Four taxi drivers are suing Uber and seeking class-action status, alleging they’ve seen up to a 40 percent dip in business since the ride-hailing service began operating in violation of local regulations.
Archive for the ‘Regulation’ Category.
I would be all for reductions in tax levels, but I don't think that current Federal tax rates are particularly a barrier to growth and prosperity. A much bigger, and ever-growing barrier to growth is regulation.
5-10 years ago, in my small business, I spent my free time, and most of our organization's training time, on new business initiatives (e.g. growth into new businesses, new out-warding-facing technologies for customers, etc). Over the last five years, all of my time and the organization's free bandwidth has been spent on regulatory compliance. Obamacare alone has sucked up endless hours and hassles -- and continues to do so as we work through arcane reporting requirements. But changing Federal and state OSHA requirements, changing minimum wage and other labor regulations, and numerous changes to state and local legislation have also consumed an inordinate amount of our time. We spent over a year in trial and error just trying to work out how to comply with California meal break law, with each successive approach we took challenged in some court case, forcing us to start over. For next year, we are working to figure out how to comply with the 2015 Obama mandate that all of our salaried managers now have to punch a time clock and get paid hourly.
Greg Mankiw points to a nice talk on this topic by Steven Davis. For years I have been saying that one effect of all this regulation is to essentially increase the minimum viable size of any business, because of the fixed compliance costs. A corollary to this rising minimum size hypothesis is that the rate of new business formation is likely dropping, since more and more capital is needed just to overcome the compliance costs before one reaches this rising minimum viable size. The author has a nice chart on this point, which is actually pretty scary. This is probably the best single chart I have seen to illustrate the rise of the corporate state:
Postscript: I had thought that all the difficult years converting all of our employees from full to part time to avoid Obamacare sanctions would be the end of our compliance hassles (no company will write health insurance for us, so our only defense against the mandates and penalties is to make everyone part-time). But the hassles have not ended. For every employee, next year we must provide a statement that has a series of codes, by month, for that employee's health care status. It is so complicated that knowledgeable people are still arguing about what codes we should be using. Here is a mere taste of the rules:
A code must be entered for each calendar month January through December, even if the employee was not a full-time employee for one or more of the calendar months. Enter the code identifying the type of health coverage actually offered by the employer (or on behalf of the employer) to the employee, if any. Do not enter a code for any other type of health coverage the employer is treated as having offered (but the employee was not actually offered coverage). For example, do not enter a code for health coverage the employer is treated as having offered (but did not actually offer) under the dependent coverage transition relief, or non-calendar year transition relief, even if the employee is included in the count of full-time employees offered minimum essential coverage for purposes of Form 1094-C, Part III, column (a). If the employee was not actually offered coverage, enter Code 1H (no offer of coverage) on line 14. For reporting offers of coverage for 2015, an employer relying on the multiemployer arrangement interim guidance should enter code 1H on line 14 for any month for which the employer enters code 2E on line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief). For a description of the multiemployer arrangement interim guidance, see Offer of health coverage in the Definitions section. For reporting for 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll or enrolled in coverage under the multiemployer plan. For reporting for 2016 and future years, ALE Members relying on the multiemployer arrangement interim guidance may be required to report offers of coverage made through a multiemployer plan in a different manner.
Here are some of the codes:
- 1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least minimum essential coverage offered to spouse and dependent(s).
This code may be used to report for specific months for which a Qualifying Offer was made, even if the employee did not receive a Qualifying Offer for all 12 months of the calendar year. However, an employer may not use the Alternative Furnishing Method for an employee who did not receive a Qualifying Offer for all 12 calendar months (except in cases in which the employer is eligible for and reports using the Alternative Furnishing Method for 2015 Qualifying Offer Method Transition Relief as described in these instructions).
- 1B. Minimum essential coverage providing minimum value offered to employee only.
- 1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).
- 1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).
- 1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.
- 1F. Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.
- 1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.
- 1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage, which may include one or more months in which the individual was not an employee).
- 1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage; received an offer that is not a qualifying offer; or received a qualifying offer for less than 12 months.
Unintended Consequences, Libertarian Edition: How A Plea for Reduced Regulation Resulted in More Regulation
A few days ago, there was an article in our daily fishwrap that said something I found hard to believe. It said that the state had initiated a crackdown on unlicensed shipments of wine from out of state at the behest of a letter from the Goldwater Institute. It even had a picture (at least in the online edition) of Clint Bolick, Goldwater's chief of litigation.
Essentially, most states do not allow or severely restrict direct purchase by consumers of liquor products from out of state. As usual for such protectionist stupidity, it is claimed to be for the children, but in fact mainly is meant to protect a small, very powerful group of liquor distributors who make a fortune from their state-granted monopoly on liquor wholesaling. Basically, by some outdated post-prohibition laws, every drop of alcohol in the state must pass through the hands of a couple of companies, who of course extract their toll like Baron's of old with castles on the Rhine.
I simply found it unfathomable that Clint Bolick, a founder of the Institute for Justice (IC) for god sakes, would be pestering the state to more vigorously enforce stupid, outdated, and protectionist licensing laws. And it turns out I was right.
Clint Bolick, the Goldwater Institute’s director of litigation, said he sent the state a letter in November 2012 asking it to get rid of a rule that required customers to show up at certain wineries annually in order to get direct shipments to their homes.
Bolick’s letter, which he provided to The Republic and azcentral, said that rule made no sense and would stop Arizonans from joining wine clubs, where wineries send a designated amount of wine to customers each year, sometimes including wines not available to the general public.
“A requirement of annual presence also does not serve any obvious public purpose, given that the purchaser has established age and identity at the time of the order,” he wrote.
Bolick said he met with the director of the department at the time, Alan Everett, who told him the department would start a regulatory review.
So it turns out that Goldwater was trying to ease regulation and make it easier for consumers to have some choice and access to more suppliers. All good.
But it turns out "regulatory review" means something different to a state regulator. I suppose it was too much to think that they might have a review to see if their regulations went too far. In fact, the "regulatory review" seems to have focused on how they could tighten regulations even further. The result was not the one Goldwater hoped for ... instead of making things easier on consumers, the state went all-in trying to make things even worse for consumers.
Hill said Bolick's 2012 letter made the department question whether the wineries sending club shipments into Arizona were all licensed.
“It was the basis for us starting to ask questions about who is shipping liquor into the state of Arizona that does not hold an Arizona liquor license,” Hill said....
So far, the department has investigated 223 violations at a total of 199 wineries, according to records obtained through the Liquor Department’s website.
Additionally, somewhere between 250 and 300 wineries were found to have not filed their production reports. Once the department receives those, it could cause some or all of those to be found in violation. Some of those wineries, in order to comply with state liquor laws and have their cases closed, might also agree to not ship wine to Arizona.
Customers frustrated that they cannot get their wine shipped anymore are funding a renewed effort to change the state’s shipping laws. Two California-based groups, The Wine Institute and Free The Grapes, said they are work
It is clear that Goldwater, representing consumers, has very little influence on the state agency. So who does? Well, you have probably guessed:
Hill said last Thursday the crackdown came at the request of a member of the Arizona wine industry, saying it was an example of government and industry working together.
Ugh, what a happy thought -- government and industry working together to protect incumbents from competition and restrict consumer choice.
Several months ago, a lot of folks where shocked to find that the Clinton Foundation only spent $9 million in direct aid out of a total budget of $150 million, with the rest going to salaries and bonuses and luxury travel for family and friends and other members of the Clinton posse.
None of this surprised me. From my time at Ivy League schools, I know any number of kids from rich families that work for some sort of trust or non-profit that has nominally charitable goals, but most of whose budget seems to go to lavish parties, first-class travel, and sinecures for various wealthy family scions.
But this week comes a story from the climate world that demonstrates that making a fortune from your non-profit is not just for the old money any more -- it appears to be a great way for activists to build new fortunes.
The story starts with the abhorrent letter by 20 university professors urging President Obama to use the RICO statute (usually thought of as a tool to fight organized crime) to jail people who disagree with them in a scientific debate. The letter was authored by Jagadish Shukla of George Mason University, and seems to take the position that all climate skeptics are part of an organized coordinated gang that are actively promoting ideas they know to be wrong solely for financial enrichment. (I will give the near-universal skeptic reply to this: "So where is my Exxon check?!"
Anyway, a couple of folks, including Roger Pielke, Jr. and Steve McIntyre, both folks who get accused of being oil industry funded but who in fact get little or no funding from any such source, wondered where Shukla's funding comes from. Shukla gets what looks like a very generous salary from George Mason University of $314,000 a year. Power to him on that score. However, the more interesting part is where he makes the rest of his money, because it turns out his university salary is well under half his total income. The "non-profits" he controls pays him, his family, and his friends over $800,000 a year in compensation, all paid out of government grants that supposedly are to support science.
A number of years ago Shukla created a couple of non-profits called the Institute for Global Environment and Security (IGES) and the Center for Ocean Land Atmosphere Interactions (COLA). Both were founded by Shukla and are essentially controlled by him, though both now have some sort of institutional relationship with George Mason University as well. Steve McIntyre has the whole story in its various details.
COLA and IGES both seem to have gotten most of their revenues from NSF, NASA, and NOAA grants. Over the years, the IGES appears to have collected over $75 million in grants. As an aside, this single set of grants to one tiny, you-never-even-heard-of-it climate non-profit is very likely way higher than the cumulative sum total of all money ever paid to skeptics. I have always thought that warmists freaking out over the trivial sums of money going to skeptics is a bit like a football coach who is winning 97-0 freaking out in anger over the other team finally picking up a first down.
Apparently a LOT of this non-profit grant money ends up in the Shukla family bank accounts.
In 2001, the earliest year thus far publicly available, in 2001, in addition to his university salary (not yet available, but presumably about $125,000), Shukla and his wife received a further $214,496 in compensation from IGES (Shukla -$128,796; Anne Shukla – $85,700). Their combined compensation from IGES doubled over the next two years to approximately $400,000 (additional to Shukla’s university salary of say $130,000), for combined compensation of about $530,000 by 2004.
Shukla’s university salary increased dramatically over the decade reaching $250,866 by 2013 and $314,000 by 2014. (In this latter year, Shukla was paid much more than Ed Wegman, a George Mason professor of similar seniority). Meanwhile, despite the apparent transition of IGES to George Mason, the income of the Shuklas from IGES continued to increase, reaching $547,000 by 2013.
Grant records are a real mess but it looks like from George Mason University press releases that IGES and its successor recently got a $10 million five-year grant, or $2 million a year from the government. Of that money:
- approximately $550,000 a year goes to Shukla and his wife as salaries
- some amount, perhaps $90,000 a year, goes to Shukla's daughter as salary
- $171,000 a year goes as salary to James Kinter, an associate of Shukla at George Mason
- An unknown amount goes for Shukla's expenses, for example travel. When was the last time you ever heard of a climate conference, or any NGO conference, being held at, say, the Dallas-Ft Worth Airport Marriott? No, because these conferences are really meant as paid vacation opportunities as taxpayer expense for non-profit executives.
I don't think it would be too much of a stretch, if one includes travel and personal expenses paid, that half the government grants to this non-profit are going to support the lifestyle of Shukla and his friends and family. Note this is not money for Shukla's research or lab, this is money paid to him personally.
Progressives always like to point out examples of corruption in for-profit companies, and certainly those exist. But there are numerous market and legal checks that bring accountability for such corruption. But nothing of the sort exists in the non-profit world. Not only are there few accountability mechanisms, but most of these non-profits are very good at using their stated good intentions as a shield from scrutiny -- "How can you accuse us of corruption, we are doing such important work!"
Postscript: Oddly, another form of this non-profit scam exists in my industry. As a reminder, my company privately operates public recreation areas. Several folks have tried to set up what I call for-profit non-profits. An individual will create a non-profit, and then pay themselves some salary that is equal to or even greater than the profits they would get as an owner. They are not avoiding taxes -- they still have to pay taxes on that salary just like I have to pay taxes (at the same individual tax rates) on my pass-through profits.
What they are seeking are two advantages:
- They are hoping to avoid some expensive labor law. In most cases, these folks over-estimate how much a non-profit shell shelters them from labor law, but there are certain regulations (like the new regulations by the Obama Administration that force junior managers to be paid by the hour rather than be salaried) that do apply differently or not at all to a non-profit.
- They are seeking to take advantage of a bias among many government employees, specifically that these government employees are skeptical of, or even despise, for-profit private enterprise. As a result, when seeking to outsource certain operations on public lands, some individual decision-makers in government will have a preference for giving the contract to a nominal non-profit. In California, there is even legislation that gives this bias a force of law, opening certain government contracting opportunities only to non-profits and not for-profits.
The latter can have hilarious results. There is one non-profit I know of that is a total dodge, but the "owner" is really good at piously talking about his organization being "cleaner" because it is a non-profit, while all the while paying himself a salary higher than my last year's profits.
When politicians argue about small business growth, they argue about stuff like taxes and access to capital and, god help me, completely irreverent (to small business) stuff like the ExIm Bank.
I would argue that there has been a fundamental shift in the economy relative to small business over the last four years, but it has nothing to do with any of that stuff. I would summarize this shift as follows:
Ten years ago, most of my company's free capacity was used to pursue growth opportunities and refine operations. Over the last four years or so, all of our free capacity has been spent solely on compliance.
Let me step back and define some terms. What do I mean by "free capacity?" In a small, privately-held company, almost all the improvement initiatives spring from the head of, or must heavily involve, the owner. That would be me. I have some very capable staff, but when we do something new, it generally starts with me.
So OK, our free capacity is somewhat limited by my personal capacity as owner and President. But actually, I have a head full of ideas for improving the company. I'd like to do some new things with training that takes advantage of streaming video. I'd like to add some customer service screening to our application process. But my time turns out not to be the only limit -- and this is one of those things that HBS definitely did not teach me.
In the real world, there are only so many new things I can introduce and train my line managers to do, and that they can then pass down to their folks. An organization can only accept a limited amount of new things (while still doing the old things well). This is what I mean by "free capacity" -- the ability to digest new things.
Over the last four years or so we have spent all of this capacity on complying with government rules. No capacity has been left over to do other new things. Here are just a few of the things we have been spending time on:
- Because no insurance company has been willing to write coverage for our employees (older people working seasonally) we were forced to try to shift scores of employees from full-time to part-time work to avoid Obamacare penalties that would have been larger than our annual profits. This took a lot of new processes and retraining and new hiring to make work. And we are still not done, because we have to get down another 30 or so full-time workers for next year
- The local minimum wage movement has forced us to rethink our whole labor system to deal with rising minimum wages. Also, since we must go through a time-consuming process to get the government agencies we work with to approve pricing and fee changes, we have had to spend an inordinate amount of time justifying price increases to cover these mandated increases in our labor costs. This will just accelerate in the future, as the President's contractor minimum wage order is, in some places, forcing us to raise camping prices by an astounding 20%.
- Several states have mandated we use e-Verify on all new employees, which is an incredibly time-consuming addition to our hiring process
- In fact, the proliferation of employee hiring documentation requirements has forced us through two separate iterations of a hiring document tracking and management system
- The California legislature can be thought of as an incredibly efficient machine for creating huge masses of compliance work. We have to have a whole system to make sure our employees don't work over their meal breaks. We have to have detailed processes in place for hot days. We have to have exactly the right kinds of chairs for our employees. We have to put together complicated shifts to meet California's much tougher overtime rules. Just this past year, we had to put in a system for keeping track of paid sick days earned by employees. We have two employee manuals: one for most of the country and one just for California and all its requirements (it has something like 27 flavors of mandatory leave employers must grant). The list goes on and on. So much so that in addition to all the compliance work, we also spent a lot of work shutting down every operation of ours in California, narrowing down to just 3 contracts today. There has been one time savings though -- we never look at any new business opportunities in CA because we have no desire to add exposure to that state.
Does any of this add value? Well, I suppose if you are one who considers it more important that companies make absolutely sure they offer time off to stalking victims in California than focus on productivity, you are going to be very happy with what we have been working on. Otherwise....
I fully understand the dangers of extrapolating from one data point**, but for folks who are scratching their head over recent plateauing of productivity gains and reduced small business origination numbers, you might look in this direction.
By the way, it strikes me that regulatory compliance issues set a minimum size for business viability. You have to be large enough to cover those compliance issues and still make money. What I see happening is that as new compliance issues are layered on, that minimum size rises, like a rising tide slowly drowning companies not large enough to keep their head above water. We are keeping up, but at times it feels like the water is lapping at our chin.
**Unrelated Postscript: I have found that in the current media/political world, people love to have only one data point. Why? Well, with two data points you are are stuck with the line those points define. With just one, you can draw any line you want in any direction with any slope.
I just got the first year bill from my payroll company for the extra reporting we have to do each year vis a vis Obamacare: $7195.50 for 2015. Note that this adds absolutely no value -- this is not the cost of insurance or cost of any extra taxes sent to Uncle Sam. This is merely the cost to handle all the new paperwork required in the law.
I will repeat what I have said before -- the Republicans tend to focus narrowly on taxes and often tend to miss or downplay the regulatory issues, which I think actually loom larger in destroying economic growth.
Despite my advancing years, I still like to stay on the bleeding edge of tech, at least tech gadgets (in fact I would argue that I am of an age I have a hard time taking anyone seriously who calls themselves a hard-core programmer that hasn't had to write in assembly language, as I did back in college).
So I enjoy having 20-something's regale me on new tech goodies at sites like Gizmodo and Engadget. But a running theme through all these sites is their shocking economic ignorance. A good example was yesterday at Engadget with Sean Buckley writing on a decision in California to declare Uber drivers as employees of Uber rather than independent contractors. Months ago I described a similar decision as signalling the death of Uber. Buckley writes: (my emphasis added)
If you ask Uber, none of their drivers are employees -- just independent contractors who happen to use their network to get fares. If you've been watching the news though, you know some drivers disagree: filing lawsuits both in California and the UK for the right to be recognized as employees. Those drivers just got some vindication, by way of the California unemployment office. According to the Employment Development Department, at least one former Uber driver qualifies for unemployment benefits.
According to Reuters, the EDD decided that a former Uber driver in southern California was an employee; the decision was held up twice by a administrative law judge when Uber appealed. Apparently, Uber's control over the driver was a deciding factor -- the company gets to define fares, bar drivers from picking non-Uber passengers and can even charge drivers a cancellation fee for choosing not to pick up a fare. That's "in fact an employer / employee relationship," according to the decision.
Uber says this ruling doesn't have any impact on pending litigation, but it's certainly a feather in the hat of drivers who want a more traditional relationship with the company. We'll have to wait and see how that turns out as the class-action lawsuit moves forward.
I won't repeat what I wrote here, but suffice it to say that I think Uber is a dead duck in the long run if forced to treat drivers as employees.
The amazing line to me is the highlighted one. What gives the author confidence that most Uber drivers "want a more traditional relationship with the company." Is that what you want, more timeclock-punching and 100-page employee manuals? My experience is that most Uber drivers value the fact that it is not a traditional job environment, and gives them a ton of flexibility on work hours, productivity rates, etc. And why, by the way, is it assumed that every job must offer the same kind of employment relationship? If someone doesn't like Uber, there are plenty of companies that will happily treat them like a mindless drone if that is what they like rather than being treated as an independent actor.
By the way, beyond the economic and liberty issues involved, I also think the California decision is just plain wrong in terms of the control Uber exercises. Sure Uber sets standards for its drivers, but everyone does that for their contractors. They key thing it does not do is set work hours and productivity rates. They don't care when you work and they don't care how many passengers you carry in an hour, because you just get paid when you drive a customer. Can you imagine a company that doesn't care when its employees show up for work or how hard they work when they do show up? Neither can I, which tells me that this is NOT an employer-employee relationship.
Remember the conversation a few weeks ago over the NY Times article that tried to make Amazon out to be some kind of employer ogre because it sets tough productivity standards for employees? That is what companies do when they have to pay by the hour (which is essentially how all employees, especially after Obama's most recent changes, must be paid). So if you don't like companies that set tough productivity standards for workers, then why are you trying to kill labor models that don't require those kinds of standards?
This picture was taken at my hotel in Vancouver, BC on Saturday. This is only about a third of the mob trying to get a taxi, a process that took me over 30 minutes. The whole thing was made doubly frustrating by another bit of government interference -- about half the taxis that showed up dropping folks off left the hotel empty despite the huge mass of people waiting. Why? Apparently certain airport taxis are not allowed to pick up people in certain areas. So the taxis had to go all the way back to the airport empty, despite the fact that people there were waiting to go to the airport. Absolute madness of crony government intervention.
Yes, I understand that Saturday is "cruise day" and there is a huge spike in demand as these boats load and unload. But this is exactly why Uber would make so much sense. Think about all the folks that have weekday jobs that would love to earn some extra money driving on a Saturday. Uber allows for just this sort of flexibility.
Vancouver BC is one of those places that have banned Uber. So lacking that alternative, I tried to book a black car (from the largest local car service) for the fairly long ride to our hotel. In trying to complete the transaction, I was told that they were very busy and that my wait would be up to 40 minutes for them to show up.
This is the second time in a week (Vegas was the first) that I have had to spend some serious wait-time just because the local government has decided to artificially limit competition and capacity. I am sure the politicians would tell me its for my own good, though.
Yeah, that headline seems a bit odd -- Dodd-Frank is about banking, right? Well, apparently buried within Dodd-Frank are conflict minerals rules which I suppose were spurred by the efforts of a few dim-bulb celebrities who have a knack for latching onto poorly thought out "solutions" for Africa that tend to have staggering unintended consequences.
In this case, the logic was that minerals sales to western companies were propping up dangerous warlords and militias, particularly in the Congo. The law imposed huge penalties on American companies that did not purge their supply chain eight, ten, twelve steps deep of any suspected bad actors in the mineral world.
The problem for US companies is that this imposes a ton of cost, and is very hard to do. So hard that the US government has not been able to successfully differentiate conflict from non-conflict suppliers. However, as we learned on issues like cybersecurity, the US Government is still more than willing to impose enormous penalties on private businesses for failing at tasks the government can't even do itself. So companies play it safe and don't buy from any source anywhere near places like Congo, even avoiding neighboring countries that have no such conflict issues.
Because what Progressive supporters forgot in patting themselves on the back for their sensitivity in passing such laws is that minerals extraction and related labor is about the only source of income for citizens of these countries, which are among the poorest in the world. We may cut have off some of the money flowing to warlords (though not much as they turn out to do pretty well in the new bootlegging environment), but we are cutting off all the money that went to the struggling population. Further, by driving the trade underground, it becomes impossible to impose event he most basic rules on the trade. Dodd-Frank turned the mineral trade in these countries into the cocaine trade.
The 2010 Dodd-Frank Act increased violence in the Congo by 143 percent (and looting by 291 percent) through its “conflict minerals” rule, which has backfired on its intended beneficiaries. So concludes a new study by Dominic Parker of the University of Wisconsin and Bryan Vadheim of the London School of Economics.
As we noted earlier, Dodd-Frank conflict minerals regulations have also caused starvation in the Congo, harmed U.S. businesses, and resulted in increased smuggling—even as they punish peaceful neighboring countries in Africa just for being near the Congo, whose civil wars have killed millions over the last 20 years. They have inflicted great harm on a country that was just beginning to recover from years of mass killing and had the world’s lowest per capita income. The new study is consistent with a 2013 paper by St. Thomas University law professor Marcia Narine that criticized the conflict minerals rule for its dire consequences for the Congolese people.
To his credit, David Aronson was on this four years ago:
For locals, however, the law has been a catastrophe. In South Kivu Province, I heard from scores of artisanal miners and small-scale purchasers, who used to make a few dollars a day digging ore out of mountainsides with hand tools. Paltry as it may seem, this income was a lifeline for people in a region that was devastated by 32 years of misrule under the kleptocracy of Mobutu Sese Seko (when the country was known as Zaire) and that is now just beginning to emerge from over a decade of brutal war and internal strife.
Meanwhile, the law is benefiting some of the very people it was meant to single out. The chief beneficiary is Gen. Bosco Ntaganda, who is nicknamed The Terminator and is sought by the International Criminal Court. Ostensibly a member of the Congolese Army, he is in fact a freelance killer with his own ethnic Tutsi militia, which provides “security” to traders smuggling minerals across the border to neighboring Rwanda.
The people of eastern Congo agree that it would be beneficial to bring greater clarity and transparency to the mineral trade. A variety of local and international initiatives to do so were under way when the embargo hit. Those efforts may now become a casualty of the Dodd-Frank law.
In advance of the Obama Administration trying to pursue cities and neighborhoods for not being sufficiently racially integrated, Cato has an interesting take on the question.
The real problem with housing affordability is not at the community level but at the regional level. In a region that has few land-use restrictions, a community that has attracted wealthy people is not going to have much of an effect on the affordability of the region as a whole because builders can always construct more affordable housing elsewhere. The problem is in regions with urban-growth boundaries and other restrictions that limit the construction of affordable housing over the entire region.
If HUD were to apply disparate-impact criteria to regions, it might look at the change in African-American populations between 2000 and 2010. Nationwide, the black population grew by 11 percent in that time period, which was about 1.3 percent faster than the population as a whole. Regions whose black populations grew less than 1.3 percent faster than their whole populations could be considered guilty of housing discrimination.
Based on this, the most racist major (more than a million people) urban area in America is San Francisco-Oakland. Though that region’s population grew by 285,000 people between 2000 and 2010, or 9.5 percent, the region’s black population actually shrank by nearly 49,000, or 14.2 percent, for a difference in growth rates of minus 23.7 percent.
That decline was entirely due to strict land-use policies that prevent development outside of the 17 percent of the region that has already been urbanized, making the Bay Area one of the least affordable housing markets in the nation. Moreover, a recent planto improve affordability by following HUD’s prescription of building more high-density housing was found to actually reduce affordability.
Other major urban areas that would be found racist include Austin (-21.5% difference between black and overall population growth), Riverside-San Bernardino (-17.5%), Honolulu (-15.4%), San Diego (-14.6%), Los Angeles (-14.5%), Bakersfield (-13.6%), and San Jose (-11.1%). All of these regions except Austin have some form of growth-management policy, while Austin has become the least affordable housing market in Texas due to local housing policies.
By comparison, the least racist major urban area is Salt Lake City, whose black population grew 57 percent faster than its total population. Other non-racist areas include Minneapolis-St. Paul (42%), Phoenix (34%), Providence (25%), Boston (19%), Las Vegas (17%), Columbus (14%), Orlando (14%), Atlanta (13%), Tampa (13%), and Miami (10%). Of these, only Providence and Boston are surprises since both have serious housing affordability problems.
The folks at Cato argue that the HUD's preferred approach of promoting high-density housing actually makes the problem worse. This should not be surprising, since Federal policy driven by New Deal Democrats is responsible for most of the worst segregation issues in major cities.
First, let me establish a few background facts. Several years ago I headed an attempt to put a Constitutional amendment legalizing gay marriage on the ballot here in Arizona. As far back as 2004 I had a gay couple running a campground, and faced a customer petition demanding we remove them because they promoted moral degeneracy by being gay (it's for the children!). I told those customers to camp somewhere else, as we were not changing our staffing. Since then I have probably hired more gay couples to run campgrounds than anyone else in the business.
After a period of foreshadowing and rumor, the Equal Employment Opportunity Commission has now gone ahead and ruled that employment discrimination on the basis of sexual orientation is forbidden under existing federal civil rights law, specifically the current ban on sex discrimination. Congress may have declined to pass the long-pending Employment Non-Discrimination Act (ENDA), but no matter; the commission can reach the same result on its own just by reinterpreting current law.
There are multiple problems with non-discrimination law as currently implemented and enforced in the US. Larger companies, for example, struggle with disparate impact lawsuits from the EEOC, where statistical metrics that may have nothing to do with past discrimination are never-the-less used to justify discrimination penalties.
Smaller companies like mine tend to have a different problem. It is an unfortunate fact of life that the employees who do the worst job and/or break the rules the most frequently tend to be the same ones with the least self-awareness. As a result, no one wants to believe their termination is "fair", no matter how well documented or justified (I wrote yesterday that I have personally struggled with the same thing in my past employment).
Most folks grumble and walk away. But what if one is in a "protected group" under discrimination law? Now, not only is this person personally convinced that their firing was unfair, but there is a whole body of law geared to the assumption that their group may be treated unfairly. There are also many lawyers and activists who will tell them that they were almost certainly treated unfairly.
So a fair percentage of people in protected groups whom we fire for cause will file complaints with the government or outright sue us for discrimination. I will begin by saying that we have never lost a single one of these cases. In one or two we paid someone a nominal amount just to save legal costs of pursuing the case to the bitter end, but none of these cases were even close.
This easy ability to sue, enabled by our current implementation of discrimination law, imposes a couple of costs on us. First, each of these suits cost us about $20,000 to win (insurance companies are smart, they know exactly how this game works, and will not sell one an employment practices defense policy without at least a $25,000 deductible, particularly in California). It takes a lot of effort for the government, even if neutral and not biased against employers as they are in California, to determine if the employee who was fired happened to be Eskimo or if the employee was fired because he was an Eskimo. Unfortunately, the costs of this discovery are not symmetric. It costs employees and their attorneys virtually nothing to take a shot at us with such discrimination cases, but costs us$20,000 each to defend and win (talk about Pyrrhic victories). Which is why we sometimes will hand someone a few bucks even if their claim is absurd, just to avoid what turns out to be essentially legal blackmail.
Second, the threat of such suits and legal costs sometimes changes our behavior in ways that might be detrimental to our customers. A natural response to this kind of threat is to be double careful in documenting issues with employees in protected groups, meaning their termination for cause is often delayed. In a service business, almost anyone fired for cause has demonstrated characteristics that seriously hinder customer service, so drawing out the termination process also extends the negative impact on customers.
To make all this worse, many employees have discovered a legal dodge to enhance their post-employment lawsuits (I know that several advocacy groups in California recommend this tactic). If the employee suspects he or she is about to be fired, they will, before getting fired, claim all sorts of past discrimination. Now, when terminated, they can claim they where a whistle blower that that their termination was not for cause but really was retaliation against them for being a whistle-blower.
I remember one employee in California taking just this tactic, claiming discrimination just ahead of his termination, though he never presented any evidence beyond the vague claim. We wasted weeks with an outside investigator checking into his claims, all while customer complaints about the employee continued to come in. Eventually, we found nothing and fired him. And got sued. The case was so weak it was eventually dropped but it cost us -- you guessed it -- about $20,000 to defend. Given that this was more than the entire amount this operation had made over five years, it was the straw that broke the camel's back and led to us walking about from that particular operation and over half of our other California business.
Business licensing and awarding of government contracts is supposed to be entirely viewpoint neutral and related only to factors explicitly listed in the licensing legislation (e.g. training attained, cleanliness, whatever). Of course, I believe that licensing is generally total BS and is basically a way for incumbent businesses to restrict potential competitors and throttle supply.
Of course, defenders of licensing laws piously intone that they are only there to protect consumers and are enforced in a totally neutral way that has nothing to do with viewpoints or political pull (lol).
Trump is a complete loss as a candidate but he is at least proving once and for all what total BS this is. Both of the following are via the definitely indispensable Overlawyered.
If Donald Trump ever wants to build a hotel in Boston, he’ll need to apologize for his comments about Mexican immigrants first, the Hub’s mayor said.
“I just don’t agree with him at all,” Boston Mayor Martin J. Walsh told the Herald yesterday. “I think his comments are inappropriate. And if he wanted to build a hotel here, he’d have to make some apologies to people in this country.”
New York City Mayor Bill de Blasio said Monday that his city may not be able to break its business contracts with Donald Trump but will avoid future deals with the 2016 GOP contender.
"My impression is that unless there has been some breaking of a contract or something that gives us a legal opportunity to act, I'm not sure we have a specific course of action," the Democratic mayor told reporters Monday, according to CNN and Capital New York.
"But we're certainly not looking to do any business with him going forward," de Blasio added.
De Blasio indicated Monday that he has yet to receive a final analysis on whether the city could get out of several contracts with Trump, a celebrity real estate developer turned presidential candidate.
New York City officials began reviewing the contracts, including a Central Park carousel, two rinks and a Bronx golf course, several weeks ago in light of Trump's controversial remarks on immigrants.
A couple of weeks ago I wrote about the negative effects of the Administrations new overtime rules for managers.
The only people who now have the right to work more than the minimum to demonstrate one's readiness for more responsibility are those paid over $48,000 a year. McKinsey consultants and lawyers and investment bankers can choose to work extra hours in order to gain promotions. McDonald's shift managers no longer have that same right. This is a law written by salaried professionals telling younger and lower-paid workers that they have no right to be ... salaried professionals.
One of the things that I failed to mention was the reaction of my own managers, which has been universally negative. No one wants to go back to filling out time sheets. I know this will sound odd to Progressives, who seem to envision that all workers only want to do the minimum, but my managers fear (rightly) that I will have to set arbitrary maximum numbers of work hours for them. They take incredible pride in the facilities I ask them to manage, and worry what will happen if something needs doing and they have run out of hours.
A reader of mine sent me another example from the Albuquerque paper that really sums up the change in relationship demanded by the new rules
Although the proposal aims to increase pay for an estimated 5 million workers, including many at restaurants and retailers, some employees are saying, “no thanks.” Bret Crowder, a general manager in one of Shriver’s cafes, doesn’t want to go back to being an hourly paid worker.
“All of a sudden, the government has just demoted me,” he says. “It would basically put me back down to being a teenager.”
My longer post on the effects of this law is here. Some notes about the arbitrary nature of this decision, and how it was dressed up as science, are here. And even the DOL admits it won't result in much extra pay.
In a comment on this article about declining startup activity and the growing average size of businesses, a commenter wrote:
The high foreign trade deficit is also a barrier to the formation of small new companies. The annual trade deficit of the US is greater than the rate of GDP growth, which explains a lot of things. Probably more companies are being destroyed than created in the US. Legislate and reverse the foreign trade deficit and there will be a massive surge in small companies.
I wrote in return
As for wolf-dogs comment on the trade deficit, I think this is totally wrong. Most of the trade imbalance is with stuff like cars and steel which are unlikely startup businesses. The easy availability of Asian manufacturing sources for nearly anything you want to make or can dream up facilitates startups and entrepreneurship. My gut feel, just seeing what entrepreneurs around me are doing but not from any hard data, is that globalization and easy international sourcing is a net positive for small business formation.
I have never seen any data on this though. Thoughts?
Jay P. Greene's suggestions for potential petty little dictators in government:
- Think about how others have plans for their own lives just as you have a plan for yours. Just because you don’t understand their plan doesn’t mean that theirs is not legitimate or that you should impose your vision on them.
- Recognize that just as others are subject to limited information and systematic deviations from rationality, so are you. You shouldn’t imagine that you are the rational, well-informed one whose plan can fix the defects from which others suffer.
- Remember that you and your friends are not the government. Once the government takes responsibility for an issue, no one can completely control what the government will do and those with the strongest vested interests (and often not the best intentions) are likely to have more influence than you.
- Be humble about the limits of your knowledge and expertise. You may have gone to an elite school and have always been told how smart you are, but that doesn’t mean that you understand everything. Understanding comes from real experience and/or rigorous examination of an issue. Reading a bunch of articles or having spent a few years as the deputy assistant director of whatever does not count as experience or rigorous examination.
This is just a sample. There is more at the link
the FTC has begun looking into Cupertino's "treatment of rival streaming music apps" to make sure it's not violating any antitrust law. See, iTunes also offers those competitor apps for download, and Apple gets a 30 percent cut per subscription paid through the program. That forces the companies to choose between charging extra on top of their $9.99 per month service (making the total $12.99) and accepting the loss to match Apple Music's pricing.
In addition, the FTC's reportedly looking into the App Store's numerous restrictions, as well. These include prohibiting companies from mentioning that their apps are also available on other platforms and from pointing customers to their websites to purchase goods and services. That's the reason why Spotify recently decided to send an email blast to subscribers with instructions on how to sign up directly on its website instead of paying $3 more through iTunes.
Good lord. What is next -- does Whole Foods have to post a notice next to the tomatoes that you can buy them cheaper at Kroger? Clearly Spotify has found a workaround without any help from Big Brother at all.
Here are some numbers from the DOL draft rule.
They think there are 21.4 million salaried workers subject to the wage test. Since the new number was set at the 40th percentile of these workers, presumably about 8.6 million will fall below the new number. But of these, only 4.6 million would be have to be shifted to hourly/overtime rules (not sure why the difference, I guess other tests must still apply as well).
Those 4.6 million are expected to cost employers an additional $1.2 billion in wages, which seems like a lot but equates to an additional $261 per person per year extra. In other words, a pittance for all this disruption.
The Left is already saying that companies won't adjust and all these folks will get raises. But the DOL obviously thinks differently. Either it thinks these folks are only working maybe an hour each of overtime per week, such that the overtime rules will only cost a few bucks a week, or the DOL thinks that a lot of work and wage rates are going to be pared back leaving folks about where they are today, except now as timeclock punchers rather than trusted salaried professionals.
I am still going through all the tables in the back where they generate this stuff, but there are a couple of admissions there you WILL NOT find on liberal blogs today
- The DOL expects that base wage rate for regular work hours to fall for the affected workers with this new law. You heard that right. See table 21. The fall from $18.38 to $18.21 after this rule in DOL projections
- You will see folks (like Kevin Drum linked above) saying that this ends 60 hour work weeks. In fact, in table 22 the DOL says the average work week of those affected by the rule is 41.6 hours, which will go down to 41.5 hours by this rule. In fact, the 60 hour folks are a minority of go-getters who are trying to prove themselves out for upper management. These are the folks hamstrung by this law, hammering precisely the upwardly mobile folks one would hope to encourage.
I have only skimmed the new DOL overtime rules, but this bit really hit a nerve:
The Department has long recognized the salary level test as “the best single test” of exempt status. If left at the same amount over time, however, the effectiveness of the salary level test as a means of determining exempt status diminishes as the wages of employees entitled to overtime increase and the real value of the salary threshold falls. In order to maintain the effectiveness of the salary level test, the Department proposes to set the standard salary level equal to the 40th percentile of earnings for full-time salaried workers ($921 per week, or $47,892 annually for a full-year worker, in 2013).
This is exactly the kind of thing that will look scientific to you average journalism major. See, $921 is not arbitrary, it is set at the 40th percentile of salary earnings.
WTF? Where did the 40th percentile come from? Out of someone's butt, that is where. The Administration started with a number they wanted, between $47K and $50K and then obviously went looking for some round-number metric that landed in this zone to justify their number as somehow analytically based.
Think about it. The 40% number is meaningless. In fact it is worse than meaningless, it is astoundingly arrogant. Basically they are saying arbitrarily that 40% of people earning a salary should not be earning a salary. What do these people do? What are their alternatives? What are the other circumstances of the job that might affect them? What is the value of their benefits? None of this stuff is considered. Some arrogant jerk just drew a line and said, below this line all those folks are paid wrong.
Well, they did it. The Obama Administration has proposed a new rule that everyone has to punch a time clock unless they are paid at least $921 a week. Here is the proposed rule. Of course, everyone on the Left is patting themselves on the back for giving everyone under that number a raise. In fact what has happened is that everyone under that number just got a demotion, from trusted junior manager to 40-hour-a-week timeclock puncher.
Here is another way to put it: The only people who now have the right to work more than the minimum to demonstrate one's readiness for more responsibility are those paid over $48,000 a year. McKinsey consultants and lawyers and investment bankers can choose to work extra hours in order to gain promotions. McDonald's shift managers no longer have that same right. This is a law written by salaried professionals telling younger and lower-paid workers that they have no right to be ... salaried professionals. This is a law propounded by a President who pays many of the young professional interns in his campaign and non-profit $0.00 an hour.
Update: By the DOL's own reckoning, 40% of salaried employees fall below this number and thus are affected. Some will get a small raise over the bar, but an enormous part of the workforce will find themselves dumped into the ranks of work-just-the-minimum timecard punchers. This has the potential to hit far more people than any minimum wage increase.
Paul Krugman and a surprisingly large portion of Leftish economists have staked out a position that labor does not act like any other commodity, such that higher minimum wages have no effect on demand. I have had people on the Left tell me that this absurd, common-sense-offending position is actually "settled". So explain Puerto Rico:
Another problem is that just 40 percent of the population [of Puerto Rico] has a job—or is even looking for one. That figure has plummeted in recent years. In the United States as a whole, it is 62.9 percent....
The report cites one surprising problem: the federal minimum wage, which is at the same level in Puerto Rico as in the rest of the country, even though the economy there is so much weaker. There are probably some people who would like to work, but because of the sickly economy, businesses can't afford to pay them the minimum wage.
Someone working full time for the minimum wage earns $15,080 a year, which isn't that much less than the median income in Puerto Rico of $19,624.
The report also cites regulations and restrictions that make it difficult to set up new businesses and hire workers, although it's difficult to know just how large an effect these rules might or might not have on the labor market.
By the way, the fact that the author thinks this is "surprising" just goes to show how far this anti-factual meme of a non-sloping labor demand curve has penetrated.
As pointed out in several places today, Puerto Rico has a surprising number of parallels to Greece. It seems to have zero fiscal restraint, it has structural and regulatory issues in its economy that suppress growth, and has its currency pegged to that of a larger, much richer nation. It is apparently facing a huge $70+ billion potential debt default.
I see a lot of folks wanting to poo-poo the notion that Uber's flexibility in terms of hours driven and such is good for drivers. Folks on the Left have in their head that any job that does not punch in and punch out at fixed hours with a defined lunch break and actually rewards working more than the minimum is somehow exploitive.
This got be thinking about a Kickstarter update I received a while back (for a computer game project). The entrepreneur wrote:
Looking back, most of the year was spent trying to recover from the 2013 Robotoki saga which delayed development by almost an entire year, left me financially devastated, and almost sunk this project beyond recovery. We’ve had our ups and downs and I’ve always found a way through, but man, these were not fun times. I was actually living out of my car when I signed the private investment contract a few months ago, so it’s been a little bit of a rough year.
This project and I are currently surviving on that private loan, my personal credit cards, and whatever I can make driving for Uber, but at least we’re getting close to launch now. I hope this doesn’t come off as a “whoa is me” kinda thing. I only mention all of this because I want to put the project into perspective and give some deserved answers about what has been going on. I know it sucks that the game is severely late and I hope you know that I’ve done everything in my power to not give up.
This entrepreneur is trying to fund his game development effort in part by working during the day on the game and driving for Uber in his spare hours. There is no way he could work really anywhere else because he would have to be an official employee and keep a regular schedule -- you can't imagine someone just showing up at McDonald's to cook whenever they feel like it. But that is what he can do for Uber. And now California is trying to kill that flexibility.
CEO of Uber France has been arrested because, uh, his competitors have resorted to violence to defend their inferior product. The fact that the victim rather than the perpetrators of violence is getting arrested speaks volumes to how far governments will go to block innovation that hurts politically-connected incumbents.
After days of violent protests and defiance on the part of Uber's French management, two of the company's employees were taken into custody for "illicit activity" today. Uber France CEO Thibaut Simphal and Uber European GM Pierre-Dimitri Gore-Coty were arrested for running the company's ride-sharing service illegally. TechCrunch reports the pair is also being held under suspicion of "concealing digital documents." Last week, French Interior Minister Bernard Cazeneuve took legal action to shut down UberPOP, the service that employs non-professional drivers to provide rides, in response to protests that blocked key transportation hubs.
Rising minimum wages are bad enough, but generally we can offset them with price increases (remember that, though, next time you get ticked off about your camping fees going up). As an aside, not every business is in a competitive position that they can do this.
But the new Obama Administration rules greatly scaling back on our ability to have our managers be exempt employees is far, far worse. Because its not just money, but it changes the entire relationship between me and my managers. Most of my managers don't want to be hourly employees (you should see the complaint emails I am getting since I announced that this is likely coming) and have pride they have moved beyond timeclock punching. Also, I think a lot understand they are not going to make more from this, and they may even make less. To the extent they are working overtime today (and they all are) they will not be allowed to work overtime in the future. So I will have to hire someone else to do those extra tasks, and that person's salary is likely to come in part from what the managers are making now.
These next few months I am having all of my salaried managers fill out time sheets just for analytical purposes. I need to know how bad this is going to be. If you run a business, you shouldn't be waiting for next year to do something, you need to be thinking and analyzing right now how you are going to handle these rules.
In McCutchen's view, the administration fails to understand that "it's still the same pot of money that's available to compensate the employee," whether a worker is classified as exempt or nonexempt. So if overtime pay is required, a likely result will be to strictly limit overtime hours worked, despite the adverse effect on productivity, rather than—as the administration expects—to increase the employee's annual compensation.
While many non-executive employees view themselves as professionals and react negatively when shifted to hourly compensation, "the DOL wants nearly everyone to be nonexempt, and to sign in and clock out as do unionized workers," McCutchen contended. "They don't believe that some employees prefer to be salaried, with guaranteed pay and the flexibility to adjust when they do their work."
Postscript: I guess I just don't understand the vision that is in the head of Progressives. How does it help their stated goal of empowering the average Joe to convert him from a valued, up-and-coming junior manager to a 40 hour a week timeclock puncher? How will people ever be able to migrate from lower end jobs to management positions if there are not junior manager positions in which they can demonstrate their energy and dedication? I suppose they must believe that junior managers will still be doing the same things and working the same hours, but just earning lots of extra overtime with these new rules. If that is really what they think, they are completely divorced from reality.
Megan McArdle is one of my favorite writers on the web. So it was fun to see my recent post on California and Uber drivers get a mention from her. I just focused on the implications for Uber and its customers, but she goes further to say that the likely results for its drivers will be negative as well, comparing their likely plight to that of freelance writers.
On the face of it, this ruling seems ludicrous. Raise your hand if you've ever had an employer who said: "Hey, as long as you don't actively alienate the customers, you can just show up and work whenever you feel like. No need to let me know when you're coming, just show up and I'll pay you for any work you do. Just put in a couple of hours every six months, m'kay?" Yeah, I never had that job either, and neither did anyone else who wasn't blackmailing the boss or working for a family member.
Not even freelance writers or contract columnists have this job......
Uber has to worry about not just the expense of complying with all these mandates, but also the expense of documenting that it has complied with these mandates -- which will mean more paperwork and hassle for Uber's HR staff and for the drivers themselves. The effect would be to introduce a substantial wedge between what Uber spends to keep a driver on the road and what drivers actually get in their checks. How many people will still be driving when their work starts to be micromanaged and their checks are docked to pay for all the new requirements?
In other words, the possibilities for Uber drivers are probably not "status quo" or "status quo plus paid sick leave"; the possibilities are probably "status quo" or "figure out what to do next because Uber just went out of business." Since economists generally assume that whatever that is, it's a less attractive option than driving for Uber, that's not a happy answer for the driver.
And in fact, these are exactly the complaints we are hearing from freelance writers as more places rely more heavily on staff, because with the economics of the Internet, it makes more sense to manage a small number of staffers than a large number of freelancers. The staffers are happy, because they're working. The freelancers are miserable, however, because here the new version of our old "gig economy" does not support that many people