Facebook Trash

We can’t be convinced to comment about the stupidity of confusing market changes in labor prices with government mandated one.  The word minimum should not appear before wage in any story about market prices.  Some of the comments on Keystone shook us out of our ennui.  Our Facebook page came up with a quote something (it won’t copy) like the following:

I applaud the President for vetoing the the Keystone Pipeline bill.  This veto tells the world that our nation takes seriously the planetary crisis of climate change.  Climate change is real.  It is caused by human activity and is already causing devastating problems.  I urge my colleagues to sustain the president’s veto.  Bernie Sanders (I-VT)

We almost commented that Burlington Northern was very happy about the outcome but Facebook isn’t the place for serious discussion.  The quote is nonsense because the veto has nothing to do with climate change.  It is about how and where will the oil be delivered.  Right now they are building a second set of tracks near our home to get all the oil through via train.  Climate change is not an issue.  Train or pipeline is the issue.  Where does it goes (US, China, Europe) is an issue.

There is also an international issue.  To what extent does the US want to insult Canada?  Quite a bit it seems.

Minimum Wage Hikes Again

Mike Rowe (ht Jim Geraghty) has a wonderful column on the Minimum Wage.  He start with a leading question about the cost of a Big Mac and gives a great essay on opportunity with lots of examples.  Here is a nice summary paragraph.

Anyway, I’m not an economist or a sociologist, but I’m pretty sure a $20 minimum wage would affect a lot more than the cost of a Big Mac. Beyond the elimination of many entry-level jobs, consider the effect on the skills gap. According to the BLS, they’re about three million available positions that companies are trying to fill right now. Very few of those jobs require a four-year degree, but nearly all require specific training. And all pay more than the current minimum wage. If we want a skilled workforce, (and believe me, we do,) should we really be demanding $20 an hour for unskilled labor?

What a great idea to get the incentives right.  If we have a lottery where some people get $20 hour for unskilled work there is a limited incentive to develop skills.  There is an incentive to be cranky if you lose the lottery.

Do read the whole thing so you get his examples but there is one we want to include here.  Mr Rowe points out the critical development of what he calls soft skills and are often referred to as non-cognitive skills:

But I was also learning the importance of “soft skills.” I learned to show up on time and tuck my shirt in. I embraced the many virtues of proper hygiene. Most of all, I learned how to take shit from the public, and suck up to my boss.

Although he has a comic touch about soft or non-cognitive skills, he recognizes are an important element of success.  His hourly wage went up by a factor of about 3.5 largely because of developing those skills.  The good news is that non-cognitive skills can be improved.  Entry-level jobs are a way to improve those skills.  Every entry-level job is a doorway to opportunity because it always teaches non-cognitive skills and often teaches technical skills.

Walmart and Wages

The New York Times tells us that Walmart:

the largest private employer in the country, said on Thursday that it would increase wages for a half-million employees, a move that comes amid persistent scrutiny of its labor practices and high employee turnover.

That is, the NYT has been investigating Walmart for years and can’t understand why anyone would want to shop there or work there.  This happened for some unknown reason.  Perhaps it is related to global warming.

The Wall Street Journal editorial page has a more serious take on the events:

[The] decision to raise the minimum pay of some 500,000 employees is being portrayed as either enlightened or cynical self-interest, depending on your point of view. We’re agnostic on the point, but one thing the decision isn’t is an argument for a higher minimum wage mandated by government.

Keeping government out of setting wages is obvious.  We would like to discuss the enlightened and cynical self-interest.  We are not agnostic.  We think it is both.  As the labor market slooowly improves, it makes sense for Walmart to stay ahead of it by being an early adopter of higher prices for labor.  It is enlightened for them to recognize that they can increase profits by continuing to influence the labor markets as the largest private employer.

It is cynical in the way that they sell the change.  They say they want to show the associates how much they care.  At the same time it is clear that digital is becoming an increasingly bigger story at Walmart.  They would rather give the associates a fruit basket than $1 an hour forever but the market demands the latter.  The cynicism is selling it as more than a market change.

Another FA Cup Weekend

It is the most fun championship in sports, the FA Cup.  It is a year-long soccer tournament in England.  This weekend is the fifth round or the way into the elite eight.  The teams that are still alive are:

Arsenal (5)
Aston Villa (18)
Blackburn (29)
Bradford City(53)
Derby City (23)
Liverpool (7)
Manchester United (3) or Preston (48)
West Bromwich Albion 14

The Man U – Preston game is Monday night.  The number is their rank in English (England and Wales are included although Wales has an international team – Scotland is out; Northern Ireland seems to be out too) soccer.  There are 20 teams in the top league, The Premiership.  The draw will be made before the Monday night game.  That’s right, somebody will be playing the winner of that game.  There is no seeding or home field advantage other than the luck of the draw.  The home teams have won by an aggregate 16-6 this weekend and the odds favor Man U expanding that margin on Monday night.  Four of the remaining Premiership teams might play each other next assuring a place for an upstart at the semifinals.  Or the upstarts might beat the big boys.

It is the tournament where you never know what will happen.  Bradford City first upset Chelsea (1) and then Sunderland (15) this weekend to get the elite eight.  Teams that are lucky and hold their nerve can do great things.  Wigan did it a couple of years ago and won the Cup despite being relegated from the Premiership.  On to the quarterfinals!

Walker and the University

Christian Schneider at NRO has a nice post on Scott Walker and the University of Wisconsin System.  Well, at least until the last paragraph.  He has great chart that shows that since 2000 state aid to the System is essentially unchanged while tuition revenue has about tripled.  Students have paid for the increasing cost of a university education under all administrations and legislatures.  We’re not barely scraping by but we are frustrated by micromanagement from the legislative process.  We’re frustrated again because neither the political process nor System Administration has been able to distinguish quality from non-quality.  Most cuts are distributed among the parts of System by the same formula.

Therefore, Schneider is correct that the opportunity to eliminate micromanagement and make significant decisions about poorly performing units is attractive to most of the denizens of UW.  There are, however, two to four schools that are scared to death to lose their political protection.   Authority could be a great thing if we have the courage to take action.

Then he his last paragraph goes off the tracks:

It also didn’t particularly help UW’s case when legislators found the system had been sitting on nearly $1 billion in reserves, stashed away for a rainy day. Perhaps Walker’s budget will provoke them to pull out their umbrellas.

The link doesn’t support him.  It says this:

the UW regents will discuss at a meeting in Stevens Point later this week, details how nearly $1 billion is set aside to cover specific expenses, make up unexpected shortfalls, pay for emergencies, and be used at the discretion of chancellors.

The link identifies the first problem with reserves.  They are there for a purpose.  They can be built up for major expenditures like a building remodel.  They are there for uneven spending.  Our textbook rental system buys more books some years and less in other.  It can’t go negative or students would not have books.  The number is exacerbated by the nature of the university.  Tuition is paid at the beginning of the semester but many expenditures are paid later.  Therefore we have money on hand to pay.

The second problem is that he cuts are base budget cuts.  As Schneider points out many oversell that cuts at $300 million when it is really a base budget cut of $150 million.  The small amounts in reserve that can actually be spent are one-time.  Once spent they are gone.  The budget cuts are base budget cuts so that is like firing an employee.  We have eliminated that salary forever.  So if we use the reserve to pay the employee we will have a problem shortly.

Just ignore the last paragraph and it is a good summary.

Classic Williamson

Today at NRO Kevin Williamson said:

But once you’ve accepted real limits on what planning can do — on what government can do — then you have at some level essentially surrendered to conservatism.

And that means that somebody, somewhere, must be a racist.

Q.E.D.  Conservative can’t be allowed to win so the only recourse is charges of racism.  The only thing left to say is read the whole thing.

Accounting Programs

By law, individuals must have 150 college credits to be licensed as a CPA.  Programs have reacted to this rule in two ways.  Some programs have created a masters degree while others have allowed students to create their own program at the undergraduate level.  We have supported the latter for two reasons.  First, the market does not distinguish between these two.  CPA ready individuals start at the same level.  Second, we believe that we would need to cannibalize our undergraduate program to support the graduate program.

Sidebar: we often feel like an outsider at American Accounting Association (AAA) meetings.  The AAA has associated with fix the debt and of course somebody asserted that it was an anti-social security site and social security was popular.  It was nice that there was a response but the problem is that it is popular.  If it wasn’t popular it would be easy to fix the debt.  End sidebar.

It was amazing program and particularly the last session the last session that folks admitted to making this trade-off.  It was, to them, a defense of the masters degree program they had created.  It was to us an admission of the shortcomings of those programs.  They are creating large undergraduate classes and moving the interesting topics into the masters programs to support the masters degree.  Their behavior has convinced us that the cheaper and faster undergraduate program is the way to go for students.

Bjorn the Great

Bjorn Lomborg, at WSJ, has a great article on environmentalism.  He updates his skepticism on the more extreme environmental claims in a wide variety of areas including noting that recent temperature changes are 90% less than expected and

And even with exceptionally optimistic assumptions about future deployment of wind and solar, the IEA expects that these energy forms will provide a minuscule 2.2% of the world’s energy by 2040.

It is great and you should read it all if you want to be an informed layperson on climate.  As great as it is we want to quibble about a couple of things.

We also need to invest in and promote growth in the world’s poorest nations, which suffer the most from natural disasters. (emphasis added)

We vote yes on promoting growth.  As Mr. Lomborg points out, experiments in market-tested betterment have positive returns to countries in avoiding loss of life from natural disasters.  Unless he has a very broad definition of invest in we vote no.  We would vote yes to reducing US tariff barriers.  Sugar would be a good place to start.  We are not convinced that sending money to other countries is very effective, see Haiti.

In his conclusion he says we need to pick the right climate policies.  So if Mr. Lomborg has broadly defined climate policies and promoting economic growth is our policy then we agree.  Otherwise, climate policy means creating a governmental interest in certain policies.  We all know how that turns out.

It is a great article but there are quibbles.