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Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the

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Speaker 1: global economy to you. Both this week and next, we're

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Speaker 1: going to be talking a bit about education. Oscar Wilde

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Speaker 1: said you could never be overdressed or over educated. But

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Speaker 1: in his day, people didn't like to wear black tie

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Speaker 1: without the tie, and white trainers with absolutely anything at all,

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Speaker 1: and he probably never found himself being served by a

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Speaker 1: waiter with two pH d s. Victorian times, only a

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Speaker 1: tiny fraction of the population had degrees. But in most

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Speaker 1: rich countries today, at least a third of the adult

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Speaker 1: population has graduated from university, and many of those heavily

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Speaker 1: credentialed workers feel distinctly under employed. Over education is a

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Speaker 1: particular problem for Greece. It turns out a country you'd

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Speaker 1: think already had its fair share of economic challenges to

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Speaker 1: deal with. We have a report from our europe Economy reporter,

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Speaker 1: Jeanette Newman on that. In a moment. We'll also have

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Speaker 1: an update from the annual gathering of the Economist Great

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Speaker 1: and Good of the American Economic Association. But first you'll

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Speaker 1: remember we ended rather less worried about trade wars. Now

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Speaker 1: two weeks into there's been fear of a real war

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Speaker 1: breaking out in the Middle East thanks to US action

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Speaker 1: on Iran. Ziad Our, chief Middle East economist, has been

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Speaker 1: sitting in Dubai thinking about the economic impact of all this. Yea,

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Speaker 1: thanks for joining us. In the past week, we've seen

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Speaker 1: a very muted market reaction to what could be a

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Speaker 1: major ratcheting up of tension in the region. Markets haven't

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Speaker 1: moved much, and although the oil price did rise a

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Speaker 1: bit at first, I see it's now below where it

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Speaker 1: was at the start of the year. Do you think

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Speaker 1: this calm reaction is justified? And maybe you should remind

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Speaker 1: us what's at stake economically in the region, what it

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Speaker 1: might mean for the global economy and oil supplies if

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Speaker 1: things take another negative turn. The market reaction has been muted,

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Speaker 1: so basically, financial markets currently expect all prices to revert

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Speaker 1: to an average of sixty five dollars per barrel in

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Speaker 1: twenty so they expect any geopolitical tensions to recede and

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Speaker 1: any supply disruption to be temporary. Are they right? Well,

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Speaker 1: potentially there are certain sources and scenarios in which markets

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Speaker 1: could be surprised by a longer last thing supply disruption.

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Speaker 1: We identify three Basically, the first one is the potential

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Speaker 1: of U S sanctions on Iraq. Iraqi is of the

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Speaker 1: second largest producer uh It produces four point seven billion

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Speaker 1: brows of oil a day, and US sanctions on your

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Speaker 1: luck that could prevent the export of Iraqi oil could

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Speaker 1: lead to much higher all prices that's not currently priced

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Speaker 1: and in the market. The second potential source of risk

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Speaker 1: is attacks on on oil facilities in the Gulf by Iran.

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Speaker 1: We've seen an attack on Saudi around call last Denver,

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Speaker 1: which took five percent of global all supply of market immediately.

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Speaker 1: Saudi Arabia is able to restore that very quickly, but

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Speaker 1: we can imagine a scenario in which the damage is

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Speaker 1: longer lasting. And finally, we could also envisage a scenario

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Speaker 1: in which oil trade routes in the Gulf might be disrupted.

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Speaker 1: We have twenty percent of global all supply goes through

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Speaker 1: the Gulf and the Strait of Hormos, and if if

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Speaker 1: there is an escalation in geopolitical tensions, if there are

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Speaker 1: attacked on all tankers in in in that area, then

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Speaker 1: that could surprise markets with a much harder or price

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Speaker 1: because simply the amount of bales of all at risk

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Speaker 1: are very large, I guess what I mean, we're used

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Speaker 1: to thinking it. Certainly, you know, in the old days

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Speaker 1: spike in oil prices, I mean, famously in the seventies,

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Speaker 1: but also since then, you know, it really had a

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Speaker 1: devastating impact on the global economy. I mean, one of

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Speaker 1: the things I've struck by in the research that you've done,

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Speaker 1: and and the chief a mere economist, Jamie Rush, is

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Speaker 1: that the impact of big oil price rises not like

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Speaker 1: it was, I mean, not for for a number of reasons,

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Speaker 1: I guess. But we shouldn't. We don't fear it in

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Speaker 1: quite the same way, do we. No, we don't at all.

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Speaker 1: What was hundred dollar or price in twenty two thou

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Speaker 1: two thousand and eleven, that would not feel like a

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Speaker 1: hundred dollar or price to day. It would feel more

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Speaker 1: like a seventy six dollar or price. And that's simply

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Speaker 1: because the you know, over time, the prices of other

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Speaker 1: goods and services have gone up, so the real value

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Speaker 1: of hundred dollar barrel of oil is less than that. Also,

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Speaker 1: because of energy efficiency, we need less oil to produce

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Speaker 1: each unit of global g d P. And because of that,

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Speaker 1: you know, the impact of the global economy of a

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Speaker 1: spark in all prices is also less significant now. But

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Speaker 1: also we've seen a structural shift in the oil market.

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Speaker 1: The world's largest economy, the US, is producing a lot

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Speaker 1: more all these days, as spark in all prices tends

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Speaker 1: to shift income from all exporters to all imports the globe.

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Speaker 1: As largest economy, the US has is producing more oil

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Speaker 1: and therefore the impact of our our prices is less

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Speaker 1: adverse in the global economy because it's less adverse on

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Speaker 1: on the US. So all of these factors. You put

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Speaker 1: all of these factors together, if you get an increase

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Speaker 1: of nominal are prices from seventy dollars stay two hundred dollars,

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Speaker 1: the impact of global on global growth is something like

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Speaker 1: twenty to thirty basis points by the beginning of twenty two,

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Speaker 1: So it is quite muted. It's not incredibly significant as

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Speaker 1: we've had in so if the world was going to

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Speaker 1: grow three percent, it might grow two point seven two

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Speaker 1: point eight, although I guess we could guarantee that people

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Speaker 1: would still complain busily about the prices they were paying

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Speaker 1: at the pump. Yeah, I think we'll probably end up

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Speaker 1: talking about this again. And stephonomics in certainly a hell

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Speaker 1: of a year for Saudi Arabia to be leading the

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Speaker 1: g twenty summit later on in the year. I wonder

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Speaker 1: how whether how that meeting will go down, or even

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Speaker 1: if it happens, if tensions continue to be so so high.

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Speaker 1: But until then, Ze, thanks very much, thank you. Now

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Speaker 1: onto Greece. It's no longer in economic free fall, but

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Speaker 1: it's still living with the legacy of the financial crisis,

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Speaker 1: and one problem it's facing is that there are more

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Speaker 1: educated Greeks than there are jobs to give them. Here

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Speaker 1: Jeanette Newman, this is a peaceful stretch of green on

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Speaker 1: the outskirts of central Athens. It's the site of one

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Speaker 1: of the Western world's first institutions of higher learning, Plato's Academy.

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Speaker 1: Now it's a park where neighbors walk their dogs. Marble

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Speaker 1: slabs from Plato's time lies scattered in the grass. If

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Speaker 1: it weren't for a tiny shack of a museum built

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Speaker 1: a couple of years ago, he would have no idea

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Speaker 1: that this place was home to a forefather of the

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Speaker 1: modern day university. But in Plato's homeland, the modern university

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Speaker 1: system has become somewhat antiquated. Out of step with the

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Speaker 1: challenges facing present day Greece. Here in Greece and many

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Speaker 1: other countries, enrollment and higher education has shot up over

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Speaker 1: the past several decades. Many parents and their children equate

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Speaker 1: more studies with more job opportunities, but the number of

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Speaker 1: young workers with graduate studies has outpaced the number of

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Speaker 1: jobs that require those degrees. The mismatch is particularly acute

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Speaker 1: in Southern European countries such as Greece, which are still

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Speaker 1: recovering from the region's devastating economic crisis. That's led to

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Speaker 1: a problem that academics have given the somewhat bewildering name

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Speaker 1: over education. Over education is described as a situation whereby

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Speaker 1: individuals are employed in a job where the level of

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Speaker 1: education required either to get or to perform that job

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Speaker 1: in question, is below the level of edge occasion held

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Speaker 1: by that worker. So an example would be a graduate

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Speaker 1: in a non graduate job, such as perhaps a waiter

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Speaker 1: or bartender. That's a Dell Wheeland, a researcher at the

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Speaker 1: Economic and Social Research Institute in Ireland, the word over

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Speaker 1: education sounds like it's judging you for getting that PhD.

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Speaker 1: In nineteenth century comparative French literature, it's not. We'll leave

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Speaker 1: that to your friends. But the issue does tend to

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Speaker 1: be overlooked by policymakers. I'm Constantas. I'm an expert specializing

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Speaker 1: in issues of vocational education and training. Constantinos Pulakas thinks

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Speaker 1: he knows why. He studied the topic at the European

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Speaker 1: Center for the Development of Vocational Training. That's an agency

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Speaker 1: based in his native Greece. He estimates that as many

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Speaker 1: as were in ten young Greeks with a university degree

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Speaker 1: could be over educated, meaning they work in a job

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Speaker 1: that doesn't require that degree. There was a long period

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Speaker 1: where even mentioning the term over education was was something

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Speaker 1: that was frowned upon. If you if you're saying that

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Speaker 1: over education is a problem, there's a fear that, you know,

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Speaker 1: some families, some young people may interpret that as basically saying,

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Speaker 1: you know, you shouldn't be pursuing more education, or that

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Speaker 1: getting a higher degree may be useless. In fact, workers

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Speaker 1: who have an advanced degree are overall better off in

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Speaker 1: terms of employment rates than those without one. They also

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Speaker 1: make an economy more productive and innovative. But over education

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Speaker 1: still has a cost. Let's say you have an m

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Speaker 1: b A, but you work. In a job that doesn't

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Speaker 1: require an MBA, you will earn on average, around fourteen

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Speaker 1: percent less than someone who is required to have an

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Speaker 1: MBA in her job. She's matched. Now, you will still

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Speaker 1: learn more than someone in your company who has less

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Speaker 1: education than you do. You will learn more than a

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Speaker 1: colleague who has, for instance, a bachelor's degree compared to

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Speaker 1: your m b A. But over educated workers tend to

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Speaker 1: feel that their skills and studies aren't being put to use.

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Speaker 1: Individuals who are over educated have lower levels of job satisfaction,

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Speaker 1: and what happens in terms of this is that individuals

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Speaker 1: who have lower levels of job satisfaction they are much

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Speaker 1: more likely to move jobs, and there's costs of the

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Speaker 1: firm associated with this cost of the individual and costs

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Speaker 1: of the firm. Greece provides an extreme example that illustrates

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Speaker 1: how overeducated workers are more likely to jump from job

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Speaker 1: to job. During the past decade, as Greece's economic crisis deepened,

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Speaker 1: an estimated four hundred thousand Greeks with a university degree

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Speaker 1: or higher left the country a massive brain drain. Even

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Speaker 1: before the crisis, Greek universities have been pumping out graduates

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Speaker 1: at a rate that's out of whack with the demand

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Speaker 1: for those higher degrees. Their universities aren't good at preparing

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Speaker 1: them for the job market, and apprenticeships aren't as institutionalized

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Speaker 1: in Greece as in other European countries. Pulakas, the Greek

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Speaker 1: over education expert, says the crisis also laid bare other

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Speaker 1: deep seated problems. Many Greeks say job offers are based

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Speaker 1: more on personal connections than professional merit. It can also

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Speaker 1: be hard to lay off under performing workers. In a

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Speaker 1: healthier economy, workers would have greater opportunities to find a

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Speaker 1: job that matches with their degree, and he wouldn't have

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Speaker 1: incentives or she wouldn't have incentives to go outside of

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Speaker 1: the country to manage to get these opportunities. So, in

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Speaker 1: a sense, they over education and the brain drain phenomenon

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Speaker 1: or inter linked in my In my view, ironically, the

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Speaker 1: exodus of so many highly skilled workers has created a

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Speaker 1: problem for the Greek economy, a lack of qualified workers

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Speaker 1: that's getting in the way of the country's nascent economic recovery.

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Speaker 1: To address the shortfall, the Greek government has launched an

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Speaker 1: initiative with a curious but catchy name it's called Rebrain

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Speaker 1: Greece platforms. That's a Greek government officials speaking at a

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Speaker 1: conference in Athens in early December. Hundreds of people had gathered,

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Speaker 1: buzzing with ideas about how to bring brains back to Greece.

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Speaker 1: At the conference, Greece's Center right government announced details of

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Speaker 1: its rebrain plan. Officials are offering salaries of around three

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Speaker 1: thousand euros per month or about thirty three dollars. They're

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Speaker 1: offering it to Greeks who returned from abroad and take

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Speaker 1: vacant technical jobs that companies are already having a hard

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Speaker 1: time filling. The Greek government will pay about two thirds

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Speaker 1: of that. The company that employs the right ane will

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Speaker 1: pay the rest. Officials based this salary on an analysis

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Speaker 1: of what mid level Greeks ages forty are already earning

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Speaker 1: in major European cities. The government will initially target a

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Speaker 1: group of about five hundred Greeks who will receive the

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Speaker 1: subsidized salaries for two years. Non Greeks can also apply,

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Speaker 1: but they are required to speak Greek so that they

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Speaker 1: can work more efficiently. Other countries that suffered brain drains

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Speaker 1: are also trying something similar. Portugal launched a program in

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Speaker 1: July to give as much as six thousand, five hundred

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Speaker 1: euros to Portuguese who return home. Spain subsidizes the salaries

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Speaker 1: the program is overdue. This is the first public initiative,

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Speaker 1: I mean governmental initiative targetting directly to the people living abroad.

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Speaker 1: cost of Greece's brain drain. Several years ago, Panopolist did

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Speaker 1: his MBA in Greece with a group of five friends.

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Speaker 1: show that you should. But okay, if everybody leaves the ship,

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Speaker 1: somebody should say, I don't know. Panopolis says he knows

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Speaker 1: that it's one thing to bring talent in Greeks home

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Speaker 1: to urgently fill some job vacancies. It's another thing to

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Speaker 1: why the government is also trying to foster the conditions

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Speaker 1: to create better jobs increase that would help encourage qualified

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Speaker 1: streamline bureaucracy. They are considering cutting the cost to higher workers. Also,

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Speaker 1: they're providing financial incentives to companies that are creating jobs,

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Speaker 1: such as in software engineering. Otherwise, well educated Greeks who

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Speaker 1: return could slip once again into the vicious cycle of

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Speaker 1: over education, getting trapped in jobs that don't match their qualifications.

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Speaker 1: If you don't have adequate incentives for you know a

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Speaker 1: entrepreneurship within your economy. If you don't have that part

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Speaker 1: high incidence of over education. You must still end up

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Speaker 1: seeing a high share of your graduate labor force working

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Speaker 1: in jobs where they would be considered to be non

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Speaker 1: graduate local level jobs. Government officials talk a lot about

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Speaker 1: the lack of skilled workers and how graduates need to

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Speaker 1: do a better job preparing for the coming robot replacement revolution,

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Speaker 1: as the case of Greece shows, though there's talent already

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Speaker 1: economies are creating jobs suited to those workers skills. Let's

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Speaker 1: call it a good match for Bloomberg News and Jeanette Newman.

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Speaker 1: We're going to talk more about education and the economy

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Speaker 1: next week with a report looking at education policy from

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Speaker 1: the standpoint of a single US state, Maryland. But right

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Speaker 1: now I'm going to catch up with DC based Federal

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Speaker 1: Reserve reporter Chris Condon on the annual meeting of the

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Speaker 1: this year it was in in San Diego. Chris. That

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Speaker 1: is a is a massive gathering of the American Economic fraternity,

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Speaker 1: lots of sort of academic stuff that happens there, people

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Speaker 1: delivering their their papers and their research, but also some

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Speaker 1: of highlights for you, sure you're you're absolutely right. It

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Speaker 1: is a boundless experience with papers and panels on every

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Speaker 1: imaginable topic under the economic sun. Disneyland is you pick

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Speaker 1: your favorite ride and you go plug down your ticket

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Speaker 1: and you go for that one. UM. And it was

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Speaker 1: a bit of its slow start, just sort of gathering

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Speaker 1: of exploded on Sunday morning, the last day of the conference,

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Speaker 1: the the concept of Japanification, that is, is the US

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Speaker 1: Japan with very long term low interest rates and low

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Speaker 1: inflation and getting stuck there. Uh. Followed immediately by a

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Speaker 1: panel of very senior central bankers from around the world

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Speaker 1: from major central banks UM talking about that topic as

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Speaker 1: well and what lessons they've learned from the crisis. A

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Speaker 1: lot of talk about inflation, and through all of it,

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Speaker 1: a lot of talk about fiscal policy. In other words,

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Speaker 1: what central bankers cannot do? Um? Are they running out

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Speaker 1: of ammunition? And who must ride to the rescue um.

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Speaker 1: So that's really where it kind of all focused at

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Speaker 1: on the last day of the conference. I mean, I

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Speaker 1: noticed it's been a theme since then as well, because

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Speaker 1: the Bank of England Governor Mark Connie has also talked

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Speaker 1: one of his sort of final interviews before he leaves office,

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Speaker 1: he's talked about sent traw banks kind of running out

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Speaker 1: of tools to respond to shocks. I mean, it's something

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Speaker 1: we've talked about quite a lot. I mean, Larry Summers

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Speaker 1: has been sort of talking this up for for a while.

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Speaker 1: But do you think it had reached another another level

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Speaker 1: or is it just that more people now agree that

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Speaker 1: it's that it's true that we're in what he would

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Speaker 1: call a kind of liquidity trap where when you, you know,

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Speaker 1: you put push interest rates down, but you're you're pushing

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Speaker 1: on the famously on a piece of string. You're not

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Speaker 1: able to get the money into the economy and get

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Speaker 1: the get the economy moving. Do you think it's more

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Speaker 1: people who kind of agree with that view now or

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Speaker 1: is it just absolutely absolutely I think the Larry's idea

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Speaker 1: of secular stagnation has moved beyond the stage of debate.

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Speaker 1: It is very widely accepted now, and now the debate

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Speaker 1: is what can we do about it and who must

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Speaker 1: do that action. And let's remember too, when we talk

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Speaker 1: about imploring fiscal policymakers to act in a certain way,

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Speaker 1: central bankers have to be very cautious. UM. It's not

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Speaker 1: really in the best interest of say, the Federal Reserve

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Speaker 1: to lecture Congress about what its job should be, when,

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Speaker 1: of course Congress is the is the authority that grants

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Speaker 1: the central bank its own independence. So it's a touchy

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Speaker 1: thing to go around talking about what, you know, what

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Speaker 1: Congress is doing wrong in what they should do. But

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Speaker 1: more and more central bankers are dropping that caution slowly

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Speaker 1: and imploring legislators around the world. In Mario Dragi, you

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Speaker 1: know he has done that. UH in the US are

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Speaker 1: doing it more and more. In Japan they're they're a

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Speaker 1: bit further along that stage UM in in trying to

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Speaker 1: get uh UM taxing and spending policies UH and in

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Speaker 1: some cases coordinated with monetary policy working in a way

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Speaker 1: that will help not only counteract, say the next drop

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Speaker 1: in demand, the next recession, but also help lift us

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Speaker 1: out of this this rut. We're stuck in a very

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Speaker 1: low growth, low trend growth, low inflation, low productivity. UM So, yes,

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Speaker 1: the the urgency is rising. The volume of those arguments

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Speaker 1: has risen, I think, and we've got to I know

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Speaker 1: that Christine Regard as she comes into the europe now

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Speaker 1: in the European Central Bank, has got to navigate that now.

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Speaker 1: And she says I heard her resist the notion that

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Speaker 1: Europe was facing Japanification. But she too is going to

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Speaker 1: face this dilemma about how much to push the fiscal

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Speaker 1: argument with European governments. I guess the assumption is she

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Speaker 1: will be able to push it a bit more because

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Speaker 1: of her close relationship, having previously been a finance minister.

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Speaker 1: But it's funny because you go all the talk of Japanification,

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Speaker 1: which used to be quite an obscure term, has now

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Speaker 1: become more more mainstream if you go to Japan, of course,

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Speaker 1: it feels like the sort of barely one percent growth

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Speaker 1: they've had there has actually served them reasonably well. They don't.

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Speaker 1: It doesn't feel like a super depressed economy, but they have.

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Speaker 1: It's got a shrinking labor for UM and a much

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Speaker 1: more extreme demographic aging issue than either even than Europe

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Speaker 1: and certainly than the US. I've always it would certainly

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Speaker 1: cause much more of a fuss I think, and be

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Speaker 1: much more of a problem politically in the US if

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Speaker 1: you had that kind of one percent growth there. I

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Speaker 1: did mention earlier that as well as these sort of

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Speaker 1: blockbuster sessions with central bankers, there's lots of economists on

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Speaker 1: the edges of these a A meetings talking about their research,

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Speaker 1: and it can be pretty interesting. Which one court which

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Speaker 1: was your sort of favorite economic paper that caught your eye, Chris,

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Speaker 1: I would have to point to the paper written by

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Speaker 1: Eric Brynhilson, he's a professor at m I T, along

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Speaker 1: with I think it was four other co authors, and

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Speaker 1: they attacked the problem that economists face in measuring g

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Speaker 1: d P in an age when new technologies have produced

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Speaker 1: so many new free or at least in terms of

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Speaker 1: money free goods and services. GDP, as you know, Stephanie,

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Speaker 1: is based on the costs of goods and services. So

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Speaker 1: if something is free, then you can't add it to GDP,

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Speaker 1: and and for the same reason you can't add it

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Speaker 1: to measures of productivity that creates a huge problem for economists,

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Speaker 1: and and GDP is further supposed to be a rough

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Speaker 1: proxy for measuring overall welfare in our society. So how

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Speaker 1: do we know that whether our our lives are being

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Speaker 1: enriched in some way by these new technologies if the

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Speaker 1: price tag is zero? So bring Hilson came up with

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Speaker 1: a very interesting set of experiments in which they asked

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Speaker 1: groups of people, um, would you be willing to give up,

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Speaker 1: say Facebook, for a month for fifty dollars? And they

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Speaker 1: as different subgroups different amounts of money, and they ended

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Speaker 1: upcoming UH. For for US Internet users, they came to

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Speaker 1: a median UH valuation of something around forty two dollars

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Speaker 1: a month for Facebook. So now they have a dollar

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Speaker 1: figure they could assigned to Facebook. And they created an

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Speaker 1: alternative sort of index of g d P and found

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Speaker 1: that by some estimates, if you if you did it

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Speaker 1: this way, Facebook could reasonably add up to about zero

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Speaker 1: point one one percentage points to GDP within this index.

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Speaker 1: So that's that's quite an extraordinary amount really for one product.

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Speaker 1: And you could apply this to many other things, perhaps

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Speaker 1: more practically to things like GPS mapping services, which really

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Speaker 1: do have a utility help us be more productive, and

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Speaker 1: so that kind of points the way. I'm sure there'll

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Speaker 1: be a lot more work on this. The points economists

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Speaker 1: in a direction where they might be able to better

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Speaker 1: measure how these new and quote unquote free technologies are

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Speaker 1: actually contributing to the economy and contributing to productivity. That's

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Speaker 1: very interesting. I suspect there will be some people who

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Speaker 1: have my thought of you know, how much would would

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Speaker 1: I pay someone to take Facebook away from me and

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Speaker 1: take some of these others. But I mean it's a

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Speaker 1: more serious point actually, although they you might find that

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Speaker 1: kind of addition of sort of hidden consumer welfare or

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Speaker 1: hidden g d P if you like, from the value

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Speaker 1: people put on Facebook. But if it is getting in

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Speaker 1: the way of people's productivity day to day, then there

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Speaker 1: could be hidden costs in there as well. So it's

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Speaker 1: I suspect that the debate will go back and forth

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Speaker 1: on this, but it will certainly be grist to the

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Speaker 1: mill of people who say we are not measuring what

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Speaker 1: matters in the economy today. Chris Condon, thank you very much,

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Speaker 1: my pleasure, thanks for listening to Stephanomics. We'll be back

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Speaker 1: next week with more brilliant insights into the global economy

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Speaker 1: in the meantime. You can find us on the Bloomberg Terminal, website, app,

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Speaker 1: or wherever you get your podcasts. We'd love it if

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Speaker 1: you took the time to rate and review our show

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Speaker 1: so it can reach more people. And for more news

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Speaker 1: and analysis from Bloomberg Economics, follow at Economics on Twitter,

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Speaker 1: or you can also find me at my Stephonomics. The

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Speaker 1: story in this episode was reported and written by Jeanette Newman.

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Speaker 1: It was produced by Magnus Hendrickson and edited by Scott Lamman,

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Speaker 1: who is also the executive producer of Stephanomics. Special Thanks

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Speaker 1: this week to see a dowd Chris Condon and Andrew Atkinson.

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Speaker 1: Francesco Levy is the head of Bloomberg Podcast