Category Archives: Business and Economy

The value of kindergarten (and kindergarten teachers)

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Several economists recently presented a paper analyzing the effect of  kindergarten performance on adult outcomes. The New York Times summarizes the findings:

Students who had learned much more in kindergarten were more likely to go to college than students with otherwise similar backgrounds. Students who learned more were also less likely to become single parents. As adults, they were more likely to be saving for retirement. Perhaps most striking, they were earning more.

All else equal, they were making about an extra $100 a year at age 27 for every percentile they had moved up the test-score distribution over the course of kindergarten. A student who went from average to the 60th percentile — a typical jump for a 5-year-old with a good teacher — could expect to make about $1,000 more a year at age 27 than a student who remained at the average. Over time, the effect seems to grow, too.

The study still has to go through the peer-review process and the researchers aren’t sure what the link is between kindergarten performance and the adult outcomes.

Based on these findings, the economists suggest excellent kindergarten teachers are worth $320,000 a year.

This analysis is based on data from a Tennessee study, Project Star, from the 1980s. By randomly assigning kids to kindergarten classes, they set up an experiment where differences between classes could later be examined.

Stress and social hierarchy

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The latest issue of Wired has a fascinating article about stress. In addition to its effect on our physical bodies, the articles examines how stress is produced from being part of a social hierarchy. According to some studies cited in the article, being at the bottom of a social ladder produces harmful stress. This is not just because of the work but because those at the bottom have less control over their work. Those who we might consider to have “high-stress jobs,” such as doctors or lawyers, don’t feel the same negative effects of this stress since they have more control over their daily activities. Those working low-trust jobs, particularly in bureaucratic organizations, have higher death rates than those at the top, even controlling for other factors.

Apparently, the article is not available online but you can read some of the opening here on a Wired blog.

Extra airline fees are here to stay

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All those fees recently enacted by airlines are adding up and they are likely here to stay. The Chicago Tribune reports that ancillary revenues reached $13.5 billion in 2009. United Airlines led the way by collecting $1.9 billion.

On our recent trip to California, we paid $25 a piece for two bags on each leg of our American Airlines flight. The fares were reasonable – but adding on the extra $100 for luggage squelched any joy produced by finding a decent deal.

Facebook: up or down?

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Stories about Facebook have been plentiful in recent weeks as the company apparently prepares to announce that it has 500 million members and the trailer for The Social Network has hit the web.

Wired suggests “Five things that could topple Facebook’s empire.” One interesting tidbit out of this article: the American Customer Satisfaction Index (from the business school at the University of Michigan) found that Facebook has ratings similar to cable companies and airlines. Also, Facebook is similarly rated to MySpace. Overall, “That puts the world’s most visited website in the bottom 5 percent of private sector companies in the survey.”

More contracted municipal work

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The Wall Street Journal reports on more municipalities contracting out city services.

Cities say they have little choice. Municipalities across the U.S. will face a projected shortfall of $56 to $86 billion between 2010 and 2012, according to a report from the National League of Cities.

The primary focus of the story is California communities.

For many of the services mentioned in the article, such as tree-trimming, residents likely won’t notice much difference.

Problems for green technology in America

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Wired explores five reasons why the green tech sector has had a difficult time in the United States.

These five reasons are primarily cultural: green technology faces an image issue. Either dire circumstances or a breakthrough technology might be needed to push forward.

Generation Y not saving for retirement

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Businessweek writes about efforts to get employees of Generation Y to contribute to 401(k) and other retirement programs. Apparently, this is difficult as student loans average around $20,000 and average salaries for this age group have dropped 19 percent over the last three decades after adjusting for inflation.

If you are in Generation Y, be prepared to see more efforts (through social media, for example) to get you to contribute to retirement savings.

h/t Instapundit

How to file 3 lawsuits an hour

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The New York Times is reporting that the recession is causing a boom for some lawyers:

As millions of Americans have fallen behind on paying their bills, debt collection law firms have been clogging courtrooms with lawsuits seeking repayment.
Few have been as prolific as Cohen & Slamowitz, a Woodbury, N.Y., firm that has specialized in debt collection for nearly two decades. The firm has been filing roughly 80,000 lawsuits a year.
With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer.
While reporter Andrew Martin makes much of the shock value of the numbers and implies that there is no way such large-scale suing could be done responsibly, these numbers don’t strike me as inherently extreme.  While I am sure that abuse can and does happen in debt collection, consider the following:
  1. 5,700 cases per lawyer works out to just under 3 cases per billable hour (assuming a 2000-hour working year).
  2. Collecting a debt is not like proving that someone committed a crime.  It’s not like creditors have to prove to a jury that debtors owe money beyond a reasonable doubt.
  3. These lawyers are using automation software.
  4. These lawyers have a large support staff (who presumably handle most of the clerical work).

Unemployment and the millennials

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The New York Times reprints some unemployment figures:

For young adults, the prospects in the workplace, even for the college-educated, have rarely been so bleak. Apart from the 14 percent who are unemployed and seeking work…23 percent are not even seeking a job, according to data from the Bureau of Labor Statistics. The total, 37 percent, is the highest in more than three decades and a rate reminiscent of the 1930s.

…and fleshes out those figures with the anecdote of Scott Nicholson, a 2008 college graduate who is still looking for work:

The daily routine seldom varied. Mr. Nicholson, 24, a graduate of Colgate University, winner of a dean’s award for academic excellence, spent his mornings searching corporate Web sites for suitable job openings. When he found one, he mailed off a résumé and cover letter — four or five a week, week after week.

I think what makes this story so interesting is its intergenerational comparison of Scott, his father, and his grandfather and the opportunities available to each.  Louis Uchitelle makes a strong case that fundamental opportunities have shifted, that the millennials’ equivalent of “go West, young man” means leaving the U.S.–and its moribund economy–entirely.

The high costs of living in suburbia

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Via Yahoo! Finance, the New York Times looks at the costs of living in the suburbs vs. living in the city. The verdict: unless a family is sending kids to private school (particularly at middle-school age and above), the suburban life costs about 18% more.

The basis for the analysis – and Manhattan is not part of the figures:

While our analysis was by no means scientific, our goal was to recreate the type of decision a hypothetical family of four earning $175,000 a year might encounter. We chose an upper-middle-class income because that’s generally what our family needs to earn, conservatively, to afford a median-price home in Park Slope, a section of Brooklyn that is family-friendly, has good schools and is generally more affordable than Manhattan.

The two-bedroom, one-bathroom co-operative apartment that we’re using as a model in Park Slope is listed at $675,000, close to the median price for the neighborhood, as calculated by Zillow.com.

We stacked that against a four-bedroom, two-and-a-half bathroom home in South Orange, N.J., just a 30-minute train ride from Manhattan, where the two parents work. The house is selling for $595,000.

Some experts have been talking a long time about the hidden costs of suburbia due to more driving and sprawl. Homes may be cheaper (and bigger) but there are added costs from lower density living.

If homeowners were presented with this sort of evidence (assuming it would hold up across cities), would they chose the suburbs in lesser numbers? Or would people still be willing to pay a premium for the amenities that suburbia can offer?