SYLVIE DOUGLIS, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith, and it is Friday, time for Indicators of the Week. Today on the show, we are joined by the great Soumaya Keynes of The Economist magazine and economist Christopher Knittel of MIT. Right after the break, we talk corporate taxes, Bono, oil prices and why Americans are saying, I quit, in record numbers.
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VANEK SMITH: It is time for Indicators of the Week. Joining me is Soumaya Keynes, the Europe economics editor at The Economist, and Christopher Knittel, an economist at MIT.
Welcome, guys. OK, so Soumaya, first up; what is your indicator of the week?
SOUMAYA KEYNES: My indicator of the week is 15% or at least 15% So this was this really exciting moment last Saturday, when the G-7 group of countries said that they were going to push for a minimum global corporation tax rate of at least 15%. Obviously, it's only seven countries. There are plans to do a much, much bigger deal with something like 139 countries, so we still have to get everyone else to agree. But the fact that they said, yup, at least 15%, that is a big thumbs-up, exciting moment for those talks.
VANEK SMITH: Why is that a big deal?
KEYNES: I mean, well, it's never been done before, right? So there's this idea for decades that essentially, governments should be free to set their own corporation tax rates, right? You shouldn't try to interfere with the sovereignty of other countries. And a few years ago, this was a super-super-controversial idea, right? And so this is meant to address this problem where basically, companies - they pay taxes on their reported profits. But they are able to shuffle around their reported profits, so they report the profits in places with very, very low tax rates.
VANEK SMITH: So, like, what are some of the countries that have a low tax rate? Like, where are some of these companies going to get deals?
KEYNES: Ireland has a 12.5% corporation tax rate. Hungary has a 9% corporation tax rate. And then you've got various islands. You've got the Cayman Islands that has a 0% corporation tax rate.
VANEK SMITH: Oh.
KEYNES: Very, very nice if you can get it.
VANEK SMITH: I mean, I imagine for countries like Ireland, this was, like, a big deal to have all these companies coming in. And this is, like, a big part of their economy to have to offer this lower tax rate and get all the sort of business that comes with that. How are they feeling about this?
KEYNES: Yeah, they're not happy.
VANEK SMITH: (Laughter).
KEYNES: They're not thrilled by this (laughter).
VANEK SMITH: This is not their indicator of the week (laughter).
KEYNES: No, they're not loving this. A few things, though - One, they're going to be facing a huge amount of pressure, right? With this minimum tax, it's one of those things where you've got a government like the U.S. - to an extent, the U.S. can kind of do this on its own. You've got a bunch of American-headquartered companies reporting profits in Ireland. The U.S. Treasury can say, no, like, we're going to apply this minimum tax rate on those profits reported in Ireland, right? So you don't actually need a global deal for the U.S. to do that. The other thing is there's been a lot of rumbling about how Ireland kind of needs to have a bit more confidence in itself, right?
VANEK SMITH: (Laughter).
KEYNES: Ireland has more to offer than really low tax rates.
KEYNES: If Ireland doesn't want to become this kind of, you know, naughty kid in a corner, it needs to attract companies with other things, like its great workforce and attractive environment. And it has those things.
VANEK SMITH: Bono is there.
KEYNES: Bono is there.
VANEK SMITH: That's a big one.
KEYNES: Bono is the main reason that - no, he's not.
VANEK SMITH: (Laughter) After low tax rates, it's Bono. And, Chris, what is your indicator of the week?
CHRISTOPHER KNITTEL: So my indicator of the week is $70, which is - oil prices hit above $70 for the first time, it seems, forever. Just a little bit over a year ago, I don't know if you remember, but oil prices were negative.
VANEK SMITH: Negative $35, right? It was - I remember that.
KNITTEL: Yeah, so how far we've come in just a year.
VANEK SMITH: Yeah, how did we get to $70 a barrel? - because, I mean, when it was negative $35, like, basically economies were shut down, so demand for oil was way down. It's expensive to store oil, and it's, like, hard to shut off the pumps sometimes and turn them back on, hence the sort of premium for storage, hence the negative price. How have we turned around? Like, what is the difference that has basically boosted it more than $100 a barrel?
KNITTEL: So I think it represents a few things. One is the global economy is coming back, which is a nice thing. It also is a byproduct of the fact that a lot of drilling stopped over the last year for a variety of reasons, not just low prices but a lot of big oil majors are trying to move away from fossil fuels. So that might have added to the reduction in drilling activity. And OPEC is staying the course in terms of not increasing production in response to these high oil prices, so that's helping keep those prices up as well.
VANEK SMITH: I have been really surprised at oil because when the negative $35 a barrel happened, everyone was like, oil's done. It's the end of oil. What do you think this means for the oil industry? Is this sort of like a swan song, kind of like a last bump? Or is this permanent?
KNITTEL: Well, I think another indicator here is at least financial markets don't quite feel as though EVs are right around the corner.
VANEK SMITH: Tesla is not going to take over the - although there is now a Ford F-150 that's an electric vehicle.
KNITTEL: Yeah, and lots of manufacturers are announcing, you know, a big shift toward EVs. There's certainly more models out, but we don't know what the consumer demand will be for these electric vehicles. But it's useful. So think about if everybody believe were taking over next year, we would see oil prices tank now because people would try to get rid of their supplies as quickly as possible. So the fact that they're not tanking suggests that the markets think that there will be sustained demand for oil for quite some time.
VANEK SMITH: All right. Well, I have my indicator of the week, which - it's a little bit of a two-parter. I don't know if you guys saw the JOLTS numbers, which came out earlier this week. I love the name JOLTS, but the actual title is the Job Openings and Labor Turnover Survey, also known as the quits rate. Well, here is what happened. The number of people quitting in the U.S. hit an all-time high. It was - nearly 4 million people quit their jobs in April, and the quits rate hit 2.7%.
KEYNES: Yeah, a high quits rate is great - right? - because it often shows that people are kind of confident enough that they've got better job prospects elsewhere. I mean, I hope it's great, right? It could be that everyone's just fed up.
VANEK SMITH: Yes.
KEYNES: But hopefully, it's good.
KNITTEL: Yeah. I wonder if it also indicates that there was a lot of mismatching during the pandemic. People were trying to find any job they could, and it wasn't the right industry. It wasn't using the right skill set. And now that the demand for labor is up, people can more accurately match their skills with the needs of the company.
VANEK SMITH: So one of the people that quit this week - I don't know if you guys are fans of reality television (laughter).
KEYNES: I have been known to dabble.
KNITTEL: Only through my wife.
VANEK SMITH: So "Keeping Up With The Kardashians" - this week, it was the last episode of "Keeping Up With The Kardashians." They are quitting the game after almost 15 years on the air.
KEYNES: But are they all kind of going to go and do their own spin-offs now? They're quitting their current job, but maybe they've got a better job lined up, which we hope is happening in the broader economy.
VANEK SMITH: Exactly.
KNITTEL: Do the cameras go away? My hunch is their lives are still being recorded.
VANEK SMITH: I mean, it's like a tree falling in the forest with them, right? Like, if you turn the camera off, do the Kardashians even exist?
VANEK SMITH: Like, maybe not; maybe there are no Kardashians. They're like the sasquatch.
Chris and Soumaya, thank you so much for talking with me today.
KEYNES: Thanks for having me.
KNITTEL: Yeah, thanks for having me. This was fun.
VANEK SMITH: This episode of THE INDICATOR was produced by Brittany Cronin with help from Gilly Moon. It was fact-checked by Michael He. Our editor is Kate Concannon, and THE INDICATOR is a production of NPR.
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