Economics – Page 142 – artdiamondblog.com

French Billionaire Entrepreneur Starts Small and Cuts Costs

On Mon., October 13, 2014, Iliad dropped its bid for T-Mobile, after lack of interest from some of the T-Mobile board and from the majority owner, Deutsche Telekom AG.

(p. B1) Iliad wants to improve T-Mobile US’s cost structure by applying its own ultraslim cost base, under which it has kept costs to a minimum in everything from IT services to back office to equipment purchases. Iliad estimates it will be able to save about $2 billion annually by cutting out costs such as sending paper bills, and savings on equipment and IT systems, Mr. Niel said.
. . .
(p. B4) . . . before Mr. Niel can execute his American dream, Iliad has to win over T-Mobile US’s board, which could prove a formidable challenge.
. . .
He says he is sticking to the same principle that has guided his ascent from a teenage computer programmer in a working class Paris suburb to one of France’s richest men.
“I always follow the same idea: Start small and disrupt to create something big,” he said.

For the full story, see:
RUTH BENDER. “Will This Billionaire Bring $3-a-Month Phone Plans to U.S.?” The Wall Street Journal (Sat., Aug. 2, 2014): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the story says it was updated on Aug. 4, 2014.)

Feds Constrain Startups

(p. A15) Virtually every state has suffered a drop in startups, which suggests that this is a national, and not a regional or state, problem.
. . .
If history is any indication, many of today’s economic heavyweights will ultimately decline as new businesses take their place. Research by the Kaufman Foundation shows that only about half of the 1995 Fortune 500 firms remained on the list in 2010.
Startups also have declined in high technology. John Haltiwanger of the University of Maryland reports that there are fewer startups in high technology and information-processing since 2000, as well as fewer high-growth startups–annual employment growth of more than 25%–across all sectors. Even more troubling is that the smaller number of high-growth startups is not growing as quickly as in the past.
. . .
Surveys by John Dearie and Courtney Gerduldig, authors of “Where the Jobs Are: Entrepreneurship and the Soul of the American Economy” (2013), show that entrepreneurs report being hamstrung by difficulties in finding skilled workers, by a complex tax code that penalizes small business, by regulations that raise the costs of doing business, and by difficulties in obtaining financing that have worsened since 2008.

For the full story, see:
EDWARD C. PRESCOTT and LEE E. OHANIAN. “Behind the Productivity Plunge: Fewer Startups; New businesses were created at a 30% lower rate in 2012 than the annual average rate in the 1980s.” The Wall Street Journal (Thurs., June 26, 2014): A15.
(Note: ellipses added.)
(Note: the online version of the story has the date June 25, 2014.)

Smugglers Respond to Putin’s Ban on Cheese

(p. A4) When the Russian government banned dairy products from a host of nations, including the United States and members of the European Union, last year in response to Western economic sanctions imposed over Russia’s military meddling in Ukraine, President Vladimir V. Putin said the restrictions would create a profitable opportunity for domestic industries.
Instead they appear to have created an opening for forgers and smugglers. The “cheese ring” was busted with an estimated $30 million worth of the stuff, nearly 500 tons, according to the Interior Ministry police.

For the full story, see:
NEIL MacFARQUHAR. “A Crackdown in Russia on a Creamy Contraband.” The New York Times (Weds., AUG. 19, 2015): A4.
(Note: the online version of the story has the date AUG. 18, 2015, and has the title “Russian Police Get Tough on Illicit Cheese.”)

“A portrait from the 1890s at the Smithsonian Institution’s National Museum of American History. Susan B. Anthony said cycling did more to emancipate women than anything else in the world.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) . . . , Twain promoted the new sport of cycling with characteristic rhubarb tartness. “Get a bicycle,” he urged readers. “You will not regret it, if you live.”
. . .
The full-bore bicycle fever was brief, and by the early 20th century it had given way to fascination with the automobile. Yet, as a new exhibit at the Smithsonian Institution’s National Museum of American History makes clear, the impact of the bicycle on the nation’s industrial, cultural, emotional and even moral landscape has been deep and long lasting.
In addition to air-filled rubber tires, we can thank the bicycle for essential technologies like ball bearings, originally devised to reduce friction in the bicycle’s axle and steering column; for wire spokes and wire spinning generally; for differential gears that allow connected wheels to spin at different speeds.
And where would our airplanes, tent poles and lawn furniture be without the metal tubing developed to serve as the bicycle frame? “The hollow steel tube is a great form,” said Jim Papadopoulos, an assistant teaching professor of mechanical and industrial engineering at Northeastern University in Boston. “It’s tremendously structurally efficient, light and strong, and it came into being for the bicycle.”
. . .
(p. D4) Bicycles also gave birth to our national highway system, as cyclists outside major cities grew weary of rutted mud paths and began lobbying for the construction of paved roads. The car connection goes further still: Many of the bicycle repair shops that sprang up to service the wheeling masses were later converted to automobile filling stations, and a number of pioneers in the auto industry, including Henry Ford and Charles Duryea, started out as bicycle mechanics. So, too, did the Wright brothers.
“The pre-story is so important,” said Eric S. Hintz, a historian with the Smithsonian’s Lemelson Center for the Study of Invention and Innovation. “You don’t get automobiles unless you first have bikes.”
. . .
By the mid-1890s, some 300 American companies were churning out well over a million bicycles a year, making the safety bike one of the first mass-produced items in history. Among the most exuberant customers were women, who discovered in the bicycle a sense of freedom they had rarely experienced before.
. . .
Bicycles allowed young men and women to tool around the countryside unsupervised, and relationships between the sexes grew more casual and spontaneous. With a bicycle at her disposal, a young woman could also venture forth in search of work.
Small wonder that Susan B. Anthony said of cycling, “I think it has done more to emancipate women than any one thing in the world.”

For the full story, see:
NATALIE ANGIER. “Basics; A Ride to Freedom.” The New York Times (Tues., JULY 14, 2015): D1 & D4.
(Note: ellipses added.)
(Note: the online version of the story has the date JULY 13, 2015, and has the title “Basics; The Bicycle and the Ride to Modern America.”)

Analyst Conflict of Interest in Predicting Tesla Stock Price

(p. A1) Just like the Internet stocks of yore, Tesla has its own Wall Street cheerleader: Adam Jonas, Morgan Stanley’s auto analyst. Jonas could not be less interested in mundane factors like earnings per share; indeed, he has had to lower his 2015 earnings estimates several times; he now predicts the company will lose $2.70 a share. But never mind: In the future that he envisions, Tesla will be the most important car company on earth.
Just a few weeks ago, in fact, Jonas raised his share price target for Tesla from $280 to $465, which would make Tesla more valuable than General Motors or Ford. Had anything fundamental changed for Tesla? Of course not!
Jonas based his new target on something he labeled Tesla Mobility, which he describes as “an app based, on-demand mobility service.” Where did he learn about Tesla Mobility? Who knows? Tesla, a company hardly averse to hype, has never acknowledged its existence.
And that’s not the worst of it. No, the worst is the timing of his call. It came days after Tesla announced that it would be issuing stock to raise yet more money — and that Morgan Stanley was among the underwriters. (The company raised close to $800 million.)

For the full commentary, see:
Joe Nocera. “The Tesla Cheerleader.” The New York Times (Sat., AUG. 29, 2015): A1 & A19.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date AUG. 28, 2015.)

Belgian Government Mandates Mayo to Be No Less than 80% Fat

(p. A1) BRUSSELS–Mayonnaise here is a sauce celebre, so important that a 60-year-old royal decree governs what goes in it.
. . .
Belgian mayonnaise must contain at least 80% fat and 7.5% egg yolk. European rivals are permitted to sell mayo with a mere 70% fat and 5% egg yolk.

For the full story, see:
TOM FAIRLESS. “No Yolk, Belgian Food Producers Fed Up with Mayonnaise Rules; But effort to relax royal recipe doesn’t go down well with chefs; yellow peas.” The Wall Street Journal (Mon., Sept. 20, 2015): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date Sept. 20, 2015 and the title “In Belgium, Mayonnaise Makers Want a New Recipe; But effort to relax royal recipe doesn’t go down well with chefs; yell;ow peas.”)

Recent Job Losses from City Minimum Wage Hikes

(p. A13) The city councils in Seattle, San Francisco and Los Angeles have already voted to increase their minimum wage to $15 an hour over several years. For large employers in Seattle, the first increase to $11 from $9.47 took effect in April. In San Francisco a hike to $12.25 from $10.74 began in May. Los Angeles rolled out a minimum wage for hotel workers of $15.37 in July.
It’s still early to know how the hikes are affecting the job market, but the preliminary data aren’t good. Mark Perry of the American Enterprise Institute, Adam Ozimek of Moody’s Analytics and Stephen Bronars of Edgewood Economics reported last month that the restaurant and hotel industries have lost jobs in all three cities. Mr. Bronars crunched the numbers and discovered that the “first wave of minimum wage increases appears to have led to the loss of over 1,100 food service jobs in the Seattle metro division and over 2,500 restaurant jobs in the San Francisco metro division.” That is a conservative estimate, he notes, as the data include areas outside city limits, where the minimum wage didn’t increase.
This comes as no surprise. In 2014 the Congressional Budget Office found that increasing the minimum wage to $10.10 an hour would result in employment falling by 500,000 jobs nationally. By the way, less than 20% of the earning benefits would flow to people living below the poverty line, as University of California-Irvine economist David Neumark has pointed out.

For the full commentary, see:
ANDY PUZDER. “A Post-Labor Day, Minimum-Wage Hangover; The evidence is already coming in: Mandatory increases in Los Angeles, San Francisco and Seattle have cost thousands of jobs.” The Wall Street Journal (Tues., Sept. 8, 2015): A13.
(Note: the online version of the commentary has the date Sept. 7, 2015.)

Evidence Minimum Wage Causes Job Loss

(p. A1) Some economists have reported that there is no longer any evidence that raising wages will cost jobs.
Unfortunately, that last claim is inaccurate. There are in fact many studies on each side of the issue. David Neumark of the University of California, Irvine and William Wascher of the Federal Reserve have done their own studies and point to dozens of others showing significant job losses.
Recently, Michael Wither and Jeffrey Clemens of the University of California, San Diego looked at data from the 2007 federal minimum-wage hike and found that it reduced the national employment-to-population ratio by 0.7 percentage points (which is actually a lot), and led to a six percentage point decrease in the likelihood that a low-wage worker would have a job.
Because low-wage workers get less work experience under a higher minimum-wage regime, they are less likely to transition to higher-wage jobs down the road. Wither and Clemens found that two years later, workers’ chances of making $1,500 a month was reduced by five percentage points.
Many economists have pointed out that as a poverty-fighting measure the minimum wage is horribly targeted. A 2010 study by Joseph Sabia and Richard Burkhauser found that only 11.3 percent of workers who would benefit from raising the wage to $9.50 an hour would come from poor households. An earlier study by Sabia found that single mothers’ employment dropped 6 percent for every 10 percent increase in the minimum wage.
A study by Thomas MaCurdy of Stanford built on the fact that there are as many individuals in high-income families making the minimum wage (teenagers) as in low-income families. MaCurdy found that the costs of raising the wage are passed on to consumers in the form of higher prices. Minimum-wage workers often work at places that disproportionately serve people down the income scale. So raising the minimum wage is like a regressive consumption tax paid for by the poor to subsidize the wages of workers who are often middle class.

For the full commentary, see:
David Brooks. “Minimum Wage Muddle.” The New York Times (Fri., JULY 24, 2015): A25.
(Note: ellipsis added.)
(Note: the online version of the article has the title “The Minimum-Wage Muddle.”)

Smart and Energetic Young Adults in France Find Opportunity in England, Australia or the U.S.

(p. A6) The income gap between generations is even more severe in France than in the United States, said Louis Chauvel, a French sociologist who has also worked in America on income inequality and other issues. On top of that, Mr. Chauvel added, the United States economy has been rebounding, while unemployment in France has been rising since 2008 and has hovered around 10 percent for the last two years.

“In the U.S., the young 25-year-olds have lots of opportunities,” he said. “It’s generally much better to be relatively young in the United States than to be aging.

“In France, we face a completely different trend: We have more and more educated young French citizens, and they face economic scarcity, even though they have more education than their parents.”

Young adults in France see their taxes going to finance social benefits for retirees that they believe they will never receive, Mr. Chauvel added. The most energetic and smartest among them do find jobs, he said, but often they can do it only by leaving France for Britain, Australia or the United States.

For the full story, see:

ALISSA J. RUBIN and AURELIEN BREEDEN. “Song for French Charity Strikes Discordant Note.” The New York Times (Weds., MARCH 4, 2015): A6.

(Note: the online version of the story has the date MARCH 3, 2015, and has the title “‘Toute La Vie,’ Song for French Charity, Strikes Discordant Note.”)

112 Years of Spectacular Progress Started With Wilbur Wright

“New close-up images of a region near Pluto’s equator reveal a giant surprise: a range of youthful mountains.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) LAUREL, Md. — The first close-up image of Pluto has revealed mountains as tall as the Rockies, and an absence of craters — discoveries that, to their delight, baffled scientists working on NASA’s New Horizons mission and provided punctuation for a journey nine and a half years in the making.

Only 112 years after the Wright Brothers were barely able to get their airplane off the ground, a machine from Earth has crossed the solar system to a small, icy world three billion miles away. The flyby on Tuesday, when New Horizons buzzed within 7,800 miles of the former ninth planet, came 50 years to the day after NASA’s Mariner 4 spacecraft made a similar first pass by Mars.

For the full story, see:
KENNETH CHANG. “Pluto’s Portrait From New Horizons: Ice Mountains and No Craters.” The New York Times (Thurs., JULY 16, 2015): A1 & A17.
(Note: the online version of the article has the date JULY 15, 2015.)

“If You Get Too Cold, I’ll Tax the Heat”

(p. A11) George Harrison knew what he was talking about when he wrote the song “Taxman” for the Beatles: “If you get too cold, I’ll tax the heat / If you take a walk, I’ll tax your feet.” Had the Internet been around in 1966, they might have added: “If you use the Web, I’ll tax your tweet.”

For the full commentary, see:
OHN THUNE and AJIT PAI. “Taxman, Won’t You Please Spare The Internet?; A moratorium on taxing online access has been an unqualified success. Let’s make it permanent.” The Wall Street Journal (Fri., July 18, 2014): A11.
(Note: the online version of the commentary has the date July 17, 2014.)