Month: January 2019

Labor Market Polarization in Cities

WagesAndPopDensityGraph2019-01-13.pngSource of graph: online version of the NYT article quoted and cited below.

I attended David Autor’s lecture at the early-January American Economic Association (AEA) meetings, that is discussed in the passages quoted below. It was an interesting, and sometimes almost exciting lecture. More than once he said something like: ‘now here’s something I wouldn’t have believed before 72 hours ago when we got these results.’
But it seemed very much a work in progress. In his lecture he accepts the polarization of the labor market has a current fact, even in cities. (“Polarization” roughly implies that high-level and low-level jobs are fine, but mid-level jobs are disappearing.)
In a 2015 paper, that I like very much, Autor argued that polarization is a temporary phenomenon that he did not expect to last. This 2015 paper was not mentioned in his Ely Lecture at the AEA.

(p. B1) “People have lamented, ‘Well, all these areas that lost manufacturing, why don’t those workers just get up and go somewhere else?'” said Mr. Autor, who looked at wage data from the census and American Community Survey and recently presented the findings at the annual meeting of the American Economic Association. “It’s just not at all obvious what that place is. It’s less obvious to me now than it was a month ago.”

Mr. Autor attributes the declining urban wage premium in this chart to the disappearance of “middle-skill jobs” in production but also in clerical, administrative and sales work. Many of these jobs have gone overseas. Others have been automated out of existence.
This kind of work, he argues, was historically clustered in cities (meaning the entire labor market around cities, within commuting zones). And because of that, workers with limited (p. B5) skills could find better opportunities by moving there.
Now, the urban jobs available to people with no college education — as servers, cleaners, security guards, home health aides — are basically the same kind as those available in smaller towns and rural communities.

For the full commentary, see:
Emily Badger and Quoctrung Bui. “The Upshot; Opportunity in Cities Falls to the Educated.” The New York Times (Saturday, Jan. 12, 2019): B1 & B5.
(Note: the online version of the commentary has the date Jan. 11, 2019, and has the title “The Upshot; What if Cities Are No Longer the Land of Opportunity for Low-Skilled Workers?”)

Autor’s 2015 paper, that I praise above, is:
Autor, David H. “Why Are There Still So Many Jobs? The History and Future of Workplace Automation.” Journal of Economic Perspectives 29, no. 3 (Summer 2015): 3-30.

Apple Watch Would Make a Small Firm’s Day, but Is Only a Ding for Apple

(p. B5) Do not pity Timothy D. Cook. He has made hundreds of millions of dollars as Apple’s chief executive. He is regarded as one of business’s best bosses, and runs a company with a beloved brand and $130 billion in cash.
. . .
Whatever he does, Mr. Cook faces enormous expectations. It takes a lot to fuel growth at a company that had $265.6 billion in revenue in its last fiscal year.
The Apple Watch dominates the market for wearable technology and would be a smash hit for any other company. For Apple? Watches have been counted in the “other products” category in financial results.

For the full story, see:

Jack Nicas. “‘5 Reasons Apple’s Chief May Face Tougher Times Ahead.” The New York Times (Saturday, Jan. 5, 2019): B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date Jan. 4, 2019, and has the title “5 Reasons You Wouldn’t Want to Be in Tim Cook’s Shoes Right Now.”)

Young Back Choi Offers Advance Praise for Openness to Creative Destruction

In this excellent book, Arthur Diamond offers a spirited defense of open and free market system, saying that much of the complaints against capitalism is based on (1) mistakenly conflating free market competition with cronyism, and (2) grossly under-appreciating the innovative entrepreneur’s ability to solve problems in all sorts of areas–in the past and in the future. One of the central claims of the author, based on his understanding of the epistemology of innovation, namely, the necessity of self-funding of all breakthrough entrepreneurs, underlines the need for open and competitive markets if we are to enjoy in the future benefits of innovative dynamism, as we have in the past.

Young Back Choi, Professor of Economics and Finance, St. John’s University. Author of Paradigms and Conventions: Uncertainty, Decision Making, and Entrepreneurship.

Choi’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Persistent Teenage Entrepreneur Sold Truffles to Fine Restaurants

(p. A19) SEATTLE — There is an industrial stretch of 37th Street in Long Island City, Queens, just off Queens Boulevard where you can walk and suddenly be hit with the most incongruous of odors: the pungent, earthy smell of truffles.
You have arrived at the nondescript warehouse of Regalis Foods, which sells fine truffles and other expensive wild foods.
Inside, the truffle smell is more intense and the work pace is on full holiday bustle.
“The week before New Year’s is our busiest of the year,” said the owner, Ian Purkayastha, 26, who started Regalis at age 19 with a cooler in a beat-up minivan. He now supplies many of the finest restaurants in Manhattan — including Eleven Madison Park and Le Bernardin — which are typically packed for New Year’s Eve.
. . .
Mr. Purkayastha grew up in Houston, and Fayetteville, Ark., where an uncle taught him how to forage for mushrooms.
A taste of truffle ravioli at age 14 began the fascination with truffles, and by 15, he was buying small shipments from Europe to sell to fine restaurants his parents would drive him to.
By 17, he moved to New York and began transporting his truffles in a cooler on wheels. He would visit upscale restaurants in Manhattan and try to convince chefs to sample his products.
The renowned restaurateur David Chang, the founder of Momofuku restaurants, recalled being impressed by the tenacity of the teen with fine products.
“He must have been 18 and he was just really persistent,” Mr. Chang said.
“The fact that he was so young was always unnerving to everyone,” he added. “But his product was extraordinary, so I trusted him to get me stuff. He continually got very high-quality products.”

For the full story, see:

Corey Kilgannon. “‘Fulfilling the Demand for New Year’s Eve Caviar, Truffle and Crab.” The New York Times (Saturday, Dec. 29, 2018): A19.
(Note: ellipsis added.)
(Note: the online version of the story has the title “Truffles, Crab and Caviar: Preparing for New Year’s at the Warehouse of Expensive Eats.” The online date is the same as the print date.)

Buyers Trust Amazon’s Delivery Speed

(p. B1) SEATTLE — Olivia Zimmermann started her holiday shopping early this year, buying a Bluetooth speaker from Best Buy for her sister. It was supposed to arrive by Dec. 10 [2018], two weeks before Christmas.
The speaker never showed up — and the post office said it had delivered the package to a different town. Best Buy apologized and offered to reship it. But Ms. Zimmermann, who works in marketing in Chicago, was over it.
“I just want a refund,” she told the retailer, and then added: “At this point, I have already ordered from Amazon because I know for a fact it will be here when they say it will.”
Amazon is far and away the leader in e-commerce, outpacing competitors like Walmart, Target and eBay. But its dominance is never more pronounced than in the nail-biter last-minute sprint before Christmas.
The company, based in Seattle, has had a two-decade-long obsession with shrinking the time from click to doorstep. It has built warehouses in more than 30 states and a sophisticated web of delivery methods, giving it a logistical advantage.
Amazon has used that edge to lead people to expect near instant gratification that, for a while, only it could deliver. The company built trust in its delivery speed with its Prime membership, which costs $119 a year and includes two-day shipping. This year, in the days leading up to Christmas, Amazon’s share of online sales will increase by almost 50 percent — to about half of all digital sales — while most rivals fade, according to the market research firm Rakuten Intelligence.
“Amazon’s ability to fulfill more quickly and effectively than competitors has been a key differentiator back to the earliest days,” said Kenneth Cassar, an analyst with Rakuten Intelligence, which is an independent subsidiary of the Japanese e-retailer Rakuten.

For the full story, see:
Karen Weise. “‘For Christmas, All They Want Is From Amazon.” The New York Times (Saturday, Dec. 22, 2018): B1 & B7.
(Note: bracketed year added.)
(Note: the online version of the story has the date Dec. 21, 2018, and has the title “Last-Minute Shoppers Increasingly Trust Only Amazon to Deliver.”)

Hollywood Should Respond When “the Audience Starts Voting with Their Feet”

(p. C1) Those who cannot remember the past are condemned to repeat it. Heading into the holidays, there still was no host for the 2019 Academy Awards, following the withdrawal of Kevin Hart over his controversial Twitter history. Next year’s ceremony will be the 30th anniversary of the last time the Oscars went emcee-free, in 1989.
The telecast’s producer, Allan Carr (“Grease,” “Can’t Stop the Music”), tried to fill the void by staging a kitschy opening number that is now considered the most cringe-worthy moment in awards-show history: Rob Lowe’s duet with Snow White on a reworked version of “Proud Mary.” (Sample lyric: “I used to work a lot for Walt Disney, starring in cartoons every night and day.”)
“It’s fitting and proper that we continue to honor the dark and tragic event that befell our nation 30 years later,” Lowe deadpanned. “I’m particularly looking forward to the candlelight vigils.”
. . .
(p. C6) Do you think the Oscars learned a lesson from this debacle?
[Sarcastically] It’s always been a huge relief to me that after Snow White, the Oscars got their act together and avoided any further controversy and embarrassment. By the way, it’s basically a show that nobody wants to do. It’s really sad. But honestly, they’ve got nobody to blame but themselves.
Why do you say that?
Making movies is about the audience, and when the audience starts voting with their feet, like they have been, only people who take themselves so seriously and self-reverentially would be incapable of making the kind of changes that one would need to make to be relevant to the times.

For the full story, see:
Bruce Fretts. “‘Rob Lowe Has A Last Laugh At the Oscars.” The New York Times (Saturday, Dec. 22, 2018): C1 & C6.
(Note: ellipsis added; bold in original online version.)
(Note: the online version of the story has the date Dec. 21, 2018, and has the title “Rob Lowe on Dancing With Snow White and Getting the Last Laugh.” The bold questions are by Bruce Fretts. The answers that follow are by Rob Lowe.)

Big Data Crushes “Intuition, Skill and Experience”

(p. 14) Drawing on an eclectic bunch of anecdotes and studies, Tenner makes his way through four sectors in which “intuition, skill and experience” have been effectively crushed by “big data, algorithms and efficiency”: media and culture, education, transportation and medicine.
A few of his examples:
Search algorithms have extended the ability to find scientific journal articles and books dating to the 19th century. In principle, this means scholars may encounter a broad range of research and discovery, dredge up forgotten work and possibly connect important dots. But in reality, as one sociologist found after studying citations in 35 million scientific journal articles from before and after the invention of the internet, researchers, beholden to search algorithms’ tendency to generate self-reinforcing feedback loops, are now paying more attention to fewer papers, and in general to the more recent and popular ones — actually strengthening rather than bucking prevailing trends.
GPS is great for getting from one point to another, but if you need more context for understanding your surroundings, it’s fairly useless. We’ve all had experiences in which the shortest distance, as calculated by the app, can also be the most dangerous or traffic-clogged. Compare the efficiency of GPS with the three years aspiring London cabdrivers typically spend preparing for the arduous examination they must pass in order to receive their license. They learn to build a mental map of the entire city, to navigate under any circumstance, to find shortcuts and avoid risky situations — all without any external, possibly fallible, help. Which is the more efficient, ultimately, the cabby or Google Maps?
In the early 2000s, electronic medical records and electronic prescribing appeared to solve the lethal problem of sloppy handwriting. The United States Institute of Medicine estimated in 1999 that 7,000 patients in the United States were dying annually because of errors in reading prescriptions. But the electronic record that has emerged to answer this problem, and to help insurers manage payments, is full of detailed codes and seemingly endless categories and subcategories. Doctors now have to spend an inordinate amount of time on data entry. One 2016 study found that for every hour doctors spent with patients, two hours were given over to filling out paperwork, leaving much less time to listen to patients, arguably the best way to avoid misdiagnoses.
Faced with all these “inefficiently efficient” technologies, what should we do? Tenner wants more balance.

For the full review, see:
Gal Beckerman. ” Kicking the Geeks Where It Hurts.” The New York Times Book Review (Sunday, June 30, 2018): 14.
(Note: the online version of the review has the date June 4, 2018, and has the title “What Silicon Valley Could Use More Of: Inefficiency.”)

The book under review, is:
Tenner, Edward. The Efficiency Paradox: What Big Data Can’t Do. New York: Alfred A. Knopf, 2018.

“The Tightest Labor Market Since 1969”

(p. B6) Crystal Romans, a recruiter in North Carolina, set up a face-to-face interview with a job candidate for a position at a large bank. She confirmed the time, 8:30 a.m., the night before and had a colleague stationed to walk the candidate into the room. When morning came, the candidate never showed.
Panicked, Ms. Romans sent text messages. She called. She left the applicant a voice mail. Silence.
“It’s a running joke here of the level of audacity,” Ms. Romans said of job candidates’ escalating bad behavior, which frequently includes “ghosting,” or vanishing without a trace on the people trying to hire them.
. . .
These are trying times for the nation’s recruiters. Once as popular as prom kings and queens–and often overrun with hundreds of qualified job applications for an open position–recruiters find their standing has shifted in the booming economy. Instead of vying for their attention, would-be workers blow off recruiters’ calls and ignore their emails.
Recruiters report they are stood up, kept waiting for appointments and regularly ridiculed online. That’s because in the tightest labor market since 1969, job seekers have the upper hand, and they know it.

For the full story, see:
Chip Cutter. “For Job Recruiters, these Are Trying Times.” The Wall Street Journal (Tuesday, Dec. 20, 2018): B6.
(Note: ellipsis added.)
(Note: the online version of the story has the date Dec. 19, 2018, and has the title “The Loneliest Job in a Tight Labor Market.”)

Drones Bringing Vaccine May Be Interpreted by Some as Cargo Cult Vindication

(p. A10) In the village of Cook’s Bay, on the remote side of the remote island of Erromango, in the remote South Pacific nation of Vanuatu, 1-month-old Joy Nowai was given shots for hepatitis and tuberculosis that were delivered by a flying drone on Monday.
It may not have been the first vial of vaccine ever delivered that way, but it was the first in Vanuatu, which is the only country in the world to make its childhood vaccine program officially drone-dependent.
“I am so happy the drone brought the stick medicine to Cook’s Bay as I don’t have to walk several hours to Port Narvin for her vaccines,” her mother, Julie Nowai told a Unicef representative. “It is only 15 minutes’ walk from my home.”
.. . .
. . . , about 20 percent of Vanuatu’s 35,000 children under age 5 do not get all their shots, according to the United Nations Children’s Fund.
So the country, with support from Unicef, the Australian government and the Global Fund to Fight AIDS, Tuberculosis and Malaria, began its drone program on Monday. It will initially serve three islands but may be expanded to many more.
In the future, that expansion may run into some unusual turbulence — Vanuatu is one of the few places where “cargo cults” are still active, and the drones match their central religious dogma: that believers will receive valuable goods delivered by airplane.
That will have to be handled carefully, a Unicef representative said.
. . .
. . . : Vanuatu still has adherents of the John Frum movement, one of the South Pacific cargo cults whose adherents pray for valuables arriving from the sky.
The cults date back more than 100 years, but reached their zenith during and after World War II.
Islanders whose ancestors had been kidnapped by whites to work on plantations in Australia and Fiji watched “silver birds” flown in by the Japanese and American militaries disgorge vast amounts of “cargo” — food, medicines, tools and weapons — which was sometimes shared with them.
The legend spread that the cargo was gifts from the ancestors, but that it had been intercepted and stolen by the foreigners. After the war ended, the cults built airstrips and model planes to lure the “birds” back.

For the full story, see:
Donald G. McNeil Jr. “‘A Buzzing Thing in the Sky’ Delivers Vaccines to Vanuatu.” The New York Times (Tuesday, Dec. 18, 2018): A10.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 17, 2018, and has the title “An Island Nation’s Health Experiment: Vaccines Delivered by Drone.”)

Iowa Regulations Require Cosmetologists Get 16 Times the Training of Medics

(p. 6) The amount of time Ms. Lozano spent learning to give haircuts, manicures and facials was enormous, but the requirement was set by the state, and she didn’t much question it. She was determined to earn enough money to move out of her mother’s house. Only a few weeks after getting her cosmetology license in 2005, she was hired at a local Great Clips.
The job, though, paid just $9 an hour, which meant that her days double-shifting at Pizza Hut weren’t over. Even with tips, Ms. Lozano didn’t earn more than $25,000 in any of her first few years as a cosmetologist. For years, she relied on food stamps and health insurance from the state. She couldn’t cover living expenses and keep chipping away at her loan payments. Thirteen years after graduating, she still owes more than $8,000.
. . .
Each state sets its own standards. Most require 1,500 hours, and some, like New York and Massachusetts, require only 1,000. Iowa requires 2,100 — that’s a full year’s worth of 40-hour workweeks, plus an extra 20. By comparison, you can become an emergency medical technician in the state after 132 hours at a community college. Put another way: An Iowa cosmetologist who has a heart attack can have her life saved by a medic with one-sixteenth her training.
There’s little evidence that spending more hours in school leads to higher wages. Nor is there proof that extra hours result in improved public safety. But one relationship is clear: The more hours that students are forced to be in school, the more debt they accrue. Among cosmetology programs across the nation, Iowa’s had the fourth-highest median student debt in 2014, according to federal data.
. . .
(p. 7) Iowa, with its 2,100-hour standard, remains “an embarrassment,” said Dawn Pettengill, a Republican state representative who will retire next month. Hoping to lower the profession’s barrier to entry, Ms. Pettengill this year introduced legislation that would drop the hours to 1,500. Republicans in the Senate proposed a similar bill.
Schools and their lobbyists mounted a fierce pushback. The schools “were livid,” said State Senator Jason Schultz, a Republican subcommittee chairman. “I didn’t expect the amount of opposition.”
The school association’s political action committee had given more than $20,000 to Iowa candidates since 2014. It also had three lobbyists registered with the state; for the last session, the organization paid the lobbyists’ company $12,500.
While the dollar amounts weren’t huge, a little goes a long way in Des Moines. Hearings weren’t publicized, or even required, giving an advantage to the well-organized group.

For the full story, see:
Meredith Kolodner and Sarah Butrymowicz. “For-Profit Cosmetology Schools Can Entangle Students in Debt That $10-an-Hour Jobs Barely Dent.” The New York Times, SundayBusiness Section (Sunday, Dec. 30, 2018): 6-7.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 26, 2018, and has the title “A $21,000 Cosmetology School Debt, and a $9-an-Hour Job.”)

Michael C. Munger Offers Advance Praise for Openness to Creative Destruction

Creative destruction is the mainspring that animates growth and prosperity. Few people fully understand creative destruction; fewer still can explain it. In this remarkable book, Diamond uses compelling stories and plain English to construct the case for creative destruction, extending Schumpeter’s deep insights into the 21st century.

Michael C. Munger, Professor of Political Science, and Director, PPE Program, Duke University. Author of Tomorrow 3.0: Transaction Costs and the Sharing Economy, and other works.

Munger’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.