Category Archives: Business and Economy

Fuel efficiency = bankrupt highways?

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Brian hit the issue almost a year ago, but Jordan Weissmann at the Atlantic recently re-focused attention on the problem of funding U.S. highways with fuel taxes:

Since back in the Eisenhower era, the federal government has maintained a Highway Trust Fund, paid for mostly by taxes on fuel, that helps cover the repair and construction of our country’s roads, bridges, and mass transit. The idea was that drivers themselves should bear some of the cost the roads they used. Unfortunately, Congress hasn’t raised the gas tax since 1993. Since then, inflation has eaten away at least a third of its value…[and] two new challenges [have] emerged. First, Americans started caring about the fuel efficiency again, as skyrocketing oil prices ended the era of gas-guzzling SUVs. Then the recession struck, and penny-pinching drivers logged fewer miles to save on gas.

The upshot, of course, is that

less money is flowing into the Highway Trust Fund, which is now facing potential insolvency in 2013, according to the Congressional Budget Office.

I guess it’s good that fuel efficiency gains are having an impact?  (Ah, unintended consequences.)  Looks like we’re headed into a world where cars will have to start paying by the mile–or the highways are going to get a lot worse.

Is “Hollywood” hypocritical?

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Cory Doctorow over at Boing Boing comments on

the hypocrisy of the way that [the entertainment industry has] painted Kim Dotcom and MegaUpload

by pointing to a blog post by Alan Parker over at the Toronto Sun.  Parker’s argument for hypocrisy is historical, based on the founding of Hollywood in the face of Thomas Edison’s assertions of monopoly control (via patents) over motion picture technology.  He concludes:

The film corporations that were spawned by the very pirates and outlaws who created a hole-in-the-wall getaway hideout in Hollywood are now leading the charge to eradicate uncontrolled Internet access to works and technology they say they hold copyright and patent title to.

And they even use much of the same hypocritical, moralistic language that the Edison Trust used to claim the high ground over the shabby, nasty little rats, weasels, thieves and cheats stealing from them.

If Carl Laemmle, William Fox, Louis B. Mayer, Sam Goldfish/Goldwyn, Jesse Lansky, Adolph Zuker, Marcus Loew, or “the Warner boys”–all cited by Alan as independent producers who resisted Edison’s monopoly–had personally tried to assert their own monopolies and cut off subsequent producers, that would undoubtedly be hypocrisy.  But that is not what Alan is arguing:  he is accusing corporations of hypocrisy because their contemporary trade organization (the MPAA) is taking a position (roughly, that “pirates” should be “shut down”) that is contrary to the position (roughly, that the “market should flourish”) taken by natural persons (particular independent producers whose associated corporations continue in some form to this day) about a hundred years ago.

Can corporations be hypocritical in this fashion?  At its core, hypocrisy is falseness, saying one thing yet doing another.  When the “saying” and the “doing” are separated by 100 years–and involve none of the same actual people–it’s hard for “hypocrisy” to have any real meaning.

Exploited workers: why Apple and other companies will not move manufacturing jobs back to the US

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The New York Times has a long piece examining why Apple, even with the pleas of President Obama, will not likely move manufacturing jobs back to the United States. It sounds like it has a lot to do with what Apple can ask of workers in China. Here are a few examples:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day…

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said…

In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.

This sounds ripe for a Marxist explanation: Apple has its products overseas because it can ask things of workers (possibly interpreted as “exploiting” these workers) that would be very difficult to ask of workers in the United States. American workers would not be happy about multiple things: non-predictable work hours, living in company dormitories, relatively low pay compared to wages in the first-world, consistent twelve hour days.

When I first read these descriptions, it immediately reminded of manufacturing in the United States in the late 1800s and early 1900s. This was a period marked by labor unrest, the rise of unions, and a change in a lot of laws about what companies could ask of employees. We’ve had company towns; think of Pullman on the south side of Chicago. We’ve had bad working conditions; think the Triangle Shirtwaist Factory fire. We’ve had low wages; now we have a minimum wage (that some would argue is still not enough and should be replaced by a living wage). With the protests of workers plus a growing prosperity, work conditions changed. Is China close to a similar period or does a different governmental approach and different culture make is less feasible? As Marx suggested, will the basics of capitalism help turn these workers against the system, pushing companies to look for workers in other countries?

The article hints at this but I think it could be put more clearly: there are not easy answers to this issue. If manufacturing jobs will not return to the US except in certain circumstances (see the recent battle over Boeing plants being located in right-to-work states), we need a clear discussion of this rather than politicians saying nice things.

Sociologist argues shorter work weeks would reduce unemployment

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Alongside a report last week suggesting the 40 hour work week was simply a cultural norm we could change, a sociologist argues that shorter work weeks would reduce unemployment levels:

[Juliet Schor, professor of Sociology at Boston College] claimed that working hour reductions have “a long history” of successfully leading to lower rates of unemployment.

“What progressive reductions in working hours financed by productivity do is allow a society to take some or all, depending on its choices, of its economic dividend of the productivity growth that it generates, and use it to give people more leisure time rather than more income,” Prof Schor added…

She cited the example of the Netherlands, where such a policy was implemented in 1980.

The Dutch began a 15-year project to alter the look of the working week, long enough to have a limited, if any, impact on real wages.

I wonder if Americans would like this trade off: fewer hours on the job and less pay for a lower unemployment rate. Would any politician have the guts or political capital to even make this a talking point? Everyone does want to reduce unemployment, don’t they…

At the same time, this could also lead to larger discussions in the United States about the emphasis on productivity and income growth over other desirable outcomes. Could you imagine lots of companies talking about wanting their employees to flourish rather than simply be more productive? Even discussions of living wages seem to focus on properly paying workers so they can survive rather than allowing them to pursue relationships and leisure time.

Breaking the social norm of the 40 hour work week

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The New Economics Foundation suggests we work 40 hour weeks because that is the prevailing social norm, not because it is necessary:

The New Economics Foundation (NEF) says there is nothing natural or inevitable about what’s considered a “normal” 40-hour work week today. In its wake, many people are caught in a vicious cycle of work and consumption. They live to work, work to earn, and earn to consume things. Missing from that equation is an important fact that researchers have discovered about most material consumption in wealthy societies: so much of the pleasure and satisfaction we gain from buying is temporary, ephemeral, and mostly just relative to those around us (who strive to consume still more, in a self-perpetuating spiral).

The NEF argues we need to achieve truly happy lives, we need to challenge social norms and reset the industrial clock ticking in our heads. It sees the 21-hour week as integral to this for two reasons: it will redistribute paid work, offering the hope of a more equal society (right now too many are overworked, or underemployed). At the same time, it would give us all time for the things we value but rarely have time to do well such as care for our family, travel, read or continue learning (as opposed to feeding consumerism).

This reminds me of past visions where modern conveniences, like new appliances or flying cars or a a perpetually robust economy, would reduce the number of hours people would have to spend on “menial” tasks like housework and working. Alas, many of these things have not happened.

This group does raise an interesting issue: there are ideological reasons for sticking to 40 hours. This foundation suggests that working less would lead to more fulfilling lives full of relationships and time to pursue our true interests. I wonder how many Americans would really be willing to work less in exchange for less money or discretionary income.

I wonder if a movement toward this direction would require a respected company to make this change.

Three years of poll data from during the Great Recession

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Here is a lot of interesting poll data collected during three years, April 2009 to early 2011, of the Great Recession. From a quick glance at the data, there is quite a bit of uncertainty and the country could go in a number of directions.

A declining response to customer surveys?

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Perhaps you, like me, has received an endless stream of invitations to take customer surveys on your receipts, in your email box, or while browsing a website. Experts note that the proliferation of these surveys may lead to a lower response rate and lower-quality data:

Surely, it’s nice to be courted for input, at least sometimes. But some consumers say they’re fed up with giving time-consuming feedback for free, don’t like being drawn into a data web used to evaluate employees or feel companies don’t act on the advice they get. Others say they simply don’t have anything revelatory to impart about, say, ordering a shirt or buying a package of pens…

“Survey fatigue” has long been a concern among pollsters. Some social scientists fear a pushback on feedback could hamper important government data-gathering, as for the census or unemployment statistics.

If more people say no to those, “the data, possibly, become less trustworthy,” said Judith Tanur, a retired Stony Brook University sociology professor specializing in survey methodology.

Response rates have been sinking fast in traditional public-opinion phone polls, including political ones, said Scott Keeter, the Pew Research Center’s survey director and the president of the American Association for Public Opinion Research. Pew’s response rates have fallen from about 36 percent in 1997 to 11 percent last year, he said. The rate includes households that weren’t reachable, as well as those that said no.

This is an issue that is bigger than customer surveys: it can be harder to reach people today with surveys because of call screening, the inability to contact people on cell phones, and the problems with doing web surveys. All of this means that people who conduct surveys will have to work even harder to get people to respond.

I wonder if the solution is to give customers better incentives for filling out surveys. A lot of these surveys include the chance for winning a prize but perhaps these could be increased or customers could earn points (and be able to redeem them) for giving consistent feedback.

I can honestly say that I very rarely fill out such surveys, even knowing how difficult it is for companies and research organizations to obtain such information. I recently started filling out a survey for Marriott after staying a few nights but the survey was ridiculously long and detailed so I quit 30% in.

The sociological department at Ford

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I stumbled across an interesting piece of information the other day: Henry Ford established a sociological department at his company in 1913. Here are some interesting tidbits about the short-lived department culled from some varied sources:

–From a University of Michigan website:

The Sociological Department of the Ford Motor Company was organized in March, 1913, and oversaw a broad array of social benefits for Ford employees, including assistance in living in well-maintained single-family homes as opposed to small apartments. After the announcement of the Five Dollar Day in 1914, the Sociological Department was responsible for determining if employees’ personal lives and personal habits made them eligible for the full wage. This phase of the Department’s activities terminated with the reorganization of the company in 1920.

–From a blogger:

On January 5 1914, Ford announced the revolutionary five-dollar, eight-hour day:

What the company announced was not a plan to pay workers an hourly rate equivalent to five dollars a day. Instead, the company announced a plan to allow the workers to share in the company profits at a rate that promised five dollars a day … The five-dollar profit sharing plan was designed by the company to include only those who were ‘worthy’ and who would ‘not debauch the additional money he receives’.

The Sociological Department, under the leadership of the Reverend Samuel S. Marquis, was put in charge of administering the programme and investigating the home lives of workers: “investigators from the Sociological Department visited workers’ homes and suggested ways to achieve the company’s standards for ‘better morals,’ sanitary living conditions, and ‘habits of thrift and saving’.”…

Inspired by welfare capitalism, Ford’s “philosophy adopted a paternalistic attitude toward workers that, in Ford’s case, was rooted in the Protestant work ethic. Ford believed in it and wanted his employees to adopt it…” And Ford’s social standards reached far beyond the confines of work-life. The PBS film Demon Rum documents the Sociological Department’s efforts to “end the working man’s drinking habit” and how the “success of the small program led to a national prohibition campaign.”

-A 2004 article in American Culture titled “Ford’s Sociology Department and the Americanization Campaign and the Manufacture of Popular Culture Among Assembly Line Workers.”

–A two-day lesson for (high school?) students on the topic.

I am not surprised by Ford’s actions: there was a lot of pressure at the time to improve efficiency and a number of companies tried other tactics we might consider paternalistic today (example: the Pullman town which is now part of Chicago).

I am also reminded about the changed role of sociology. Ford seems to have viewed sociology as a means of “social engineering” or enforcing particular ways of living. This involved very strong value judgments and a lot of company control over workers. I imagine this would make most, if not all, sociologists today very nervous.

Virginia Postrel takes on typical arguments about worthless college majors

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Virginia Postrel counters arguments that many American college students are studying subjects that don’t matter and won’t help them find a job:

According to the National Center for Education Statistics, humanities majors account for about 12 percent of recent graduates, and art history majors are so rare they’re lost in the noise. They account for less than 0.2 percent of working adults with college degrees, a number that is probably about right for recent graduates, too. Yet somehow art history has become the go-to example for people bemoaning the state of higher education.

A longtime acquaintance perfectly captured the dominant Internet memes in an e-mail he sent me after my last column, which was on rising tuitions. “Many people that go to college lack the smarts and/or the tenacity to benefit in any real sense,” he wrote. “Many of these people would be much better off becoming plumbers — including financially. (No shame in that, who’re you gonna call when your pipes freeze in the middle of the night? An M.A. in Italian art?)”…

The higher-education system does have real problems, including rising tuition prices that may not pay off in higher earnings. But those problems won’t be solved by assuming that if American students would just stop studying stupid subjects like philosophy and art history and buckle down and major in petroleum engineering (the highest-paid major), the economy would flourish and everyone would have lucrative careers…

The critics miss the enormous diversity of both sides of the labor market. They tend to be grim materialists, who equate economic value with functional practicality. In reality, however, a tremendous amount of economic value arises from pleasure and meaning — the stuff of art, literature, psychology and anthropology. These qualities, built into goods and services, increasingly provide the work for all those computer programmers. And there are many categories of jobs, from public relations to interaction design to retailing, where insights and skills from these supposedly frivolous fields can be quite valuable. The critics seem to have never heard of marketing or video games, Starbucks or Nike, or that company in Cupertino, California, the rest of us are always going on about. Technical skills are valuable in part because of the “soft” professions that complement them.

The American economy is large and difficult to describe. It is a complex system where there are lots of educated and uneducated workers trying to fill a lot of different job slots. Simple answers on either side are not the solution in helping people to understand what is really going on. If there are lots of jobs in certain fields that need to be filled, like technical trades or nursing, it doesn’t necessarily mean that every student should suddenly go in that direction. I wonder if this is all tied to the Sportscenter-ization of discussion.

I wonder if someone has tracked whether these sorts of discussions happen in good economic times. In other words, when the economy is good and unemployment is low, do many people worry about what majors college students are pursuing or does it not really matter?

Quick Review: Boomerang

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Michael Lewis’s latest book, Boomerang, gives the current economic crisis some international context. In an entertaining and somewhat breezy manner, Lewis investigates why countries as disparate as Iceland, Greece, Germany, and the United States all fell into the economic mess. Here are a few thoughts about his take:

1. My overwhelming thought about Lewis’s explanations is that he wants to delve into different cultural approaches to the world of finance. Lewis’s argument goes like this: even though these countries have very different histories and cultural mindsets, somehow they all got involved with bad debt in the 2000s. This same topic could spark a fascinating economic sociology or cultural sociology manuscript.

2. Unfortunately, Lewis either doesn’t have much time to spend with each country (he admits the book began as he was working on understanding the US system, which became The Big Short or he doesn’t want to delve deeply into his thin arguments. For example, in Germany he tries to tie their fondness for following rules (which means Germans were the last people to be being disastrous American CDOs) to their fondness for scatalogical humor (which Lewis bases on one anthropological study). While there is a lot of potential here for showing how different cultures can be tied together by a global finance market, Lewis needs a lot more evidence to construct a convincing argument.

3. I found the last chapter to be both exhilarating and depressing. Lewis comes back to the United States in the final chapter and describes how this could all play out. Here is what Lewis suggests: while the centralized governments of Europe struggle, the problem in the US is pushed down the road because the federal government can push off more and more obligations on state and local governments. If this plays out as Lewis suggests (though there is debate over whether it will be as bad as Meredith Whitney suggested), local governments will continue to feel the pain of the economic crisis for years to come and the results may not be pretty.

Summary: I think Lewis is on to something here but I would like to see the topic covered with more depth and include more research.