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‘Assortative mating’: In wedlock, rich are getting richer and poor, poorer

These are stories Report on Business is following Tuesday, Jan. 28, 2014.

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I now pronounce you … very rich
Unromantic as it is, "assortative mating" isn't a phrase oft heard in the wedding chapel.

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What it means is that the rich are marrying the rich – keeping it on the right side of the tracks, if you will – and by doing so are exacerbating income inequality.

Put another way, 1 per cent plus 1 per cent still equals 1 per cent.

A new American study, which tracked hundreds of thousands of families based on U.S. Census Bureau data from 1960 to 2005, finds that "positive assortative mating in the marriage market" increased as more women began working and couples hooked up along career and educational lines.

The study published this month by the National Bureau of Economic Research – "Marry Your Like: Assortative Mating and Income Inequality" – is an important one as the widening divide between rich and poor becomes such a key concern in the post-crisis era.

The working paper by Jeremy Greenwood, Nezih Guner, Georgi Kocharkov and Cezar Santos uses complex formulas – decidedly not what you'd call sweet nothings – to come to the conclusion that marriage can be a factor.

"In 1960 a household at the 10th percentile earned 16 per cent of mean income," says the paper, also reported by The Wall Street Journal.

"This dropped to 8 per cent in 2005," it adds.

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"A household in the 90th percentile earned 251 per cent of mean income in 1960s versus 317 per cent in 2005. Incomes are more polarized in 2005. The change in wages across individuals is the primary driver of this increase in income inequality."

Obama to act on minimum wage
President Barack Obama is poised today to boost the minimum wage for workers of federal contractors to $10.10 (U.S.) an hour from $7.25, a move aimed at prompting broader action from Congress, The Globe and Mail's Paul Koring reports.

The president is trying to find his way out of sagging approval ratings amid a deadlocked Washington, in an election year.

So he will announce in his State of the Union address that he's moving ahead without Congress.

What to expect from Flaherty
Canadians should expect a "relatively minimalist" federal budget next month.

"I'm expecting a steady-as-she-goes budget," economist Sonya Gulati of Toronto-Dominion Bank said after Finance Minister Jim Flaherty said yesterday he'd bring down his budget on Feb. 11, in the middle of the Olympics.

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The two key themes, she said, will be "a focus on the economy and long-term prosperity" and a return to a budget surplus after several years in deficit.

"A few new spending initiatives will make their way into the budget, but they will likely be small, targeted and inexpensive," Ms. Gulati said.

"Economic growth assumptions remain modest, which gives the government little unanticipated revenue windfall to play with. Tax hikes will likely be off the table, similar to past budgets."

Chief economist Douglas Porter of BMO Nesbitt Burns agreed.

"All signs point to this being a relatively minimalist budget – very early in the year, during the Olympics, the year before an election, and no big changes or surprises on the economic backdrop," he said.

"Finally, with still some work to be done before we reach the promised land of surpluses, there's little room for new measures. Having said that, there is always at least one notable talking point in every budget, and this one may see more (minor) measures aimed at bringing down some targeted tariffs on specific goods."

BMO buys asset manager
Bank of Montreal has done its deal for a British firm that bills itself as the "world's first investment vehicle."

As The Globe and Mail's Tim Kiladze reports, the Canadian bank is paying $1.3-billion for F&C Asset Management, which has struggled since the crisis.

Tracing its roots back to 1868, F&C is selling for 120 pence in cash, or about £708-million.

"The acquisition demonstrates BMO's deep commitment to the asset management business," said chief executive officer Bill Downe.

India hikes rates
India's central bank surprised investors today with a hike of one-quarter of a percentage point in its key rate, a move against rampant inflation that underscores some of the troubles in emerging markets.

The rate now stands at 8 per cent.

"The gravest risk to the value of the rupee is from CPI inflation which remains elevated at close to double digits, despite the anticipated disinflation in vegetable and fruit prices," said Raghuran Rajan, governor of the Reserve Bank of India.

"It is possible to bring inflation under control without a substantial sacrifice of short term growth, provided we do what is necessary, and are patient," he added.

The move had not been expected.

"The rate hike occurs in a context of both: a) the recent bout of weakness in emerging markets (extreme weakness in some cases), and b) the general weakening of the INR over the past seven months and runaway inflation in the 10-per-cent year-over-year range," said Derek Holt and Dov Zigler of Bank of Nova Scotia, referring to India's rupee by its symbol.

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