Category: Labor Economics

Uber Drivers Learn to Work Optimal Hours

(p. B1) For nearly 20 years, economists have been debating how cabdrivers decide when to call it a day. This may seem like a trivial question, but it is one that cuts to the heart of whether humans are fundamentally rational — in this case, whether they earn their incomes efficiently — as the discipline has traditionally assumed.
In one camp is a group of so-called behavioral economists who have found evidence that many taxi drivers work longer hours on days when business is slow and shorter hours when business is brisk — the opposite of what economic rationality, to say nothing of common sense, would seem to dictate.
In another camp is a group of more orthodox economists who argue that this perverse habit is largely an illusion in the eyes of certain researchers. Once you consult more precise numbers, they argue, you find that drivers typically work longer hours when it is in their financial interest to do so.
. . .
So who is right? That’s where Uber comes in. When one of the company’s researchers, using its supremely detailed data on drivers’ work time and rides, waded into the debate with a paper this year, the results were intriguing.
Over all, there was little evidence that drivers were driving less when they could make more per hour than usual. But that was not true for a large portion of new drivers. Many of these drivers appeared to have an income goal in mind and stopped when they were near it, causing them to knock off sooner when their hourly wage was high and to work longer when their wage was low.
. . .
“A substantial, although not most, frac-(p. B5)tion of partners do in fact come into the market with income targeting behavior,” the paper’s author, Michael Sheldon, an Uber data scientist, wrote. The behavior is then “rather quickly learned away in favor of more optimal decision making.”
In effect, Mr. Sheldon was saying, the generally rational beings that most economists presume to exist are made, not born — at least as far as their Uber driving is concerned.
. . .
As for Mr. Sheldon, the Uber paper’s author, he attributed his finding to the adventurous nature of many Uber drivers, who were open to running headlong into unfamiliar territory. It’s the sheer unfamiliarity of the Uber driving experience, he speculated, that may explain the initial bout of economically irrational behavior.
Mr. Sheldon was less open to the idea that people who did not depend on Uber for their livelihood helped account for his finding. So far as Uber can tell from other research, he said, those who drive irregularly respond more to fare increases than more regular drivers, at any level of earnings.

For the full story, see:
NOAM SCHEIBER. “Are Uber Drivers Rational? Not Always, Economists Say.” The New York Times (Mon., SEPT. 5, 2016): B1 & B5.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date SEPT. 4, 2016, and has the title “How Uber Drivers Decide How Long to Work.”)

The working paper by Michael Sheldon mentioned above, is:
Sheldon, Michael. “Income Targeting and the Ridesharing Market.” Working Paper, Feb. 18, 2016.

Income Redistribution May Hurt Innovation

(p. A13) Edward Conard is on a dual crusade. First, he is out to prove that technological innovation is the major driver of the creation of wealth. Second, that government programs to redistribute income are at best futile and at worst the enemy of the middle class.
. . .
“The late Steve Jobs,” Mr. Conard writes, “may have made huge profits from his innovations, but his wealth was small in comparison with the value of the iPhone and its imitators to their users.”
. . .
“Redistribution–whether achieved through taxation, regulatory restrictions, or social norms–appears,” he asserts, “to have large detrimental effects on risk-taking, innovation, productivity, and growth over the long run, especially in an economy where innovation produced by the entrepreneurial risk-taking of properly trained talent increasingly drives growth.”

For the full review, see:
RICHARD EPSTEIN. “BOOKSHELF; The Necessity of the Rich; Steve Jobs may have earned huge profits from his innovations, but they pale in comparison with the value of the iPhone to its users.” The Wall Street Journal (Thurs., Sept. 15, 2016): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Sept. 14, 2016, and has the title “BOOKSHELF; The Necessity of the Rich; Steve Jobs may have earned huge profits from his innovations, but they pale in comparison with the value of the iPhone to its users.”)

The book under review, is:
Conard, Edward. The Upside of Inequality: How Good Intentions Undermine the Middle Class. New York: Portfolio, 2016.

“I Could Lose My Ability to Control My Business”

(p. B4) Small-business owners say they are shouldering higher costs and scaling back expansion plans because of a revised federal rule that gives employees more leverage in settling workplace grievances.
The new policy, intended to hold businesses accountable for labor-law violations against people whose working conditions they control but don’t claim as employees, was put in place last year through a ruling by the National Labor Relations Board, . . .
. . .
Businesses say they are in a regulatory limbo because the new standard is vague about what constitutes control.
The previous test measured the direct control one business had over working conditions of people employed by another business. Now, even indirect control can count.
So far the impact seems to be largely on the franchisees. A home health-care business in Wisconsin is taking on $10,000 in annual recruiting costs because its franchiser stopped providing assistance to steer clear of regulators, and a small hotelier in Florida is abandoning expansion plans in small markets because one of its franchisers scaled back worker training it provides. A printing business owner in Washington state said he canceled plans to open an eighth store because he doesn’t want to risk the investment until it is clear his franchiser wouldn’t be considered a joint-employer.
“I could lose my ability to control my business,” said Chuck Stempler, an owner of the seven printing stores that operate under the AlphaGraphics brand in Washington and California.
. . .
Employers say the NLRB is confusing control with contractual relationships that help businesses and workers thrive.
“The NLRB is applying a new legal standard that would undermine a successful American business model that has enabled thousands of families to operate their own small businesses and help support millions of American jobs,” McDonald’s said in a statement, referring to the franchising business.

For the full story, see:
MELANIE TROTTMAN. “New Labor Law Curbs Small Firms’ Plans.” The Wall Street Journal (Sat., Aug. 6, 2016): B4.
(Note: ellipses added.)
(Note: the online version of the story has the date Aug. 5, 2016, and has the title “Some Small-Business Owners Trim Expansion Plans, Cite New Labor Law.”)

Mobile Game Helps When Work Is Absurd Drudgery

(p. A1) SEOUL–When Lee Jin-po was laid off last year for the third time in as many years, the 29-year-old mobile-game programmer expressed his frustration in his own instinctive way: He made a mobile game about it.
In Mr. Lee’s “Don’t Get Fired!,” the object is to rise through the ranks at a nameless corporation by performing an endless string of mind-numbing tasks, while avoiding a long list of fireable offenses.
“It’s just like real life,” he says.
In South Korea, where youth unemployment has hit an all-time high amid sluggish economic growth, “Don’t Get Fired!” has become a certified hit–one in a small raft of mobile games that has found success by embracing the drudgery and absurdity of work.
. . .
(p. A10) Mr. Lee later found volunteers to translate it into 12 languages, helping the international version attract another million downloads. Griffin Crowley, a 20-year-old high-school graduate in a Cleveland suburb, couldn’t stop playing after stumbling on it while fiddling with his cellphone. “Sometimes, you just have to laugh at the futility of life,” says Mr. Crowley, who recently worked a stint at a telemarketing company.

For the full story, see:
Cheng, Jonathan. “Congratulations Player One, Your Zombie Boss Didn’t Fire You; South Korean unemployment inspires games about work; laugh at chief’s jokes.” The Wall Street Journal (Mon., August 6, 2016): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date August 8 [sic], 2016.)

Chernow Is Consumed by His Work “in a Deep, Quiet, Rewarding Way”

(p. 12) I collect art, and the piece I adore most is an 1888 Winslow Homer etching called “Mending the Tears.” It depicts two women seated along the shore of an English fishing village. One is mending a net; the other is darning socks. They are consumed by their work, but in a deep, quiet, rewarding way. That’s how I feel when I write.

For the full commentary, see:
Ron Chernow (as told to Marc Myers). “HOUSE CALL; Ron Chernow; New York’s ‘Quietest’ Home.” The Wall Street Journal (Fri., Aug. 26, 2016): M10.
(Note: the online version of the commentary has the date Aug. 23, 2016, and has the title “HOUSE CALL; Hamilton Biographer Ron Chernow Finds New York’s ‘Quietest’ Home.”)

I have learned a lot from these two books by Chernow:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
Chernow, Ron. Titan: The Life of John D. Rockefeller, Sr. New York: Random House, 1998.

Chinese Industry Using Robots to Automate Routine Tasks

(p. B1) China’s appetite for European-made industrial robots is rapidly growing, as rising wages, a shrinking workforce and cultural changes drive more Chinese businesses to automation. The types of robots favored by Chinese manufacturers are also changing, as automation spreads from heavy industries such as auto manufacturing to those that require more precise, flexible robots capable of handling and assembling smaller products, including consumer electronics and apparel.
At stake is whether China can retain its dominance in manufacturing.
. . .
(p. B2) China, in 2013, became the world’s largest market for industrial robots, surpassing all of Western Europe, according to the International Federation of Robotics. In 2015, Chinese manufacturers bought roughly 67,000 robots, about a quarter of global sales, and demand is projected to more than double to 150,000 robots annually by 2018.

For the full story, see:
Robbie Whelan and Esther Fung. “China’s Factories Turn to Robots.” The Wall Street Journal (Weds., August 17, 2016): B1-B2.
(Note: ellipsis added.)
(Note: the online version of the story has the date August 16, 2016, and has the title “China’s Factories Count on Robots as Workforce Shrinks.”)

Executive Job-Hopping Increases

(p. B8) Corey Heller often finds himself ordering fresh business cards. The human resources executive has switched employers nine times since 1996–and spent less than three years at six of those workplaces.
In any other era, the 51-year-old Mr. Heller would be viewed as an unstable job hopper. But today, that stigma is starting to fade amid greater pressure for rapid results and decreased workplace loyalty, according to executive recruiters and coaches. The change suggests that companies increasingly believe high-level hires with multiple recent employers bring fresh insights and a mix of experience.
. . .
Brief stints will spread “because of the explosion of online recruiting and opportunistic offers to candidates with strong profiles,” predicts Stefanie Smith, a New York executive coach.

For the full story, see:
JOANN S. LUBLIN. “Job-Hopping Is Losing Its Stigma.” The Wall Street Journal (Weds., July 27, 2016): B8.
(Note: ellipsis added.)
(Note: the online version of the story has the date July 26, 2016, and has the title “Job-Hopping Executives No Longer Pay Penalty.”)

Innovations Make It Easier to Form and Run Smaller Firms

(p. B3) Unilever is paying $1 billion for Dollar Shave Club, a five-year-old start-up that sells razors and other personal products for men. Every other company should be afraid, very afraid.
The deal anecdotally shows that no company is safe from the creative destruction brought by technological change. The very nature of a company is fundamentally changing, becoming smaller and leaner with far fewer employees.
. . .
Now it is possible to leverage technology and transportation systems that never existed before. Dollar Shave Club used Amazon Web Services, a cloud computing service started by the online retailing giant in 2006 that encouraged a proliferation of e-commerce companies. Manufacturing now is just as much a line item as is a distribution apparatus. This is the business strategy of many other disruptive companies, including the home-sharing site Airbnb, which upends the idea of needing a hotel. The ride-hailing start-up Uber could never have been possible without a number of inventions including the internet, the smartphone and, most important, location tracking technology, enabling anyone to be a driver.

For the full commentary, see:
STEVEN DAVIDOFF SOLOMON. “Deal Professor; In Comfort of a Close Shave, a Distressing Disruption.” The New York Times (Weds., JULY 27, 2016): B3.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date JULY 26, 2016, and has the title “Deal Professor; $1 Billion for Dollar Shave Club: Why Every Company Should Worry.”)

Lack of Control at Job Causes Stress, Leading to Cardiovascular Disease

(p. 6) Allostasis is not about preserving constancy; it is about calibrating the body’s functions in response to external as well as internal conditions. The body doesn’t so much defend a particular set point as allow it to fluctuate in response to changing demands, including those of one’s social circumstances. Allostasis is, in that sense, a politically sophisticated theory of human physiology. Indeed, because of its sensitivity to social circumstances, allostasis is in many ways better than homeostasis for explaining modern chronic diseases.
Consider hypertension. Seventy million adults in the United States have it. For more than 90 percent of them, we don’t know the cause. However, we do have some clues. Hypertension disproportionately affects blacks, especially in poor communities.
. . .
Peter Sterling, a neurobiologist and a proponent of allostasis, has written that hypertension in these communities is a normal response to “chronic arousal” (or stress).
. . .
Allostasis is attractive because it puts psychosocial factors front and center in how we think about health problems. In one of his papers, Dr. Sterling talks about how, while canvassing in poor neighborhoods in Cleveland in the 1960s, he would frequently come across black men with limps and drooping faces, results of stroke. He was shocked, but today it is well established that poverty and racism are associated with stroke and poor cardiovascular health.
These associations also hold true in white communities. One example comes from the Whitehall study of almost 30,000 Civil Service workers in Britain over the past several decades. Mortality and poor health were found to increase stepwise from the highest to the lowest levels in the occupational hierarchy: Messengers and porters, for example, had nearly twice the death rate of administrators, even after accounting for differences in smoking and alcohol consumption. Researchers concluded that stress — from financial instability, time pressures or a general lack of job control — was driving much of the difference in survival.

For the full commentary, see:
SANDEEP JAUHAR. “When Blood Pressure Is Political.” The New York Times, SundayReview Section (Sun., AUG. 7, 2016): 6.
(Note: ellipses added.)
(Note: the online version of the review has the date AUG. 6, 2016.)

The commentary quoted above is distantly related to Jauhar’s book:
Jauhar, Sandeep. Doctored: The Disillusionment of an American Physician. New York: Farrar, Straus and Giroux, 2014.

College Admissions Process Encourages Superficial Service

(p. 3) This summer, as last, Dylan Hernandez, 17, noticed a theme on the social media accounts of fellow students at his private Catholic high school in Flint, Mich.
“An awfully large percentage of my friends — skewing towards the affluent — are taking ‘mission trips’ to Central America and Africa,” he wrote to me in a recent email. He knows this from pictures they post on Snapchat and Instagram, typically showing one of them “with some poor brown child aged 2 to 6 on their knee,” he explained. The captions tend to say something along the lines of, “This cutie made it so hard to leave.”
But leave they do, after as little as a week of helping to repair some village’s crumbling school or library, to return to their comfortable homes and quite possibly write a college-application essay about how transformed they are.
. . .
Hernandez reached out to me because he was familiar with writing I had done about the college admissions process. What he described is something that has long bothered me and other critics of that process: the persistent vogue among secondary-school students for so-called service that’s sometimes about little more than a faraway adventure and a few lines or paragraphs on their applications to selective colleges.
It turns developing-world hardship into a prose-ready opportunity for growth, empathy into an extracurricular activity.
And it reflects a broader gaming of the admissions process that concerns me just as much, because of its potential to create strange habits and values in the students who go through it, telling them that success is a matter of superficial packaging and checking off the right boxes at the right time. That’s true only in some cases, and hardly the recipe for a life well lived.
. . .
Richard Weissbourd, a child psychologist and Harvard lecturer who has studied the admissions process in the interest of reforming it, recalled speaking with wealthy parents who had bought an orphanage in Botswana so their children could have a project to write and talk about. He later became aware of other parents who had bought an AIDS clinic in a similarly poor country for the same reason.
“It becomes contagious,” he said.
A more recent phenomenon is teenagers trying to demonstrate their leadership skills in addition to their compassion by starting their own fledgling nonprofit groups rather than contributing to ones that already exist — and that might be more practiced and efficient at what they do.
. . .
In many cases they are compelled. Tara Dowling, the director of college counseling at the Rocky Hill School in East Greenwich, R.I., said that many secondary schools (including, as it happens, Dylan Hernandez’s) now require a minimum number of hours of service from students, whose schedules — jammed with sports, arts, SAT prep and more — leave little time for it.
Getting it done in one big Central American swoop becomes irresistible, and if that dilutes the intended meaning of the activity, who’s to blame: the students or the adults who set it up this way?

For the full commentary, see:
Bruni, Frank. “To Get to Harvard, Go to Haiti?” The New York Times, SundayReview Section (Sun., AUG. 14, 2016): 3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date AUG. 13, 2016.)

When Minimum Wage Rises, So Does Crime

(p. A13) By significantly reducing the available stock of job opportunities at the bottom end of the career ladder, a higher minimum wage increases the likelihood that unemployed teens will seek income elsewhere. A 2013 study by economists at Boston College analyzed increases in state and federal minimum-wage levels between 1997 and 2010. It found that low-skill workers affected by minimum-wage hikes were more likely to lose their jobs, become idle and commit crime. The authors warn that their results “point to the dangers both to the individual and to society from policies that restrict the already limited employment options of this group.”

For the full commentary, see:
MARK J. PERRY and MICHAEL SALTSMAN. “The Fight for $15 Will Hit North Philly Hard; Not far from Democrats’ soiree, teen unemployment is at 42%. What if the minimum wage doubles?” The Wall Street Journal (Weds., July 27, 2016): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date July 26, 2016.)

The 2013 study by Boston College economists, mentioned above, was published in 2014. The published version is:
Beauchamp, Andrew, and Stacey Chan. “The Minimum Wage and Crime.” B.E. Journal of Economic Analysis and Policy 14, no. 3 (July 2014): 1213-35.