Category: Labor Economics

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.

RFID Tags Can Enable Process Innovations

(p. A11) The numbers don’t look good: Last week the Bureau of Labor Statistics reported that worker productivity dropped 0.5% in the second quarter of 2016–the third quarterly decline in a row. Productivity growth, a key driver of improved living standards, has averaged only 1.3% a year over the past decade, compared with 2.9% from mid-1995 through the end of 2005.
Why the slowdown? One theory is that markets have already wrung the easy efficiencies out of current technology. Federal Reserve Chair Janet Yellen noted in June that some economists “believe that the low-hanging fruit of innovation largely has been picked and that there is simply less scope for further gains.”
Count me in the optimistic camp. Low-cost wireless technologies are only beginning to break down the wall between the physical and digital worlds, and early-adopting companies are already achieving astounding productivity gains.
. . .
Employees can take inventory by waving an RFID reader over a shelf or a rack. A 2009 study by the University of Arkansas found scanning 10,000 items took 53 hours using bar codes, but only two hours with RFID. That efficiency allows Macy’s to inventory items every month rather than once or twice annually. Pam Sweeney, Macy’s senior vice president of logistics systems, tells me that RFID has pushed inventory accuracy in these departments to 95%.
. . .
As the cost of RFID tags falls to only cents apiece, the applications widen. Imagine checking out at the grocery store one day simply by running your cart through a scanner in a few seconds–no bar codes required. How many hours a year would that save consumers and employees both? If you want a million minuscule reasons to be bullish about productivity, look no further than tiny RFID tags.

For the full commentary, see:
MARK ROBERTI. “How Tiny Wireless Tech Makes Workers More Productive; Macy’s and Delta are using cheap RFID tags to blend the physical and digital.” The Wall Street Journal (Weds., Aug. 17, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Aug. 16, 2016.)

87% of Billionaires Inherited Less than Half of Wealth

(p. C6) Billionaires controlled 3.9% of the world’s total household wealth in 2015, slightly down from 4% in 2014, according to Wealth-X, a consulting group that uses public records and research staff to manually track the habits of ultra-high-net-worth individuals, or people valued at more than $30 million.
. . .
For most billionaires, however, it takes more than an inheritance to join the so-called three-comma club, according to the census; 87% of billionaires, up from 81% in 2014, made the majority of their fortunes themselves.
Todd Morgan, senior managing director at Bel Air Investment Advisors LLC in Los Angeles, says several of his billionaire clients are entrepreneurs and they are “very driven” and typically opt to keep working long after they’ve made their fortune.
“It’s not, ‘I’m worth a billion, now I’m going to sit on a beach and relax.’ It’s more of, ‘What can I create or achieve next?'” he says.

For the full story, see:
VERONICA DAGHER. “Ranks of Billionaires Grow, and They’re Getting Richer.” The Wall Street Journal (Weds., Aug. 8, 2016): C6.
(Note: ellipsis added.)
(Note: the online version of the story has the title “The Rich Get Richer as Billionaires Increase in Number.” There are minor differences in wording between the online and print versions. The sentences quoted above, follow the online version.)

Based on Cost and Fairness, 76.9% of Swiss Voters Say “No” to Taxpayer-Paid Minimum Income for All

(p. C6) ZURICH–Swiss voters on Sunday overwhelmingly rejected a controversial initiative that would have guaranteed all Swiss residents a minimum income on which to live.
The Basic Income Initiative received just 23.1% of the vote in Sunday’s referendum, compared with 76.9% against. . . .
Rather, the significance of Sunday’s vote–which the plan’s backers ensured by collecting the necessary 100,000 signatures–was that it gave a high-profile airing to an idea that has gained traction among economists in Europe and the U.S. in recent years.
Though the monthly amount wasn’t spelled out, it was expected to have been around 2,500 Swiss francs ($2,560) per adult, with a smaller subsidy for children, without regard to employment, education, disability, age or even wealth.
. . .
Opponents, . . . , latched on to two critiques: cost and fairness.

For the full story, see:
BRIAN BLACKSTONE. “Switzerland Votes to Reject Basic Income Initiative.” The Wall Street Journal (Mon., June 6, 2016): C6.
(Note: ellipses added.)
(Note: the online version of the story has the date June 5, 2016.)

Obama and Koch Brothers Agree Occupational Licensing Restricts Opportunity

GranatelliGraceCanineMassageTherapist2016-07-11.jpg“Grace Granatelli, a certified canine massage therapist. In 2013, Arizona’s Veterinary Medical Examining Board demanded that she close up shop for medically treating animals without a veterinary degree.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) SCOTTSDALE, Ariz. — “I usually start behind the neck,” Grace Granatelli said from her plump brown sofa. “There’s two pressure points back behind the ears that help relax them a little bit.” In her lap, she held the head of Sketch, her mixed beagle rat terrier, as her fingers traced small circles through his fur.

Ms. Granatelli, whose passion for dogs can be glimpsed in the oil portrait of her deceased pets and the bronzed casts of their paws, started an animal massage business during the recession after taking several courses and workshops. Her primary form of advertising was her car, with its “K9 RUBS” license plate and her website, Pawsitive Touch, stenciled onto her rear window.
But in 2013, Arizona’s Veterinary Medical Examining Board sent her a cease-and-desist order, demanding that she close up shop for medically treating animals without a veterinary degree. If not, the board warned, every Swedish doggy massage she completed could cost her a $1,000 fine.
To comply with the ruling and obtain a license, Ms. Granatelli would have to spend about $250,000 over four years at an accredited veterinary school. None require courses in massage technique; many don’t even offer one.
. . .
(p. B5) The Obama administration and the conservative political network financed by the Koch brothers don’t agree on much, but the belief that the zeal among states for licensing all sorts of occupations has spiraled out of control is one of them. In recent months, they have collaborated with an array of like-minded organizations and political leaders in a bid to roll back licensing rules.
. . .
. . . the current mishmash of requirements is too often “inconsistent, inefficient, and arbitrary,” a White House report concluded last year. Many of them, the report said, have little purpose other than to protect those already in the field from further competition.
. . .
Only rarely are licensing requirements removed. Last month, though, Arizona agreed to curb them for yoga teachers, geologists, citrus fruit packers and cremationists.
But dozens more professions escaped the ax. “Arizona is perceived as a low-regulatory state, but this was the most difficult bill we worked on this session,” said Daniel Scarpinato, a spokesman for the Republican governor, Douglas Ducey.
Licensing boards are generally dominated by members of the regulated profession. And in Arizona, more than two dozen of the boards are allowed to keep 90 percent of their fees, turning over a mere 10 percent of the revenue to the state.
“They use that money to hire contract lobbyists and P.R. people,” Mr. Scarpinato said. “This is really a dark corner of state government.”
They are often joined in their campaign by lobbyists from industry trade associations and for-profit colleges, which sell the required training courses.

For the full story, see:
PATRICIA COHEN. “Horse Rub? Where’s Your License?” The New York Times (Sat., JUNE 18, 2016): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the story has the date JUNE 17, 2016, and has the title “Moving to Arizona Soon? You Might Need a License.”)

The White House report mentioned above, is:
The White House. “Occupational Licensing: A Framework for Policy Makers.” July 2015.

$10,000 Universal Income Would Reduce Work and Cost Taxpayers Trillions

(p. B4) This month [June 2016], Charles Murray of the American Enterprise Institute will publish an updated version of his plan to replace welfare as we know it with a dollop of $10,000 in after-tax income for every American above the age of 21.
. . .
Its first hurdle is arithmetic. As Robert Greenstein of the left-leaning Center on Budget and Policy Priorities put it, a check of $10,000 to each of 300 million Americans would cost more than $3 trillion a year.
Where would that money come from? It amounts to nearly all the tax revenue collected by the federal government. Nothing in the history of this country suggests Americans are ready to add that kind of burden to their current taxes. Cut it by half to $5,000?
. . .
As Lawrence H. Summers, the former Treasury secretary and onetime top economic adviser to President Obama, told me, paying a $5,000 universal basic income to the 250 million nonpoor Americans would cost about $1.25 trillion a year. . . .
The popularity of the universal basic income stems from a fanciful diagnosis born in Silicon Valley of the challenges faced by the working class across industrialized nations: one that sees declining employment rates and stagnant wages and concludes that robots are about to take over all the jobs in the world.
. . .
Work, as Lawrence Katz of Harvard once pointed out, is not just what people do for a living. It is a source of status. It organizes people’s lives. It offers an opportunity for progress. None of this can be replaced by a check.
A universal basic income has many undesirable features, starting with its non-negligible disincentive to work. Almost a quarter of American households make less than $25,000. It would be hardly surprising if a $10,000 check each for mom and dad sapped their desire to work.
. . .
As Mr. Summers told a gathering last week at the Brookings Institution, “a universal basic income is one of those ideas that the longer you look at it, the less enthusiastic you become.”

For the full commentary, see:
Porter, Eduardo. “ECONOMIC SCENE; Plan to End Poverty Is Wide of the Target.” The New York Times (Weds., June 1, 2016): B1 & B4.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date MAY 31, 2016, and has the title “ECONOMIC SCENE; A Universal Basic Income Is a Poor Tool to Fight Poverty.”)

Government Land Use Regulations Increase Income Inequality

(p. A1) . . . a growing body of economic literature suggests that anti-growth sentiment, when multiplied across countless unheralded local development battles, is a major factor in creating a stagnant and less equal American economy.
It has even to some extent changed how Americans of different incomes view opportunity. Unlike past decades, when people of different socioeconomic backgrounds tended to move to similar areas, today, less-skilled workers often go where jobs are scarcer but housing is cheap, instead of heading to places with the most promising job opportunities, according to research by Daniel Shoag, a professor of public policy at Harvard, and Peter Ganong, (p. B2 [sic]) also of Harvard.
. . .
“To most people, zoning and land-use regulations might conjure up little more than images of late-night City Council meetings full of gadflies and minutiae. But these laws go a long way toward determining some fundamental aspects of life: what American neighborhoods look like, who gets to live where and what schools their children attend.
And when zoning laws get out of hand, economists say, the damage to the American economy and society can be profound. Studies have shown that laws aimed at things like “maintaining neighborhood character” or limiting how many unrelated people can live together in the same house contribute to racial segregation and deeper class disparities. They also exacerbate inequality by restricting the housing supply in places where demand is greatest.
The lost opportunities for development may theoretically reduce the output of the United States economy by as much as $1.5 trillion a year, according to estimates in a recent paper by the economists Chang-Tai Hsieh and Enrico Moretti. Regardless of the actual gains in dollars that could be achieved if zoning laws were significantly cut back, the research on land-use restrictions highlights some of the consequences of giving local communities too much control over who is allowed to live there.
“You don’t want rules made entirely for people that have something, at the expense of people who don’t,” said Jason Furman, chairman of the White House Council of Economic Advisers.

For the full story, see:
CONOR DOUGHERTY. “When Cities Spurn Growth, Equality Suffers.” The New York Times (Mon., July 4, 2016): A1 & B2 [sic].
(Note: the online version of the story has the date July 3, 2016, and has the title “How Anti-Growth Sentiment, Reflected in Zoning Laws, Thwarts Equality.”)

The paper mentioned above by Ganong and Shoag, is:
Ganong, Peter, and Daniel Shoag. “Why Has Regional Income Convergence in the U.S. Declined?” Working Paper, Jan. 2015.

The paper mentioned above by Hsieh and Moretti, is:
Hsieh, Chang-Tai, and Enrico Moretti. “Why Do Cities Matter? Local Growth and Aggregate Growth.” National Bureau of Economic Research (NBER) Working Paper # 21154, May 2015.

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.”)