Tag: Academe

About that Minimum Wage Study in Seattle

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The weepy table

The state of Washington commissioned a study of Seattle’s minimum wage, and found that low wage workers lost money as a result.

This comes as a surprise, since all the other studies found no effect, but this has not stopped the economic journalist community from touting this as conclusive evidence that raising the minimum wage does now work.

What the study concluded was that for low wage workers, the number of hours worked decreased, resulting in a loss of wages, but the devil is in the details.

The study appears to have been deliberately structured to deliver this results:

  • They did not include any multi-location employers, about 40% of the data set.
  • It defines “low wage” as earning less than $19 an hour, in a labor market where wages have increased by 18% over the period in question, so if a worker’s pay goes from $16.50/hour to $19.25/hour, (a 16% increase), this would be counted as lost low wage hours. (Bracket creep)
  • Downplays the fact that employment at the single site employers that they survey increased total hours worked at all wage levels by 18% as well. 
  • Assumes that increases in higher wage jobs NEVER involved lower wage employees making more.

This is complete crap:

Words cannot describe the torment experienced by the data before they confessed what the University of Washington team got them to confess. I can only urge readers with an open mind to study Table 3 carefully. The average wage increase, from the second quarter of 2014 to the third quarter of 2016, for all employees of single site establishments was 18 percent. Eighteen percent! That is an annual increase of almost 8 percent. For two and a quarter years in a row. Not bad. And the number of hours worked of ALL employees of single site establishments? Up 18 percent in a little over two years. That too is an increase of almost 8 percent per annum.

Now multiply that wage by those hours and the total payroll for all employees rose 39.5 percent over the course of nine quarters. An annual rate of increase of 17.5 percent. These are BIG numbers. They are freaking HUGE numbers.

It must have taken a team of at least six academics to extract a 9.4 percent decline in hours from the 86,842 workers (out of a total of 336,517) earning under $19 dollars an hour at these single-site establishments. Look at the Table and weep.

(emphasis original)

Sources as diverse as the Economic Policy Institute and the Financial Times have excoriated the methodology here as well for much the same reasons.

Since the study has not yet been peer reviewed, I’d like to see the results, because I think that the the authors had a conclusion, and then cherry picked data to confirm their desired outcome.

The Emperor Has No Clothes

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A report from the Stanford Graduate School of Business has concluded that the “Unicorns” of Silicon Valley are massively overvalued:

Unicorns were once considered rare. Now, the United States is home to more than 100 of these venture-backed companies, each worth more than $1 billion.

But are these magical beasts really dressed-up ponies? New research from Stanford Graduate School of Business Professor Ilya Strebulaev shows that these companies report values on average about 51% above what they are really worth. And some, including management software company Compass and financial technology company Kabbage, are more than 100% above fair market value.

The Black Box of Market Value
Determining a startup’s worth can be a challenge. Many are fast-growing and unprofitable, and almost all have complex financial structures. They raise funding in multiple rounds, offering investors different restrictions and protections, and therefore stock pricing. The average unicorn, the researchers note, has eight stock classes for different types of investors, including founders, employees, venture capitalists, mutual funds, and others.

Because of that complicated structure, valuation is often based on the latest series’ price, applied to all outstanding shares.

But that doesn’t accurately reflect the preferred treatment some investors might get, the researchers say. In some series, for example, investors are promised 1.5 to 2 times their money should an initial public offering (IPO) fizzle. In that case, other shares can be worth far less.

“Some unicorns have made such generous promises to their preferred shareholders that their common shares are nearly worthless,” the researchers note.

We need to tighten up on securities fraud laws.

And This Is a Bad Thing Because???????

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More real jobs, fewer contingent laborers, what’s not to love?


Higher wages too.

Various economists have noted just how disastrous it will be as advanced societies transition from population growth to population decline.

It appears that this catastrophe will involve improving working standards for ordinary people.

Oh the horror!  Who will be left to overpay economists?

Japan’s tightest labor market in decades shows signs of reversing a long shift toward the hiring of temporary workers.

The number of full-time, permanent workers is rising for the first time since the global financial crisis, outpacing growth in temporary jobs over the past two years.

“The labor shortage has become so bad that companies can’t fill openings only with part-timers,” said Junko Sakuyama, Tokyo-based senior economist at Dai-ichi Life Research Institute.

Japan’s 2.8 percent unemployment rate is the lowest since 1994 but most of the hiring over the past decade or so has been for temporary, often part-time positions, known as non-regular.

A shift back toward permanent hiring could help sluggish consumer spending pick up. Economists say a decades-long move toward non-regular jobs is partly to blame for weak consumer demand. Non-regular workers now make up more than a third of the workforce. Many work part time, and all on average receive less pay, few benefits, little training and no real job security.

It’s too early to declare a trend reversal, but the number of regular jobs grew by 260,000 in March from a year ago, while part-time, temporary and contract jobs rose by 170,000, the internal affairs ministry reported on Friday. Last year, 510,000 permanent jobs and 360,000 non-regular ones were added.

I’ve said it many times:  Economists who talk about population declines like they are the end of the world are completely unconnected to the real world.

The historical record, most notably the aftermath Black Death (1346-1353), which show that population declines are followed by increases in standards of living and productivity.

The people who don’t do better are (in the 1300s) the nobility or (today) the holders of capital, rentiers, and people who alibi the decrease in well being for the rest of us (economists) who find that they need to spend more to pay people to work for them.

My heart bleeds borscht for them.

Another Staple of Neoliberal Economics Falls

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Correlation does not imply causation, but lack of correlation does imply lack of causation.

As such the /complete lack of causation between minimum wage levels and employment puts a stake through the heart of the trope that minimum wages kill jobs:

Since the passage of the Fair Labor Standards Act in 1938, business interests and conservative politicians have warned that raising the minimum wage would be ruinous. Even modest increases, they’ve asserted, will cause the U.S. economy to hemorrhage jobs, shutter businesses, reduce labor hours, and disproportionately cast young people, so-called low-skilled workers, and workers of color to the bread lines. As recently as this year, the same claims have been repeated, nearly verbatim.

Raise wages, lose jobs, the refrain seems to go.

If the claims of minimum-wage opponents are akin to saying “the sky is falling,” this report is an effort to check whether the sky did indeed fall. In this report, we examine the historical data relating to the 22 increases in the federal minimum wage between 1938 and 2009 to determine whether or not these claims—that if you raise wages, you will lose jobs—can be substantiated. We examine employment trends before and after minimum-wage increases, looking both at the overall labor market and at key indicator sectors that are most affected by minimum-wage increases. Rather than an academic study that seeks to measure causal effects using techniques such as regression analysis, this report assesses opponents’ claims about raising the minimum wage on their own terms by examining simple indicators and job trends.

The results were clear: these basic economic indicators show no correlation between federal minimum-wage increases and lower employment levels, even in the industries that are most impacted by higher minimum wages. To the contrary, in the substantial majority of instances (68 percent) overall employment increased after a federal minimum-wage increase. In the most substantially affected industries, the rates were even higher: in the leisure and hospitality sector employment rose 82 percent of the time following a federal wage increase, and in the retail sector it was 73 percent of the time. Moreover, the small minority of instances in which employment—either overall or in the indicator sectors—declined following a federal minimum-wage increase all occurred during periods of recession or near recession. That pattern strongly suggests that the few instances of such declines in employment are better explained by the overall national business cycle than by the minimum wage.

These employment trends after federal minimum-wage increases are not surprising, as they are in line with the findings of the substantial majority of modern minimum-wage research. As Goldman Sachs analysts recently noted, citing a state-of-the-art 2010 study by University of California economists that examined job-growth patterns across every border in the U.S. where one county had a higher wage than a neighboring county, “the economic literature has typically found no effect on employment” from recent U.S. minimum-wage increases. This report’s findings mirror decades of more sophisticated academic research, providing simple confirmation that opponents’ perennial predictions of job losses when minimum-wage increases are proposed are rooted in ideology, not evidence.

Of course, this runs counter to the two rules of neoliberalism:

  1. Because markets.
  2. Go die!

But neoliberalism has never lived up to its promise of a rising tide lifting all boats.

It’s widespread adoption have correlated to reduced growth and falling wages, though, of course, we know that correlation does not imply causation.

H/t The Big Picture.

Seriously, This Guy Should Have Been Drowned at Birth

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I am referring, of course to Penn State trustee Albert Lord, who has stated that he is, “Running out of sympathy for 35 yr old, so-called victims with 7 digit net worth for the people who were raped by Jerry Sandusky, with the knowledge of Joe Paterno and Penn State:

Penn State trustee Albert L. Lord said he is “running out of sympathy” for the “so-called” victims of former Nittany Lions assistant football coach Jerry Sandusky, according to an email sent to The Chronicle of Higher Education.

Lord, a former CEO of student loan company Sallie Mae, also defended Graham Spanier, the dismissed Penn State president who was convicted of one count of child endangerment last week for his handling of complaints about Sandusky.

“Running out of sympathy for 35 yr old, so-called victims with 7 digit net worth,” Lord said in the email sent Saturday. “Do not understand why they were so prominent in trial. As you learned, Graham Spanier never knew Sandusky abused anyone.”

One thing to note here:  He is an trustee elected by alumni, and there is a contested election for his position that will be ongoing for the next few months.

If you are an alum, vote early and often for the other guys.

You Have to Read This

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It’s an essay about economists by an economist titled, The Wrongest Profession, and the can of whup ass that it’s author, CEPR economist Dean Baker, unleashes on the dismal science is a thing of beauty:

Over the past two decades, the economics profession has compiled an impressive track record of getting almost all the big calls wrong. In the mid-1990s, all the great minds in the field agreed that the unemployment rate could not fall much below 6 percent without triggering spiraling inflation. It turns out that the unemployment rate could fall to 4 percent as a year-round average in 2000, with no visible uptick in the inflation rate.

As the stock bubble that drove the late 1990s boom was already collapsing, leading lights in Washington were debating whether we risked paying off the national debt too quickly. The recession following the collapse of the stock bubble took care of this problem, as the gigantic projected surpluses quickly turned to deficits. The labor market pain from the collapse of this bubble was both unpredicted and largely overlooked, even in retrospect. While the recession officially ended in November 2001, we didn’t start creating jobs again until the fall of 2003. And we didn’t get back the jobs we lost in the downturn until January 2005. At the time, it was the longest period without net job creation since the Great Depression.

When the labor market did finally begin to recover, it was on the back of the housing bubble. Even though the evidence of a bubble in the housing sector was plainly visible, as were the junk loans that fueled it, folks like me who warned of an impending housing collapse were laughed at for not appreciating the wonders of modern finance. After the bubble burst and the financial crisis shook the banking system to its foundations, the great minds of the profession were near unanimous in predicting a robust recovery. Stimulus was at best an accelerant for the impatient, most mainstream economists agreed—not an essential ingredient of a lasting recovery.

While the banks got all manner of subsidies in the form of loans and guarantees at below-market interest rates, all in the name of avoiding a second Great Depression, underwater homeowners were treated no better than the workers waiting for a labor market recovery. The Obama administration felt it was important for homeowners, unlike the bankers, to suffer the consequences of their actions. In fact, white-collar criminals got a holiday in honor of the financial crisis; on the watch of the Obama Justice Department, only a piddling number of bankers would face prosecution for criminal actions connected with the bubble.

I think that the last graph is a bit to kind to Obama, but it’s well worth the read.

This Is What Happens When Big Pharma Takes over Research

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As a result of increased corporate funding of research, and the pressure to deliver the desired results that inevitably results, the majority of current medical research is garbage that cannot be reproduced:

Science is facing a “reproducibility crisis” where more than two-thirds of researchers have tried and failed to reproduce another scientist’s experiments, research suggests.

This is frustrating clinicians and drug developers who want solid foundations of pre-clinical research to build upon.

From his lab at the University of Virginia’s Centre for Open Science, immunologist Dr Tim Errington runs The Reproducibility Project, which attempted to repeat the findings reported in five landmark cancer studies.

“The idea here is to take a bunch of experiments and to try and do the exact same thing to see if we can get the same results.”

You could be forgiven for thinking that should be easy. Experiments are supposed to be replicable.

The authors should have done it themselves before publication, and all you have to do is read the methods section in the paper and follow the instructions.

Sadly nothing, it seems, could be further from the truth.

After meticulous research involving painstaking attention to detail over several years (the project was launched in 2011), the team was able to confirm only two of the original studies’ findings.

Two more proved inconclusive and in the fifth, the team completely failed to replicate the result.

“It’s worrying because replication is supposed to be a hallmark of scientific integrity,” says Dr Errington.


………
According to a survey published in the journal Nature last summer, more than 70% of researchers have tried and failed to reproduce another scientist’s experiments.

Marcus Munafo is one of them. Now professor of biological psychology at Bristol University, he almost gave up on a career in science when, as a PhD student, he failed to reproduce a textbook study on anxiety.

………

The problem, it turned out, was not with Marcus Munafo’s science, but with the way the scientific literature had been “tidied up” to present a much clearer, more robust outcome.
………
“The issue of replication goes to the heart of the scientific process.”

You said it.

The problem is that research has increasingly become a zero sum game in which corporate funders dictate results before the first experiment is fully designed.

It is a petri dish for corruption.

You Poor Delicate Flower, They Ignore Your Dazzling Brilliance!

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Numerous prominent economists living and working in the UK are incensed that the current government will not consult foreign economists on how to manage the Brexit:

Leading foreign academics from the LSE [London School of Economics] acting as expert advisers to the UK government were told they would not be asked to contribute to government work and analysis on Brexit because they are not British nationals.

The news was met with outrage by many academics, while legal experts questioned whether it could be legal under anti-discrimination laws and senior politicians criticised it as bewildering.

“It is utterly baffling that the government is turning down expert, independent advice on Brexit simply because someone is from another country,” said Nick Clegg, the Liberal Democrats’ EU spokesman.

“This is yet more evidence of the Conservatives’ alarming embrace of petty chauvinism over rational policymaking.”

Sara Hagemann, an assistant professor at the London School of Economics who specialises in EU policymaking processes, EU treaty matters, the role of national parliaments and the consequences of EU enlargements, said she had been told her services would not be required. Hagemann tweeted on Thursday:

UK govt previously sought work& advice from best experts. Just told I & many colleagues no longer qualify as not UKcitizens #Brexit @LSEnews

— Sara Hagemann (@sarahagemann) October 6, 2016

………

It is understood up to nine LSE academics specialising in EU affairs have been briefing the Foreign Office on Brexit issues, but the school was informed by a senior FCO official that submissions from non-UK citizens would no longer be accepted.

The staff concerned were then made aware of the instruction in an email from the head of the LSE’s European Institute, Kevin Featherstone, which said the Foreign Office planned to approach academics to contract staff for a Brexit advisory panel – but that those to be contracted “must be UK passport-holders.” 

These are arguably the most delicate negotiations for the UK in at least a generation.  The idea that the details of negotiations would be classified as a “NoForn” (No Foreigners) is not a particularly surprising.

The resultant hissy fit is both unseemly and thoroughly predictable.

Department of Ed Takes Steps Against the For Scam Profit Colleges

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The Accrediting Council for Independent Colleges and Schools (ACICS), which has been a source for performance free accreditation for the for-profit colleges, has been debarred by the US Department of Education, which means that the schools that it accredits will not qualify for federal student loans:

The Education Department on Thursday moved to shut down the nation’s largest accreditor of for-profit colleges, which had stood watch as failing institutions like Corinthian Colleges and ITT Technical Institute teetered on a pileup of fraud investigations.

The Accrediting Council for Independent Colleges and Schools — known as A.C.I.C.S. — is one of a few dozen different organizations charged with maintaining standards and quality at the country’s more than 5,400 higher education institutions.

An accreditor’s seal of approval is a prerequisite for colleges’ enrollment of students receiving federal student loans and aid, a funding stream that is essential for the institutions’ survival.

A letter from the Education Department said that A.C.I.C.S. was out of compliance with regulations in 21 areas. While it acknowledged some progress, the letter stated that the group’s “track record does not inspire confidence that it can address all of the problems effectively.”

………

A.C.I.C.S. was responsible for approving roughly 240 institutions that received $4.7 billion in taxpayer money last year.

An estimated 600,000 students currently attending schools the council has accredited are in no immediate danger of losing their federal financial aid. Regardless of any appeal, those schools have 18 months to secure the approval of another accreditor — although they might have to meet more stringent standards.

………

As a group, the mostly for-profit colleges that A.C.I.C.S. has overseen have the lowest graduation rates in the country and among the highest rates of student loan defaults. The Education Department staff report found that it failed to verify job placements, identify institutions that were at risk and monitor educational quality.

The accrediting agency was also plagued with conflicts of interest. At least two-thirds of its commissioners worked as executives at for-profit colleges, including Corinthian and ITT, a ProPublica investigation discovered last year.

………

“Accrediting agencies are supposed to make sure students get a good education and ensure colleges aren’t cheating students while sucking down taxpayer money,” said Senator Elizabeth Warren of Massachusetts, one of the sponsors. “But right now the accreditation system is broken.

Your mouth to God’s ear, Senator Warren.

Interestingly enough, this is a single point of failure for the scam colleges, who are dependent on a captive accreditation process, so by effectively shutting down this agency, the Department of Education has effectively opened up a major can of whup ass on the whole corrupt industry.

Well done.

Nashville Does the Right Thing, of Course, AT&T Will Sue to Stop This

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After months of obstruction and delay by the incumbent providers, the Nashville City Council has voted to Google Fiber authorization to mount the the lines on the poles themselves.

Needless to say AT&T will not stand for such consumer friendly behavior:

The Nashville Metro Council last night gave its final approval to an ordinance designed to help Google Fiber accelerate deployment of high-speed Internet in the Tennessee city, despite AT&T and Comcast lobbying against the measure. Google Fiber’s path isn’t clear, however, as AT&T said weeks ago that it would likely sue Nashville if it passes the ordinance. AT&T has already sued Louisville, Kentucky over a similar ordinance designed to help Google Fiber.

The Nashville Council vote approved a “One Touch Make Ready” ordinance that gives Google Fiber or other ISPs quicker access to utility poles. The ordinance lets a single company make all of the necessary wire adjustments on utility poles itself, instead of having to wait for incumbent providers like AT&T and Comcast to send work crews to move their own wires.

One Council member who opposed the ordinance asked AT&T and Comcast to put forth an alternative plan, but the council stuck with the original One Touch Make Ready proposal.

AT&T and Comcast were using their positions on the top of the poles to delay Google deployment, a rather unsurprising state of affairs given that their business model is predicated on extracting monopoly rents.

The existing model is not a free market, but incumbent monopolies, which is why US internet is so expensive and so slow.

The Brave New World of Technological Innovation, It’s Another way to F%$# the Students

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Greg Mankiw, who teaches Economics 10 at Harvard has decided to inflict an overpriced online license for course materials:

For the first time, students in the College’s introductory economics class must purchase a $132 access code to an online textbook and set of online materials—a course requirement that many have criticized as making the class too expensive. But the course’s professor and the textbook’s author, N. Gregory Mankiw, said the new system is worth the pricetag.

When Greg Mankiw says that this is, “Worth the pricetag,” means that this makes him money, because, even if he cannot directly profit from Harvard sales, a standard setup at universities, it creates sales at other institutions, which does benefit him directly.

Students enrolled in Harvard’s introductory economics course must now purchase loose-leaf copies of N. Gregory Mankiw’s ‘Principles of Microeconomics’ as well as a code to online materials.

 Unlike in previous years, students in Economics 10: “Principles of Economics,” the foundational course for the Economics Department, cannot purchase used textbooks, which often offer a cheaper alternative to the new books. Instead, they must purchase access to the MindTap learning system, an online platform developed by the textbooks’ publisher that includes test preparation materials, problem-sets, and quizzes for the course. An online copy of the textbook is included on MindTap’s website, and students also receive a loose-leaf hard copy.

The access will expire after 12 months, so students can not resell their textbooks, Mankiw said.

How convenient.

The Douglas Adams phrase, “A bunch of mindless jerks who’ll be the first against the wall when the revolution comes,” seems an apt description of both Dr. Mankiw his fellow travellers.