1%... Of What?

The Occupy movement may not be as active as it was last fall, but the theme of inequality features prominently in the U.S. Presidential Election. It has often been asserted in the media that the top 1% (in the U.S.) are those with incomes above around $350,000. However, income is probably not the right measure here: while for most of the population, purchasing power is mainly dictated by income - most people don't have much savings outside their home and their retirement account - for the rich, wealth matters much more. Unfortunately, statistics on wealth are much harder to come by than statistics on income since wealth is not directly taxed in North America.

The Survey of Consumer Finances (SCF) by the Federal Reserve is probably the best source of information about the wealth of Americans. It is conducted every three years, and the latest survey was done in 2010, with its data released last month. 6,492 families were interviewed; because means are very sensitive to the financial situation of the richest families, these were oversampled and weighed accordingly.

(By the way, there is a Canadian version of the SCF called the Survey of Financial Security (SFS). It is not conducted regularly; the most recent SFS was in 2005, and the previous one was in 1999. Given that the current government does not value data, we might have a long time to wait before the next SFS.)

You can read the Fed's summary of the results here. We learn, for example, that the median family net worth in the U.S. was $77,300. For financial assets alone, which excludes real estate, vehicles, business equity, but also all liabilities, the median (among the 94% of families that have any financial assets) was just $21,500. This includes not just one's bank accounts and CDs, but also retirement accounts, stocks, bonds, mutual funds, etc.

So what about the top 1%? This hasn't been widely reported since the Fed's writeup doesn't include the information, but since the SCF's data is (mostly) publicly available, I decided to take a look. It turns out that the threshold to be in the top 1% of U.S. families by net worth is about $6.82 million. (The average family has 2.7 people, so that would be about $2.5 million per person.)

If you're curious, here are thresholds for other levels:
Top 50% - $77,300, as mentioned above
Top 25% - $301,700 (can be found in Fed's report)
Top 10% - $952,500 (ditto)
Top 5% - $1.86 million (ditto)
Top 4% - $2.20 million
Top 3% - $2.85 million
Top 2% - $4.28 million
Top 1% - $6.82 million
Top 0.5% - $11.2 million
Top 0.2% - $19 million
Top 0.1% - $27 million

At the other end of the spectrum, about 11% of families have negative net worth, and another 2% have zero net worth.

Now, the above data is for all families. A family with $7 million that includes a couple, three kids and two grandparents would certainly be rich, but few would call it better off than a 30-year-old bachelor with $5 million. So rather than a single threshold of $6.82 million for labeling a household "1%," it would be more appropriate to have different thresholds for different types of families. Here are some examples (all in millions of dollars):

- Singles age 25-30 (my group!): 0.43
- Couples with 2 kids, head age 40-45: 6.6
- All couples (with or without kids), head age 60-65: 13.5

(If you're curious, the medians for these groups are, respectively, $13,000, $130,000 and $310,000.)

Did Robocalls Depress Voter Turnout?

Yes, according to this study by SFU Economics professor Anke Kessler, which finds that polling stations with lower Conservative vote shares experienced a larger decrease in voter turnout in robocall ridings than in non-robocall ridings. The study compares polling stations within ridings (rather than simply comparing ridings with and without robocalls). This gets around the problem that robocall ridings were tighter and thus likely to have higher turnout, which would mask the actual effect of robocalls.

Specifically, the study finds that, in non-robocall ridings, a polling station with 10% more opposition support would experience a 0.46% relative decrease in turnout - this is just the result of the left having a bad night and the right having a good night. However, in robocall ridings, a polling station with 10% more opposition support would instead experience a 0.97% relative decrease in turnout. (All '%' denote percentage points.)

In other words, relative to Conservative turnout, non-Conservative turnout decreased by 4.6% in non-robocall ridings, but 9.7% in robocall ridings. The net effect of robocalls is thus measured to be 5.1%. The study notes that the average riding had about 82,000 registered voters and roughly 60% opposition support, so, in an average riding, the results suggest that a robocall campaign would depress opposition turnout by 2,500 votes, over and beyond what it would have been.

Even fully believing in this result (and ignoring that ridings have different sizes and opposition support levels), however, does not imply that the winner would have been different in all robocall ridings where the Conservative margin of victory was below 2,500 votes: the decrease in turnout is spread among all the opposition parties, and not just the one that finished second.

On the other hand, this study looks specifically at the effect of robocalls on turnout. It ignores the fact that people might have still shown up to the polls, but voted for a different party due to robocalls. Thus, the true impact of robocalls could have been significantly larger.

2012: The Year of Presidential Elections

Happy New Year! After the slew of general elections in Canada in 2011, this year will be relatively quiet at home: it is likely that only Alberta and Nunavut will head to the polls.

However, internationally, 2012 will be a big electoral year, specifically in presidential countries. The 19 largest economies of the world (by purchasing power parity) are divided as follows:
- 5 monarchies: Japan, UK, Spain, Canada, Australia
- 4 with presidents that are not popularly elected: China, India, Germany, Italy
- 1 with a president that is not the head of state: Iran
- 9 with head-of-state presidents that are popularly elected: US, Russia, Brazil, France, Mexico, South Korea, Indonesia, Turkey, Taiwan

Fully 7 of the 9 countries in the last category will have a presidential election in 2012. This is a very rare occurrence: if these 9 countries' presidential election schedules remain unchanged (either by law or events), this only happens once every 60 years. Here's a brief rundown of these seven elections:

- January: Taiwan. Like every presidential election in this country, this one will have a profound impact on China-Taiwan relations, which may deteriorate if the pro-independence candidate Tsai Ing-Wen beats the incumbent Ma Ying-Jeou. This race is very tight. 4-year term. Legislative elections, where the ruling party is expected to hold on, will be held concurrently.

- March: Russia. Vladimir Putin will probably win, but it will be interesting to see the extent of the vote rigging, the reaction to it, and whether Putin needs a second round. 6-year term (for the first time). Legislative elections were held in December 2011, spawning mass protests over irregularities and claims that Putin's United Russia would not have won a majority in a fair vote.

- April/May: France. Socialist François Hollande will probably defeat incumbent Nicolas Sarkozy and take over the presidency. There is an outside chance that Sarkozy does so poorly that far-right candidate Marine Le Pen makes it to the second round. 5-year term. Legislative elections to follow the presidential election.

- July: Mexico. The incumbent cannot run since presidents here are limited to a single 6-year term. Legislative elections will be held concurrently.

- August: Turkey. This will be the first popular election for President, who is mainly a figurehead. 5-year term. Legislative elections were held last year.

- November: United States. You all know what this is about. 4-year term. Legislative elections will be held concurrently.

- December: South Korea. The ruling Conservatives are much more hawkish toward North Korea than the Centrist/Liberal opposition. The Conservative incumbent cannot run since presidents here are limited to a single 5-year term. Legislative elections will also be held this year, in April.

Bill C-20: Representation

Well, moving back to Canada, settling down, and starting a new job have taken their toll, but given my past posts (see here and here) on this issue, I wanted to say a few words about Bill C-20.

My comments will refer to the following five redistribution schemes, all of which ensure that no province loses seats relative to the 1988/1993 elections:

1. Current law: divide 279 seats proportionally among the 10 provinces, and then make sure no province loses seats.

2. My proposal: make the size of the House such that Québec is proportionally represented with 75 seats. Divide the remaining seats proportionally among provinces other than Québec. Then make sure no province loses seats, and divide the remaining seats proportionally among the remaining provinces. Iterate until no province loses seats.

3. Second* Tory proposal: Québec gets 75 seats, and every province gets seats in proportion. Then make sure no province loses seats.

4. Third Tory proposal: each province's number of seats is its population divided by the electoral quotient, but no province loses seats. The electoral quotient is 108,000, and then increases with the 10-province population growth.

5. Current Tory proposal (C-20): each province's number of seats is its population divided by the electoral quotient. The electoral quotient is 111,166, and then increases with average of the population growth in each of the 10 provinces. Then make sure no province loses seats. Then add seats to Québec such that it is not underrepresented relative to its share of the 10-province population.

The first 4 schemes use raw census counts. C-20, however, uses population estimates based on census counts. The advantage is that this corrects for some people not counted by the census. The disadvantage is that figuring out how many people the census missed is somewhat arbitrary, so whoever comes up with those estimates (Statistics Canada bureaucrats, perhaps under pressure by the government) has the power to influence the number of seats.

*If you remember, the first Tory proposal sought to disadvantage Ontario with respect to Alberta and BC due to Ontario being a "large" province. Obviously, that went nowhere.


Short-run comparisons (what happens after the next redistribution)
- All of the following are estimates, based on current population estimates for July 1, 2011 (which haven't yet incorporated 2011 census data), and on the 2006 census' estimated undercounts.
- Under all proposals, provinces and territories other than BC, AB, ON and QC keep their current seat count, for a combined 63 seats.

	BC	AB	ON	QC	Total
Current law	37	30	108	75	313
My proposal	38	31	111	75	318
Second Tory	42	35	122	75	337
Third Tory	42	34	119	75	333
Bill C-20	42	34	121	78	338

- Under C-20, relative to current law, the House expands by 25 extra seats. Over half of that gain (13) goes to Ontario, with 5 accruing to BC, 4 to AB and 3 to QC.

- Under C-20, Alberta could very possibly end up with 35 seats, while BC and ON may well end up with just 41 and 120 seats respectively - this will depend on how the census plays out.

- Under C-20, relative to the previous Tory proposal, Québec obviously gains, but not all other provinces lose. Indeed, the change is roughly neutral for Ontario and Alberta, at least if census undercoverage remains similar as in 2006: it was around 4% in ON and AB, but just 3% in Canada as a whole. Thus, using population estimates rather than census counts gives Ontario 1-2 extra seats, and pushes Alberta closer to that 35th seat. This roughly compensates for the slightly larger size of the House.

- C-20 is a little worse than my proposal for Québec even though both seek to make its seat share equal to its population share. The reason is that census undercoverage tends to be lower in Québec - just 1-2% in 2006 - so using raw census data would give Québec a higher share than using population estimates. This is, of course, just a measurement issue, and in principle, C-20 treats Québec in the same way as my plan, so I view it as fair. Props to the government on that.

- Overall, I'm ambivalent towards the main difference between C-20 and my plan: the size of the House. On the one hand, C-20 makes it quite a bit bigger, with all the associated expenses. On the other hand, given that the 6 small provinces' seat numbers are fixed, the only way to reduce their overrepresentation is to have more MPs. I think I'd be willing to swallow the pill if future growth in the House size were controlled under C-20. Is it the case?


Long-Run Comparisons

All five plans have the following common-sense feature: the size of the House doesn't change if all provinces grow at the same rate. But this condition is far from holding in Canada! In each plan, the House grows if historical trends continue.

1. Current law: the rate of expansion of the House depends on the difference between BC, AB and ON's population growth rate and the 10-province population growth rate. 6-7 seats in the past two redistributions, and would probably have been 5-7 this time.

2. My proposal: the rate of expansion of the House depends on the difference between the national population growth rate and Québec's population growth rate. This difference has shrunk dramatically recently: just 0.1-0.2% per year in the past three years. That translates into a 3-to-7-seat increase in the size of the House per decade. In the late 90s, the gap was instead 0.5-0.6% per year, which would mean a 16-to-20-seat increase per decade.

3. Second Tory proposal: the rate of expansion of the House depends on the difference between BC, AB and ON's population growth rate and Québec's population growth rate. Since this difference would only affect BC, AB and ON's seats, the House would grow roughly as fast as under my proposal. (The fact that BC, AB and ON's seat shares are slightly below their population shares should be roughly canceled by the fact that the smaller provinces grow, on average, a bit slower than Québec.)

4. Third Tory proposal: essentially the same as current law.

5. Bill C-20: the rate of expansion of the House depends on the difference between BC, AB and ON's population growth rate and the average of the population growth rates of the 10 provinces. The latter is likely to be significantly lower than the 10-province population growth rate because smaller provinces send to grow slower. As a result, the House would grow more quickly under Bill C-20 than under current law or the previous Tory plan. This discrepancy was only about 0.1% in the past three years because of healthy growth rates in SK, MB and PEI, but it was 0.4% as recently as in 2007, and 0.5% from 1991 to 2001. Since BC, AB and ON would have about 60% of seats, Bill C-20 is likely to increase the House size 0.7-3% per decade more quickly than current law. This would mean a total increase of 7 to 18 seats per decade, about the same as under plans 2 and 3 above.

What we see is that Bill C-20 combines the largest immediate seat increase and the largest House growth rate of the 5 plans. It's an expensive way to correct representational inequities, necessitated by the six small provinces being unwilling to recognize the logical consequence of their reduced population weight...

R.I.P. Jack

My thoughts are with his family. Coping with the loss of any family member is difficult. But from recent experience, I can attest that when the decedent is a public figure, there are even more things to arrange and take care of.

A sidenote: the CPC is now the only party in the Commons with a permanent leader and more than one MP.

Layton Has Second Cancer, Takes Break

Layton suggests that Hull--Aylmer MP Nycole Turmel be interim leader of the NDP.

Good luck, Jack.

PQ In-Fighting Opens Door to Legault

A Québec provincial poll suggests that the centre-right party proposed by François Legault has 40% support against 26% for the Liberals, 17% for the PQ and 8% for the ADQ. Just like for the NDP, such a result would give Mr. Legault a commanding majority.

Of course, as Legault gets more scrutiny, his support may wane, though that didn't happen with the NDP. Still, these results imply that 74% of the Québec electorate is ready to vote for a right-of-centre party. This is consistent with the analysis that Québec's NDP vote on May 2 was for change rather than for a left-wing agenda.

Even without Legault's new party, the PQ would lose by 6% to the Liberals (29-35). It goes without saying that the recent crisis has greatly damaged Marois' party.

Note: Sorry for the lack of posting in the past month - three major life events that normally only occur every few years and lots of traveling have taken their toll. Posting will likely remain limited for the next three months, but hopefully there won't be any more whole-month gaps.

Election Results Are Official

The election results from every riding have been validated, and the four recounts have been completed. As previously noted, the validation process moved one Québec riding from the Tories to the NDP. None of the recounts produced a further change in the winner.

Economy, Economy, Economy

For any government, the state of the economy is of paramount importance. But it is even more so for the Harper government over the next four years. After all, it is its perceived competence in that matter that drove Torontonians to give it a majority.

The Conservative economic and fiscal platform was basically: we'll make sure the recovery continues; this will eliminate most of the deficit, and we'll make some not-too-painful cuts to eliminate the rest.

Whether the recovery continues or not is, alas, largely outside the incoming government's control. Obviously, Canada has little impact on international factors such as the U.S. recovery. But even on the domestic front, most of the story has already been determined, and we're just waiting to see how things play out.

Indeed, on macroeconomic issues, a government's performance often depends more on the previous government's actions than on its own. For example, Mulroney's poor showing had much to do with Trudeau's economic mismanagement, while foundations of the Liberal success in the 90s were laid by the Tories with the GST and FTA. Similarly, the continued success of the Canadian economy under Harper was mostly a product of Chrétien and Martin's sound policies and Canadians' sacrifices in the 90s.

In many ways, over the next four years, we will find out how good the Tories' management of the economy has been over the past five years. We will have a better sense of whether:
- the government's stimulus plan succeeded in producing a sustainable recovery;
- the Tories spent outside the country's means prior to the recession;
- there is a housing bubble which the Tories should have tried to prevent.

How these issues play out will have a direct impact on Canadians' well-being and on the government's agenda. If there is no housing bubble, the recovery is sustained, and past spending increases were reasonable, then the Conservatives can deliver on their plan to balance the budget with moderate cuts that most Canadians won't notice. However, if we find out that there is a housing bubble (through it bursting), if the recovery runs out of steam, or if the spending growth of the good times was excessive, then the government will have to introduce unpopular measures, show up to the 2015 election with a deficit, or both.

Barring major events in Québec or a major scandal, the Conservatives' fate in the 2015 election may have already been largely determined.

The same cannot be said of the Liberals and the NDP. Obviously, if the economy does well, they have little chance of winning power in 2015. But the NDP can durably squeeze out the Grits if they manage to establish economic credibility over the next four years. Conversely, if the NDP fails to do so, then the Grits could regain the position of government-in-waiting if they get their act together. Of course, since the election, both parties' performances have ranged from disappointing to laughable...

Districts of Different Sizes: Who Benefits?

It is well-known that the size of electoral districts (whether measured by population, electorate, or votes) varies wildly, not only across provinces, but also within provinces. When we put everything together, which party benefited from these discrepancies in 2011?

One measure of this would be to compare a party's actual voting share to what I'll call its effective voting share, defined as the average of that party's share of votes in each riding.

For example, suppose that a country has two electoral districts, with 40 votes in district A, and 60 votes in the district B. A party gets 50% of the vote in A, and 30% in B. Clearly, that party is favoured because it's doing well in a less populated district. Its actual national vote share is 38% (38 votes out of 100), but because the districts have equal weight, the party's effective voting share is 40% (average of 50% and 30%).

For each of the major parties, below is its effective voting share, with its actual voting share in parentheses:

CON: 39.7% (39.6%)
LIB: 19.3% (18.9%)
NDP: 30.8% (30.6%)
BQ: 5.6% (6.0%)
GRN: 3.7% (3.9%)

CON: 39.9% (39.8%) in 307 ridings with candidates
BQ: 23.2% (23.4%) in Québec
GRN: 3.8% (4.0%) in 304 ridings with candidates

We immediately notice that all three main parties modestly benefit from some votes being more important than others. This may be slightly surprising in the case of the Tories, whose support is concentrated in underrepresented BC, Ontario and Alberta. However, this is more than countered by Conservative support being concentrated in rural ridings, which tend to be less populated, and by Albertans voting less than other Canadians.

The Bloc and the Greens, on the other hand, are hurt. The Bloc is disadvantaged mainly because Québec votes are worth less than the average vote elsewhere due to a larger number of electors per district, while the Greens' support is concentrated in underrepresented BC.

The lesson I take from this exercise is that this distortion is rather minimal: no party's effective voice is changed by more than 0.4% (1 seat if we had a proportional system). So while the variation of district sizes may be unfair to certain constituencies, it does not significantly affect party representation in the Commons.