February 2014 – Page 2 – Economic Thinking In Action

Younger women significantly narrow the gender pay gap while education attainment outpaces men

A new study by Pew Research suggest that young women are ‘leaning in’ more and more as earnings and education attainment level increase for women. A study by the Pew Research center shows that for younger women, the so called Millennial generation, the unadjusted gap between what women an men earn is significantly smaller than women from other generations. The survey, which is based on U.S. Census data, finds that:

this group of young women are the first in modern history to start their work lives at near parity with men. In 2012,

The study found that among workers ages 25 to 34, women’s unadjusted hourly earnings were 93% those of men. By comparison, for all working men and women ages 16 and older, the study found that women’s hourly wages were 84% those of men.

The study does not adjust for factors such as the type of job. Accounting for these types of employment factors would likely decrease the earnings gap even further.

The study also found that women in the Millennial generation outpaced men in terms of educational attainment. The graph below shows the % of men and women enrolled in college and those earning Bachelors’ degrees.

ADP employment levels almost back to pre-Great Recession levels

Texas oil expansion continues as Phillip 66 invest $3 billion in two new facilities 60 miles south of Houston

According to FuelFix, Phillips 66 approved a $3 billion investment in two facilities 60 miles south of Houston.

A planned liquefied petroleum gas export terminal in Freeport capable of exporting 4.4 million barrels of products like butane and propane overseas every month by 2016.
A new fractionation facility in Old Ocean that will separate natural gas liquids into chemicals used in plastics manufacturing and other industries.

Combined the two Brazoria County facilities would create 50 permanent jobs in southeast Texas, Phillips 66 says. The economic impact of the expansion is magnified as the money flows through the area and creates additional jobs and economic opportunities for supplies and other vendors related to the Oil an Gas industry.

Going to Harvard from the comfort of your couch? It is a good idea that many start but few finish

Want to go to Harvard or Stanford without all the travel? Massive open online courses (MOOC) may be what you are looking for. So far, however MOOCs are a good idea that many people start but few actually finish. Prof. Robert Grossman of Marist discusses the MOOC movement in HR Magazine. Prof. Grossman writes that MOCC’s are

Designed for large-scale participation and free access via the Web, a typical MOOC lecture is self-paced, short—maybe 10 or 15 minutes—and spiced with multimedia components. Professors highlight issues as well as pose and answer questions based on “crowdsourcing” of information that participants submit. After each session, students take quizzes to verify that they understand the material. They also discuss content among themselves; interaction often leads to Facebook and LinkedIn chats or even face-to-face meetings. Students take exams and a final, submit reports, and grade other students’ essays. Anyone can sign up, and there are no prerequisites. MOOCs are free, although some require fees for certificates of completion or charge tuition for college credit

A number of big named universities as well as business leaders have signed on to the idea of online learning. While there are clearly a number of advantages, such as cost and accessibility, to this type of learning environment there are a number of downsides to MOOCs. Most notably, hardly any students actually finish MOOCs..

McFarland says the 3.48 percent completion rate is typical among MOOCs. Published reports claim about 10 percent of students finish such courses.

What FLSA does not says about wages, overtime, and recordkeeping

FLSA, and what is actually required under it, are frequently misstated. While clearly some of FLSA requires a law degree to understand, the basic truths of the law can be obtained straight from the FAQ at the Department of Labor (DOL). So here are a few things that the FLSA does not provide for:

When are pay raises required?

Pay raises to amounts above the Federal minimum wage are not required by the FLSA.

Is extra pay required for weekend or night work?

The FLSA does not require extra pay for weekend or night work.

How are vacation pay, sick pay, holiday pay computed and when are they due?

The FLSA does not require payment for time not worked, such as vacations, sick leave or holidays (Federal or otherwise)

How is severance calculated and when is it due?

There is no requirement in the FLSA for severance pay.

When must breaks and meal periods be given?

The FLSA does not require breaks or meal periods be given to workers.

However, if employers do offer short breaks (lasting about five to 20 minutes), federal law considers these short breaks time for which employees must be compensated.

What must an employer provide to workers who want to express breast milk in the workplace?

Effective March 23, 2010, employers are required under the FLSA to provide unpaid break time and space for nursing mothers to express breast milk for one year after the child’s birth.

Are periodic performance evaluations required?

The FLSA does not require performance evaluations.

How many hours per day or per week can an employee work?

The FLSA does not limit the number of hours per day or per week that employees aged 16 years and older can be required to work.

How many hours is full-time employment? How many hours is part-time employment?

The FLSA does not define full-time employment or part-time employment. This is a matter generally to be determined by the employer. Whether an employee is considered full-time or part-time does not change the application of the FLSA.

When can an employee’s scheduled hours of work be changed?

The FLSA has no provisions regarding the scheduling of employees, with the exception of certain child labor provisions. T

When is double time due?

The FLSA has no requirement for double time pay.

Is extra pay required for weekend or night work?

The FLSA does not require extra pay for weekend or night work.

Are pay stubs required?

The FLSA does not require an employer to provide employees pay stubs. The FLSA does require that employers keep accurate records of hours worked and wages paid to employees.

What notices must be given before an employee is terminated or laid off?

The FLSA has no requirement for notice to an employee prior to termination or lay-off.

BLS reclassifies education in Consumer Expenditure Survey to better reflect income and spending patterns.

According to the BLS, its most recent re-classification of education in the Consumer Expenditure (CE) survey better reflects income and spending patterns in the US. The BLS reports this in Beyond the Numbers: Prices & Spending, vol. 3, no. 1 (U.S. Bureau of Labor Statistics, January 2014.

Starting with the release of calendar year 2012 CE data, classification of household expenditures by the education of the reference person was changed. In the latest release, and into the future, education will be replaced by classification by the highest level of education attained by any consumer unit (CU) member. So for example, if the Husband is the reference person and has a Bachelor’s degree and the wife has a Post-graduate degree, the household’s education in the post 2012 data will be classified as Post-Graduate instead of Bachelors/College Graduate.

Ann Foster, the author of article, states that the rationale for the change was that the highest level of education attained by any household member more accurately reflects income and spending patterns than does the education level of the reference person only.

Source:

Ann C. Foster, “New education classification better reflects income and spending patterns in the Consumer Expenditure Survey ,” Beyond the Numbers: Prices & Spending, vol. 3, no. 1 (U.S. Bureau of Labor Statistics, January 2014), http://www.bls.gov/opub/btn/volume-3/education-classification-and-income-and-spending-patterns.htm

Looking at the Civil Rights movement through the eyes of a misfit: Malcolm Gladwell’s David and Goliath

Malcom Gladwell’s new book is intriguing; especially his novel take on the Civil Rights movement. In his book he argues that many of the Civil Rights leaders necessarily had to act as ‘Davids’ in their battle with Goliath. He argues that the use of the media was a key tool for Civil Rights leaders. He goes on further an states that some of the most notable and stirring moments in the Civil Rights movement were in fact not as they seemed at the moment that they occurred.

For example, he argues that the classic picture of the young boy (below) who was being attacked by a police dog was not what it looked like.

Gladwell, argues that the young boy was not actually a civil rights protester but instead was simply there to attend a well publicized street event that was organized by civil rights groups. According to later interviews with the young High School student Walter Gadsden, who was the son of two African-American newspaper publishers, Gladwell opines that Gadsen was actually defending himself and actually leaning into the dog. Based on more investigation, Gladwell concludes that the police officer was actually attempting to hold the dog back. Intriguing research. Gladwell of course tells the story much better than I do! Read it for yourself!

The economics behind affordable health insurance and the decision to reduce work (or not work at all)

A recent study by the CBO projects that access to affordable health insurance will result in over 2 million workers reducing their hours or leaving the workforce all together.

There are four questions that come to mind when thinking about this issue.

Q1: Is the economics behind the CBO economic projection sound?

Yes, the economics behind this projection are sound. If health-insurance is a important determinant of a person’s decision to supply labor then a person that no longer has to supply as much labor to the labor market to get health insurance will no longer have as much incentive to work as hard.

That is, at every wage there will be fewer workers, all other things equal, that will be willing to work

If that is the case, then labor supply falls and the number of workers in the labor market falls and, if labor demand remains unchanged, wages rise. In addition to the number of workers falling, the amount of hours worked could also decrease if individuals were able to get affordable health care without working full-time.

So the economics of the statement and the CBO projection are sound.

Q2: Is it even possible to reduce the hours that a person works? That is don’t most people have their hours dictated to them by their employer?

Yes, it is very possible to reduce the hours that a person works. The person could choose to work part time as opposed to full time.

Most studies however would suggest that it is more likely that people would choose to not work it all. In particular lower income workers would more likely be faced with a decision of receiving subsidized, lower health care and working less or working more hours and having to pay for unsubsidized health insurance.

Q3: By how much would access to affordable healthcare reduce the number of hours worked by employees in my industry?

The answer to this question is varied. Most recent studies of labor market elasticities suggest that some workers, such as young in unmarried mothers, would be more sensitive to changes in the health law than other types of workers such as higher income professional workers.

The CBO, the authors of the most recent study, recently published a review of the latest labor market supply elasticities. Generally, the review suggest that younger and lower income unmarried women would be most likely to be impacted.

Q4: Is this reduction in work hours and labor force participation a good thing or bad thing for the economy?

This question is for the citizenry to answer! If for example the reduction in hours worked results in unmarried young mothers having more time to rear their children then society may see this as a good thing.

Alternatively, the reduction in hours work and labor force participation will at some point cause an increase in wages. Fewer people in a labor market will do that. This could be viewed as a bad for society. The true impact depends on the individual labor supply elasticities of the groups at issue and most at risk of being impacted and having to make the decision to work or not work.