Category: Labor Economics

Most Eventually Successful Entrepreneurs Don’t Quickly Quit Their Day Jobs

(p. B4) For people who prefer an introspective read that is both inspiring and has a dash of self-help, Adam Grant’s “Originals: How Non-Conformists Move the World” is truly original. Mr. Grant, the youngest-ever tenured full professor at the Wharton School at the University of Pennsylvania, dives into what it takes to be a shoot-the-moon, Steve-Jobs-like success. Many of his conclusions are counterintuitive and based on deep research.
The biggest surprise for me was that the most successful entrepreneurs didn’t quit their day jobs to pursue their ideas; instead, they stayed at work until they had worked all the kinks out of their plans and gotten them off the ground. The other head-scratcher in this book? Procrastination is a great thing. (This was a terrific revelation.)
Mr. Grant’s research shows that some of the most creative thoughts develop during periods of so-called procrastination.

For the full commentary, see:
Sorkin, Andrew Ross. “DEALBOOK; Tell-Alls, Strategic Plans and Cautionary Tales.” The New York Times (Tues., JULY 5, 2016): B1 & B4.
(Note: the online version of the commentary has the date JULY 4, 2016, and has the title “DEALBOOK; A Reading List of Tell-Alls, Strategic Plans and Cautionary Tales in Finance.”)

The book praised by Sorkin in the passage quoted above, is:
Grant, Adam. Originals: How Non-Conformists Move the World. New York: Viking, 2016.

Computers and Humans as Complements Rather than Substitutes

(p. B1) “A lot of companies pushed hard on the idea that technology will solve every problem, and that we shouldn’t use humans,” said Paul English, the co-founder of a new online company called Lola Travel. (p. B10) “We think humans add value, so we’re trying to design technology to facilitate the human-to-human connection.”
. . .
“I tried to create the best travel website on the market,” he said. “But as good as we thought our tech was, there were many times where I thought I did a better job for people on the phone than our site could do.”
You’ve most likely experienced the headaches Mr. English is talking about. Think back to the last time you booked anything beyond a routine trip online. There’s a good chance you spent a lot more time and energy than you would have with a human. Sure, the Internet has obligingly stepped in to help; there are review sites, travel blogs, discussion forums and the hordes on social media to answer every possible travel question. But these resources only exacerbate the problem. They often turn what should be a fun activity into an hourslong research project.
. . .
In many cases, yes, but there remain vast realms of commerce in which guidance from a human expert works much better than a machine. Other than travel, consider the process of finding a handyman or plumber. The Internet has given us a wealth of data about these services. You could spend all day on Craigslist, Yelp or Angie’s List finding the best person for your job, which is precisely the problem.
“It’s going to be a long time until a computer can replace the estimating power of an experienced handyman,” said Doug Ludlow, the founder of the Happy Home Company, a one-year-old start-up that uses human experts to find the right person for your job. The company, which operates in the San Francisco Bay Area but plans to expand nationally, has contracts with a network of trusted service professionals in your area. To get some work done, you simply text your Happy Home manager with a description of the problem and maybe a few pictures.
“A quick glance from our handyman gives us an idea of who to send to your job, and what it will cost,” Mr. Ludlow said. The company handles payment processing, scheduling and any complaints if something goes wrong.
I recently used Happy Home to get a few home theater cables concealed in a wall. The experience was liberating — I found a handyman and a drywall specialist to do my job with little more than few texts, and no time spent scouring through web reviews.
It isn’t feasible to get humans involved in all of our purchases. Humans are costly and they’re limited in capacity. The great advantage of computers is that they “scale” — software can serve evermore customers for ever-lower prices.
But one of the ironies of the digital revolution is that it has also helped human expertise scale. Thanks to texting, human customer service agents can now serve multiple customers at a time. They can also access reams of data about your preferences, allowing them to quickly find answers for your questions.
As a result, for certain purchases, the cost of adding human expertise can be a trivial part of the overall transaction. Happy Home takes a cut of each service it sets up, but because it can squeeze out certain efficiencies from operating a network of service professionals, its prices match what you’d find looking for a handyman on your own. That’s true of human travel agencies, too — the commissions on travel are so good that Lola can afford to throw in human expertise almost as a kind of bonus.
The rise of computers is often portrayed as a great threat to all of our jobs. But these services sketch out a more optimistic scenario: That humans and machines will work together, and we, as customers, will be allowed, once more, to lazily beg for help.

For the full commentary, see:
Manjoo, Farhad. “State of the Art; The Machines Rose, but Now Start-Ups Add Human Touch.” The New York Times (Thurs., DEC. 17, 2015): B1 & B10.
(Note: ellipses added.)
(Note: the online version of the commentary has the date DEC. 16, 2015, and has the title “State of the Art; In a Self-Serve World, Start-Ups Find Value in Human Helpers.”)

Tribe Uses Autonomy to Fight American Dental Association (A.D.A.) Credentialism

(p. A10) Mr. Kennedy, 56, a soft-spoken Tlingit Native Alaskan, is a dental therapist, the rough equivalent of a physician assistant. He is trained to perform the most common procedures that dentists do, from fillings to extractions. Since January, when he started at the Swinomish Dental Clinic, over 50 miles north of Seattle, he has been the only dental therapist on tribal land anywhere in the lower 48 states. He studied in Alaska, which has the nation’s only program — patterned after one in New Zealand — aimed at training therapists specifically to work in underserved tribal areas.
Laws here in Washington and most other states bar dental therapists, who have long been opposed by the American Dental Association, so the tribe created its own licensing system. The federal Indian Health Service, which pays for medical care on Indian lands, cannot compensate therapists unless authorized by the state, so the Swinomish (pronounced SWIN-o-mish) needed private foundation support and meticulous accounting so that no law was violated.
“We had to take matters into our own hands,” said Brian Cladoosby, the chairman of the Swinomish Senate and president of the National Congress of American Indians. The breaking point came in 2015, after Washington’s Legislature — pressured by the dental lobby, Mr. Cladoosby said — declined for the fifth year in a row to pass a bill allowing a therapist program. Asserting tribal sovereignty, the tribe forged ahead anyway.
“The American Dental Association is no friend to American Indian tribes,” Mr. Cladoosby said in an interview.
. . .
(p. A11) Dr. Rachael R. Hogan, a dentist who works at the Swinomish Clinic, supervises Mr. Kennedy’s work. At first she did not think the arrangement would work. The A.D.A.’s safety concerns made sense, she said.
“I was leery,” she said. But after watching Mr. Kennedy for the past four months and visiting the training school in Alaska, she has changed her mind. By practicing procedures over and over — more than most dental school graduates, who must also study a broad range of diagnostic and disease issues — therapists can hone procedures, she said, to an art.
“Their fillings are better,” she said. “Are we providing substandard care by providing a therapist? Actually, I would say it’s the opposite.”

For the full story, see:
KIRK JOHNSON. “Asserting Tribal Sovereignty to Improve Indian’s Dental Care.” The New York Times (Mon., MAY 23, 2016): A10-A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date MAY 22, 2016, and has the title “Where Dentists Are Scarce, American Indians Forge a Path to Better Care.”)

Richest Rich Use Crony Capitalism to Game Tax System

(p. A1) Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.
. . .
(p. A12) “There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who served as chief economic adviser to Vice President Joseph R. Biden Jr. “That’s why these egregious loopholes exist, and why it’s so hard to close them.”

The Family Office
Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.
Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities.
The well-paid technicians who devise these arrangements toil away at white-shoe law firms and elite investment banks, as well as a variety of obscure boutiques. But at the fulcrum of the strategizing over how to minimize taxes are so-called family offices, the customized wealth management departments of Americans with hundreds of millions or billions of dollars in assets.
. . .
The major industry group representing private equity funds spends hundreds of thousands of dollars each year lobbying on such issues as “carried interest,” the granddaddy of Wall Street tax loopholes, which makes it possible for fund managers to pay the capital gains rate rather than the higher standard tax rate on a substantial share of their income for running the fund.

For the full story, see:
NOAM SCHEIBER and PATRICIA COHEN. “By Molding Tax System, Wealthiest Save Billions.” The New York Times (Weds., DEC. 30, 2015): A1 & A12.
(Note: bold, and larger font, in original; ellipses added.)
(Note: the online version of the story has the date DEC. 29, 2015, and has the title “For the Wealthiest, a Private Tax System That Saves Them Billions.”)

“Robots Take Away Subhuman Jobs”

(p. A21) Joseph F. Engelberger, a visionary engineer and entrepreneur who was at the forefront of the robotics revolution, building robots for use on assembly lines and fostering another, named Seymour, to handle chores in hospitals, died on Tuesday [December 1, 2015] in Newtown, Conn. . . .
. . .
Mr. Engelberger was a force in robotics from its early days, in the 1960s, when his company, Unimation, in Danbury, Conn., developed the Unimate, a robotic arm that would greatly accelerate industrial production lines.
. . .
Labor unions and some corporate managers resisted robotics at first, worrying, as Mr. Engelberger later put it, “that the robots can take all the jobs away.”
He disagreed with that notion.
“It’s unjustified,” he told The New York Times in 1997. “The robots take away subhuman jobs which we assign to people.”
Unimate proved to be more precise than the human hand in completing some repetitive and dangerous tasks. Automobile makers employed the arm to weld and move vehicle parts, apply adhesives to windshields and spray-paint car bodies — jobs that had posed chemical hazards to workers.

For the full obituary, see:
JEREMY PEARCE. “Joseph F. Engelberger, a Leader of the Robot Revolution, Dies at 90.” The New York Times (Thurs., DEC. 3, 2015): A33.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the obituary has the date DEC. 2, 2015, and has the title “Joseph F. Engelberger, a Leader of the Robot Revolution, Dies at 90.”)

Workers Gain Slightly Larger Percent of GDP

WorkerCompensationGraph2016-05-27.jpgSource of graph: online version of the NYT article quoted and cited below.

(p. B1) American workers are reaping fewer of the gains of a growing economy in the form of pay and benefits. Shareholders are reaping more in the form of corporate profits. That shift has been one of the most important economic stories of the last several decades, and it is the key to understanding stagnant wages for middle-class workers and a soaring stock market in the last quarter-century.

Here is what is less widely understood: That trend appears to be reversing itself.
It is early and the reversal may not last. And it certainly hasn’t fully undone the shift underway since the 1980s. But the numbers are quite clear that in the last couple of years workers have claimed a bigger piece of the economic pie and shareholders a smaller one.
The evidence available so far in 2016 — steady growth in wages and weak earnings for publicly traded companies — suggests that the reversal is continuing this year.

For the full story, see:
Neil Irwin. “The Upshot; Workers Are Getting a Bit More of the Economic Pie.” The New York Times (Fri., MAY 6, 2016): B1 & B9.
(Note: the online version of the story has the date MAY 3, 2016, and has the title “The Upshot; Workers Are Getting a Bit More of the Economic Pie (and Shareholders Less).”)

More Evidence that Once-Dynamic Florence Is Now Stagnant

(p. C1) New research from a pair of Italian economists documents an extraordinary fact: The wealthiest families in Florence today are descended from the wealthiest families of Florence nearly 600 years ago.
The two economists — Guglielmo Barone and Sauro Mocetti of the Bank of Italy — compared data on Florentine taxpayers in 1427 against tax data in 2011. Because Italian surnames are highly regional and distinctive, they could compare the income of families with a certain surname today, to those with the same surname in 1427. They found that the occupations, income and wealth of those distant ancestors with the same surname can help predict the occupation, income and wealth of their descendants today.

For the full story, see:
JOSH ZUMBRUN. “Florence’s Rich Stay Rich–for 600 Years.” The Wall Street Journal (Fri., May 20, 2016): C1-C2.
(Note: the online version of the story has the date May 19, 2016, and has the title “The Wealthy in Florence Today Are the Same Families as 600 Years Ago.” Where there are minor differences in the two versions, the passages quoted above follow the online version.)

The Barone and Mocetti working paper, is:
Barone, Guglielmo, and Sauro Mocetti “Intergenerational Mobility in the Very Long Run: Florence 1427-2011.” Bank of Italy Working Paper #1060, April 2016.

Feds’ Regulatory Delay Supports High-Fare Trans-Atlantic Airline Oligopoly

(p. B1) In the past three years, Norwegian, one of Europe’s biggest low-cost airlines, has quietly established a beachhead in the trans-Atlantic market by offering low-fare, no-frills service on long-haul flights.
Thanks to a small but expanding fleet of fuel-efficient planes combined with deeply discounted ticket prices, Norwegian Air Shuttle has attracted a growing number of leisure travelers looking for cheap flights.
It is all part of the vision of Norwegian’s outspoken chief executive, Bjorn Kjos, who is determined to force the same kind of low-fare competition on international routes that has been so successful in domestic markets for airlines like Southwest and Spirit, and Ryanair in Europe.
. . .
But Norwegian’s expansion has been stymied by vigorous opposition. Legacy airlines on both sides of the Atlantic see a low-cost competitor on their cash-cow routes as a major threat to their long-term profitability. Labor unions object to Norwegian’s plans to hire flight crew from Thailand, a practice they have repeatedly described as “labor dumping.”
The airline has also faced lengthy delays in receiving regulatory approvals in the United States.
. . .
(p. B4) A spokeswoman for the Transportation Department did not give any reasons for the delays that have left Norwegian in bureaucratic limbo in the United States. The airline’s first request was filed more than two years ago. . . .
The long delay in approving the application “does not reflect well on the political independence of the Department of Transportation with respect to the free trade principles behind the E.U.-U.S. open skies agreement,” according to a report by analysts at the CAPA Center for Aviation. “The calculated inaction only serves to restrict competition and to deny consumer choice.”
. . .
“There is still a lot to do,” Mr. Kjos said. “We have to think about how to fly more people more cheaply. There are hundreds of millions of people that don’t have access to cheap flights.”

For the full story, see:
JAD MOUAWAD. “Norwegian Air Flies in the Face of the Trans-Atlantic Establishment.” The New York Times (Tues., FEB. 23, 2016): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 22, 2016.)

Welfare System Hurts Those It Is Intended to Help

I saw part of a C-SPAN 2 presentation, originally broadcast on 3/28/16, of a new book by Harvey and Conyers that appears to argue persuasively that the current American welfare system makes it harder for welfare recipients to transition to employment. It further argues that work is an important part of the good life, usually an important contributor to happiness. As a result, the current welfare system hurts the very people that it is intended to help.

The book discussed above, is:
Harvey, Phil, and Lisa Conyers. The Human Cost of Welfare: How the System Hurts the People It’s Supposed to Help. Santa Barbara, CA: Praeger, 2016.

Tech Replaces Labor When Government Raises Labor Costs

(p. A11) In late 2013, Chili’s and Applebee’s announced that they were installing more than 100,000 tableside tablets at their restaurants across the country, allowing customers to order and pay their bill without ever talking to a waiter. The companies were soon followed by Buffalo Wild Wings, Panera Bread, Olive Garden and dozens of others. This means fewer servers covering more tables. Quick-service restaurant chains are also testing touch-screen ordering.
. . .
So why the increased use of technology? The major reason is consumer preference. Research shows that many appreciate the speed, order accuracy, and convenience of touch screens. This is particularly so among millennials who already do so much on smartphones and tablets. I’ve watched people–young and old–waiting in line to use the touch screens while employees stand idle at the counter.
The other reason is costs. While the technology is becoming much cheaper, government mandates have been making labor much more expensive.
In 2015, 14 cities and states approved $15 minimum wages–double the current federal minimum. Additionally, four states, 20 cities and one county now have mandatory paid-sick-leave laws generally requiring a paid week of time off each year per covered employee. And then there’s the Affordable Care Act, which further raises employer costs.

For the full commentary, see:
ANDY PUZDER. “Why Restaurant Automation Is on the Menu; Forget about robot waiters, but technology helps cut government-imposed costs. And consumers like it.” The Wall Street Journal (Fri., March 25, 2016): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date March 24, 2016.)

Owner Wants to Give Up Business Due to Regulations

(p. A11) D. Joy Riley, 59, of Brentwood, Tenn., who went to hear Mr. Rubio speak last weekend in the affluent Nashville suburb of Franklin, said that his story struck a chord with her personally. Her father was a coal miner. She is now a physician with a master’s degree in bioethics. “We’re all one or two generations away from some story like that,” she said, repeating a line Mr. Rubio often uses in his speeches.
. . .
Mr. Rubio’s story is intended to pull at the heartstrings. At his rally in Franklin, he spoke of his mother’s struggles growing up in poverty in rural Cuba.
“My mother was one of seven girls raised by a disabled father,” he said as he looked out on a horde of gingham shirts, khaki, fine Sunday dresses and derby hats.
He recalled how she left him with a strong understanding of selflessness and sacrifice. “My mother says her and her sisters never went to bed hungry,” he continued. “But she’s sure her parents did many nights.”
As he tells these personal stories, Mr. Rubio weaves in the policy prescriptions he would act on as president, making his case for a smaller, more conservative government.
When he talks of the need for lower taxes, he cites the work his parents found in hospitality. The only reason the hotel where his father worked could exist, he insists, was because the business climate in Miami Beach was friendly enough that someone wanted to invest. And had it not been for taxes that were low enough to allow people the disposable income to vacation in Las Vegas, he says, his mother would not have had any hotel rooms to clean.
. . .
Nancy Conklin, 52, a business owner from North Hampton, N.H., was nodding along as Mr. Rubio spoke near Portsmouth last month. “You get older, have a family, employ people, and you start to realize how difficult all these regulations are,” she said. “You don’t want to have a business because you can’t afford it.”

For the full story, see:
JEREMY W. PETERS. “Rubio’s Bootstraps Entice a Receptive Constituency: The Well-to-Do.” The New York Times (Sat., FEB. 27, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 26, 2016, and has the title “Marco Rubio Entices a Receptive Constituency: The Well-to-Do.”)