Friday, July 22, 2016

Join Amazon "Prime Student," get a deal on a student loan

I'm not making this up.  See WSJ for more details.  This is a partnership between Wells Fargo and Amazon.  Binge watch and binge borrow at the same time?

Sunday, July 17, 2016

Fewer young men are working or in school. What are they doing?

Playing video games.  Seriously.  See this blog post about Booth Chicago's Erik Hurst in Marginal Revolution for details.

Apparently able to depend on parents, spouses or significant others, it is a bit hard to imagine these young men are going to be qualified for jobs or even looking for jobs anytime soon.  I am reluctantly concluding that we are getting as close to full employment as we are going to get.

Saturday, July 16, 2016

How to Misuse Analytics

Catherine Tucker at MIT Sloan and Anja Lambrecht of London Business School have a great HBR piece on how to make big mistakes with analytics.  Here are what they see as the biggest challenges:

  1. Size isn't everything.  Usually managers have to merge data sets from different sources that were designed for different purposes.  If the data sets cannot be cross-referenced in a meaningful way, their usefulness can be limited.  
  2. Our ability to analyze structured data is well ahead of our ability to analyze unstructured data.  The authors observe that firms have had more success with unstructured data when analyzed in conjunction with structured data.  
  3. Data processing skills are more critical to reaching meaningful conclusions than bigger data sets.  Companies need to invest in both.
  4. Correlation is not causation.  Any well-trained PhD in economics has had this drummed into their head all the way through graduate school.  But now lots of employees are looking at computer-generated results, see a correlation and think they have something.  Field experiments on relatively small amounts of data are likely to lead to greater insight.  

Sunday, July 10, 2016

NC legislature experiments with teacher incentives

Pay for public school teachers in North Carolina has been a big focus for the legislature over the last two years.  After no raises for many years, pay for starting teachers received a boost last year and pay for more experienced teachers is scheduled to increase this coming year.

This coming year's budget also includes two incentive plans that I would call unique.  One would allocate $10m to give a bonus to third grade teachers whose student growth scores place in the top 25%.  Bonus plans for individuals make sense when the employee has some control over the work environment and the metrics map reasonably well with employee effort and performance.  Although well-intentioned, I cannot help but wonder why the legislature did not consider two obvious problems with their scheme:
(1) Why put all the money on third grade teachers? Don't the other grades matter at least a little?
(2) Why didn't they select a more objective measure of actual learning?  The reward goes to the top 25%, regardless of how much or how little student growth took place.

The second plan pays a $50 bonus to Advanced Placement teachers for each student who passes the AP test.  So a student passes the AP Calculus test with flying colors, but is that because the AP teacher was so great or did it have something to do with the Algebra 1 and other teachers that they had before AP?  Also, what happens in parts of the state where school systems lack the budget to offer AP courses?  And should we be focusing incentive dollars on AP students or on those who are struggling to graduate?

The big mistake that legislators are making is the decision to use individual as opposed to group incentives.  Student achievement hinges on a collective effort of teachers from K to 12.  School-based plans are likely to be more effective than individual-based plans.

However, the third grade plan will solve one problem -- principals will not have any trouble filling open third grade positions!

Wednesday, June 22, 2016

Using workplace incentives to reduce carbon footprint

In a fascinating new NBER research paper by economists at Chicago and LSE, pilots at Virgin Atlantic Airways were offered recognition and incentives if they successfully took steps to reduce fuel consumption.  Separate targets were developed for pre-flight (how much fuel to load), during flight (course corrections), and runway decisions.  Over the eight month study, the researchers found a robust response to the incentive programs, saving Virgin over $500k.

Usually when the topic of carbon abatement comes up, the response from economists and policy makers alike is to impose caps, require new equipment or charge a tax.  This paper shows that there is another avenue that should be considered: adjust management decisions!

Sunday, June 19, 2016

Why are waiters so anxious to grab your plates?

Have you noticed how quickly your plate disappears once you have finished?  Regardless of whether others in your party have finished or not!  This sends an awkward social signal, according to this recent WP blog entry:
When a server clears a plate before everyone is finished, he or she leaves the table with a mess of subtle but important signals. Those who are still eating are made to feel as though they are holding others up; those who are not are made to feel as though they have rushed the meal. What was originally a group dining experience becomes a group exercise in guilt.
So what is going on here?  Are restaurants running lean inventories of plates and tableware?  Do customers get really upset if their empty plate isn't removed instantly?

George Mason economist and Marginal Revolution blogger Tyler Cowen thinks that economic forces are at work.  Land prices in urban areas are going up and that means higher rents.  As a result, restaurants feel more pressure to turn tables so that they can get more customers per day.

Thursday, June 16, 2016

Incentives matter: the case of Medicaid

A critical challenge in designing income maintenance programs is the tradeoff between benefit generosity and the incentive to work.  In a recent WP column, Catherine Rampell compares work incentives in the states where Medicaid has expanded under Obamacare to the states (including North Carolina) which have kept the pre-Obamacare system.  In the 19 states that have rejected the Medicaid expansion under Obamacare, if a working parent earns more than 61% of the poverty line ($12,300 for a family of three), then that household loses ALL of their Medicaid benefits.

Rampell suggests that a sliding scale be used instead, so that as the parent starts earning more than $12.3k, the family loses a fraction of their Medicaid benefits as opposed to the whole amount.  The current practice in effect penalizes work effort that generates more that $12.3k, locking millions of households into poverty.

Now there is a catch -- a sliding scale means that more families become eligible for Medicaid.  Benefits might not be entirely phased out until the parent earns $25k or more.  But as more parents work more hours, extra revenue gets generated because (1) their families rely less on Medicaid and other income maintenance programs and (2) they pay more income and payroll taxes.

I expect this to be a big issue in the NC gubernatorial contest this year.  Gov. McCrory famously turned down federal funds that would have provided significant increases in health care for poor North Carolina families.  They have a big incentive to remember that on Nov. 8.

Tuesday, June 7, 2016

Words that needed to be said

Today in Bret Stephens "Global View" WSJ column:
Meanwhile, let’s state clearly what shouldn’t need saying but does: Americans are blessed to have Mexico as our neighbor and Hispanics as our citizens. On this point, disagreement is indecency.
Stephens notes that the murder rate in Mexico is about the same as Philadelphia (and less than Miami), no one from Mexico has attacked the US since Pancho Villa, Mexico is the 2nd largest purchaser of US products, and more Mexicans are headed south of the border than in the opposite direction.  

Monday, June 6, 2016

The myth of the unemployed college grad

Great online NYT piece on unemployment of college grads.  Last week's jobs report put the US unemployment rate at 4.7 percent.  The NYT article leads off with a quiz that had been part of a Google survey:  The unemployment rate for high-school grads between the ages of 25 and 34 is 7.4 percent; guess the unemployment rate for college grads in the same age range!

Here are the answers they received: the average Google respondent thought the unemployment rate for college grads was 9.2%, whereas the average NYT website respondent thought it was 6.5%.  

These answers are way wrong: the actual unemployment rate for 25-34 year old college grads is 2.4 percent.  Keep in mind that this represents all college grads -- all majors, all types of schools (even the for-profits).  

So what is going on here?  One obvious lesson is that the mainstream news media have been running so many stories about unemployed college grads (usually with heavy loan obligations as well) that anecdotes have become accepted as data.  Maybe the unemployment rate for journalism majors is a lot higher than for other majors?  Maybe journalism schools don't teach their majors how to find labor statistics, so they keep writing these misleading stories.  

Sunday, June 5, 2016

Rethinking the full-time versus part-time equation

Today 27m Americans are working part-time and 6.430m of them would prefer to have full-time jobs.  The latter number is only slightly smaller than the number of unemployed persons (7.436m).

An employer thinking about whether to hire full-time or part-time help has to consider the following factors:

  1. Differences in compensation cost per hour: full-time workers must receive health insurance and usually receive other employee benefits as well, whereas part-time workers typically just receive hourly wages.  Also, hourly wages in part-time jobs tend to be lower than in full-time jobs.  Advantage: part-time.
  2. Costs of hiring and training workers: It takes twice as much effort and time to find and develop two part-time workers as it does for one full-time worker.  Also, turnover is much higher for part-time workers, so that means even larger hiring and training costs.  Advantage: full-time.  
A recent WSJ article shows that some companies are rethinking this tradeoff and hiring more full-time workers.  The Sheetz convenience store chain found that 83% of its part-time help left within a year, much lower than the 25% of its full-time hourly help.  Sheetz also finds its full-time workers are more committed to customer service.  Buffalo Wings & Rings finds that full-timers ring up more sales and have lower rates of absenteeism.  

There is a simple economics lesson here:  you cannot just focus on cost comparisons; you also need to think about productivity.  As the unemployment rate keeps getting lower and more individuals drop out of the labor force, expect to see more companies calling up Sheetz's CEO.