Category: Labor Economics

With High Minimum Wages and Living Costs, S.F. Restaurants Cannot Afford, or Even Find, Servers

(p. D1) SAN FRANCISCO — Souvla, a Greek restaurant with a devoted following, serves spit-fired meat two ways: in a photogenic sandwich, or on a photogenic salad, either available with a glass of Greek wine. The garnishes are thoughtful: pea shoots, harissa-spiked yogurt, mizithra cheese.
The small menu is so appealing and the place itself so charming that you almost forget, as a diner, that you have to do much of the work of dining out yourself. You scout your own table. You fetch and fill your own water glass. And if you’d like another glass of wine, you go back to the counter.
Runners will bring your order to the table, but there are no servers to wait on you here, or at the two other San Francisco locations that Souvla has added — or, increasingly, at other popular restaurants that have opened in the last two years: RT Rotisserie, which is roasting cauliflower a few blocks away; Barzotto, a bistro serving hand-rolled pasta in the Mission district; and Media Noche, a Cuban sandwich spot with eye-catching custom tilework.
Inside these restaurants, it’s evident that the forces making this one of the most expensive cities in America are subtly altering the economics of everything. Commer-(p. D6)cial rents have gone up. Labor costs have soared. And restaurant workers, many of them priced out by the expense of housing, have been moving away.
Restaurateurs who say they can no longer find or afford servers are figuring out how to do without them. And so in this city of staggering wealth, you can eat like a gourmand, with real stemware and ceramic plates. But first you’ll have to go get your own silverware.
. . .
On July 1 [2018], the minimum wage in San Francisco will hit $15 an hour, following incremental raises from $10.74 in 2014. The city also requires employers with at least 20 workers to pay health care costs beyond the mandates of the Affordable Care Act, in addition to paid sick leave and parental leave.
Despite those benefits, many workers say they can’t afford to live here, or to stay in the industry. And partly as a result of those benefits, restaurateurs say they can’t afford the workers who remain. A dishwasher can now make $18 or $19 an hour. And because of California labor laws, even tipped workers like servers earn at least the full minimum wage, unlike their peers in most other states.
Enrico Moretti, an economist at the University of California, Berkeley, estimates that when housing prices rise by 10 percent, the price of local services, including restaurants, rises by about 6 percent. (The median home price in San Francisco has doubled since 2012.)

For the full commentary, see:
Emily Badger. “Hi! You’ll Be Your Server Tonight.” The New York Times (Wednesday, June 27, 2018): D1 & D6.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the commentary has the date June 25, 2018, and has the title “THE UPSHOT; San Francisco Restaurants Can’t Afford Waiters. So They’re Putting Diners to Work.”)

The published version of the Moretti paper, mentioned above, is:
Moretti, Enrico. “Real Wage Inequality.” American Economic Journal: Applied Economics 5, no. 1 (Jan. 2013): 65-103.

Tech Entrepreneurs Know Innovation Thrives in Flexible Labor Markets

(p. B1) A politically awakened Silicon Valley, buttressed by the tech industry’s growing economic power, could potentially alter politics long after President Trump has left the scene. But if the tech industry becomes a political force, what sort of policies will it push?
(p. B6) A new survey by political scientists at Stanford University suggests a mostly straightforward answer — with one glaring twist. The study is the first comprehensive look at the political attitudes of wealthy technologists, whose views have long been misunderstood to the point of caricature by many outside the industry.
. . .
Over all, the study showed that tech entrepreneurs are very liberal — among some of the most left-leaning Democrats you can find. They are overwhelmingly in favor of economic policies that redistribute wealth, including higher taxes on rich people and lots of social services for the poor, including universal health care.
. . .
Now for the twist. The study found one area where tech entrepreneurs strongly deviate from Democratic orthodoxy and are closer to most Republicans: They are deeply suspicious of the government’s efforts to regulate business, especially when it comes to labor. They said that it was too difficult for companies to fire people, and that the government should make it easier to do so. They also hope to see the influence of both private and public-sector unions decline.
. . .
. . . if they’re not libertarians, what accounts for techies’ opposition to regulation? One idea might be that it’s driven by self-interest. A large fraction said they opposed regulating car-sharing services as if they were taxis, for instance; to the extent that the tech elite have a lot of money riding on the sharing economy, they may worry that regulation of such companies could hurt their wallets.
. . .
To tease out whether self-interest was at play in their views on regulation, surveyors asked a question about Uber’s surge-pricing policy, which increases prices during periods of peak demand. But the researchers disguised it with a business unrelated to tech: “On a holiday, when there is a great demand for flowers, sellers usually increase their prices. Do you think it is fair for them to raise their prices like this?”
A majority of Democrats and Republicans said it would be unfair for a florist to do that. But 96 percent of the tech elite thought it would be fair.
“My guess is there’s an underlying principle to their views,” Dr. Broockman said. “They see an entrepreneur trying to do what they want in the marketplace, and they see nothing unfair about that.”

For the full commentary, see:
Farhad Manjoo. “Tech’s Giants Skew Liberal.” The New York Times (Thursday, Sept. 7, 2017): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 6, 2017, and has the title “STATE OF THE ART; Silicon Valley’s Politics: Liberal, With One Big Exception.”)

The Stanford study, discussed above, has been published online in advance of print publication:
Broockman, David E., Gregory Ferenstein, and Neil Malhotra. “Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs.” American Journal of Political Science published online on Nov. 19, 2018, https://doi.org/10.1111/ajps.12408.

False Fears of Killer Robots Distract Us from Real Benefits of Collaborative A.I.

(p. A27) If we spend all of our time looking over our shoulders for killer robots, that means we are not looking ahead to discern the outcomes we might actually want.
. . .
The most successful A.I. systems out there today are dependent on teams of humans, just as the humans depend on those systems to provide insights and perform tasks beyond their own abilities. Image-processing A.I. can outperform human radiologists at spotting tumors in X-rays, if medical personnel get patients in front of the right machine and ask the right questions. But teams of human doctors will be vital to marrying technology and empathy for the effective treatment of complex diseases.

For the full commentary, see:
Ed Finn. “Don’t Fear the Killer Robots.” The New York Times (Saturday, Nov. 17, 2018): A27.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Nov. 15, 2018, and has the title “A Smarter Way to Think About Intelligent Machines.”)

Little Correlation Between a State’s Tax Breaks and Subsidies to Firms, and the State’s Unemployment and Income Levels

(p. A27) It’s politically difficult for city and state officials to offer incentives to one firm and not another, Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research, told me. Like Lay’s potato chips, “you can’t hand out just one,” as he put it. He fears that after the hysteria over Amazon’s HQ2 and the recent $4.1 billion deal struck between the state of Wisconsin and the Taiwanese electronics company Foxconn, incentive amounts will only climb.
Unfortunately, incentives and tax breaks don’t work. Research by Mr. Bartik indicates that there is not a large correlation between a state’s giveaways and its unemployment rate or income levels.
. . .
Lavish benefits also don’t have much influence over the choice of a location. The typical package changes a decision only 25 percent of the time or less — about two-thirds of the incentives are handed to companies that would have moved to the state offering them, regardless.
Instead, the deals often end up being a burden on budgets. Texas schools have lost an estimated $4 billion to the state’s economic development program and Cleveland schools lost over $34 million in one year alone. New Jersey’s budget is at risk of bleeding $1 billion a year, while Michigan’s liability for its business tax credits is set to soar to $9.38 billion over the next two decades and incentives have already led to a $325 million budget deficit. None of that accounts for the extra outlays to upgrade infrastructure and services for the people who move in to take advantage of any jobs that are created.
. . .
The solution, . . . , must be an armistice. States and cities need to collectively swear off big-dollar economic deals aimed at particular companies. If no one offers them, corporations will have to figure out where to locate on their own.
There’s nothing to love about these incentives. Republicans should be outraged by the idea of government picking winners and insist instead that companies be left to choose locations based on the conditions they need to operate their businesses, not sweetheart deals. Democrats should oppose them because they are starving state and city coffers of funds needed for important services, such as schools.

For the full commentary, see:

Covert, Bryce. “HQ2 Winners Are Losers.” The New York Times (Wednesday, Nov. 13, 2018): A27.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Nov. 13, 2018, and has the title “Cities Should Stop Playing the Amazon HQ2 Bidding Game.” Where there are minor differences in the versions, the passages quoted above follow the online version.)

The research by Bartik, mentioned above, is:
Bartik, Timothy J. “A New Panel Database on Business Incentives for Economic Development Offered by State and Local Governments in the United States.” W.E. Upjohn Institute for Employment Research: Prepared for the Pew Charitable Trusts, 2017.

“The Stigma of Being ‘Drivers'”

(p. 6) They were arrested, suspended from jobs, shunned by relatives and denounced by clerics as loose women out to destroy society. Their offense? They did what many in Saudi Arabia considered unthinkable: getting in cars and driving.
Their protest in 1990 against the kingdom’s ban on women driving failed, and the women paid dearly for it, with the stigma of being “drivers” clinging to them for years.
So last month, when King Salman announced that the ban on women driving would be lifted next June, few were happier than the first women to demonstrate for that right — almost three decades ago.
. . .
Many restrictions on women remain, including so-called guardianship laws that give Saudi men power over their female relatives on certain matters. But the original protesters are overjoyed that their daughters and granddaughters will have freer lives than they did, thanks to the automobile.
“That I am driving means that I know where I am going, when I’m coming back and what I’m doing,” said Ms. Alaboudi, the social worker.
“It is not just driving a car,” she said, “it is driving a life.”

For the full story, see:
BEN HUBBARD. “27 Years After Protest, a Victory Lap for Saudi Women.” The New York Times, First Section (Sunday, October 8, 2017): 6.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 7, 2017, and has the title “‘Once Shunned as ‘Drivers,’ Saudi Women Who Fought Ban Now Celebrate.”)

Bezos Richer than Rockefeller in Real Wealth

(p. A2) With a fortune exceeding $150 billion, Amazon founder Jeff Bezos was recently declared the richest person in modern history.
But is he?
The answer depends on how you account for the wealth of past contenders for the title.
There are at least five ways to do that, and each provides a different result, according to Samuel H. Williamson, an economist and president of the website Measuring Worth.
Real wealth, the most familiar yardstick, accounts for the relative purchasing power of a particular sum by adjusting it for inflation based on the Consumer Price Index.
Using that measure, the fortune of John D. Rockefeller, America’s first billionaire and Mr. Bezos’ stiffest competition among latter day aristocrats, would equal only $24 billion today.
Working in reverse, Mr. Bezos’ fortune would amount to about $6.5 billion in 1916, when Rockefeller’s riches first hit the $1 billion mark.

For the full commentary, see:
Jo Craven McGinty. “THE NUMBERS; Bezos vs. Rockefeller, a Rich History Lesson.” The Wall Street Journal (Saturday, Aug. 11, 2018): A2.
(Note: the online version of the commentary has the date Aug. 10, 2018, and has the title “THE NUMBERS; Is Jeff Bezos Really the Richest of Them All?”)

Deregulation Can Revive 3% Economic Growth

(p. A17) Growth deniers are declaring that America’s economy has lost its ability to grow at 3% above inflation. If that’s the case, maybe we should go back to where we lost 3% growth and retrace our steps until we find it. For only with 3% or higher growth does America experience measurable progress in poverty reduction, strong job creation and income growth. If 3% growth is irretrievably lost, so is the American Dream.
Did America actually experience 3% real growth to start with? Yes. In the postwar era, the U.S. averaged 3.4% annual growth from 1948 through 2008. We averaged 3% growth for half of the George W. Bush presidency (2003-06). From 2009-12, the Obama administration, the Congressional Budget Office and the Federal Reserve all thought they saw 3% growth just around the corner. If the possibility of 3% growth is gone forever, it hasn’t been gone very long.
. . .
While Obama apologists like to claim that labor-productivity and labor-supply factors preclude 3% growth, most of the growth constraints we face today are directly attributable to Mr. Obama’s policies.
. . .
A tidal wave of new rules and regulations across health care, financial services, energy and manufacturing forced companies to spend billions on new capital and labor that served government and not consumers. Banks hired compliance officers rather than loan officers. Energy companies spent billions on environmental compliance costs, and none of it produced energy more cheaply or abundantly. Health-insurance premiums skyrocketed but with no additional benefit to the vast majority of covered workers.
In a world of higher costs, productivity plummeted. Productivity measures the production of things the market values that flow from the employment of labor and capital. Try listing the Obama-era regulatory requirements that generated the employment of labor and capital in ways that actually produced something you buy.
. . .
Bad policies–not bad luck or a loss of God’s favor–have driven down labor productivity and the labor supply. We can change those policies.
. . .
With 3% growth, the American dream is achievable and virtually anybody willing to work hard can live it. Let 3% growth die and a lot of what we love most about our country will die with it.

For the full commentary, see:
Phil Gramm and Michael Solon. “Finding America’s Lost 3% Growth; If the country can’t grow like it once did, then the American Dream really is irretrievably lost.” The Wall Street Journal (Monday, Sept. 11, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 10, 2017.)

Scarcity of Workers Increases Use of Robots

(p. B1) PRAGUE — When Zbynek Frolik needed new employees to handle surging orders at his cavernous factories in central Bohemia, he fanned advertisements across the Czech Republic. But in a prosperous economy where nearly everyone had work, there were few takers.
Raising wages didn’t help. Nor did offers to subsidize housing.
So he turned to the robots.
“We can’t find enough humans,” said Mr. Frolik, whose company, Linet, makes state-of-the art hospital beds sold in over 100 countries. “We’re trying to replace people with machines wherever we can.”
Such talk usually conjures visions of a future where employees are no longer needed. In many major economies, companies are experimenting with replacing factory workers, truck drivers and even lawyers with artificial intelligence, raising the specter of a mass displacement of jobs.
But in Eastern Europe, robots are being enlisted as the solution for a shortage of workers. Often they are helping to create new types of jobs as businesses in the Czech Republic, Hungary, Slovakia and Poland try to stay agile and competitive. Growth in these countries, which became low-cost manufacturing hubs for Europe after the fall of Communism, has averaged 5 percent in recent years, buoyed by the global recovery..

For the full story, see:
Alderman, Liz. “Humans Wanted, But Robots Work.” The New York Times (Tuesday, April 17, 2018): B1 & B8.
(Note: the online version of the story has the date April 16, 2018, and has the title “Robots Ride to the Rescue Where Workers Can’t Be Found.”)

Some Democrats Trying to Restrict “Zoning, Environmental, and Procedural Laws” that “Thwart” New Housing

(p. A1) SACRAMENTO — A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families. The median cost of a home here is now a staggering $500,000, twice the national cost. Homelessness is surging across the state.
In Los Angeles, booming with construction and signs of prosperity, some people have given up on finding a place and have moved into vans with makeshift kitchens, hidden away in quiet neighborhoods. In Silicon Valley — an international symbol of wealth and technology — lines of parked recreational vehicles are a daily testimony to the challenges of finding an affordable place to call home.
Heather Lile, a nurse who makes $180,000 a year, commutes two hours from her home in Manteca to the San Francisco hospital where she works, 80 miles away. “I make really good money and it’s frustrating to me that I can’t afford to live close to my job,” said Ms. Lile.
. . .
Now here in Sacramento, lawmakers are considering extraordinary legislation to, in effect, crack down on communities that have, in their view, systematically delayed or derailed housing construction proposals, often at the behest of local neighborhood groups.
The bill was passed by the Senate last month and is now part of a broad package of housing proposals under negotiation that Gov. Jerry Brown and Democratic legislative leaders announced Monday was likely to be voted on in (p. A13) some form later this summer.
“The explosive costs of housing have spread like wildfire around the state,” said Scott Wiener, a Democratic senator from San Francisco who sponsored the bill. “This is no longer a coastal, elite housing problem. This is a problem in big swaths of the state. It is damaging the economy. It is damaging the environment, as people get pushed into longer commutes.”
. . .
The bill sponsored by Mr. Wiener, one of 130 housing measures that have been introduced this year, would restrict one of the biggest development tools that communities wield: the ability to use zoning, environmental and procedural laws to thwart projects they deem out of character with their neighborhood.

For the full story, see:

Adam Nagourney and Conor Dougherty. “Housing Costs Put California In Crisis Mode.” The New York Times (Tuesday, July 18, 2017): A1 & A13.
(Note: ellipses added.)
(Note: the online version of the story has the date July 17, 2017, and has the title “The Cost of a Hot Economy in California: A Severe Housing Crisis.”)

Some Brain Traits Ease Music Learning

(p. C2) A study published in Cerebral Cortex in July [2015] shows that unusual activity in specific neural areas can predict how easily musicians learn their chops.
. . .
The data . . . point to a distinct starting advantage in some people–and where that advantage might reside in the brain. A retroactive examination of the first fMRI images predicted who would be the best learners.
Those with a hyperactive Heschl’s gyrus (part of the cerebral cortex that is associated with musical pitch) and with lots of reactivity in their right hippocampus (an area linked to auditory memory) turned out to be more likely to remember tunes they had heard before and, after some practice, play them well.
The “kicker,” said Dr. Zatorre, was finding that neural head start. “That gives you an advantage when you’re learning music, and it’s a completely different system from the parts of the brain that show learning has taken place. It speaks to the idea of 10,000 hours.” In his book “Outliers,” Malcolm Gladwell called 10,000 hours of practice “the magic number of greatness.” Dr. Zatorre disagrees, saying, “Is it really fair to say that everyone’s brain is structured the same way, and that if you practice, you will accomplish the same thing?”

For the full commentary, see:
Susan Pinker. “Practice Makes Some Perfect, Others Maybe Not.” The Wall Street Journal (Saturday, Aug. 29, 2015): C2.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the commentary has the date Aug. 26, 2015.)

The print version of the Cerebral Cortex article discussed above, is:
Herholz, Sibylle C., Emily B. J. Coffey, Christo Pantev, and Robert J. Zatorre. “Dissociation of Neural Networks for Predisposition and for Training-Related Plasticity in Auditory-Motor Learning.” Cerebral Cortex 26, no. 7 (July 1, 2016): 3125-34.

The Gladwell book mentioned above, is:
Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.

What Wofford’s Family “Lacked in Money, They Made Up for in Expectations”

(p. A19) Growing up on Buffalo’s rough and often neglected East Side, Keith H. Wofford recalled many crisp autumn Sundays spent with his father bonding over the Bills, following the team’s losses and wins on the radio.
Tickets to football games were not in the family’s budget: His father, John Wofford, worked at the nearby Chevrolet factory for 32 years, and his mother, Ruby, picked up odd jobs in retail to bring in extra income. But what the Woffords lacked in money, they made up for in expectations for their two sons.
“They always had an incredible amount of confidence in us,” Mr. Wofford, 49, said in an interview. “They made very clear that they didn’t see any limitations.”
Mr. Wofford held tight to that ideal as he left high school as a 17-year-old junior to attend Harvard University on a scholarship. Seven years later, he graduated from Harvard Law School. Last year, Mr. Wofford earned at least $4.3 million as a partner overseeing 300 lawyers and 700 employees at the New York office of international law firm Ropes & Gray, LLP, according to financial disclosure forms.
Now he’s the Republican nominee for state attorney general in New York, vying to become one of the most powerful law enforcement officials in the country.
“How many guys who work at a white shoe law firm had dads who had a union job?” asked C. Teo Balbach, 50, the chief executive of a software firm who grew up in Buffalo, and played intramural rugby at Harvard with Mr. Wofford.
“He’s a real hard worker and grinder, and that comes from that upbringing where you come from a middle-class family in a difficult neighborhood and you don’t take anything for granted,” Mr. Balbach added.
. . .
. . . issues facing Mr. Wofford should he win are potential conflicts of interest from his law practice.
. . .
Mr. Wofford said the criticism about him is indicative of Ms. James’s “hyperpartisan” attitude, and he sought to distinguish himself from her by characterizing himself as an outsider.
“Being on the wrong side of the tracks in Buffalo,” Mr. Wofford said, “is about as far from insider as you can get.”
His success as a lawyer, however, did allow him one heartfelt opportunity: In his father’s last years, Mr. Wofford returned to Buffalo, and during football season, they would bond again over Bills games — but in person, at the stadium, as a season-ticket holder.

For the full story, see:
Jeffery C. Mays. “Can an Unknown G.O.P. Candidate Become Attorney General?” The New York Times (Saturday, Oct. 13, 2018): A19.
(Note: ellipses added.)
(Note: the online version of the story has the date Oct. 12, 2018, and has the title “Can a Black Republican Who Voted for Trump Be New York’s Next Attorney General?”)