Category: Labor Economics

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.”)

The “Grit” of the Successful Consists of “Passion and Perseverance”

(p. A11) Most people would think of John Irving as a gifted wordsmith. He is the author of best-selling novels celebrated for their Dickensian plots, including “The Cider House Rules” and “The World According to Garp.” But Mr. Irving has severe dyslexia, was a C-minus English student in high school and scored 475 out of 800 on the SAT verbal test. How, then, did he have such a remarkably successful career as a writer?
Angela Duckworth argues that the answer is “grit,” which she defines as a combination of passion and perseverance in the pursuit of a long-term goal. The author, a psychology professor at the University of Pennsylvania, has spent the past decade studying why some people have extraordinary success and others do not. “Grit” is a fascinating tour of the psychological research on success and also tells the stories of many gritty exemplars, . . .
. . .
Ms. Duckworth first realized the importance of grit as a teacher. Before she became an academic, she worked as a seventh-grade math teacher at a public school in New York. Some of her students were more inherently gifted with numbers than others. But not all of these capable students, to her surprise, got the best grades. Those who did weren’t always “math people”: For the most part, they were those who consistently invested more time and effort in their work.
Ms. Duckworth decided to become a research psychologist to figure out what explained their success. One of her first studies was of West Point cadets. Every year, West Point enrolls more than 1,000 students, but 20% of cadets drop out before graduation. Many quit in their first two months, during an intense training program known as Beast Barracks, or Beast. The most important factor in West Point admissions is the Whole Candidate Score, a composite measure of test scores, high-school rank, leadership potential and physical fitness. But Ms. Duckworth found that this score, which is essentially a measure of innate ability, did not predict who dropped out during Beast. She created her own “Grit Scale,” scored using cadets’ responses to statements like “I finish whatever I begin” or “New ideas and projects sometimes distract me from previous ones.” Those who scored highest on the Grit Scale were the most likely to make it to the end of Beast.
. . .
Grit may be defined by strenuous effort, but what drives that work, Ms. Duckworth finds, is passion, and a great service of Ms. Duckworth’s book is her down-to-earth definition of passion. To be gritty, an individual doesn’t need to have an obsessive infatuation with a goal. Rather, he needs to show “consistency over time.” The grittiest people have developed long-term goals and are constantly working toward them. “Enthusiasm is common,” she writes. “Endurance is rare.”

For the full review, see:

Emily Esfahani Smith. “BOOKSHELF; The Virtue of Hard Things; A study of Ivy League undergraduates showed that the smarter the students were, as measured by SAT scores, the less they persevered.” The Wall Street Journal (Weds., May 4, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the review has the date May 3, 2016.)

The book under review, is:
Duckworth, Angela. Grit: The Power of Passion and Perseverance. New York: Scribner, 2016.

Simple App Takes Entrepreneur from Rags to Riches

(p. B1) When Facebook bought WhatsApp for more than $19 billion in 2014, Jan Koum, a founder of the messaging company, arranged to sign a part of the deal outside the suburban social services center where he had once waited in line to collect food stamps.
Mr. Koum, like many in the tech industry, is an immigrant. He was a teenager when he and his mother moved to the San Francisco Bay Area in the early 1990s, in part to escape the anti-Semitic tide then sweeping his native Ukraine. As Mr. Koum later told Forbes, his mother worked as a babysitter and swept floors at a grocery store to survive in the new country; when she was found to have cancer, the family lived off her disability payments.
Tales of immigrant woe are not unusual in Silicon Valley. But Mr. Koum’s story carries greater resonance because his app has quietly become a mainstay of immigrant life. More than a billion people regularly use WhatsApp, which lets users send text messages and make phone calls free over the internet. The app is particularly popular in India, where it has more than 160 million users, as well as in Europe, South America and Africa.
. . .
(p. B7) One of the secrets to WhatsApp’s growth has been a focus on simplicity. The app is purposefully unflashy, and it does just a few things — texts, voice calls and video calls. As a result, it is supremely easy to use even for people who are neophytes to digital technology. This is one reason immigrants find it so powerful; it has given them access to a wider set of relatives who might have shunned the social networks that came before.
Adoption of WhatsApp often follows a curious pattern — older relatives often suggest it to younger ones, rather than the other way around.
“My aunt, who’s in her late 70s, was the one who really pushed me to get on it,” Ms. Reef said. Now, she said, she uses it nearly every day; lately she’s even gotten her children to use it.

For the full commentary, see:
Manjoo, Farhad. “STATE OF THE ART; A Shared Lifeline for Millions of Migrants.” The New York Times (Thurs., DEC. 22, 2016): B1 & B7.
(Note: eilipsis added.)
(Note: the online version of the commentary has the date DEC. 21, 2016, and has the title “STATE OF THE ART; For Millions of Immigrants, a Common Language: WhatsApp.”)

Tech Startup Rejects Gig Economy

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

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

Factory Workers Collaborate with Robots

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

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

47% Believe College Degree Will NOT Lead to Good Job

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

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

Reducing Taxes and Regulations Can Boost Growth

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

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

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

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

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

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

Lower 50% Have Largely Stagnated in Recent Decades

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

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

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