGE INCOME INEQUALITIES, BUT IT ALSO HAS A LOT OF INCOME MOBILITY INDEED, THE USA-INEQUALITIES PROVIDE THE INHABITANTS OF THE USA WITH THE MOTIVATION TO CLIMB UP IN INCOME DOES THE OECD ADDRESS THIS RIGHT-WING EXPLANATION? YES!

21. SINCE A BOOK BY WERNER SOMBART FROM 1906 IT IS A COMMON THEORY THAT THE USA HAS MORE SOCIAL MOBILITY THAN EUROPEAN COUNTRIES PARTICULARLY FATHER-SON OCCUPATIONAL MOBILITY THE SOCIOLOGIST SAYMOUR MARTIN LIPSET REPEATED THIS THEORY IN A BOOK IN 1959, AND EVER SINCE

22. HOWEVER, LIPSET FOUND IN 1959 THAT MOBILITY RATES ARE PRETTY MUCH THE SAME IN INDUSTRIAL COUNTRIES IN 1978 JOHN GOLDTHORPE FROM BRITAIN AND ROBERT HAUSER FROM THE USA TOOK SOMBART’S THESIS NOT TO BE ABOUT ABSOLUTE MOBILITY RATES, BUT ABOUT RELATIVE MOBILITY CHANCES

23. RECENT DATA OF SOCIOLOGISTS SHOW THAT RELATIVE MOBILITY CHANCES ARE HIGHEST IN THE SCANDINAVIAN COUNTRIES AND QUITE LOW IN THE USA HOWEVER, SOCIOLOGISTS MEASURE MOBILITY WITHIN A SYSTEM OF CLASSES OR ALONG AN OCCUPATIONAL PRESTIGE SCALE ECONOMISTS LIKE TO STUDY INCOME MOBILITY

24. THE FIRST STUDIES ON FATHER-SON INCOME MOBILITY FOR UNREPRESENTATIVE SAMPLES FOR THE USA FOUND CORRELATIONS OF AT MOST 0.2 FOR FATHER’S YEARLY INCOME AND SON’S YEARLY INCOME SOME DECADES LATER THIS WAS MUCH LOWER THAN THE CORRELATION OF AT LEAST 0.4 THAT SOCIOLOGISTS FOUND WITH RANDOM SAMPLES BETWEEN THE OCCUPATIONAL PRESTIGE OF FATHERS AND SONS

25. LATER STUDIES BY ECONOMISTS ON INCOME MOBILITY COMPUTED THE CORRELATION BETWEEN FATHER’S INCOME AVERAGED OVER THREE YEARS AND SON’S INCOME AVERAGED OVER THREE YEARS THEN THE CORRELATION ROSE TO ABOUT 0.4 THE SOCIOLOGISTS HAD COME UP WITH THE RIGHT VALUE OCCUPATIONAL PRESTIGE STANDS FOR LONG-RUN INCOME

26. THIS IS THE OECD RESULT ON INCOME INEQUALITY AND INCOME MOBILITY FORGET THE RIGHT PART OF THE FIGURE HIGHER INCOME INEQUALITY GOES TOGETHER WITH LESS INCOME MOBILITY

29. OF LATE, THE OECD HAS BEEN MAKING THE HEADLINES WITH PISA PISA = THE PROGRAM FOR INTERNATIONAL STUDENT ASSESSMENT FOR PISA, LARGE NUMBERS OF STUDENTS AGED 15 YEARS FROM THE OECD MEMBER COUNTRIES MAKE STANDARDIZED TESTS ON LANGUAGE COMPREHENSION AND MATHEMATICS PISA ALSO COLLECTS DATA ON THE SCHOOLS OF THESE STUDENTS, ON THEIR TEACHERS, AND ON THEIR PARENTS

30. THE RANKINGS OF COUNTRIES AFTER THE SCORES OF THEIR STUDENTS TEND TO CAUSE POLITICAL UPROARS IN SEVERAL COUNTIRES FOR INSTANCE, GERMANY WAS SHOCKED TWO YEARS AGO ABOUT ITS LOW RANKINGS THE HIGH RANKING OF FINLAND BELIED THE HYPOTHESIS THAT IF TEACHER’S PAY IS HIGHER, STUDENT’S SCORES ARE HIGHER TOO FINNISH TEACHERS ARE NOT PAID A LOT

31. PISA’S BOSS ANDREAS SCHLEICHER ANSWER TO A QUESTION OF A JOURNALIST IN THE INTERNATIONAL HERALD TRIBUNE OF NOVEMBER 12, 2012 Q: I WANT TO ASK YOU ABOUT A RESULT OF YOURS ON CLASS SIZE A: IT IS CLEAR THAT IF EVERYTHING ELSE IS EQUAL, A SMALLER CLASS IS BETTER THAN A LARGER CLASS. BUT THAT IS NOT THE RIGHT QUESTION. THE RIGHT QUESTION IS: IF YOU HAVE ONE DOLLAR EXTRA TO SPEND, DO YOU PUT IT INTO A SMALLER CLASS, A BETTER TEACHER, MORE LEARNING TIME? WHAT OUR RESEARCH VERY CLEARLY SHOWS IS THAT IF YOU HAVE TO MAKE A CHOICE BETWEEN A GREAT TEACHER AND A SMALL CLASS, CHOOSE THE GREATER TEACHER.

32. STUDIES LIKE PISA, STUDIES COLLECTING SCORES FOR STUDENTS, CHARACTERISTICS THEIR PARENTS, THE SIZE OF THE CLASS THEY ATTEND, THE FINANCING OF THEIR SCHOOL, WERE UNDERTAKEN IN THE USA IN THE 1960S ACCORDING TO HAUSER, THEIR MODEL IS NOT TO BE FOLLOWED, WHILE PISA DOES HAUSER SAID SO AT SENATE HEARINGS HE REPEATED THIS AT THE MEETING OF THE RESEARCH COMMITTEE ON SOCIAL STRATIIFICATION AND MOBILITY IN YALE IN 2009

33. HAUSER’S ARGUMENT IS THAT PISA IS CROSS-SECTIONAL WHILE DYNAMIC DATA ON THE SAME STUDENT ARE NEEDED A STUDENT THAT MOVED FROM A BAD SCHOOL TO A GOOD ONE IS TREATED IN THE CROSS SECTIONAL ANALYSIS AS A STUDENT WHO HAS ATTENDED ALL HIS LIFE THIS SCHOOL BUT EXPOSURE TO FIVE YEARS OF A BAD SCHOOL IS NOT WASHED OUT BY ONE YEAR AT A GOOD SCHOOL SCHOOL EFFECTS SHOW UP GRADUALLY: THEY ARE WEAK IN THE FIRST YEAR, AND BECOME STRONGER LATER PISA’S STUDENTS ARE ALL IN THE SAME CLASS AND OF THE SAME AGE

34. TO PARAPHRASE SCHLEICHER: IF YOU AS A RESEARCH SOCIOLOGIST HAVE ONE DOLLAR EXTRA TO SPEND WOULD YOU SPEND IT ON REPEATING CROSS SECTIONAL RESEARCH FOR OTHER STUDENTS OR WOULD YOU SPEND IT ON RESEARCH FON THE SAME STUDENTS SOME YEARS LATER? ACCORDING TO METHODOLOGY TEXTBOOKS THE ANSWER IS CLEAR: FOLLOW BEGINNING STUDENTS THROUGH THEIR EDUCATIONAL CAREER

36. UNCLARITIES AND ERRORS OF PISA AND THE OECD

37. THIS IS THE MAIN DIAGONAL OF A MOBILITY TABLE A CURIOUS READER WOULD ALSO LIKE TO SEE THE OFF-DIAGONAL CELLS

38. MEN FROM THE BOTTOM FIFTH HAVE FOUR STEPS TO TAKE TO THE HIGHEST FIFTH, MEN FROM THE MIDDLE FIFTH TWO STEPS THERE IS LESS MOBILITY OF FOUR STEPS THAN OF TWO STEPS IN BOTH COUNTRIES IS THIS ENLIGHTENING? MOBILITY OF FOUR STEPS IS LESS COMMON IN THE USA THAN IN DENMARK

39. HOW ABOUT MOBILITY OF ONE STEP UP AND ONE STEP DOWN? IS IT POSSIBLE FOR A PERSON IN THE TOP QUINTILE TO GO ONE STEP UP? IS IT POSSIBLE FOR A PERSON IN THE BOTTOM QUINTILE TO GO ONE STEP DOWN?

40. OECD, EDUCATION AT A GLANCE 2012, PAGE 104 CHART 6.1 PROPORTION OF 20-34 YEAR OLD STUDENTS IN HIGHER EDUCATION WHOSE PARENTS HAVE LOW LEVELS OF EDUCATION PROPORTION OF PARENTS WITH LOW LEVELS OF EDUCATION IN THE TOTAL POPULATION THE ODDS OF BEING A STUDENT IN HIGHER EDUCATION IF PARENTS HAVE LOW LEVELS OF EDUCATION

41. WHAT ARE ODDS? COMPUTE ODDS RATIOS!