Category: Regulations

Connecticut Upholds Car Dealerships’ “Lucrative Stranglehold” on New Car Market

(p. A23) Connecticut and Tesla should be a perfect fit. But lawmakers failed to act on a bill in this year’s regular legislative session (for the third straight year) that would have legalized direct sales by Tesla, whose business model is rooted in selling directly to consumers.
The culprit? Heavy lobbying by the state’s car dealerships.
Thanks to Connecticut’s decades-old franchise laws, new cars can be sold only through licensed franchises independent of carmakers. Even though only about 5,500 zero-emission cars have sold in Connecticut since 2011, Tesla’s effort to cut out the middlemen would undermine the lucrative stranglehold that car dealerships have on the new car market.
. . .
. . . , the National Automobile Dealers Association claimed franchise laws “keep prices competitive and low.” However, a 2009 paper by an economist at the Justice Department’s Antitrust Division instead concluded that “car customers would benefit from elimination of state bans on auto manufacturers’ making direct sales to consumers.” The paper pointed to a study by a Goldman Sachs analyst in 2000 that found that direct manufacturer sales could lower costs by 8.6 percent, with most of the savings resulting from more efficient matching between consumer demand and supply, and a subsequent reduction in inventory.
No wonder the Federal Trade Commission has criticized franchise laws as a “special protection” for these dealers — “a protection that is likely harming both competition and consumers.”

For the full commentary, see:
NICK SIBILLA. “‘Connecticut Should Be Tesla Turf.” The New York Times (Fri., JULY 7, 2017): A23.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Connecticut Should Be Tesla Country.”)

The Department of Justice research paper, mentioned above, is:

Bodisch, Gerald R. “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers.” U.S. Department of Justice, Economic Analysis Group, Competition Advocacy Paper # EAG 09-1 CA. May 2009.

Boys Town Closes California Sites Due to Intrusive Regulations

(p. 1A) It’s been a century since a young Irish priest named Father Edward Flanagan welcomed homeless boys into a run-down Victorian mansion in downtown Omaha.
But as Boys Town celebrates its centennial, the organization is lessening its focus on the kind of residential care model that made it famous.
The latest wave came in June, as Boys Town announced the shuttering of sites in New York, Texas and California, including one residential care site in Orange County.
. . .
In 2000 under the Rev. Val Peter, then its executive director, the organization had 16 sites — though some were shelters without residential care.
The Rev. Steven Boes, current president and national executive director, insists the Flanagan mission of caring for American families and children remains, despite what he called some tough decisions to close sites.
. . .
(p. 2A) Boys Town decided to shutter its 80-acre residential site in Trabuco Canyon and two family homes in Tustin, California, after years of advocating for regulatory changes in that state. At the time of the June announcement, those homes housed 28 children.
The Trabuco Canyon site was one of 14 Boys Town residential care facilities opened in the 1980s and ’90s as Peter worked to spread the model to larger metro areas around the nation.
Since then, changing state regulations have made it more difficult to implement the Boys Town model in many of those areas, said Bob Pick, executive vice president of youth care.
“We opened those sites 20 or 30 years ago, and it was an exciting time,” Pick said. “But times change, contracts change and we have to serve kids with the highest quality. We just couldn’t do that in some locations.”
When the Trabuco Canyon facility opened, youths stayed for up to two years, Pick said, adding that Boys Town’s own research shows that the minimum stay should be about six months and a yearlong stay is ideal.
Because of contractual rules including mandated length of stays in California, “we couldn’t get kids to stay longer than two or three months,” Pick said. “That’s just not quality care.”
. . .
The changes at Boys Town haven’t come without criticism.
The Rev. Peter worries that the closing of Boys Town sites and focus on research runs afoul of Flanagan’s mission. “I gave my whole life to this — to Flanagan’s dream,” Peter, 83, said. “This is called God’s dream. Times change, but God’s dream doesn’t.”

For the full story, see:
Klecker, Mara. “Renowned care model no longer main focus; Overall trend is toward in-home family consulting, fewer residential sites.” Omaha World-Herald (Sun., Aug. 27, 2017): 1A-2A.
(Note: ellipses added..)

California Elite Regulates to Reduce Affordable Housing

(p. A11) In Silicon Valley the median home costs $1.2 million, about 2.5 times as much as in Seattle. Houses are less expensive inland–about $350,000 in Riverside and Sacramento–but living there often means a long commute. The weather also isn’t much better than in Phoenix or Dallas, so why not move to another state? A net 800,000 people did just that between 2005 and 2015, and many of them earned less than $30,000.
. . .
The state Legislative Analyst Office notes that in California’s coastal metros more than two-thirds of cities and counties have policies explicitly aimed at restricting housing growth, such as limits on density. When a developer wants to break ground, local governments impose multilayered reviews that can mean getting approval from the municipal building department, health department, fire department and planning commission as well as elected officials.
Neighbors can delay or block projects using the state’s 1970 Environmental Quality Act. It isn’t coincidental that California’s housing prices soared during the 1970s. Getting a building permit in San Francisco takes about three times as long as in the typical American metro.
There are more-direct costs, too: Local governments tack on hefty development fees, which run about three to four times as high in California as in the rest of the country. Politicians often attach conditions to projects requiring developers to pay workers “prevailing wages,” determined by local unions. This is one reason the cost of construction labor in California is about 20% higher than nationwide. Stringent building codes and energy-efficiency standards can add tens of thousands to the price of a house–even though low-flow appliances often cause people to use more water.
All told, it costs between $50,000 and $75,000 more to build a home in California than in the rest of the country. Building a low-income housing unit costs $332,000–about $80,000 more than the median home in Dallas or Phoenix.
. . .
Zoning is generally the biggest obstacle to development in coastal areas.
. . .
California’s housing policies are intrinsically regressive. Limiting the supply drives up home values in well-to-do coastal communities, while pricing everyone else out of the market.

For the full commentary, see:
Allysia Finley. “Why Housing Is Unaffordable in California; What could really help is deregulation, but residents aren’t likely to get it from Democratic lawmakers.” The Wall Street Journal (Sat., Sept. 30, 2017): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 29, 2017.)

Regulations Reduce Health Care Quality and Increase Health Care Cost

(p. A15) There are two million home health aides in the U.S. They spend more time with the elderly and disabled than anyone else, and their skills are essential to their clients’ quality of life. Yet these aides are poorly trained, and their national median wage is only a smidgen more than $10 an hour.
The reason? State regulations–in particular, Nurse Practice Acts–require registered nurses to perform even routine home-care tasks like administering eyedrops. That duty might not require a nursing degree, but defenders of the current system say aides lack the proper training. “What if they put in the cat’s eyedrops instead?” a health-care consultant asked me. In another conversation, the CEO of a managed-care insurance company wrote off home-care aides as “minimum wage people.”
But aides could do more. With less regulation and better training, they could become as integral to health-care teams as doctors and nurses. That could improve the quality of care while saving buckets of money for everyone involved.
. . .
. . . the potential cost savings are considerable. There are 2.3 million Medicaid patients receiving long-term care at home. Imagine if even half of them replaced one hourlong nurse’s visit a month with a stop by a trained aide. Assuming the nurse makes $35 an hour and the aide $15, that’s an immediate savings of roughly $275 million a year.

For the full commentary, see:
Paul Osterman. “Why Home Care Costs Too Much; Regulations often require that nurses do simple tasks like administer eyedrops.” The Wall Street Journal (Weds., Sept. 13, 2017): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 12, 2017.)

The commentary, quoted above, is related to the author’s book:
Osterman, Paul. Who Will Care for Us? Long-Term Care and the Long-Term Workforce. New York: Russell Sage Foundation, 2017.

“We Need an Economy That Is Much More Flexible, Much Faster Moving”

(p. A9) France has stagnated for years under chronically elevated unemployment and slow growth. The country’s strong worker protections and expensive benefits have been blamed by some for being at least partly at the root of the problem.
. . .
Mr. Macron’s chan ges make it easier to hire and fire workers and allow some workplace issues to be negotiated directly at the company level, rather than through industrywide agreements, in hopes of stimulating both growth and job creation. The government focused especially on smaller businesses with fewer than 50 employees — the majority of French businesses — which have complained bitterly about excessive red tape and regulations.
. . .
“We are entering into an economy built on innovation, skills, digitalization,” said Mr. Macron in an interview Thursday with the weekly newsmagazine Le Point.
“To succeed in this world we need an economy that is much more flexible, much faster moving.”
Employees will no longer have jobs that last for a lifetime, but periods of unemployment are more likely to be temporary and go in hand-in-hand with more frequent job changes and retraining, he said.
Among the changes in the decrees published Thursday is license for employers to directly negotiate with their workers over certain workplace issues rather than having to follow industrywide agreements. That will allow a car parts factory in one region to have a different agreement with its workers than a similar company elsewhere.
Small companies especially are being given more leeway to bargain directly with workers or their representatives, without the mediation of unions.

For the full story, see:
ALISSA J. RUBIN. “Economy Idle, France Relaxes Its Labor Law.” The New York Times (Fri., SEPT. 1, 2017): A1 & A9.
(Note: ellipses added.)
(Note: the online version of the story has the date AUG. 31, 2017, and has the title “France Unveils Contentious Labor Overhaul in Big Test for Macron.”)

“I Believe in Free Markets and Open Skies”

(p. B1) DELHI — When the fast-growing Malaysian carrier AirAsia wanted to expand, India looked like the ideal frontier.
. . .
Then, AirAsia discovered the difficulties of doing business in India.
While it benefited from a recent loosening of restrictions on foreign investment in airlines, AirAsia India has contended with a web of red tape and regulations for new entrants that have added significant cost and complexity to its operations.
. . .
(p. B7) . . . Mr. Chandilya acknowledges that he misjudged India’s regulatory environment, which is uniquely stringent for airlines.
Taxes on aviation turbines are higher than almost anywhere else in the world. Every airline, even those with just a few planes, is also required to fly regularly to remote regions, where flights often run half full. And new entrants like AirAsia India are prohibited from flying lucrative international routes until they are five years old and have at least 20 aircraft, the so-called 5/20 rule.
“I believe in free markets and open skies, but if you look at the policies we have in place, I don’t think we have that at all,” Mr. Chandilya said.
. . .
Each Indian state controls its own taxes on aviation turbine fuel, and in many places it is kept as high as 30 percent. More than half of AirAsia India’s operating costs are fuel-related.
High taxes also extend to maintenance and Indian airlines often choose to take their aircraft to nearby countries for that work. AirAsia India plans to send its planes to Malaysia or Singapore for servicing once they’ve been operational for two years.
“I talk to ministers and policy makers about how they can help the industry and promote growth, but it is very difficult to get them to understand that reducing these taxes will probably boost their states’ economies,” Mr. Chandilya said.

For the full story, see:
MAX BEARAK. “India’s Restricted Airspace.” The New York Times (Tues., JUNE 23, 2015): B1 & B7.
(Note: eilipses added.)
(Note: the online version of the story has the date JUNE 22, 2015, and has the title “AirAsia Faces Red Tape and Tough Competition in India.”)

Regulatory “Pain in Spain”

(p. A1) Gerard Vidal formed a data-encryption firm, Enigmedia, when he couldn’t find an employer looking for a Ph.D. in physics. But even a physicist was perplexed by the paperwork involved in starting a company in Spain, and the launch was delayed months by a process he calls “illogical, inefficient and totally frustrating.”
For many in the eurozone, where government budget cuts and corporate layoffs have left more than 18 million people out of work, the only way to find work is to create their own jobs. But these inexperienced entrepreneurs are flying into harsh headwinds.
Scarce capital, dense bureaucracy, a culture deeply averse to risk and a cratered consumer market all suppress startups in Europe.
. . .
(p. A12) In 2013, the OECD ranked Spain second worst in a survey on barriers to entrepreneurship in 29 nations. Spanish entrepreneurs have found that one of their big business challenges is simply getting incorporated. In the six months that Diana and Arantxa Fernández needed to obtain the multitude of permits required to open up a nursery school last year, the sisters burned through most of the capital they had husbanded from taking lump-sum unemployment. Now they are on the financial ropes.
. . .
When David Fito tried to open a gluten-free bakery after getting laid off by a bank a few years ago, he said 30 banks refused to lend him the €100,000 he needed. He got the credit only after his parents pledged their apartment as collateral and seven other wage earners agreed to co-sign. He said his business is now growing.
. . .
In Spain, young people with an entrepreneurial DNA long felt like fish out of water. María Alegre started selling homemade jewelry in Barcelona at age 13 and still remembers her profit–13,000 pesetas, worth about $90 at the time. But she said she never heard the word “entrepreneurship” until her fifth year at a Spanish business school and didn’t get encouragement until she was studying at the University of Michigan. Today, the 29-year old Ms. Alegre is CEO and co-founder of Chartboost Inc., a 130-employee San Francisco company that helps mobile-game developers find new users and monetize games. Ms. Alegre bemoans what she calls a Spanish “culture of being against risk and not dreaming big enough.”

For the full story, see:

Matt Moffett. “New Entrepreneurs Find Pain in Spain.” The Wall Street Journal (Fri., Nov. 28, 2014): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story has the date Nov. 27, 2014.”)

“Make School Lunches Great Again”

(p. D1) ATLANTA — On a sweltering morning in July, Sonny Perdue, the newly minted secretary of agriculture, strode across the stage of a convention hall here packed with 7,000 members of the School Nutrition Association, who had gathered for their annual conference.
After reminiscing about the cinnamon rolls baked by the lunchroom ladies of his youth, he delivered a rousing defense of school food-service workers who were unhappy with some of the sweeping changes made by the Obama administration. The amounts of fat, sugar and salt were drastically reduced. Portion sizes shrank. Lunch trays had to hold more fruits and vegetables. Snacks and food sold for fund-raising had to be healthier.
“Your dedication and creativity was being stifled,” Mr. Perdue said. “You were forced to focus your attention on strict, inflexible rules handed down from Washington. Even worse, you experienced firsthand that the rules were failing.”
Mr. Perdue then outlined how his department was loosening some of those rules. He finished with a folksy story about a child who asked whether Mr. Perdue could make school lunches great again.
Some in the audience cheered. Some walked out.

For the full story, see:

KIM SEVERSON. “Will the Trump Era Transform the School Lunch?” The New York Times (Weds., SEPT. 6, 2017): D1 & D6.
(Note: the online version of the story has the date SEPT. 5, 2017, and has the title”Will the Trump Era Transform the School Lunch?”)

“Bankruptcies and Losses Concentrate the Mind on Prudent Behavior”

(p. A18) Allan H. Meltzer, an influential conservative economist who strongly opposed government bailouts and was credited with coining the anti-bailout slogan, “Capitalism without failure is like religion without sin,” died on Monday in Pittsburgh. He was 89.
. . .

In books like “Why Capitalism?” (2012), Dr. Meltzer promoted the view that countries and investors should suffer the consequences of their mistakes, whether flawed fiscal measures or bad lending decisions.
In coining the slogan “Capitalism without failure is like religion without sin,” he added another maxim: “Bankruptcies and losses concentrate the mind on prudent behavior.”
. . .
In recent years Mr. Meltzer found a new interest in law and regulation. He and other scholars were working on a book, “Regulation and the Rule of Law.”

For the full obituary, see:
ZACH WICHTER. “Allan H. Meltzer, Economist Averse to Bailouts, Dies at 89.” The New York Times (Sat., MAY 13, 2017): A18.
(Note: ellipses added.)
(Note: the online version of the obituary has the date MAY 12, 2017, and has the title “Allan H. Meltzer, Conservative Economist, Dies at 89.”)

Meltzer’s book on capitalism, mentioned above, is:
Meltzer, Allan H. Why Capitalism? New York: Oxford University Press, 2012.

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

FinanceJobsMigrateFromNYCandSF2017-08-15.pngSource 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.