Category: Labor Economics

Xi’s Micromanaging “Zero Covid” Policy Hurting Chinese Economic Growth

(p. A1) Earlier this year, Xi Jinping issued brief instructions to education officials in Beijing. China’s leader wanted to reform the country’s $100 billion private tutoring industry, which the state worried was helping well-to-do families gain advantages for their offspring and creating anxiety among families that couldn’t afford the help.

Education officials drafted a plan that included new limits on tutoring for children up to the equivalent of ninth grade, said people familiar with the effort.

The plan was too soft, Mr. Xi said, in a one-sentence note to the education ministry, according to the people.

Scrambling to please him, the ministry expanded the limits to include students up to the equivalent of 12th grade. In addition, it required all private education companies to re-register as nonprofits.

The more extreme rules, issued in July [2021], triggered panic selling that erased tens of billions of dollars from the value of education com-(p. A14)panies listed on U.S. and Hong Kong stock exchanges. Officials from the China Securities Regulatory Commission hastily scheduled meetings with foreign investors to calm them down, according to people familiar with the conversations, and promised that Beijing would consider market impact before introducing future policies.

The episode is just one example of Mr. Xi’s evolving management style as the Chinese president consolidates control of the world’s second-largest economy. He is widely considered the most powerful Chinese leader in a generation. He is also a micromanager who intervenes often, unpredictably and sometimes vaguely in policy matters big and small.

. . .

Behind the scenes, many officials question some of Mr. Xi’s decisions.

In late July [2021], a Covid-19 outbreak caused more than 1,200 infections after months of nearly zero reported cases. Some central government officials, eyeing other countries, suggested it might be time for China to stop its strategy of pursuing “zero Covid” and learn to live with the virus, according to a person familiar with the discussions.

Mr. Xi was furious, said people familiar with the issue. In a note to underlings, he asked if officials were becoming “lax and numbed” in fighting the virus, according to these people and to state media reports. “Zero Covid” would remain the policy.

Local officials intensified their efforts. In late October [2021], they locked more than 30,000 visitors into Shanghai Disneyland and forced them to undergo Covid-19 tests after one customer tested positive. Authorities temporarily shut one of China’s biggest container ports after a single case, hurting global supply chains.

China’s economic growth slowed to 4.9% in the third quarter from the previous quarter’s 7.9% rate. Economists have said China’s zero-tolerance pandemic measures, including lockdowns of residential compounds and cancellations of public events, are likely to have a significant impact on China’s growth if they don’t succeed in snuffing out the virus soon.

Some local government officials have warned against “excessive pandemic prevention” measures, according to speeches quoted on websites. Yet officials keep pressing, fearful they might be punished if a Covid-19 case emerged in their area.

. . .

Mr. Xi later “personally planned, personally proposed, personally deployed and promoted” the development of Xiongan, a new “eco-city,” out of farmland about 60 miles from Beijing, according to state media, and urged state firms to move there. Despite billions of dollars of investment, it hasn’t matched the quick success of Deng-era special economic zones such as Shenzhen.

To comply with the new regulatory regime for after-school tutoring this year, education companies have laid off tens of thousands of employees, including teachers. Given the impact on the industry, officials have been enforcing the rules on tutoring for children only up to the equivalent of ninth grade—as originally proposed.

. . .

“Some only act when the party’s central leadership has instructed them to do so,” Mr. Xi said in a speech to the party’s top disciplinary officials last January, made public only recently. He complained that many officials aren’t competent to deal with complicated issues, and that if he didn’t issue so many instructions, little would get done.

“I issue instructions as a last line of defense,” he said.

For the full story, see:

Josh Chin. “Xi Jinping’s Style: Micromanagement.” The Wall Street Journal (Thursday, Dec. 16, 2021): A1 & A14.

(Note: ellipses, and bracketed years, added.)

(Note: the online version of the story has the December 15, 2021, and has the title “Xi Jinping’s Leadership Style: Micromanagement That Leaves Underlings Scrambling.”)

Chinese Social Media Attacks Walmart as Some Firms Reduce Investment in China

(p. A1) Walmart Inc., the world’s largest retailer, became the latest Western company to face scrutiny over its handling of business involving Xinjiang, following the passage of a U.S. law that virtually bans all imports from the northwestern Chinese region over forced-labor and human-rights concerns.

The Bentonville, Ark.-based retailer attracted anger on Chinese social media beginning last week after internet users shared comments that purported to show that Walmart had stopped stocking products from Xinjiang in its China-based Walmart and Sam’s Club stores.

. . .

Last week, U.S. semiconductor giant Intel Corp. issued an apology to Chinese consumers, partners and the public following an outcry on Chinese (p. A9) social media against the Santa Clara, Calif.-based company, which had published on its website a letter to suppliers asking them to avoid sourcing from Xinjiang.

. . .

Chinese social media campaigns are often not as organic as their overseas peers, as authorities and technology firms curate and censor domestic online content.

. . .

The American Chamber of Commerce in Shanghai said in September that 30% of retail and consumer companies polled in its most recent business survey cited public backlash and consumer boycotts as a top concern, the highest among the major industries covered by the business lobby. More than one-tenth of the companies said they had reduced planned investments in China because of concerns about consumer boycotts.

For the full story, see:

Liza Lin. “Walmart Draws Anger In China Over Xinjiang.” The Wall Street Journal (Tuesday, December 28, 2021): A1 & A9.

(Note: ellipses added.)

(Note: the online version of the story has the date December 27, 2021, and has the title “Walmart Sparks Public Outcry in China Over Products From Xinjiang.”)

Californians Move to Texas, to Prosper

(p. 5) A Californian will feel right at home in Dallas even before touching the ground. Like the suburbs around Los Angeles, San Diego and across the Bay Area, Dallas and other Texas metros are built on the certainty of cars and infinite sprawl; from the air, as I landed, I could see the familiar landscape of endless blocks of strip malls and single-family houses, all connected by a circulatory system of freeways.

. . .

My guide through the Dallas suburbs was Marie Bailey, a real estate agent who runs Move to Texas From California!, a Facebook group that helps disillusioned Californians find their way to the promised land. Bailey is herself a Californian. She and her family moved in 2017 from El Segundo, a beach city next to Los Angeles International Airport, to Prosper, a landlocked oasis of new housing developments north of Dallas. In El Segundo, the median home list price is $1.3 million; in Prosper, it’s less than half that.

And in Prosper, the houses are palatial, many of them part of sprawling new developments that brim with amenities unheard-of in California. “It’s like living in a country club,” Bailey told me, which sounded like hyperbole until she showed me the five-acre lagoon and white sand beach in the development where she and her husband purchased a home. Their house is 5,000 square feet; they bought it for about the same price for which they sold a home they owned in Orange County, which was 1,500 square feet.

Bailey’s move gets to the heart of the great California-Texas migration: housing. As she drove me around Dallas’s suburbs, Bailey would point out cute house after cute house now occupied by a Californian. I had been talking about the idea of choosing between California and Texas, but for many people moving here, Bailey suggested, there really was not much choice at all — it was simply that, economically, they could not make their lives work in California, and in Texas, they could.

. . .

Texas, now, feels a bit like California did when I first moved here in the late 1980s — a thriving, dynamic place where it doesn’t take a lot to establish a good life. For many people, that’s more than enough.

For the full commentary, see:

Farhad Manjoo, Gus Wezerek and Yaryna Serkez. “Is Texas the New California?” The New York Times, SundayReview Section (Sunday, November 28, 2021): 4-5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Nov. 23, 2021, and has the title “Everyone’s Moving to Texas. Here’s Why.”)

Concentrating at the Office Can Be Harder than Concentrating at Home

(p. A4) Many people returning to offices are starting to wonder how they ever managed to be productive in a place with so many distractions. On top of standard interruptions to the workday that have long existed—say, small talk while making a fresh cup of coffee—there are now new temptations and annoyances (depending on whom you ask) spawned by staggered schedules, hybrid work, and the pandemic-induced realization that socializing can be exhausting.

. . .

Valerie Warshaw, 40, an interior designer with an architecture firm in Richmond, Va., also has trouble focusing with people chatting near her desk, but for different reasons.

“I get distracted just from hearing other people’s conversation and then I’m like, ‘Ooh! I want to chime in on that,’ ” she said. “The group that I’m in is very social.”

. . .

Her noise-canceling AirPods can help but have a downside: she gets startled when people come up behind her desk without warning. Ms. Warshaw has learned the best way to get anything done is to barricade herself in a conference room.

“People don’t disturb you because they think you’re on a call,” she said.

For the full story, see:

Katherine Bindley. “Working From Work Can Be Hard.” The Wall Street Journal (Saturday, Dec. 18, 2021): A1 & A4.

(Note: ellipses added.)

(Note: the online version of the story was updated December 17, 2021, and has the title “Working From Work Is Harder Than It Sounds.”)

E-Mobility Devices Offer Consumers “Lower Virus Risk” and More Convenience Than Public Transit

(p. A9) A boom in electric-powered mobile devices is bringing what is likely to be a lasting change and a new safety challenge to New York’s vast and crowded street grid.

The devices have sprouted up all over. Office workers on electric scooters glide past Manhattan towers. Parents take electric bikes to drop off their children at school. Young people have turned to electric skateboards, technically illegal on city streets, to whiz through the far corners of New York.

Though many of these riders initially gave up their subway and bus trips because of the lower virus risk of traveling outdoors, some say they are sticking with their e-mobility devices even as the city begins to move beyond the pandemic.

“I use the scooter for everything, it’s really convenient,” said Shareese King, 41, a Bronx resident who deleted the Uber app from her phone after she started running her errands on an electric scooter.

Electric bikes, scooters and other devices are in many cases made for urban life because they are affordable, better for the environment, take up little, if any, street space for parking and are just fun to use, said Sarah M. Kaufman, the associate director of the Rudin Center for Transportation Policy and Management at New York University.

For the full story, see:

Winnie Hu and Chelsia Rose Marcius. “As Personal E-Mobility Spreads, Safety Challenges Grow.” The New York Times (Tuesday, October 28, 2021): A9.

(Note: the online version of the story was updated Nov. [sic] 8, 2021, and has the title “As E-Scooters and E-Bikes Proliferate, Safety Challenges Grow.”)

High Inflation Most Hurts the Poor

(p. B2) Inflation has become central to the American zeitgeist in 2021 in a way that it hadn’t been for decades. Google searches are up. Supply chain issues feature into popular Instagram posts. The satire website The Onion warned in a recent headline that “higher prices may force Americans to eat reasonable portions on Thanksgiving.”

Even as inflation hits its highest level since 1982 and inserts itself as a topic of popular discussion, trying to understand it can be a mind-bending task.

. . .

High or unpredictable inflation that isn’t outmatched by wage gains can be especially hard to shoulder for poor people, simply because they have less wiggle room.

Poor households spend a bigger chunk of their budgets on necessities — food, housing and especially gas, which is often a contributor to bouts of high inflation — and less on discretionary expenditures. If rich households face high inflation and their wages do not keep up, they may have to cut back on vacations or dining out. A poor family may be forced to cut back on essentials, like food.

“For lower income households, price increases eat up more of their budget,” said Laura Rosner-Warburton, a senior economist at MacroPolicy Perspectives, pointing out that some research suggests that poor people may even end up paying comparatively more for the same products. That may be partly because they lack the free cash to take advantage of temporary discounts.

Around the world, poor people historically have reported greater concern around inflation, and that is also the case in the United States in the current episode.

For the full story, see:

Jeanna Smialek. “Inflation 101: Stark Facts And Nuance.” The New York Times (Saturday, December 25, 2021): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date Dec. 24, 2021, and has the title “Inflation Has Arrived. Here’s What You Need to Know.”)

“People Come to This Country to Build Amazing Businesses”

(p. 1) WASHINGTON — ADW Capital Partners would appear to be the kind of hedge fund that Democrats on the Senate Finance Committee would like to tax more heavily: small but growing fast, with $330 million in assets, an incorporation in Delaware but doing business in Florida, and an offshore “feeder” corporation shielding some of its clients from U.S. taxation.

No wonder, then, that its owner, Adam Wyden, has come out as a vocal and vociferous critic of the tax increases being pushed by the committee’s chairman, Senator Ron Wyden of Oregon — his father.

. . .

(p. 25) “The issue is bigger than my father. I’m not interested in discussing anything personal,” he said in a brief phone call before declining to go further. He said he was “not a Trumper” and “not an Ocasio” — referring to Representative Alexandria Ocasio-Cortez of New York, an icon of the Democratic left. He is a libertarian, he said, raised in Washington, D.C., who moved to Florida “to get away from the food fight.”

But he has gone public with his grievances against his father’s proposals, in an appearance last month on CNBC that he recommended for viewing, and in a tweet responding to the elder Mr. Wyden’s assertion that Elon Musk and other billionaires should not get to decide whether to pay taxes based on a Twitter poll.

“Why does he hate us / the American dream so much?!?!?!?!” Adam Wyden said in the Twitter post last month. “Reality is: most legislators have never built anything … so I guess it’s easier to mindlessly and haphazardly try and tear stuff down.”

. . .

“Thankfully, I think I can compound” investment gains “faster than my dad and his cronies can confiscate it,” Adam Wyden wrote.

Lauded on CNBC’s “Squawk Box,” he elaborated on air. “Amazon, Netflix, Google, Tesla: I mean, we are the envy of the rest of the world,” he said. “People come to this country to build amazing businesses, and I want that to continue.”

Without referring to his son, the elder Mr. Wyden suggested a possible reason for his stance: “Many millionaires perhaps may consider themselves tomorrow’s billionaires.”

For the full story, see:

Jonathan Weisman. “Rift Between Senator and Son Shows Challenge of Taxing the Ultrarich.” The New York Times, First Section (Sunday, December 12, 2021): 1 & 25.

(Note: ellipses added.)

(Note: the online version of the story was updated Dec. 11, 2021, and has the title “Rift Between Senator and Son Shows the Challenge of Taxing the Ultrarich.” The online version says that the article appeared on p. 24 of the New York edition of the print version.)

Federal Covid-19 Stimulus Subsidies Reduced Labor Force Participation

(p. A2) . . ., home prices and stocks have soared, in part because of stimulus from the Fed. From the start of 2020 through Sept. 30 this year, U.S. households’ total assets soared 22% to nearly $163 trillion, Fed data show.

At the same time, the labor-force participation rate fell sharply and has remained stubbornly low. At 61.8% in November [2021], it was 1.5 percentage points below its pre-pandemic level. Many older workers retired early. But even among prime-age workers—those between 25 and 54—participation remains down more than a percentage point.

Some economists believe the extra cash is one reason for this. In part, that is based on research showing declines in wealth seem to have had the opposite effect. Falling housing and stock values from 2006 and 2010 led many who otherwise would have fallen out of the labor force to stay in, according to the Federal Reserve Bank of Chicago. The study found that participation was 0.7 percentage point higher than otherwise as a result.

Families that win at least $30,000 in the lottery tend to earn less in the next five years, according to a National Bureau of Economic Research working paper released in July by four University of Chicago scholars. The more a person wins, the bigger the effect that the award has on earnings and employment, the paper found. Upper-income winners are more likely to reduce their hours, while lower-income winners are more likely to drop out of the labor market entirely, the paper found.

In Austria, workers who received severance payments worth two months of pay were far less likely to find a job within 20 weeks compared with those who received no such lump sum, according to a 2006 paper released by the NBER. The researchers also found a similar effect among workers whose unemployment benefits were extended from 20 weeks to 30 weeks.

For the full commentary, see:

Josh Mitchell. ” THE OUTLOOK; New Hope for Easing Labor Shortage.” The Wall Street Journal (Monday, Dec. 20, 2021): A2.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the commentary has the date December 19, 2021, and has the title ” THE OUTLOOK; Vast Household Wealth Could Be a Factor Behind U.S. Labor Shortage.”)

The July 2021 NBER working paper mentioned above is:

Golosov, Mikhail, Michael Graber, Magne Mogstad, and David Novgorodsky. “How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income.” National Bureau of Economic Research Working Paper #29000, July 2021.

The published version of the 2006 NBER working paper mentioned above is:

Card, David, Raj Chetty, and Andrea Weber. “Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market.” The Quarterly Journal of Economics 122, no. 4 (Nov. 2007): 1511-60.

Open Source Log4j Software Bug “Poses a Severe Risk”

In Openness to Creative Destruction, I argue that open source software has severe drawbacks, compared to a system where firms receive higher profits for selling better software. The severe Log4j bug, discussed in the quoted passages below, is an example that strongly supports my argument.

(p. B1) The Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency issued an urgent alert about the vulnerability and urged companies to take action. CISA Director Jen Easterly said on Saturday, “To be clear, this vulnerability poses a severe risk.”  . . .  Germany’s cybersecurity organization over the weekend issued a “red alert” about the bug. Australia called the issue “critical.”

Security experts warned that it could take weeks or more to assess the extent of the damage and that hackers exploiting the vulnerability could access sensitive data on networks and install back doors they could use to maintain access to servers even after the flawed software has been patched.

“It is one of the most significant vulnerabilities that I’ve seen in a long time,” said Aaron Portnoy, principal scientist with the security firm Randori.

. . .

(p. B2) The software flaw was reported late last month to the Log4j development team, a group of volunteer coders who distribute their software free-of-charge as part of the Apache Software Foundation, according to Ralph Goers, a volunteer with the project. The foundation, a nonprofit group that helps oversee the development of many open-source programs, alerted its user community about the vulnerability on Dec. 9 [2021].

“It’s a very critical issue,” Mr. Goers said. “People need to upgrade to get the fix,” he said. Log4j is used on servers to keep records of users’ activities so they can be reviewed later on by security or software development teams.

Because Log4j is distributed free, it is unclear how many servers are affected by the bug, but the logging software has been downloaded millions of times, Mr. Goers said.

For the full story, see:

Robert McMillan. “Software Flaw Spurs Race to Patch Bug.” The Wall Street Journal (Monday, December 13, 2021): B1-B2.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story was updated Dec. 12, 2021, and has the title “Software Flaw Sparks Global Race to Patch Bug.”)

My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

MIT Cancels Chicago Professor for Saying Merit Matters

(p. A13) I am a professor at the University of Chicago. I was recently invited to give an honorary lecture at the Massachusetts Institute of Technology. The lecture was canceled because I have openly advocated moral and philosophical views that are unpopular on university campuses.

Here are those views:

I believe that every human being should be treated as an individual worthy of dignity and respect. In an academic context, that means evaluating people for positions based on their individual qualities, not on membership in favored or disfavored groups. It also means allowing them to present their ideas and perspectives freely, even when we disagree with them.

I care for all of my students equally. None of them are overrepresented or underrepresented to me: They represent themselves. Their grades are based on a process that I define at the beginning of the quarter. That process treats each student fairly and equally. I hold office hours for students who would like extra help so that everyone has the opportunity to improve his or her grade through hard work and discipline.

Similarly, I believe that admissions and faculty hiring at universities are best focused on academic merit, with the goal of producing intellectual excellence. We should not penalize hard-working students and faculty applicants simply because they have been classified as belonging to the wrong group. It is true that not everyone has had the same educational opportunities. The solution is improving K-12 education, not introducing discrimination at late stages.

. . .

. . ., the university has a duty to encourage students and faculty to offer their opinions and insight on the widest possible range of topics.

. . .

. . . hurt feelings are no reason to ban certain topics. We are all responsible for our own feelings. We cannot control things that are external to us, such as the comments of others, but we can control how we respond to them.

For the full commentary, see:

Dorian Abbot. “The Views That Made Me Persona Non Grata at MIT.” The Wall Street Journal (Saturday, Oct. 30, 2021): A13.

(Note: ellipses added.)

(Note: the online version of the commentary was updated Oct. 29, 2021, and has the same title as the print version.)

Climate Change Infrastructure Subsidies Mainly Benefit the Rich

(p. A9) Mr. Biden has insisted that at least 40 percent of the benefits of federal climate spending will reach underserved places, which tend to be low income, rural, communities of color, or some combination of the three.

But historically, it is wealthier, white communities — with both high property values and the resources to apply to competitive programs — that receive the bulk of federal grants. And policy experts say it’s unclear whether, and how quickly, federal bureaucracy can level the playing field.

. . .

The new climate provisions in the infrastructure bill inject billions of dollars into competitive grant programs. These are pots of money that towns, cities and counties can access only by submitting applications, which federal agencies then rank, with funds going to applicants with the highest scores.

That system is designed to ensure that funding goes to the most worthwhile projects.

But it also hinges on something outside the control of the federal government: The ability of local officials to use sophisticated tools and resources to write successful applications. The result is a process that has widened the gap between rich communities and their less affluent counterparts, experts say.

The disparity begins even before the application process begins. That’s because local governments must be aware of the grant programs in the first place, which means having dedicated staff to track those programs. Then they need to design proposals that will score highly, and correctly complete the reams of required paperwork.

Even if they are awarded a grant, communities are required to pay a share of the project — often 25 percent, which is unaffordable for many struggling towns and counties.

Governments that can clear those obstacles face a final hurdle: Demonstrating that the value of the property that would be protected is greater than the cost of the project. That rule often excludes communities of color and rural areas, where property values are usually lower than in white communities.

. . .

The Biden administration has touted the program, called Building Resilient Infrastructure and Communities, or BRIC, as a model that should be expanded. The infrastructure bill provides billions more to the program.

But most of the first round winners were wealthy, predominantly white areas in a handful of coastal states, federal data show.

More than half the money went to California, New Jersey and Washington State. The largest single recipient was a $68 million flood-control project in Menlo Park, Calif., where the median household income is more than $160,000, the typical home costs more than $2 million and only one in five residents are Black or Hispanic. The project is in line to get $50 million from FEMA.

For the full story, see:

Christopher Flavelle. $50 Billion Conundrum: Who Gets Climate Protection?” The New York Times (Saturday, December 4, 2021): A9.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 3, 2021, and has the title “Billions for Climate Protection Fuel New Debate: Who Deserves It Most.”)