Tuesday, 25 March 2014

The Dawesville "cut"

The Australian is in full attack mode on Union corruption. On the weekend of March 22 it ran two closely related articles:
Early 1992: The WA government entered contractual agreements directly with Thiess to build the channel at a fixed price of $56.7m.
June 24, 1992: The AWU WRA Inc was officially incorporated. It continued to issue monthly invoices for work purportedly performed at the Dawesville site. No such work was ever performed. Thiess continued to pay the invoices.
April 1994: Liberal premier Richard Court opened the Dawesville Channel from a boat on the waterway. The worksite was inundated according to plan on April 4, 1994, and Thiess closed the project in its books, eight months ahead of schedule.
August 1994: Thiess continued to pay the AWU WRA invoices for “workplace reform” at the now-closed Dawesville worksite. Payments in respect of Dawesville totalled just more than $300,000 to the association.
Why was there no public tender as originally promised for such a significant project? Why did the WA government enter into a contract directly with Thiess? And what did Thiess get in return for the $300,000 it paid to Wilson?
On November 28, 1991 transport minister Pam Beggs told the WA parliament that cabinet had decided to abandon plans to seek competitive tenders for the construction work, instead opting to accept a “turnkey” contract proposal from the landowner.
Beggs: “The estimated cost of the government’s building the channel had been $76.8m, and the major reason for the lower cost (almost $60m) under the total construction package stems from having a single contractor responsible for all site works. This introduces an economy of scale and enables the significant construction risk to be spread over a wider scope or work. The agreement between the government and Wannunup has widespread support, including, I understand, even the member for Mandurah.”
But with no competitive tender, the government was guessing. The major reason for Thiess getting the job, according to Wilson’s AWU sidekick Ralph Blewitt, was that Wilson demanded it.
I'm no fan of corruption. However, what amazes me is actually that the government's guess of the costs was so cheap—the cut and bridge together are a huge and complex engineering project that I visit several times a year—as I expected that it would have cost well over $100m, even back in 1992:
Even when the winds roar in from the ocean, it’s easy to forget that the 2.5km, 200m wide waterway was dry land just 20 years ago—part of a continuous strip of coastal land that ran south from Mandurah for about 50 unbroken kilometres.
In return for the $300,000 it paid to Wilson, Thiess closed the project in its books on budget (I assume; not mentioned in either article), and eight months ahead of schedule! If we could get industrial peace and on-time, on-budget completion for other infrastructure projects, for such a nominal sum—which, perhaps, could be considered as a "success fee"—then it seems like very good value.

Such a fee pales into insignificance compared to Arthur Sinodinos’ $200k salary for 100 hours work or the $1 million success fee that that Senator Sinodinos negotiated with Liberal Party lobbyist Michael Photios to get a public-private partnership with the NSW Government, as shown by the board minutes of Australian Water Holdings.

Saturday, 22 March 2014

The STEM Crisis?

Two quite similar articles on the STEM crisis have appeared in the last year:
  • The STEM Crisis Is a Myth: A nice side-bar shows the STEM "crisis" through the decades. The author Robert N. Charette, also cites the research of Michael S. Teitelbaum, the author of the following article, which appeared in The Atlantic. The bottom line:
[E]veryone needs a solid grounding in science, engineering, and math. In that sense, there is indeed a shortage—a STEM knowledge shortage. To fill that shortage, you don’t necessarily need a college or university degree in a STEM discipline, but you do need to learn those subjects, and learn them well, from childhood until you head off to college or get a job. Improving everyone’s STEM skills would clearly be good for the workforce and for people’s employment prospects, for public policy debates, and for everyday tasks like balancing checkbooks and calculating risks. And, of course, when science, math, and engineering are taught well, they engage students’ intellectual curiosity about the world and how it works.
Many children born today are likely to live to be 100 and to have not just one distinct career but two or three by the time they retire at 80. Rather than spending our scarce resources on ending a mythical STEM shortage, we should figure out how to make all children literate in the sciences, technology, and the arts to give them the best foundation to pursue a career and then transition to new ones. And instead of continuing our current global obsession with STEM shortages, industry and government should focus on creating more STEM jobs that are enduring and satisfying as well.
Every high school graduate should be competent in science and mathematics—essential to success in almost any 21st century occupation and to informed citizenship as well. 
The evidence all points to high levels of student interest, high-performance levels among the students most likely to pursue majors and careers in science and engineering, and large numbers of graduates in these fields.
The repeated past cycles of “alarm/boom/bust” have misallocated public and private resources by periodically expanding higher education in science and engineering beyond levels for which there were attractive career opportunities. In so doing they produced large unintended costs for those talented students who devoted many years of advanced education to prepare for careers that turned out to be unattractive by the time they graduated, or who later experienced massive layoffs in mid-career with few prospects to be rehired.
UPDATE February 2016: The following Nature article Physics: Post-PhD job stability headlines with "Fewer than one-third of physics PhD graduates take permanent jobs, and that is a record high." That doesn't sound like evidence of a STEM shortage to me!

Thursday, 6 March 2014

The rich don't pay a 'fair share' of tax ...

In his article No, the rich don't pay a 'fair share' of tax—just most of it, Adam Creighton, Economics Correspondent for The Australian writes
...only the top fifth of households paid any tax. The bottom 6.9 million households got more in cash welfare and services than they paid in.
Interesting. Perhaps I should strive to be poorer so that I become richer!

According to his Centre for Independent Studies bio, Creighton started his career at the RBA and for six years was an (award winning) checkout operator at Woolworths. Perhaps that was where he developed his economic outlook? Some more quotes:
Only the top fifth of households ranked by their income—those with incomes of more than $200,000 a year in the financial year ending June 2012—pay anything into the system net of the value of social security in cash and kind received, according to data from the latest Australian Bureau of Statistics survey of household income. The distribution of personal income tax—the federal government’s biggest source of revenue, raising about 45 per cent of the total ($165 billion this year)—is far more progressive than headline marginal tax rates suggest. Including the 1.5 per cent Medicare levy, Australia’s income tax rates range from 19 per cent for every dollar of income above $18,200 to 46.5 per cent for every dollar above $180,000. Most taxpayers face a 34.5 per cent marginal rate. But average income tax rates on households’ privately generated income (ordinarily wages and salaries, but dividends and rental income too) ranged from 1.5 per cent for the bottom fifth of households in 2012 to 22 per cent for the top fifth.
There is no explanation of how this is possible. How do these ‘‘rich’’ households pay only 22 per cent tax?
In the financial year ending June 2010, what one might call ‘‘holistic average tax rates’’ (including indirect and direct taxes and net of social security in cash and kind) ranged from -64 per cent for the bottom quintile, to -22 per cent for median households and 13 per cent for the top fifth of households. Put simply, only the top fifth of households paid any tax. 
Even more interesting; how do these ‘‘rich’’ households pay only 13 per cent average tax?
It is absurd to claim the ‘‘rich’’—assuming incomes rather than wealth are the defining criterion—aren’t paying their ‘‘fair share’’ of tax when they in fact pay all of it. 
Really?  Curiously, the elephant in the room is not mentioned; how can an article about salary and tax not mention salary packaging?

The note at the bottom of the (unattractive) figure in the article, mentions imputed rent, stating that homeowners enjoy (untaxed) income from not having to pay rent. Sounds reasonable. However, there is no mention of the additional benefit that selling your own home is not subject to CGT.
[I]ncome tax becomes more progressive every year without any deliberate change because of what economists call ‘‘fiscal drag’’. Because the income tax thresholds are fixed in nominal terms and prices tend to rise, every year more taxpayers are pushed into ever-higher tax brackets and larger portions of their real incomes are taxed at higher rates.
True. But this could easily be solved by indexing the tax thresholds, which neither of the main parties want.
The massive disparity between gross and net payments of tax—12.6 million people lodged income tax returns in 2010-11—suggests ‘‘churn’’ is rampant and an immensely complex system is rife for rationalisation: we have more than 100 different taxes across three tiers of government interacting with a multitude of social security services in cash and kind. The administrative costs of collecting taxes—especially income tax—are large, not to mention the damage they cause to enterprise and effort.
While questioning the numbers, and the framework of the analysis, it is hard to disagree with this observation. One solution would be to increase the GST rate, reduce income tax, raise the thresholds, and eliminate all deductions. But careful modelling is required to determine the true impact of all these changes (see e.g. here), and ensure that the changes are fair to everyone. There's a contradiction here though: if we change the rates there must be winners and losers—and the losers are unlikely to be happy.
While the scope and size of governments have soared since then, the price of civilisation still, rightly, falls disproportionately on the richest.
So now he's saying the ‘‘rich’’ should pay more? Seems reasonable ...
The distribution of tax is not the problem but its growth as a share of national income is (along with undue focus on income rather than wealth as the determinant of someone’s capacity to pay).
Surely he's not proposing a wealth tax! So what is he suggesting? I think that Rupert didn't read this paragraph carefully enough prior to publication.
The moral case for fixed, reasonable taxes may resonate more than the pure economic one. Arbitrary increases in taxes to pay for services the market can and should provide offend the rule of law and erode individual property rights.
If there was one set of immutable tax rates that was truly fair to everyone then that's what should apply from now to eternity. Now try to get all Australians to agree on those rates ...

As Greg Jericho (who also makes no mention of salary packaging) writes:
Always remember when someone starts talking to you about how there should be just one flat tax rate for everyone, who really will be winning out of the change? Unless you happen to be one of Creighton’s barristers or chief financial officers, it most likely is not going to be you.

Monday, 3 March 2014

Network diagram of Physics formulas

Here is an interesting interactive CDF demonstration of the network of formulas based on related physical quantities, produced using Wolfram | Alpha.

Hold your mouse over a node to see a formula, and the physical quantities it contains, and follow the edges to related formulas. The interactive CDF is, unfortunately, a little slow.