Dwight Steward, Ph.D. – Page 4 – Economic Thinking In Action

FLSA and wage and hour case involving truck drivers and per-load pay

Overview

In this case, several truck driver plaintiffs filed a FLSA and wage and hour lawsuit against a petroleum transport company that provides crude oil transportation services. Its drivers pick up crude oil from well sites and deliver that oil to refineries, pipelines and storage facilities, etc. The driver’s compensation plan for its drivers included: a) pay per load for transporting the oil; and b) hourly pay for certain other activities.

Pay Per Load. For transporting a load of oil, the company paid the drivers a certain percentage of the price it received from its customer for transporting that load.

Hourly Pay. Drivers received hourly pay for: i) washing a truck; ii) time spent waiting with a disabled truck; iii) time spent at a load or delivery site after a certain point; d) training & meetings

Details on GM Compensation Plan for Death and Physical Recall Injury Claims

In a recent document and interview, GM has laid out its plan to compensate people injuried or those with familiy members who were killed due to product defects. The full plan can be found here. Some highlights are below.

Types of claims covered by plan:

1. Individual Death Claims
2. Category One Physical Injury Claims: claims involving quadriplegic injury,
paraplegic injury, double amputation, permanent brain damage requiring
continuous home medical assistance, or pervasive burns encompassing a
substantial part of the body.
3. Category Two Physical Injury Claims: claims, other than Category One
Physical Injury Claims, that, within 48 hours of the accident, require either
overnight hospitalization of one or more nights or, in extraordinary
circumstances as determined on a case by case basis by the Administrator,
outpatient medical treatment

METHODOLOGIES FOR CALCULATING COMPENSATION

1. Track A – Presumptive Compensation
The Track A presumed methodology relies upon a combination of the decedent’s
historical earnings and personal details with assumptions of likely future events based
upon multiple sources of publicly available national data including the Bureau of Labor
Statistics and the Internal Revenue Service. Eligible Claimants need not present detailed
computations or analyses

This Track A presumed methodology ensures consistent economic loss calculations for
similarly situated victims (i.e., same age, number of dependents and income level)

2. Track B – Complete Economic Analysis

Track B entails a complete, comprehensive economic loss analysis of the decedent’s past,
present and assumed future income. The Facility will consider the financial history of the
decedent through incorporation of submitted individual income data, including past,
present and future earnings, wage growth, work life expectancy, etc., as well as other
case-specific information and circumstances of the decedent that the claimant believes
the Facility should consider in determining the total value of the claim. I

Non-economic losses will also be determined as follows.

• $1,000,000 for the death of the decedent, and
• $ 300,000 for the surviving spouse, and
• $ 300,000 for each surviving dependent of the decedent.

In addition, life care plans to cover future medicals will also funded for injured individuals needing future care.

Accounting for kids and marriage in the calculation of a person’s worklife expectancy

Abstract (From Millimet et. al)

Measuring an individual’s human capital at a point in time as the present actuarial value of expected net lifetime earnings has a lengthy history. Calculating such measures requires accurate estimates of worklife expectancy. Here, worklife estimates for men and women in the USA categorized by educational attainment, race, marital status, parental status and current labour force status are presented. Race has a much larger impact on the worklife expectancy of men than women. Education is associated with larger worklife differentials for women. The association between marriage and worklife expectancy is significant, but of opposite sign, for men and women: married women (men) have a lower (higher) worklife expectancy than single women (men). Parenthood is associated with a reduction in the worklife expectancy of women; the association is smaller and varies from positive for some education/marital status groups to negative for others for men.

From:

DETAILED ESTIMATION OF WORKLIFE EXPECTANCY FOR THE MEASUREMENT OF HUMAN CAPITAL: ACCOUNTING FOR MARRIAGE AND CHILDREN
Daniel L. Millimet
Southern Methodist University
Michael Nieswiadomy
University of North Texas
Daniel Slottje
Southern Methodist University:

Are Internally Generated Patents Assets?

Here is the situation. Two divorcing individuals are disputing the value of a company that the two built. After, reviewing the books, one of the parties argues that the other party’s books does not reflect the value of a patent for a medical product they the two individuals developed and held.

The charged party argues that the patent was never recorded as an asset but was instead expensed. That is, the cost of developing the patent was expensed therefore the cost was never capitalized. So the question is:

Q: Is this a common practice for patents?

A: According to some accountants, this is a standard practice for some types if patents.

Specifically, according to some accountants, internally generated intangibles are never capitalized, their cost to develop is expensed. According to FASB ASC 350, 805, only acquired intangibles are on the balance sheet.

What is the true value of placing your kids in a high performing school?

by Dwight Steward

Deciding which schools their children attend is one of the biggest and anxiety producing decisions that parents make. Often at the heart of the decision is determining how much value there is in children attending highly competitive high schools versus less competitive high schools. For example, are kids in highly competitive schools more likely to attend and graduate from college?

Recent research by Princeton economist Will Dobbie and Harvard economist Roland Fryer, suggest that in contrast to some conventional wisdom, that the typical college applicant does not gain much from attending competitive high schools. The authors conclude;

Our results suggest that the typical applicant does not significantly benefit from attending a school with dramatically higher-achieving and more homogeneous peers….With that said, without longer-term measures such as income, health, or life satisfaction, it is difficult to fully interpret our results. To the extent that attending an [highly competitve high school] with higher-achieving peers increases social capital in ways that are important for later outcomes that are independent of college enrollment, graduation, important for later outcomes that are independent of college enrollment, graduation, or human capital, then there is reason to believe that our conclusions are premature…

by Dwight Steward

Rest Periods, Hybrid Pay Systems, and the Minimum Wage in California

Dwight Steward wrote:

Companies use many different systems to pay employees. One such system is a hybrid pay system, where an employee earns an hourly rate as well as a wage for productive tasks. For example, an employee who is paid $4 per hour and additionally $0.10 per box unloaded from a truck. Recent cases discuss how companies that utilize a hybrid pay system should pay their employees a minimum wage for rest periods.

According to a May 8, 2013 decision in Bluford v. Safeway Stores, “rest periods must be separately compensated in a piece-rate system. Rest periods are considered hours worked and must be compensated… A piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law.” In other words, earnings for productive tasks cannot be used to subsidize rest breaks.

3 Strategies 4 Extending Drug Patents

Patents create short term monopolies that can last up to 20 years. The idea is that the time is needed to provide the patent pioneers time to recoup the money it took to research and develop the product. When the patents expire patent holders in the pharmaceutical industry have generally employed a number of strategies to effectively extend the patients and ward off competition.

Strategy one: Marketing
Strategy two: Moving customers to drugs that are still protected by a patent
Strategy three: Paying potential competitors not to enter

See The Economist June 21, 2014 p. 74 for more discussion on the issue.

Steps to converting non-analyzable wage, time, and business electronic data

When manual data entry of non-analyzable financial or wage data is not an option, OCR software and specialized designed and written computer software data cleaning routines is a good alternative.

For example in our approach, we use a number of OCR programs including Abbey Reader to first translate the data into a format that is recognized by statistical programs such as STATA and computer software script languages such as VBA.

Once the data is converted, we write specialized computer software routines to extract the relevant data from the converted file. The computer code, which is written in STATA, VBA, or other scripting language, puts the extracted data into a format that can be analyzed by statistical and spreadsheet programs.

These approach to converting wage, business, employment or other types of data has the advantage of being able tobe reproduced by either party if required.

Having both the data cleaning and statistical and economic analysis performed by the same economic outfit and team is desirable. Data cleaning is not performed in a vacuum; that is the very definition of ‘dirty data; depends on what the data is to be used for. Some data items may not convert very well by the OCR and software code, but the items may be of little value in the economic and statistical analysis in the first place.

One advantage of using the same research outfit to do both the data cleaning and the economic and statistical analysis is that the distinction gets made early in the analysis process.

Evaluating economic damage allegations related to damaged credit

Allegations of economic loss arising from damaged credit history appear in cases involving business damages as well as personal injury torts.

In these cases, the loss allegations generally revolve around a specific economic damage such as a mortgage loan denial or a higher interest rate.

The economic damage calculation and/or rebuttal analysis general involves comparing the plaintiff’s current economic and credit situation to the economic and credit situation that could have been reasonably expected to occur had the incident in question not occurred.

The credit situation that could have been reasonably expected to occur had the incident in question not occurred is typically referred to as the ‘but-for’ scenario.

Confirming the business background of financial services professionals

The NMLS is the legal system of record and free service for consumers to confirm that the financial-services company or professional is authorized to conduct business in their state.

A little bit about what the NMLS Consumer AccessSM provides:

Contains licensing/registration information on mortgage, consumer finance, debt, and money services companies, branches, and individuals licensed by state regulatory agencies participating in NMLS.
Information regarding federal agency-regulated institutions and their mortgage loan originators who are registered with NMLS.
Contains information that is self-reported to regulatory agencies or an individual’s employing institution by the licensed/registered company or professionals.
Is updated nightly on business days