January 16, 2017

Why do millennials earn some 20% less than boomers did at the same stage of life?

Filed under: Economics — Tags: , , , , — Nicholas @ 03:00

Tim Worstall explains why we shouldn’t be up in arms about the reported shortfall in millennial earnings compared to their parents’ generation at the same stage:

Part of the explanation here is that the millennials are better educated. We could take that to be some dig at what the snowflakes are learning in college these days but that’s not quite what I mean. Rather, they’re measuring the incomes of millennials in their late 20s. The four year college completion or graduation rate has gone up by some 50% since the boomers were similarly measured. Thus, among the boomers at that age there would be more people with a decade of work experience under their belt and fewer people in just the first few years of a professional career.

And here’s one of the things we know about blue collar and professional wages. Yes, the lifetime income as a professional is likely higher (that college wage premium and all that) but blue collar wages actually start out better and then don’t rise so much. Thus if we measure a society at the late 20s age and a society which has moved to a more professional wage structure we might well find just this result. The professionals making less at that age, but not over lifetimes, than the blue collar ones.


We’ve also got a wealth effect being demonstrated here. The millennials have lower net wealth than the boomers. Part of that is just happenstance of course. We’ve just had the mother of all recessions and housing wealth was the hardest hit part of it. And thus, given that housing equity is the major component of household wealth until the pension is fully topped up late in life, that wealth is obviously going to take a hit in the aftermath. There is another effect too, student debt. This is net wealth we’re talking about so if more of the generation is going to college more of the generation will have that negative wealth in the form of student debt. And don’t forget, it’s entirely possible to have negative net wealth here. For we don’t count the degree as having a wealth value but we do count the loans to pay for it as negative wealth.

January 9, 2017

QotD: The wider effects of raising the minimum wage

Filed under: Business, Economics — Tags: , — Nicholas @ 01:00

When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off their staff. What is more likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be somewhat reduced. People who were looking at opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide that the potential profits can’t justify the risk of some operations. Some folks who have been in the business for a while will conclude that with reduced profits, it’s no longer worth putting their hours into the business, so they’ll close the business and retire or do something else. Businesses that were not very profitable with the earlier minimum wage will slip into the red, and they will miss their franchise payments or loan installments and be forced out of business. Many owners who stay in business will look to invest in labor saving technology that can reduce their headcount, like touch-screen ordering or soda stations that let you fill your own drinks.

These sorts of decisions take a while to make. They still add up, in the end, to deadweight loss — that is, along with a net transfer of money from owners and customers to employees, there will also simply be fewer employees in some businesses. The workers who are dropped have effectively gone from $9 an hour to $0 an hour. This hardly benefits those employees. Or the employee’s landlord, grocer, etc.

There are secondary effects beyond the employment market too. Proponents of a higher wage are claiming that this will boost the local economy by putting more money into the pockets of workers. This is the same sort of argument you frequently hear for the construction of massive new sports complexes. But of course, the money has to come from someone else’s pocket — the customer and the employer. What were those people doing with it? If the answer is “buying stuff from Amazon,” then maybe diverting more money to wages is a net gain for the Los Angeles economy. But if the answer is mostly “buying stuff produced in LA” — for example, paying rent, or buying services performed by low-wage workers — then this is like trying to get rich by picking your own pocket.

There’s no question that the wage increase will transfer money around within the economy — out of the pockets of commercial landlords, for example, and into the pockets of folks who own real estate in low-rent districts. But little evidence has so far been offered that any boost in local spending will cancel out the deadweight loss, much less exceed it.

Megan McArdle, “$15 Minimum Wage Will Hurt Workers”, Bloomberg View, 2015-05-20.

November 14, 2016

QotD: The relationship between unions and occupational licensing

Filed under: Bureaucracy, Economics, Quotations — Tags: , , , — Nicholas @ 01:00

… this is also known as “licensure”. And the rate in the 50s, at that peak of union power, was around 5% of workers needed such a licence to go to work. And union membership was, at that peak, 35% and is now around 10% or a little above, and licensure has gone from 5% to 30%.

For my point to work we have to consider unionisation and licensure as being the same thing. And they’re obviously not exactly the same thing. But they are sorta, kinda, the same thing. For all the claims that the requirement for a licence is in order to protect consumers (a theory for which the technical economic term is “codswallop”) it’s really a way to protect the wages of the ingroup against competition. As, of course, is being in a union a method of protecting those economic interests of the ingroup.

Actually, licensure is most akin to the medieval and early modern guilds system, out of which the union movement itself grew. So it’s really not surprising at all that they share certain attributes. That aim and desire of protecting the incomes of members of the group against the economic interests of everyone else.

So, my argument is that we’ve not in fact had a fall in the power of organised labour over these recent decades. We’ve just seen a change in the form of it, from unionisation to licensure. The point being that this is absolutely and definitely true in part and may or may not be true entirely. I tend towards the entirely end of that spectrum and I’d be absolutely fascinated to see if there’s been any academic comparisons made of the strengths of the two systems in protecting workers’ wages and conditions. I’d even be willing to believe that licensure works better than unionisation, given that the first is a conspiracy against the consumer, something easier to carry off than the unions’ conspiracy against the employer.

Tim Worstall, “More Union Power Won’t Raise Wages Or Reduce Inequality”, Forbes, 2015-03-07.

July 13, 2016

Thirty years of corporate anti-harassment training has made no difference at all

Filed under: Business, Law, USA — Tags: , , — Nicholas @ 02:00

Amy Alkon on the not-very-surprising discovery of a recent US government Equal Employment Opportunity Commission study that after three decades of corporate anti-harassment training, no discernable difference in workplace harassment can be detected:

Anti-Harassment Training Doesn’t Work

But let’s keep it up so we can feel like we’re doing something. (More on that below.)

By the way, as I’ve written before, referencing the work of evolutionarily-driven law professor Kingsley Browne, men give each other shit — in the workplace and as a way of competing with each other.

Sure, there’s a point at which this can become toxic, but if you can’t take a joke or a bit of teasing, maybe you need to strengthen up so you can make it in the work world, as opposed to demanding that the work world conform to nursery school niceness standards.

Then again, you can always stay home and just care for the kiddies while your spouse braves those, “Hey, nice pants, dude!” jokes.

By the way, men’s competitiveness comes out of evolved sex differences — how men are the warriors (and competitors) of the species and are comfortable in competition with each other and with hierarchies in a way women are not.

Sex differences research Joyce Benenson explains that women group in “dyads” — twos — and are covert competitors, engaging in sniping and casting out any women who seem to stand out as better than the rest. (Women seem to have evolved to show vulnerabilities rather than strengths to other women in order to show they are trustworthy — which may be why women tend to be apologizers and put themselves down.)

June 30, 2016

Do Unions Raise Wages?

Filed under: Business, Economics — Tags: , , — Nicholas @ 04:00

Published on 7 Apr 2015

Do unions raise wages for workers as a whole? If not, can unions raise the wages of some workers? The answer is, well, it depends. Unions have the ability to restrict the supply of labor to a job, which can increase wages for some workers. However, unions can also lower wages. For example, work stoppages and strikes supported by unions can slow down economic growth, lowering real wages. To illustrate this, we take a look at what happened to Great Britain’s economy during the 1970’s union strikes.

It’s important to note that unions are not just about wages — they can be helpful in protecting workers from arbitrary abuses and maintaining positive workplace relationships.

Finally, we ask — are there differences between professional associations and unions? How are they similar? Watch to learn more about how unions affect the economy.

June 27, 2016

Compensating Differentials

Filed under: Economics — Tags: , , — Nicholas @ 04:00

Published on 7 Apr 2015

Firms have an incentive to increase job safety, because then they can lower wages. In this video, we explore this surprising claim in much greater depth. Bear in mind that wages adjust until jobs requiring a similar level of skill have similar compensation practices. Why do riskier jobs often pay more? Why has job safety increased over the years? How does a firm’s profit motive play a role?

June 20, 2016

QotD: Commencement speeches

Filed under: Bureaucracy, Government, Quotations, USA — Tags: , — Nicholas @ 01:00

This is the season of college Commencement speeches — an art form that has seldom been memorable, but has increasingly become toxic in recent times.

Two themes seem to dominate Commencement speeches. One is shameless self-advertising by people in government, or in related organizations supported by the taxpayers or donors, saying how nobler it is to be in “public service” than working in business or other “selfish” activities.

In other words, the message is that it is morally superior to be in organizations consuming output produced by others than to be in organizations which produce that output. Moreover, being morally one-up is where it’s at.

The second theme of many Commencement speakers, besides flattering themselves that they are in morally superior careers, is to flatter the graduates that they are now equipped to go out into the world as “leaders” who can prescribe how other people should live.

In other words, young people, who in most cases have never had either the sobering responsibility and experience of being self-supporting adults, are to tell other people — who have had that responsibility and that experience for years — how they should live their lives.

In so far as the graduates go into “public service” in government, whether as bureaucrats or as aides to politicians or judges, they are to help order other people around.

It might never occur to many Commencement speakers, or to their audiences, that what the speakers are suggesting is that inexperienced young graduates are to prescribe, or help to dictate, to vast numbers of other people who have the real world experience that the graduates themselves lack.

To the extent that such graduates remain in government — “public service” — they can progress from aides to becoming career politicians, bureaucrats and judges, never acquiring the experience of being on the receiving end of their prescriptions or dictates. That can mean a lifetime of people with ignorance presuming to prescribe to people with personal knowledge.

Thomas Sowell, “Commencement Season”, Townhall.com, 2016-05-24.

June 13, 2016

QotD: The absurdities of many occupational licenses

Filed under: Bureaucracy, Business, Quotations, USA — Tags: , , — Nicholas @ 01:00

In 2012, the Institute for Justice — a public-interest law firm advocating libertarian causes — looked at the number of occupations that require licensing. Specifically, the institute looked at occupations typically filled by lower- and middle-income workers. These are not your airline pilots, your certified public accountants and your neurosurgeons; they’re the nations interior decorators, auctioneers and florists. (Yes, you read that right: In at least one state, these occupations cannot be practiced without a license.)

Why, you might ask, is the state requiring a license to decorate an interior? Are customers at risk of death from collapsing piles of pillow shams? Must we fear that they will be blinded by the decorator’s decision to pair fuchsia chiffon drapes with a chartreuse brocade sofa? Do we worry that without the threat of losing their license to keep them on the straight and narrow, these fly-by-night operators might be tempted into purchasing furniture from unlicensed auctioneers, and sourcing their floral arrangements from black-market florists?

Well, no. Mostly, these regulations benefit folks who are already plying the trade. They get helpful state legislators to protect them from competition by instituting tough licensing requirements. Their income goes up; the consumer’s wallet suffers. And people who want to follow their dreams into the industry get shut out if they lack the time to study for the licensing exams, the capital to pay the licensing exam fees (which can run in to the hundreds of dollars), or the social capital to know how to work the system.

Megan McArdle, “You’re Gonna Need a License for That”, Bloomberg View, 2016-05-17.

June 1, 2016

The Tradeoff Between Fun and Wages: No Such Thing as a Free Lunch

Filed under: Economics — Tags: , , — Nicholas @ 03:00

Published on 7 Apr 2015

If you had to choose, would you rather be a sewer inspector spending your days underground or a lifeguard on the beach? Most would say that being a lifeguard is a more fun job, but a sewer inspector has higher wages to compensate for the less-fun aspects of the job. In this video, we discuss the tradeoff between fun and wages and show how this illustrates that “There ain’t no such thing as a free lunch!”

May 31, 2016

QotD: The minimum wage

Filed under: Business, Economics, Quotations — Tags: , , — Nicholas @ 01:00

In truth, there is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.

Murray Rothbard, “Outlawing Jobs: The Minimum Wage”, 1998.

May 18, 2016

Human Capital and Signaling

Filed under: Economics — Tags: , , , — Nicholas @ 02:00

Published on 7 Apr 2015

Wages in America differ greatly among workers. Why is that? One reason includes differences in human capital — tools of the mind. Education is one of the biggest investments people make to increase their human capital. Which college majors offer the greatest returns? And are all returns on education due to human capital? A college degree can “signal” other factors as well, and we discuss what is commonly known as the “sheepskin effect.” In this video, we also discuss how globalization has affected wages in the U.S.

May 13, 2016

British doctors and the attraction of moving to Australia

Filed under: Britain, Health — Tags: , , , , — Nicholas @ 03:00

Scott Alexander talks about the dispute between the junior doctors and the British government:

A lot of American junior doctors are able to bear this [the insane working hours] by reminding themselves that it’s only temporary. The worst part, internship, is only one year; junior doctorness as a whole only lasts three or four. After that you become a full doctor and a free agent – probably still pretty stressed, but at least making a lot of money and enjoying a modicum of control over your life.

In Britain, this consolation is denied most junior doctors. Everyone works for the government, and the government has a strict hierarchy of ranks, only the top of which – “consultant” – has anything like the freedom and salary that most American doctors enjoy. It can take ten to twenty years for junior doctors in Britain to become consultants, and some never do. […]

Faced with all this, many doctors in Britain and Ireland have made the very reasonable decision to get the heck out of Britain and Ireland. The modal career plan among members of my medical school class was to graduate, work the one year in Irish hospitals necessary to get a certain certification that Australian hospitals demanded, then move to Australia. In Ireland, 47.5% of Irish doctors had moved to some other country. The situation in Britain is not quite so bad but rapidly approaching this point. Something like a third of British emergency room doctors have left the country in the past five years, mostly to Australia, citing “toxic environment” and “being asked to endure high stress levels without a break”. Every year, about 2% of British doctors apply for the “certificates of good standing” that allow them to work in a foreign medical system, with junior doctors the most likely to leave. Doctors report back that Australia offers “more cash, fewer hours, and less pressure”. I enjoy a pretty constant stream of Facebook photos of kangaroos and the Sydney Opera House from medical school buddies who are now in Australia and trying to convince their colleagues to follow in their footsteps.

Upon realizing their doctors are moving abroad, British and Irish health systems have leapt into action by…ignoring all systemic problems and importing foreigners from poorer countries who are used to inhumane work environments. I worked in some rural Irish towns where 99% of the population was white yet 80% of the doctors weren’t; if you have a heart attack in Ireland and can’t remember what their local version of 911 is, your best bet is to run into the nearest mosque, where you’ll find all the town’s off-duty medical personnel conveniently gathered together. This seems to be true of Britain as well, with the stats showing that almost 40% of British doctors trained in a foreign country (about half again as high as the US numbers, even though the US is accused of “stealing the world’s doctors” – my subjective impression is that foreign doctors try to come to the US despite barriers because they’re attracted to the prospect of a better life here, but that they are actively recruited to Britain out of desperation). Many of the doctors who did train in Britain are new immigrants who moved to Britain for medical school – for example, the Express finds that only 37% of British doctors are white British (the corresponding number for America is something like 50-65%, even though America is more diverse than Britain). While many new immigrants are great doctors, the overall situation is unfortunate since a lot of them end up underemployed compared to their qualifications in their home country, or trapped in the lower portions of the medical hierarchy by a combination of racism, language difficulties, and just the fact that everyone is trapped in the lower portions of the medical hierarchy these days.

If Britain continues along its current course, they’ll probably be able to find more desperate people willing to staff its medical services after even more homegrown doctors move somewhere else (70% say they’re considering it, although we are warned not to take that claim at face value). I work with several British and Irish doctors in my hospital here in the US Midwest, they’re very talented people, and we could always use more of them. But this still seems like just a crappy way to run a medical system.

I don’t know anything about the latest dispute that has led to this particular strike in Britain. Both sides’ positions sound reasonable when I read about them in the papers. I would be tempted to just split the difference, if not for the fact several years of medical work in the British Isles have taught me that everything that a government health system says is vile horrible lies, and everybody with a title sounding like “Minister of Health” or “Health Secretary” is an Icke-style lizard person whose terminal value is causing as many humans to die of disease as possible. I can’t overstate the importance of this. You read the press releases and they sound sort of reasonable, and then you talk to the doctors involved and they tell you all of the reasons why these policies have destroyed the medical system and these people are ruining their lives and the lives of their patients and how they once shook the Health Secretary’s hand and it was ice-cold and covered in scales. I don’t know how much of this is true. I just think of it as something in the background when the health service comes up to doctors and says “Hey, we have this great new deal we want to offer you!”

April 23, 2016

The Marginal Product of Labor

Filed under: Economics — Tags: , , — Nicholas @ 03:00

Published on 7 Apr 2015

In this video on the marginal product of labor, we discuss some commons questions such as: How are wages determined? Why do most Americans earn so much by global standards? What exactly is meant by ‘human capital’? Do labor unions help workers, and if so, by how much? How does discrimination affect labor markets? How is the demand for labor different than the demand for a good? We’ll discuss how to derive the demand for labor based on the marginal product of labor, and use real-world examples — such as the demand for janitors in a fast food restaurant — to illustrate this calculation. We’ll also cover an individual’s labor supply curve vs. market supply of labor.

March 18, 2016

QotD: The war on competence

Filed under: Books, Business, Media, Quotations, USA — Tags: , — Nicholas @ 01:00

There is a war on. People who can do things, even just the things our parents could do, or less, are losing.


But there is worse. Lately I’ve been running into a new category “people who can’t do their jobs.” And these aren’t just our manual labor imports, I mean, people who supposedly are trained and certified and either can’t or won’t do their jobs.

I know everyone was very impatient with me last year when I was fixing the house for sale, but honestly, there is a reason I do all the manual labor I can. The reason is the tile wall I paid someone 1500 to fix (it had fallen. Long story) and which fell in the night, the day after he put it up. He’d mixed the adhesive wrong. So he came back and fixed it. It fell again. The third time I got a book (this was before Youtube) figured how to do it and did it. This wasn’t an isolated incident. It just keeps happening when someone comes over to fix something. So if I can, I do it.

But there’s more serious cases, like the guy who replaced our brakes but didn’t replace the brake cables. Leading to us losing brake power 15 minutes later. (Thank G-d someone was looking out for us. We lost it a) when Dan was driving. I’d have panicked. Well, he did too, but… he works even panicked. b) we were JUST outside a garage c) we’d been going very slowly.) Or the doctor who convinced himself my 13 year old had an STD and wouldn’t listen to the kid when he insisted he was a virgin. If I hadn’t gone over his head to a urologist, and told the boy to stop taking the antibiotic that was making him ill, my son would probably have died within months. (Of the problem, which was rare, but not unheard of particularly in early teens. As in the urologist identified it on symptoms alone.)

I’ve been given completely wrong instructions by someone selling me a machine or a product. I’ve had ghastly things done to garments or objects taken in for repair because the person who was supposedly an expert on this just couldn’t do it.


Publishing… well, there’s a reason the houses are floundering. And it’s not just the innovation, the end of push marketing, or the fact they can’t wrap heads around Amazon. That’s all I’ll say. Every time someone tells me they can’t go indie because how do they know the book is good if no professional has read it, I remember when I was sitting in a panel with the editor of my friend’s book, (professional, one of the big five) and it became clear not only hadn’t she read the book, but she had only skimmed the proposal. I later watched for the tells and (other than Baen) most of my books were published without anyone but the copyeditor even looking at them. And the copyeditor often sounded like she (it was always a she) had a high school education, even the ones editing history books.

Movie making. Director’s cuts are illuminating. “I filmed that scene, then it didn’t work. I don’t know why” — usually the reason is a gross error in basic storytelling. One anyone who had read a couples of plotting books could fix. But billionaires in Hollywood have no clue. They were never trained.

Sarah Hoyt, “The War On Competence”, According to Hoyt, 2016-03-04.

January 22, 2016

QotD: Non-monetary incentives

Filed under: Business, Economics, Quotations — Tags: , — Nicholas @ 01:00

… the free market flourishes when everyone, most of the time, refrains from taking advantage of each other’s vulnerability.

Many people, especially college professors, are surprised by how much honesty, reciprocity, and trust exist among those who engage in business. The biggest, most successful corporations in the world, such as Google and Apple, are renown[ed] for how much they trust their employees and how much independence they give them. (There are much smaller companies that do so, too.) A very successful entrepreneur I know told me recently that the key to running a large, profitable business is to treat your employees, suppliers, and customers with respect and like responsible people. It’s just not possible always to be looking over someone’s shoulder.

When you trust people to reciprocate that trust, you’re taking a chance that they may take advantage of you. Such pessimism, however, means your relationships with other people — your suppliers, employees, and customers — will never have a chance to flourish. That’s why it goes against your long-term interests to hunker down and never leave yourself vulnerable to opportunistic behavior.

The incentive to treat people right by following norms of honesty and fair play is non-monetary, but it can make your business prosper. It seems that the best business owners aren’t driven primarily by profit-seeking, although they probably wouldn’t do what they’re doing without earning that profit. No, the incentives they follow often have more to do with knowing that they’ve done things the right way and so deserve all that they’ve earned. (Which is why they can get very upset when a politician says, “If you’ve got a business, you didn’t build that.”) That knowledge is something all the money in the world can’t buy.

Sandy Ikeda, “Incentives 101: Why good intentions fail and passing a law still won’t get it done”, The Freeman, 2014-11-13.

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