Quotulatiousness

April 24, 2014

You can’t say the IRS isn’t caring and generous

Filed under: Bureaucracy, Government, USA — Tags: , — Nicholas Russon @ 08:27

Tim Cavanaugh explains that your jaundiced view of the Internal Revenue Service is clearly contradicted by the IRS’s approach to helping people with tax troubles:

Sometimes it seems like you only hear the bad news about the Internal Revenue Service: the targeting of the president’s enemies; the padding of union bosses’ hours.

But sometimes the federal tax collector is there to lend a hand.

During 26 of the darkest months of the post-recession, 1,100 persons in the United States had “substantiated Federal tax compliance problems.”

Yet during that same time period, from October 2010 through December 2012, the IRS showed mercy, even charity. It gave those 1,100 people more than $1 million in cash awards, as well as other considerations of value.

The other considerations included 69 workplace promotions and 10,000 hours worth of what California public employees call “air time.”

That is to say: All of those 1,100 were IRS employees.

March 30, 2014

In which Tim Worstall admits that Karl Marx was right

Filed under: Business, Economics, Law — Tags: , , , , — Nicholas Russon @ 10:37

Well, right in this particular analysis, anyway:

Which is where we can bring Karl Marx into the discussion. Wrong as he was on many points he was at times a perceptive analyst. And he noted that what determined the wages of the workers wasn’t some calculation of a “fair wage”, nor some true value of their production (although he had much to say on both points), but in a market economy the wages that were paid were a reflection of what other people were willing to pay for access to that labour.

If, for example, there were a large number of unemployed (that “reserve army of the unemployed”) then a capitalist didn’t have to raise the wages of his workers however far productivity grew. If anyone tried to capture a bit more of the value being created, say through a strike or other activity, then the capitalist could simply fire them and bring in some of those unemployed. No profits needed to be shared with the workers. However, when we get to a situation of full employment then the dynamic changes. It’s not possible to simply hire and fire to keep wages low. For the other capitalists are competing for access to that labour that makes those profits. The higher profits go the higher all capitalists will be willing to bid up wages to continue making some profit at all.

The obverse of this is if the employers collude in order to artificially suppress the wages of the workers which is why that case involving Apple, Google and so on is going to trial. That’s monopoly capitalism that is and we really don’t like it at all.

But in this case with Yahoo trying to challenge Google’s YouTube, it will be the workers who benefit. For the two companies are vying with each other for access to the content being made and thus the profits that can be made. Of whatever revenue can be made a larger portion will go to the producers of the content and a smaller one to the owners of the platforms. Which is excellent, this is exactly what we want to happen.

State occupational licensing is out of control

Filed under: Bureaucracy, Business, Politics, USA — Tags: , , , — Nicholas Russon @ 08:58

Ramesh Ponnuru discusses some examples of ridiculous state occupational license requirements:

Melanie Armstrong wanted to be an African hair braider, practicing a skill passed down from generation to generation. In Tupelo, Mississippi, where she lived, government licensing rules meant she had to take 300 hours of course work to start her salon: 300 hours, she notes, “none of which covered hair braiding.”

In testimony before a U.S. House subcommittee on Wednesday, Armstrong explained that her “ultimate goal” was to teach others how to braid. Getting the needed licenses to do that would have taken 3,200 hours. None of them taught students how to braid hair, either. That’s more hours than it would have taken her to get licenses to become a firefighter, emergency medical technician, hunting instructor, ambulance driver or real estate appraiser. It’s longer than it would have taken her to get licenses for all those things combined.

The subcommittee — led by New Yorkers Richard Hanna, a Republican, and Grace Meng, a Democrat — was considering the excesses of state occupational licensing. More and more jobs fall under these regulations. In the 1950s, according to one study, only about one in 20 jobs required a license. By 2006, about 29 percent did.

While Armstrong helped get her state to scale back the requirements for hair braiders, the trend is toward more stringent regulation. Patti Morrow, who runs an organization fighting licensing for interior designers, says, “These bills come back year after year like zombies.”

March 26, 2014

Minimum-wage jobs becoming more likely to be replaced by robots

Filed under: Economics, Technology — Tags: , , — Nicholas Russon @ 07:44

Everyone seems to want to raise the minimum wage right now (well, everyone in the media certainly), but it might backfire spectacularly on the very people it’s supposed to help:

It’s become commonplace for computers to replace American workers — think about those on an assembly line and in toll booths — but two University of Oxford professors have come to a surprising conclusion: Waitresses, fast-food workers and others earning at or near the minimum wage should also be on alert.

President Obama’s proposal to increase the federal minimum wage from $7.25 to $10.10 per hour could make it worthwhile for employers to adopt emerging technologies to do the work of their low-wage workers. But can a robot really do a janitor’s job? Can software fully replace a fast-food worker? Economists have long considered these low-skilled, non-routine jobs as less vulnerable to technological replacement, but until now, quantitative estimates of a job’s vulnerability have been missing from the debate.

Based on a 2013 paper by Carl Benedikt Frey and Michael A. Osborne of Oxford [PDF], occupations in the U.S. that pay at or near the minimum wage — that’s about one of every six workers in the U.S. — are much more susceptible to “computerization,” or as defined by the authors, “job automation by means of computer-controlled equipment.” The researchers considered a time frame of 20 years, and they measured whether such jobs could be computerized, not whether these jobs will be computerized. The latter involves assumptions about economic feasibility and social acceptance that go beyond mere technology.

The minimum-wage occupations that Frey and Osborne think are most vulnerable include, not surprisingly, telemarketers, sales clerks and cashiers. But also included are occupations that employ a large share of the low-wage workforce, such as waiters and waitresses, food-preparation workers and cooks. If the computerization of these low-wage jobs becomes feasible, and if employers find it economical to invest in such labor-saving technology, there will be huge implications for the U.S. labor force.

H/T to Colby Cosh, who said “McDonald’s is going to turn into vending machines. Can’t say this enough. McDonald’s…vending machines.”

March 23, 2014

The march of technology and the future of work

Filed under: Business, Technology — Tags: , , , — Nicholas Russon @ 10:28

Matt Ridley on the perpetual fretting that technological change will eliminate jobs and leave many permanently without work:

Bill Gates voiced a thought in a speech last week that is increasingly troubling America’s technical elite — that technology is about to make many, many people redundant. Advances in software, he said, will reduce demand for jobs, substituting robots for drivers, waiters or nurses.

The last time that I was in Silicon Valley I found the tech-heads fretting about this in direct proportion to their optimism about technology. That is to say, the more excited they are that the “singularity” is near — the moment when computers become so clever at making themselves even cleverer that the process accelerates to infinity — the more worried they are that there will be mass unemployment as a result.

This is by no means a new worry:

In the 1700s four in every five workers were employed on a farm. Thanks to tractors and combine harvesters, only one in fifty still works in farming, yet more people are at work than ever before. By 1850 the majority of jobs were in manufacturing. Today fewer than one in seven is. Yet Britain manufactures twice as much stuff by value as it did 60 years ago. In 1900 vast numbers of women worked in domestic service and were about to see their mangles and dusters mechanised. Yet more women have jobs than ever before.

Again and again technology has disrupted old work patterns and produced more, not less, work — usually at higher wages in more pleasant surroundings.

The followers of figures such as Ned Ludd, who smashed weaving looms, and Captain Swing, who smashed threshing machines (and, for that matter, Arthur Scargill) suffered unemployment and hardship in the short term but looked back later, or their children did, with horror at the sort of drudgery from which technology had delivered them.

Why should this next wave of technology be different? It’s partly that it is closer to home for the intelligentsia. Unkind jibe — there’s a sort of frisson running through the chatterati now that people they actually know might lose their jobs to machines, rather than the working class. Indeed, the jobs that look safest from robots are probably at the bottom of the educational heap: cooks, gardeners, maids. After many years’ work, Berkeley researchers have built a robot that can fold a towel — it takes 24 minutes.

February 13, 2014

“Minimize your therbligs”, or Taylor versus Gilbreth

Filed under: Business, History, USA — Tags: , , , — Nicholas Russon @ 09:05

Sippican Cottage makes a strong case for Frank Bunker Gilbreth being the greatest man ever produced by Maine (republishing an older post from 2012):

Frank Gilbreth was born in Fairfield, Maine, in 1868. He never went to college except to teach at Purdue eventually. He’s famous, in a way, and anonymous in another. He’s the father portrayed in the original Cheaper By The Dozen, using a stopwatch to figure out how to make his family more efficient. That was his thing — efficiency.

He was a bricklayer. Built houses. He got to wondering if the repetition of laying one oblong slug of fired clay atop two others in a bed of mortar could be improved by observing the motions of skilled persons, breaking these exertions down into their component movements, and eliminating the wasted motions in the routines. It can, and he did. I’ve been a hod carrier and mason tender, and I can tell you that working off the ground or a platform the same height as your feet would be backbreaking and slow way to assemble masonry. We always used the footing form boards and leftover planks to assemble ad hoc shelves just lower than waist height behind the mason so that they could turn and pick up a brick and some mortar and go back to the next slot in the wall. I had no idea Clifton Webb, er, Frank Gilbreth came up with the idea less than a century before. It would be literally impossible to calculate how much time, money, effort, and how many worker’s backs Frank Gilbreth (and his wife, who was his partner and carried on after his early death) saved anonymously. His method is now universal and uncontroversial. How many people are incalculably useful to their fellow men?

I first heard of Gilbreth in my first college semester, and while the biographical detail is new to me, the basic idea is the same as my (post-strike replacement) instructor described. So who’s the “Taylor” of my title?

Frederick Taylor is the progenitor of so many things that are in the common language today that he deserves to be discussed with the most influential people of his time. That’s not necessarily a good thing. Almost all the fruit of Taylor’s tree is rotten.

Taylor is the guy standing behind dehumanized workers with a stopwatch, keeping track of bathroom breaks, and generally treating all work as a series of unrelated steps that any unskilled human could do, and constantly finding new ways of measuring it and subdividing it to harangue a little more out of the continually less and less skilled worker. “Scientific Management,” they called it. The Soviet Union loved it. They thought all people were just cogs in a big machine anyway. Most of the terms for malingering in dead-end jobs come from Taylorism. Goldbricking. Dogging it. Taylor observed that when normal people are in a group and everyone has the same duties, it is human nature for everyone in the group to devolve and perform at the level of the least capable and energetic member. His solution was a big expansion of management. He is the busted idol of micromanagement, and by extension, big government.

I have a lovely leather-bound copy of Taylor’s The Principles of Scientific Management that I’ve never actually opened … it was on the used book charity fundraising table at my local bank branch, so I paid $1 for it. From Sippican’s description, I may not bother to read it, as I think I’ve encountered most of the content in the working world.

Minimize your therbligs until it becomes automatic; this doubles your effective lifetime — and thereby gives time to enjoy butterflies and kittens and rainbows.

That’s Robert Heinlein in his “Lazarus Long” character voice. What the heck is a therblig, and why is it in this post? Therbligs are Gilbreth’s basic motions of physical work; the essential parts of any manual task. Minimize them to make the work more efficient. The name is derived, as my college instructor put it, by spelling Gilbreth sideways.

February 5, 2014

NYT – reducing full-time employment by 2.5 million is a good thing

Filed under: Business, Economics, USA — Tags: , , — Nicholas Russon @ 09:33

This New York Times editorial tries valiantly to make the case that the recent prediction by the Congressional Budget Office of 2.5 million full-time job losses is a good thing for the affected workers and the economy as a whole:

The Congressional Budget Office estimated on Tuesday that the Affordable Care Act will reduce the number of full-time workers by 2.5 million over the next decade. That is mostly a good thing, a liberating result of the law. Of course, Republicans immediately tried to brand the findings as “devastating” and stark evidence of President Obama’s health care reform as a failure and a job killer. It is no such thing.

The report estimated that — thanks to an increase in insurance coverage under the act and the availability of subsidies to help pay the premiums — many workers who felt obliged to stay in a job that provided health benefits would now be able to leave those jobs or choose to work fewer hours than they otherwise would have. In other words, the report is about the choices workers can make when they are no longer tethered to an employer because of health benefits. The cumulative effect on the labor supply is the equivalent of 2.5 million fewer full-time workers by 2024.

[...]

The new law will free people, young and old, to pursue careers or retirement without having to worry about health coverage. Workers can seek positions they are most qualified for and will no longer need to feel locked into a job they don’t like because they need insurance for themselves or their families. It is hard to view this as any kind of disaster.

Despite all the whistling as we stroll along the cemetery fence, the editorial does correctly point out that insurance benefits that are tied to particular employers do limit choices for many workers. I’ve made the argument a few times that this is something that unions should be pushing very hard for: to make benefits more portable for both unionized and non-unionized workers. The rest of the editorial isn’t quite as helpful … two and a half million current workers no longer working (and not through a voluntary switch to self-employment or retirement) isn’t the wonderful thing they claim it is. Those people and their families will still need income to provide themselves with food, shelter, and all the other necessities of modern life. Tough to do that without visible means of support.

Update: At the National Journal, James Oliphant rallies to the White House’s defence during what he calls “the worst day that Obamacare has had in weeks — and that’s saying something.”

To debate that point, the White House supplied as its first responder Jason Furman, the chairman of the Council of Economic Advisers, an academic and policymaker schooled in the intricacies of the labor market. Furman disputed any reading of the report that said the ACA was a net drag on the economy — but often doing so in head-scratching language of a Washington insider.

At one point, a reporter at Tuesday’s briefing asked Furman in frustration, “What the heck do you mean?”

Furman’s presence, however, outlined in neon the problem the Obama administration has been having since the ACA became law: a persistent inability to detail its benefits in language that resonates with the public. And in its defense, the ACA’s multiple mechanisms are not the easiest to explain. To that end, its critics, who often have relied upon hyperbole and scare tactics, have always held the political advantage.

But sometimes you just have to punch the bully in the nose — and Furman wasn’t the person for the job. That was the case Tuesday. The first takeaway from a complex CBO report was that the office had concluded that Obamacare is going to be a job-killer. Period. Full stop. It fell upon Furman — along with liberal bloggers — to attempt to explain that, no, it’s more complicated than that.

Follow along: The report doesn’t say that the ACA will result in 2 million jobs lost by 2017, but projects there will be 2 million fewer workers in the workforce, the White House says (a number it doesn’t necessarily agree with). It’s the difference, Furman underscored, between labor supply and labor demand. And they aren’t “jobs,” he reiterated, they are “FTEs.” (Full-time equivalents, if you are scoring at home.)

In other words, he explained, businesses will still want as many workers as ever, but the ACA will result in an increasing number of workers deciding to take themselves either entirely out of the job market or working fewer hours. Why? Because they may decide to keep their income below a certain level in order to qualify for government help to buy health insurance on the exchanges.

This is a good thing, Furman said, because the ACA will give workers more flexibility, whether they want to become entrepreneurs or take another, lower-paying job. And again, the press corps had some trouble with this concept. It’s good for someone to take a lower-paying job? And it’s good that the law encourages them to take it?

February 3, 2014

The welfare trap

Filed under: Britain, Bureaucracy, Government — Tags: , , , — Nicholas Russon @ 09:27

An older post by A Very British Dude discusses the real problem with most of the public welfare/income support/unemployment benefits in Britain, but the same argument applies to most Western countries:

So your taxes, about a third of which go to paying working-age benefits, about a third in pensions, and the rest, everything else are part of a decent society in which everyone’s helping everyone else. Or they would be if the system wasn’t comprehensively broken, failing at all the significant tasks the welfare state is supposed to achieve. The welfare state is supposed to prevent poverty. It is, in fact, its major cause.

The problem is one of incentives, and not just those faced by the poor themselves. It’s obvious to anyone who isn’t paid handsomely to farm the poor, that for many people, it’s simply irrational to work. Once they’ve paid for taxes, clothes, transport and lunch, they’re considerably worse off than they would have been had they stayed in their pyjamas and watched Jeremy Kyle. Why would you take a miserable, boring, unpleasant minimum wage job instead of existing on benefits? The job insecurity at the bottom of the pyramid and the bureaucratic complexity of informing the authorities of a ‘change in circumstance’ is a further barrier. So when when the low-waged is “let go” after a couple of weeks, he’s got to re-apply for Housing benefits, Job-seekers’ allowance, Council Tax Benefit, income support and so on, from scratch. He may be genuinely destitute as a result of payments stopped, then restarted again too late, thanks to an abortive effort to “do the right thing”. Is it really any wonder so many feel trapped?

So, who benefits from this system? Certainly not those getting the benefits many of whom are comprehensively trapped in a life they wouldn’t have chosen. Not the Children of those getting benefits, who learn no other life thanks to the distorted incentives faced by their parents, but in whose name the benefits are paid. Certainly not the people paying the bill, John Q. Taxpayer, who thanks to the system face a sullen and resentful underclass, some of whom spend their non-working lives looking for ways to relieve you of your easily saleable property in order to buy sufficient narcotics to break the tedium for a few hours.

The main benefit of the benefits system accrues to those employed on secure graduate salaries to administer the system. These people are the farmers of the poor. This is not just the civil servants and local government employees who administer the system, but also the charity employees who don’t see the homeless and destitute (they outsource this to unpaid volunteers). It’s the police who are part of the state-crushing of the spirit of the young who find themselves trapped in this hell. The that the poor exist at all causes fear in the hearts of the affluent, and justifies the need for a police force. The Bureaucracy is an excellent provider of jobs. Which is why none of the solutions suggested by the Left of the political spectrum would ever reduce bureaucacy or police numbers, or the benefits bill. For that would involve firing sub-paying members of Unite or the PCS, and Unite is by far the biggest funder of the Labour party.

H/T to Amy Alkon for the link.

Update: A useful reminder from Rob Fisher at Samizdata — inflation hits the poor much harder than anyone else.

The Institute for Fiscal Studies is pointing out that while poorer people are paying more for food and fuel, richer people are enjoying low interest rates. So government spending and borrowing and the artificially low interest rates that go along with that are harmful to poor people, as are taxes on fuel, and income tax on minimum wage earners, and countless other instances of state meddling.

February 2, 2014

The “77 cents” meme

Filed under: Economics, Politics — Tags: , , , , , — Nicholas Russon @ 09:08

President Obama recycled the old claim that women are systematically underpaid and only get 77 cents for every dollar earned by men. Christina Hoff Sommers says this is far from the first time he’s been corrected (by the Washington Post, among others) for this hoary myth:

These and other differences in employment preferences and work-family choices have been widely studied in recent years and are now documented in a mountain of solid empirical research. By now the President and his staff must be aware that the wage gap statistic has been demolished. This is not the first time the Washington Post has alerted the White House to the error. Why continue to use it? One possibility is that they have been taken in by the apologetics of groups like the National Organization for Women and the American Association of University Women. In its 2007 Behind the Pay Gap report, the AAUW admits that most of the gap in earnings is explained by choices. But this admission is qualified: “Women’s personal choices are similarly fraught with inequities,” says the AAUW. It speaks of women being “pigeonholed” into “pink-collar” jobs in health and education. According to NOW, powerful sexist stereotypes “steer” women and men “toward different education, training, and career paths.”

Have these groups noticed that American women are now among the most educated, autonomous, opportunity-rich women in history? Why not respect their choices? For the past few decades, untold millions of state and federal dollars have been devoted to recruiting young women into engineering and computer technology. It hasn’t worked. The percent of degrees awarded to women in fields like computer science and engineering has either stagnated or significantly decreased since 2000. (According to Department of Education data, in 2000, women earned 19 percent of engineering BA’s, and 28 percent in computer science; by 2011, only 17 percent of engineering degrees were awarded to females, and the percent of female computer science degrees had dropped to 18.) All evidence suggests that though young women have the talent for engineering and computer science, their interest tends to lie elsewhere. To say that these women remain helplessly in thrall to sexist stereotypes, and manipulated into life choices by forces beyond their control, is divorced from reality — and demeaning to boot. If a woman wants to be a teacher rather than a miner, or a veterinarian rather than a petroleum engineer, more power to her.

The White House should stop using women’s choices to construct a false claim about social inequality that is poisoning our gender debates. And if the President is truly persuaded that statistical pay disparities indicate invidious discrimination, then he should address the wage gap in his own backyard. Female staff at the White House earn 88 cents on the dollar compared to men. Is there a White House war on women?

January 27, 2014

FATCA and the “toxic citizen” problem for Americans working abroad

Filed under: Bureaucracy, Law, USA — Tags: , , , — Nicholas Russon @ 11:04

Emma Elliott Freire explains why she and other Americans living and working in other countries feel like they’re being treated as “toxic citizens”:

The [travel] books tend to emphasize romance and adventure. As an American who is actually living abroad, though, I’ve found that the reality is quite different. My fellow Americans back home sometimes regard me with suspicion, and I feel like my government considers me a “toxic citizen.”

The US is one of two countries in the world that taxes its citizens on the income they earn while living abroad. The other is Eritrea. Every single other country bases its taxation on residency, i.e., you only pay taxes where you live and work.

Americans are required to file an annual tax return with the IRS when they’re abroad — even if they don’t owe any money. They’re also required to file a form called an FBAR to declare their foreign bank accounts. An undeclared account incurs a $10,000 fine.

As you might expect, international tax accountants get a lot of business from Americans. One tax accountant based in Amsterdam told me his American clients take their filings very seriously. “If they get the IRS going after them, they have a real problem,” he says.

His clients are the savvy ones, though. In my experience, many Americans who move abroad are not aware that they need to file. The US government does precious little to inform its citizens of their obligations in this area. Over several years, I’ve been informally asking Americans I meet abroad if they file their US taxes. Most of them told me they don’t. They only file and pay taxes in their country of residency. They assume that’s enough. But, in fact, they have unwittingly become lawbreakers. If they move back to America, they could find themselves in quite a bit of trouble.

The IRS is enforcing new rules passed in 2010, which extend US taxation laws to non-US banks that deal with American citizens. To no great surprise (except perhaps to the legislators themselves), a side-effect of this is that many banks are closing existing accounts and refusing to accept new business from American would-be customers:

The IRS is currently implementing a new law called the Foreign Account Tax Compliance Act (FATCA). Basically, FATCA requires every bank in the entire world to report the account information of its American clients. So every bank in the world is becoming an agent of the US government. It’s still unclear how FATCA can be implemented because in some countries it violates national privacy laws. However, FATCA stipulates that any foreign bank that fails to comply will be subject to a 30 percent withholding tax on its US income.

January 26, 2014

Moving the definitional goalposts – adolescents

Filed under: Britain, Economics — Tags: , , , — Nicholas Russon @ 10:53

In Spiked, Tom Slater talks about the constantly moving concept of “adulthood”:

The spike in young people staying and moving back home, although undoubtedly exacerbated by the floundering economy, nevertheless marks a profound cultural shift in the attitudes of young people towards independence. And it doesn’t take much digging to grasp the roots of it all.

The value of adulthood is battered out of young people nowadays. When last year psychologists announced they were extending the clinical definition of adolescence to 25, it felt sadly appropriate. Indeed, in all corners of society, young people are being fretted over and micromanaged with all manner of initiatives to help them negotiate the adult world. From university wellbeing services to the recent attempts of one charity to rebrand youth joblessness as a mental-health crisis, young people are imbibing the idea that they are essentially overgrown children in need of constant support and intervention.

The sense of victimhood is bolstered by the ‘jilted generation’ brigade, who insist that young people have been undone by the avarice of their baby-boomer forbears. As a result, so we’re told, young people will never be able to achieve the same success their parents’ generation enjoyed. Moving out into less-than-lush surroundings has come to be seen as a kind of concession to the oldies wot wronged us. The bizarre focus on house prices in this discussion is particularly revealing on this point. Young people have been led to believe that their parents skipped renting and started buying up houses when they were barely out of school – an idea which Grace Dent gave a thorough rinsing in the Independent this week. In this sense, Generation Y have begun to conceive of themselves as the victims of an illusory, more prosperous past, to the point where even renting a box-room in a mould-ridden house-share is an inconvenience they’re not prepared to endure.

With all of this in mind, you can almost see why they choose to stay at home and spend their disposable income on other things. If things are indeed so bleak, why not buy a car or, as is increasingly becoming the norm, save up your wages and go travelling? Young people seem to forget having your own wheels or jetting off around the world are luxuries that were never within the grasp of their supposedly cash-rich parents.

January 5, 2014

Excerpt from Glenn Reynolds’ new book

Filed under: Bureaucracy, Economics, USA — Tags: , , , — Nicholas Russon @ 10:19

The Wall Street Journal has an excerpt from The New School: How the Information Age Will Save American Education From Itself, the latest book by the Instapundit himself:

Though the GI Bill converted college from a privilege of the rich to a middle-class expectation, the higher education bubble really began in the 1970s, as colleges that had expanded to serve the baby boom saw the tide of students threatening to ebb. Congress came to the rescue with federally funded student aid, like Pell Grants and, in vastly greater dollar amounts, student loans.

Predictably enough, this financial assistance led colleges and universities to raise tuition and fees to absorb the resources now available to their students. As University of Michigan economics and finance professor Mark Perry has calculated, tuition for all universities, public and private, increased from 1978 to 2011 at an annual rate of 7.45%. By comparison, health-care costs increased by only 5.8%, and housing, notwithstanding the bubble, increased at 4.3%. Family incomes, on the other hand, barely kept up with the consumer-price index, which grew at an annual rate of 3.8%.

For many families, the gap between soaring tuition costs and stagnant incomes was filled by debt. Today’s average student debt of $29,400 may not sound overwhelming, but many students, especially at private and out-of-state colleges, end up owing much more, often more than $100,000. At the same time, four in 10 college graduates, according to a recent Gallup study, wind up in jobs that don’t require a college degree.

Students and parents have started to reject this unsustainable arrangement, and colleges and universities have felt the impact. According to a recent analysis by this newspaper, private schools are facing a long-term decline in enrollment. More than a quarter of private institutions have suffered a drop of 10% or more — in some cases, much more. Midway College in Kentucky is laying off around a dozen of its 54 faculty members; Wittenberg University in Ohio is eliminating nearly 30 of about 140 full-time faculty slots; and Pine Manor College in Massachusetts, with dorm space for 600 students but only 300 enrolled, has gone coed in hopes of bringing in more warm bodies.

Even elite institutions haven’t been spared, as schools such as Haverford, Morehouse, Oberlin and Wellesley have seen their credit ratings downgraded by Moody’s over doubts about the viability of their high tuition/high overhead business models. Law schools, including Albany Law School, Brooklyn Law School and Thomas Jefferson Law School, have also seen credit downgrades over similar doubts. And now Democrats on Capitol Hill are pushing legislation to give colleges “skin in the game” by clawing back federal aid money from schools with high student-loan default rates. Expect such proposals to get traction in 2014.

January 3, 2014

QotD: Pensions, an idealized view

Filed under: Humour, Quotations — Tags: , — Nicholas Russon @ 17:47

I am going to lose my job — my salaried job with medical and dental and even a pension plan. Didn’t even know what a pension was until the employee benefits counselor clued me in, and it nearly blew the top of my skull off. For a couple of weeks I was like that lucky conquistador from the poem — stout what’s-his-name silent upon a peak in Darien — as I dealt this wild surmise: 20 years of rough country ahead of me leading down to an ocean of Slack that stretched all the way to the sunlit rim of the world, or to the end of my natural life expectancy, whichever came first.

Neal Stephenson, “Spew”, Some Remarks, 2012.

December 31, 2013

Social networking – your weak contacts may be the most valuable ones

Filed under: Business, Technology — Tags: , , , — Nicholas Russon @ 10:20

Tim Harford explains why your friends and family are not the most valuable members of your extended social network … at least when it comes to looking for jobs:

This dispiriting stuff reminded me of Mark Granovetter’s work on “the strength of weak ties”, published in 1973. Granovetter, a sociologist, brought together two disparate strands of work: a survey of how people with professional or managerial jobs had found those jobs; and a theoretical analysis of the structure of social networks.

Start with the theoretical observation first: the most irreplaceable social connections, paradoxically, are often rather weak or distant ones. A family group or clique of close friends all tend to know each other and know similar things at similar times. Their social ties are strong but also redundant, in the sense that there are many different paths through which information could pass from one member of that group to another.

By contrast, “weak ties” between one social cluster and another are valuable precisely because the social contact is unusual. Information passed along a weak tie will often be totally new — and if it doesn’t arrive through the weak tie, it is unlikely to arrive at all.

Granovetter then supplemented this theoretical idea with his survey, showing that it was very common for people to find jobs — especially managerial jobs and jobs with which they were satisfied — through personal contacts. The old saw is true: it’s not what you know, it’s who you know. Or as Granovetter put it in his book Finding a Job, what matters most is “one’s position in a social network”.

But this is not because of crude nepotism: the key contacts who helped jobseekers find jobs were typically distant rather than close friends — old college contacts, perhaps, or former colleagues. Granovetter’s analysis made this finding make sense: it’s the more peripheral contacts who tell you things you don’t already know.

This observation has certainly been true for many of my jobs: colleagues from a decade or more in the past suddenly pop up with an interesting position or business opportunity (such contacts are all the more interesting because they’re completely unexpected).

December 26, 2013

The limits of redistributive politics

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas Russon @ 09:19

Wendy McElroy on the economic redistribution problem in politics:

A friend is celebrating the season by visiting her children in the States. Like many millennials, her 20-something son is working brutal hours for minimum wage at an unfulfilling job. After visiting with him and his girlfriend, my friend emailed, “These kids are SO stuck in not being able to even pay their rent that they have no energy left to dream anything.”

A similar story is playing out in family after family across America. Twenty-somethings are holding down two minimum wage jobs because no one wants to hire full-time people for whom they might have to provide health insurance. In a stagnant economy, their unemployment tops the chart. Meanwhile, they are saddled with debt and taxes for entitlements they will probably never receive, like social security.

As I moved through the day, my friend’s words haunted me. They perched at the back of my mind as I read a New York Times article that was an odd combination of proclaiming the obvious and writhing to avoid it. One quote captures the dance: “These days the word ["redistribution"] is particularly toxic at the White House, where it has been hidden away to make the Affordable Care Act more palatable to the public and less a target for Republicans…. But the redistribution of wealth has always been a central feature of the law and lies at the heart of the insurance market disruptions driving political attacks this fall.” The obvious: The core goal of Obamacare is the redistribution of wealth. The writhing: Obama lied, only he had to lie because of those wretched Republicans.

And, then, it occurred to me. It wasn’t just wealth. The dreams and future of my friend’s son have been systematically redistributed away over the last five years. As a white, male, 20-something, he is in a particularly hard-hit category of people. He is likely to work unfulfilling, low-paid jobs for as far in the future as he can see. And, as diligent as he may be, it is far from clear that he will be able to rise through merit.

From the onset of his presidency in 2009, Obama’s domestic policies have revolved around distributive justice. That is, he uses the force of law to forcibly wrench wealth, political pull, opportunity and dreams themselves from those in so-called ‘privileged’ classes and transfer them to so-called ‘disadvantaged’ ones. As his popularity sinks, Obama is returning to the theme of redistributing wealth, which has been a vote winner among his constituents. On December 4, he delivered a speech that foreshadowed policy in 2014. The White House called it a speech on “economic mobility”; the press called it his “inequality speech.” It was a call for egalitarianism, especially in terms of income and opportunities. In other words, a greater redistribution of wealth and further regulation to guarantee that everyone has access to money and upward mobility.

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