Labor Economics – Page 51 – artdiamondblog.com

Tech Startup Rejects Gig Economy

(p. 1) SEATTLE — When Glenn Kelman became the chief executive of his online real estate start-up, he defied the tech industry’s conventional wisdom about how to grow.
Instead of hiring independent contractors, he brought in full-time employees and put them on the payroll — with benefits. That decision over a decade ago made Mr. Kelman and his company, Redfin, iconoclasts in the technology world.
Many tech start-ups lean on the idea of the “gig economy.” They staff up rapidly with freelancers, who are both cheaper to hire (none of the insurance, 401(k) and other expenses) and more flexible (they can work as much or as little as needed). It’s the model Uber has used to upend the taxi business.
. . .
Mr. Kelman argues that full-time employees allow him to offer better customer service. Redfin gives its agents salaries, health benefits, 401(k) contributions and, for the most productive ones, Redfin stock, none of which is standard for contractors. Redfin currently employs more than 1,000 agents.
Now with his company on a stronger footing, Mr. Kelman says he believes his approach has been vindicated. He has even (p. 5) become an informal counselor to other tech entrepreneurs exploring a shift to employees from contractors.
. . .
A number of technology companies have switched or are in the process of switching their contractors to employees for reasons similar to those of Redfin, including Shyp, a parcel shipping service; Luxe Valet, which offers a valet parking app; and Munchery, a food delivery service. Honor, an on-demand service for home health care professionals, is making the move to improve training.

For the full story, see:
NICK WINGFIELD. “A Start-Up Shies Away from Gig Economy.” The New York Times, SundayBusiness Section (Sun., JULY 10, 2016): 1 & 5.
(Note: ellipses added.)
(Note: the online version of the story has the date JULY 9, 2016, and has the title “Redfin Shies Away From the Typical Start-Up’s Gig Economy.”)

Factory Workers Collaborate with Robots

(p. B1) MARION, Ohio–A new worker is charming the staff at Whirlpool Corp.’s plant here: a robot called Chappy.
Employees at the dryer factory say they have taken a shine to one-armed, programmable robots that have assumed some repetitive tasks, working in concert with their human colleagues. One, nicknamed after a worker whose rote duties it has inherited, snaps photographs to scan for defects.
“If I can get some help doing my job, I’m all for that,” said Karen “Chappy” Beidler, who is now free to focus on checking and fixing wiring connections. “It’s technology helping manpower–you can’t beat it.”

For the full story, see:
Andrew Tangel. “Latest Robots Lend an Arm.” The Wall Street Journal (Weds., Nov. 9, 2016): B1 & B4.
(Note: the online version of the story has the date Nov. 8, 2016, and has the title “Latest Robots Lend a Helping Arm at Factories.”)

47% Believe College Degree Will NOT Lead to Good Job

(p. A3) Americans are losing faith in the value of a college degree, with majorities of young adults, men and rural residents saying college isn’t worth the cost, a new Wall Street Journal/NBC News survey shows.
The findings reflect an increase in public skepticism of higher education from just four years ago and highlight a growing divide in opinion falling along gender, educational, regional and partisan lines.
. . .
Overall, a slim plurality of Americans, 49%, believes earning a four-year degree will lead to a good job and higher lifetime earnings, compared with 47% who don’t, according to the poll of 1,200 people taken Aug. 5-9. That two-point margin narrowed from 13 points when the same question was asked four years earlier.
Big shifts occurred within several groups. While women by a large margin still have faith in a four-year degree, opinion among men swung significantly. Four years ago, men by a 12-point margin saw college as worth the cost. Now, they say it is not worth it, by a 10-point margin.
Likewise, among Americans 18 to 34 years old, skeptics outnumber believers 57% to 39%, almost a mirror image from four years earlier.
Today, Democrats, urban residents and Americans who consider themselves middle- and upper-class generally believe college is worth it; Republicans, rural residents and people who identify themselves as poor or working-class Americans don’t.

For the full story, see:
Josh Mitchell and Douglas Belkin. “Fewer Americans Value a College Degree, Poll Finds.” The Wall Street Journal (Fri., SEPT. 8, 2017): A3.
(Note: ellipsis added.)
(Note: the online version of the story has the date SEPT. 7, 2017, and has the title “Americans Losing Faith in College Degrees, Poll Finds.” The order of paragraphs was different in the online and print versions; the passages quoted above are from the online version.)

Reducing Taxes and Regulations Can Boost Growth

(p. A2) The angst was on display this weekend at the annual conference of the American Economic Association, the profession’s largest gathering. The conference is a showcase for agenda-setting research, a giant job fair for the nation’s most promising young economists and, this year, the site of endless discussion about how to rebuild trust in the discipline.
Many academic economists have been champions of free trade and globalization, ideas under assault among rising populist movements in advanced economies around the world. The rise of President-elect Donald Trump, with his fierce rhetoric against elites, in particular, left many at this conference questioning their place in the world.
“The economic elite did many things to undermine their credibility while people’s economic fortunes were taking a turn for the worse,” said Steven Davis, an economist at the University of Chicago.
. . .
Stanford University’s John Taylor and Columbia’s Glenn Hubbard said Mr. Trump’s plans to simplify the tax and regulatory codes could indeed boost the economy’s growth. Both economists served in the past in the White House Council of Economic Advisers, long populated by academics who present at the AEA conference every January.
This year, academics are out in the cold. During the election The Wall Street Journal contacted every former member of the CEA, including those going back to President Richard Nixon. None had been tapped as an adviser to Mr. Trump’s campaign, nor did any publicly endorse him.
The president-elect is “not particularly interested in hearing from the academic economist club,” Mr. Davis said.

For the full story, see:
Josh Zumbrun. “Economists Grapple With Public Disdain.” The Wall Street Journal (Mon., Jan. 9, 2017): A2.
(Note: ellipsis added.)
(Note: the online version of the story has the date Jan. 8, 2017, and has the title “Top Economists Grapple With Public Disdain for Initiatives They Championed.”)

Courageous Grover Cleveland Belongs in “Entitlement Reform Hall of Fame”

(p. A11) Mr. Cogan has just written a riveting, massive book, “The High Cost of Good Intentions,” on the history of entitlements in the U.S., and he describes how in 1972 the Senate “attached an across-the-board, permanent increase of 20% in Social Security benefits to a must-pass bill” on the debt ceiling. President Nixon grumbled loudly but signed it into law. In October, a month before his re-election, “Nixon reversed course and availed himself of an opportunity to take credit for the increase,” Mr. Cogan says. “When checks went out to some 28 million recipients, they were accompanied by a letter that said that the increase was ‘signed into law by President Richard Nixon.’ ”
The Nixon episode shows, says Mr. Cogan, that entitlements have been the main cause of America’s rising national debt since the early 1970s. Mr. Trump’s pact with the Democrats is part of a pattern: “The debt ceiling has to be raised this year because elected representatives have again failed to take action to control entitlement spending.”
. . .
Mr. Cogan conceived the book about four years ago when, as part of his research into 19th-century spending patterns, he “saw this remarkable phenomenon of the growth in Civil War pensions. By the 1890s, 30 years after it had ended, pensions from the war accounted for 40% of all federal government spending.” About a million people were getting Civil War pensions, he found, compared with 8,000 in 1873, eight years after the war. Mr. Cogan wondered what caused that “extraordinary growth” and whether it was unique.
When he went back to the stacks to look at pensions from the Revolutionary War, he saw “exactly the same pattern.” It dawned on him, he says, that this matched “the evolutionary pattern of modern entitlements, such as Social Security, Medicare, Medicaid, food stamps.”
. . .
Who would feature in an Entitlement Reform Hall of Fame? Mr. Cogan’s blue eyes shine contentedly at this question, as he utters the two words he seems to love most: Grover Cleveland. “He was the very first president to take on an entitlement. He objected to the large Civil War program and thought it needed to be reformed.” Cleveland was largely unsuccessful, but was a “remarkably courageous president.” In his time, Congress had started passing private relief bills, giving out individual pensions “on a grand scale. They’d take 100 or 200 of these bills on a Friday afternoon and pass them with a single vote. Incredibly, 55% of all bills introduced in the Senate in its 1885 to 1887 session were such private pension bills.”.

For the full interview, see:
Tunku Varadarajan. “THE WEEKEND INTERVIEW with John F. Cogan; Why Entitlements Keep Growing, and Growing, and . . ..” The Wall Street Journal (Tues., Sept. 9, 2017): A11.
(Note: ellipsis in title, in original; other ellipses added.)
(Note: the online version of the interview has the date Sept. 8, 2017, and has the title “THE WEEKEND INTERVIEW; Why Entitlements Keep Growing, and Growing, and . . ..”.)

The Cogan book, mentioned above, is:
Cogan, John F. The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs. Stanford, CA: Stanford University Press, 2017.

Lower 50% Have Largely Stagnated in Recent Decades

(p. B1) Even with all the setbacks from recessions, burst bubbles and vanishing industries, the United States has still pumped out breathtaking riches over the last three and half decades.
The real economy more than doubled in size; the government now uses a substantial share of that bounty to hand over as much as $5 trillion to help working families, older people, disabled and unemployed people pay for a home, visit a doctor and put their children through school.
Yet for half of all Americans, their share of the total economic pie has shrunk significantly, new research has found.
This group — the approximately 117 million adults stuck on the lower half of the income ladder — “has been completely shut off from economic growth since the 1970s,” the team of economists found. “Even after taxes and transfers, there has been close to zero growth for working-age adults in the bottom 50 percent.”
. . .
(p. B3) By 2014, the average income of half of American adults had barely budged, remaining around $16,000, while members of the top 1 percent brought home, on average, $1,304,800 or 81 times as much.
That ratio, the authors point out, “is similar to the gap between the average income in the United States and the average income in the world’s poorest countries, the war-torn Democratic Republic of Congo, Central African Republic and Burundi.”
The growth of incomes has probably increased a bit since 2014, the latest year for which full data exists, said Mr. Zucman, who, like Mr. Saez, also teaches at the University of California, Berkeley. But it is “not enough to make any significant difference to our long-run finding, and in particular, to affect the long-run stagnation of bottom-50-percent incomes.”
. . .
Mr. Piketty, Mr. Saez and Mr. Zucman concluded that the main driver of wealth in recent years has been investment income at the top. That is a switch from the 1980s and 1990s, when gains in income were primarily generated by working.

For the full story, see:
PATRICIA COHEN. “”A Bigger Pie, but Uneven Slices; Research Shows Slim Gains for the Bottom 50 Percent.” The New York Times (Weds., DEC. 7, 2016): B1 & B3.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 6, 2016, and has the title “A Bigger Economic Pie, but a Smaller Slice for Half of the U.S.” The print article shares the title “A Bigger Pie, but Uneven Slices” with a commentary by Eduardo Porter. The Cohen article has the unique subtitle “Research Shows Slim Gains for the Bottom 50 Percent.”)

The July 7, 2017 draft of Piketty, Saez and Zucman’s working paper, mentioned above, is:
Piketty, Thomas, Emmanuel Saez, and Gabriel Zucman. “Distributional National Accounts: Methods and Estimates for the United States.” Working Paper, July 6, 2017.

Half of Today’s 36-Year-Olds Earn Less Than Their Parents Did at Same Age

Source of graph: http://www.equality-of-opportunity.org/

(p. 2) These days, people are arguably more worried about the American dream than at any point since the Depression. But there has been no real measure of it, despite all of the data available. No one has known how many Americans are more affluent than their parents were — and how the number has changed.

The beginnings of a breakthrough came several years ago, when a team of economists led by Raj Chetty received access to millions of tax records that stretched over decades. The records were anonymous and came with strict privacy rules, but nonetheless allowed for the linking of generations.
The resulting research is among the most eye-opening economics work in recent years.
. . .
After the research began appearing, I mentioned to Chetty, a Stanford professor, and his colleagues that I thought they had a chance to do something no one yet had: create an index of the American dream. It took them months of work, using old Census data to estimate long-ago decades, but they have done it. They’ve constructed a data set that shows the percentage of American children who earn more money — and less money — than their parents earned at the same age.
The index is deeply alarming. It’s a portrait of an economy that disappoints a huge number of people who have heard that they live in a country where life gets better, only to experience something quite different.
. . .
About 92 percent of 1940 babies had higher pretax inflation-adjusted household earnings at age 30 than their parents had at the same age.
. . .
For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did.

For the full commentary, see:
Leonhardt, David. “The American Dream, Quantified at Last.” The New York Times, SundayReview Section (Sun., DEC. 11, 2016): 2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date DEC. 8, 2016.)

The Chetty co-authored paper mentioned above, is:
Chetty, Raj, David Grusky, Maximilian Hell, Nathaniel Hendren, Robert Manduca, and Jimmy Narang. “The Fading American Dream: Trends in Absolute Income Mobility since 1940.” Science 356, no. 6336 (2017): 398-406.

More Workers Benefit from Driverless Cars, Than Are Hurt

(p. A2) Self-driving vehicles have the potential to reshape a wide range of occupations held by roughly one in nine American workers, according to a new U.S. government report.
About 3.8 million people drive taxis, trucks, ambulances and other vehicles for a living. An additional 11.7 million workers drive as part of their work, including personal care aides, police officers, real-estate agents and plumbers. In all, that’s roughly 11.3% of total U.S. employment based on 2015 occupational data, according to the analysis by three Commerce Department economists.
If businesses embrace autonomous vehicles on a large scale, workers in the first category are “more likely to be displaced” from their jobs, while workers in the latter group “may be more likely to benefit from greater productivity and better working conditions,” wrote David Beede, Regina Powers and Cassandra Ingram in the report, released Friday.

For the full story, see:
Ben Leubsdorf. “Driverless Cars May Alter 1 in 9 Jobs.” The Wall Street Journal (Tues., Aug 15, 2017): A2.
(Note: the online version of the story has the date Aug 14, 2017, and has the title “Self-Driving Cars Could Transform Jobs Held by 1 in 9 U.S. Workers.”)

The report summarized in the passages quoted above, is:
Beede, David, Regina Powers, and Cassandra Ingram. “The Employment Impact of Autonomous Vehicles.” ESA Issue Brief, #05-17, Aug. 11, 2017.

“Achievement Is a Magnet to Mentors and a Beacon to Backers”

(p. 7) It’s true that networking can help you accomplish great things. But this obscures the opposite truth: Accomplishing great things helps you develop a network.
Look at big breaks in entertainment. For George Lucas, a turning point was when Francis Ford Coppola hired him as a production assistant and went on to mentor him. Mr. Lucas didn’t schmooze his way into the relationship, though. As a film student he’d won first prize at a national festival and a scholarship to be an apprentice on a Warner Bros. film — he picked one of Mr. Coppola’s.
Or take Justin Bieber’s career: Although it took off after Usher signed him, he didn’t network his way into that meeting. Mr. Bieber taught himself to sing and play four instruments, put a handful of videos on YouTube, and a manager ended up clicking on one. Adele was discovered that way, too: She wrote and recorded a three-song demo, a friend posted it on Myspace, and a music exec heard it. Developing talent — and sharing it — catapulted them into those connections.
For entrepreneurs, too, achievement is a magnet to mentors and a beacon to backers. Spanx took off when Oprah Winfrey chose it as one of her favorite things of the year — but not because she was stalked by the company’s founder, Sara Blakely. For two and a half years, Ms. Blakely sold fax machines by day so that she could build her prototype of footless pantyhose by night. She sent one from the first batch to Ms. Winfrey.
Networks help, of course. In a study of internet security start-ups, having a previous connection to an investor increased the odds of getting funded by that investor in the first year. But it was pretty much irrelevant afterward. Accomplishments were the dominant driver of who invested over time.
Similarly, researchers found that in hospitals, the radiologists who ended up with the most desirable networks were the ones with the highest performance nine months earlier. And in banks, star performers attracted bigger networks and were more likely to maintain those ties. Achievements don’t just help us make connections; they also help sustain those connections.
. . .
So stop fretting about networking. Take a page out of the George Lucas and Sara Blakely playbooks: Make an intriguing film, build a useful product.
And don’t feel pressure to go to networking events. No one really mixes at mixers. Although we plan to meet new people, we usually end up hanging out with old friends. The best networking happens when people gather for a purpose other than networking, to learn from one another or help one another.

For the full commentary, see:
Grant, Adam. “Networking Is Overrated.” The New York Times, SundayReview Section (Sun., AUG. 27, 2017): 7.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date AUG. 24, 2017, and has the title “Good News for Young Strivers: Networking Is Overrated.”)

Higher-Paid Finance Jobs Moving from NYC and San Francisco to Phoenix, Salt Lake City, and Dallas

Source of graph: online version of the WSJ article quoted and cited below.

(p. B1) Traditional finance hubs have yet to recover all the jobs lost during the recession, but the industry is booming in places like Phoenix, Salt Lake City and Dallas. The migration has accelerated as investment firms face declining profitability and soaring real estate costs.
. . .
“San Francisco is a wonderful place, but unfortunately it’s an expensive place from a real estate standpoint,” said Brian McDonald, a senior vice president for Schwab. “So we had to identify other places where we could make things work.”
While the finance industry has been relocating entry-level jobs since the late 1980s, today’s moves are claiming higher-paid jobs in human resources, compliance and asset management, chipping away at New York City’s middle class, said (p. B2) Kathryn Wylde, president and chief executive of the Partnership for New York City, a nonprofit that represents the city’s business leadership.
“This industry isn’t just a bunch of rich Wall Street guys,” Ms. Wylde said. “It’s a big source of employment that’s disappearing from New York.”

For the full story, see:
Asjylyn Loder. “Wall Street’s New Frontier.” The Wall Street Journal (Thurs., JULY 27, 2017): B1-B2.
(Note: ellipsis added.)
(Note: the online version of the story has the date JULY 26, 2017, and has the title “Passive Migration: Denver Wins Big as Financial Firms Relocate to Cut Costs.”)

Seattle Increase in Minimum Wage Results in Fewer Hours Worked, and Lower Incomes

(p. A13) By now you have read 15 articles on the Seattle minimum-wage fiasco. Since the city boosted its local minimum from $9.47 in 2014 to $13 last year (on its way to $15), a detailed investigation by University of Washington economists finds that beneficiaries actually saw their incomes fall by a net $125 a month because employers cut their hours.
. . .
The impetus came from people who don’t actually earn the minimum wage–labor-union leaders and think-tankers and activist organizations.
. . .
Organizers look fondly to Denmark, where a McDonald’s line worker receives $41,000 a year and five weeks of paid vacation. As the Atlantic put it two years ago, “Unionizing workers at McDonald’s and other fast-food chains might be a long shot, but if it succeeds, it might help lift a million or more workers into the middle class (or at least into the lower middle class) and create a model for low-wage workers in other industries.”
This sounds pretty but is misleading in a fundamental way. The workers a McDonald’s franchise would hire at $15 an hour are different from those it would hire at $8.29, the average earned by a fast-food worker today.
Costs would go up. The industry would likely shrink, it would likely replace workers with automation, but it would still create jobs at $15 an hour for people whose productivity can justify $15 an hour. The people who work at McDonald’s today, typically, would already be earning $15 an hour somewhere else if their productivity could justify $15 an hour.
Everybody needs to start somewhere, including the unskilled and those who lack a work history. Some need a job that doesn’t demand much of them. They have other obligations. They accept less pay to maximize flexibility and freedom from responsibility. They don’t plan to make a career of it. The fast-food industry in America is built on such people.

For the full commentary, see:
Holman W. Jenkins, Jr. “Seattle Aims at McDonald’s, Hits Workers.” The Wall Street Journal (Sat., July 1, 2017): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 30, 2017.)

The Seattle minimum wage paper, mentioned above, is:
Jardim, Ekaterina, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, and Hilary Wething. “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” National Bureau of Economic Research Working Paper Series, # 23532, June 2017.