Thursday, December 1, 2016

Youth and the Economic Future of Arab States

"Most recent statistics indicate that two-thirds of the Arab region’s population is below thirty years
of age, half of which falling within the 15 - 29-year age bracket. This age category defines “youth”
according to the report, which estimates the number of young people in the region at over one hundred million. This unprecedented demographic mass of young people at the prime of their working and productive abilities constitutes a huge potential for advancing economic and social development if given the opportunity. ... The report asserts that today’s generation of young people is more educated, active and connected to the outside world, and hence have a greater awareness of their realities and higher aspirations for a better future. However, young people’s awareness of their capabilities and rights collides with a reality that marginalises them and blocks their pathways to express their opinions, actively participate or earn a living. As a result, instead of being a massive potential for building the future, youth can become an overwhelming power for destruction."

This comment comes from a report just published by the  United Nations Development Programme, the Arab Human Development Report 2016, which is subtitled "Youth and the Prospects for
Human Development in a Changing Reality." The report ranges over a wide array of issues, including gender, health, armed conflict, the role of religion, and others. Here, I'll focus on the economic challenge. The most visible problem is a need for job creation to reduce sky-high levels of youth unemployment in the region. But the solutions require confronting what this United Nations report calls the "failure of the Arab development model." Here's the unemployment problem in Arab countries (footnotes omitted for readability):
Unemployment among youth in Arab countries is the highest in the world, 29 percent in 2013, versus 13 percent worldwide. First-time job seekers account for around half the unemployed, also the highest rate in the world. Youth unemployment is hugely costly to the region’s societies and requires a major turnaround in policy thinking about jobs. The region needs to create more than 60 million new jobs in the next decade to absorb the large number of workforce entrants and stabilize youth unemployment. ... 
Job creation, particularly decent and sustainable job creation, is the most challenging issue facing the region. If the workforce continues to grow at current or similar rates, 60 million new jobs will need to be created in the next decade to absorb the large number of workforce entrants. Informality is one of the characteristics of employment in the region, and a large number of youth work in the informal sector where jobs are unstable and offer low wages and poor working conditions. For instance, over 2000–2005, 75 percent of new labour market entrants in Egypt were employed in the informal sector, a startling jump from only 20 percent in the early 1970s. Similarly, during 2001–2007, 69 percent of new jobs in Syria were in the informal sector.18 In 2011, vulnerable employment across the Arab region accounted for almost 30 percent of all jobs. The problem is even serious among low-income youth, who are more likely to settle for informal or unpaid family work.

The report argues that the underlying problem here is a development model which has placed too much reliance on government favoritism and government employment, in a way which has strangled the private sector. But the government isn't going to be able to pay for the 60 million new jobs that are needed. For a UN report, the language describing these issues is unsparing, even harsh. Here's a sample (again, footnotes omitted, along with references to figures):
"Countries in the Arab region share much more than a common language and social and cultural traditions. They have long pursued a model of development that is dominated by the public sector and turns governments into providers of first and last resort. This flawed Arab model of development depends on inefficient forms of intervention and redistribution that, for financing, count heavily on external windfalls, including aid, remittances and rents from oil revenues. The reliance on unearned income is sometimes dubbed the original sin of Arab economies.
"Since independence, most countries have seen little change in economic structure. Manufacturing—the primary vehicle for job creation in emerging economies—has registered painfully slow and sometimes negative growth. The public sector has either crowded out and manipulated the private sector or forged uncompetitive and monopolistic alliances, while inhibiting the development of viable systems of public finance. With few exceptions, the private sector is weak and dependent on state patronage, and the business environment hampers the rise of young and independent entrepreneurs. Because of their limited size and scope, the investments of the private sector have not been able to pick up the slack created by the more recent rollback in state employment. The sustainability of this system has been increasingly eroded by the rising costs of repression and redistribution.
"The state-led development model has created contradictions. It has expanded access to key entitlements, whether public employment or food subsidies, thereby raising some levels of human development. Thus, partly because of the entitlements, societies have been able to lower the incidence of poverty and income inequality, shielding disadvantaged groups from some of the worst economic pressures of our times. However, these ostensibly favourable outcomes have entailed a deeper trade-off in the long run. ...
"While the model has created an adverse legacy of entitlement that aims to sustain some individuals from conception to coffin, it has also fostered political marginalization, economic deprivation and social exclusion. Thus, the associated trade frictions push firms without political or social connections to the margins of the economy, and opportunities for absorbing young entrants to the workforce are lost. The model thereby hobbles promising enterprises, discourages economic efficiency and deters young talents because its goal is not to promote innovation or competition, but solely to preserve access to wealth and power among a few. The result is a top-down model that is based on hand-outs, undermines individual agency and encourages short-term consumption at the expense of long-term investment in human capabilities and competitive production.
The contribution of private investment to growth in the region is among the lowest in the world. This is especially the case because entrepreneurs consistently face anticompetitive and discretionary practices that favour incumbent or large firms at the expense of new entrants, small businesses and young entrepreneurs. These practices go beyond opportunistic corruption; they reflect a deep structural alliance between political and economic elites to secure economic interests. ... Resource rents in the region have been channelled into lavish and conspicuous real estate projects,  unproductive public sector spending and military expenditures, but the spending benefits a tiny slice of society." 
Conflict across the Middle East has many causes. But the combination of an interconnected world in which young people can see and hear how others around the world are living, combined with a system of political and economic governance that makes it extremely difficult for many of them to attain even a modestly secure middle-class economic future, is a recipe for social turmoil.

Monday, November 28, 2016

Improvements in US Air Pollution

The US government passed its first Air Pollution Control Act in 1955, but the major amendments to that law passed in 1970--including the creation of the Environmental Protection Agency to administer the law--greatly expanded the federal and state enforcement efforts. The EPA has published a web report called "Our Nation's Air: Status and Trends through 2015."

It's been common since 1970 to refer to the six "criteria" air pollutants, which include carbon monoxide, lead, nitrogen oxides, ozone, particulates, and sulfur dioxide. The lines on the graph, from top to bottom, show the rise since 1970 in US GDP, vehicle-miles traveled, population, energy consumption, and carbon emissions--and the fall in the overall emissions of the six criteria pollutants since 1970.

Here's more detail since 1990. On this figure, the vertical axis shows the level of various measures of the criteria air pollutants relative to the National Ambient Air Quality Standards (NAAQS). These air pollutants are below the national standard, and falling since 1990s.

As the report notes:
Nationally, concentrations of the criteria air pollutants have dropped significantly since 1990:
Carbon Monoxide (CO) 8-Hour, 77%
Lead (Pb) 3-Month Average, 99%
Nitrogen Dioxide (NO2) Annual, 54%
Nitrogen Dioxide (NO2) 1-Hour, 47%
Ozone (O3) 8-Hour, 22%
Particulate Matter 10 microns (PM10) 24-Hour, 39%
Particulate Matter 2.5 microns (PM2.5) Annual, 37%
Particulate Matter 2.5 microns (PM2.5) 24-Hour, 37%
Sulfur Dioxide (SO2) 1-Hour, 81%
In my experience, this kind of news tends to produce extreme and opposing reactions, either self-congratulatory or self-flagellatory. The self-congratulatory view points to the progress. The self-flagellatory view had no trouble pointing out shortcomings. The reduction in air pollutant emissions might have happened sooner, or at lower cost. There are hot spots of air pollution across the country where air pollution is often above these levels. The criteria pollutants don't include carbon emissions.
The self-congratulatory sometimes point to this progress as an argument that efforts toward cleaner air can be relaxed; the self-flagellatory argue that past progress is a reason to accelerate such efforts. 

At least for today, I'd like to step out of that dichotomy and just emphasize that economic growth in high-income countries can, at least in these important cases, happen together with outright reductions in air pollution. Given that air pollution is the world's biggest health hazard, according to the World Health Organization, this is potentially very good news.

Friday, November 25, 2016

The Plague of Long-Term Unemployment in Europe

There's plenty of legitimate reason for concern about the extent to which the US labor market is producing high quality jobs. But every now and again, Americans might want to glance to the east and contemplate Europe's unemployment issues.

Here's the unemployment rate in Europe (from Eurostat), with the red line showing the unemployment rate in the 19 countries of euro-zone, and the blue line showing the unemployment rate across all 28 countries of the EU. In the euro-zone, the average unemployment rate has been above 9% since 2000, with the exception of a dip just before the Great Recession hit, and it's been in the range of 10% or higher for almost all of the last seven years.

But in at least two ways, Europe's problem is worse than this figure suggests. One is that the averages don't take into account the stress in countries with higher-than-average unemployment: for example, unemployment in France in September 2016 was 10.2%; in Italy, 11.7%; in Spain, 19.3%; and in Greece, 23.2%.

Another dimension is that Europe's overall unemployment rate doesn't show what share of that unemployment is long-term, rather than short-term and transition. A new e-book, Long-Term Unemployment After the Great Recession: Causes and Remedies, edited by Samuel Bentolila and Marcel Jansen, offers a series of short and readable essays with some overall perspectives and close-up looks at long-term unemployment in eight countries: Denmark, France, Germany, Italy, Netherlands, Poland, Spain, and the UK.

In the "Introduction" by Bentolila and Jansen, they point out that if you counted as unemployed only those who have been out of work and looking for a job for more than a year, the unemployment rate across the 28 countries would still have been nearly 5% in 2015. Moreover, in many countries the long-term unemployed are 40%, 50%, and more of the total unemployed. Here's a figure:

As the figure shows, the long-term unemployed (more than a year) in the US economy is less than 20% of its the total number of our much lower unemployment rate.

American readers: can you imagine the social turmoil in the US if the unemployment rate has been above 10% for the last seven years, instead of peaking at 10% back in October 2009 and falling down to about 5% by a year ago in fall 2015? Can you imagine if half of these unemployed had been looking for work for more than a year? Consider the difference, and you'll have a better sense of why the EU is struggling to have much appeal to the European public.

Thursday, November 24, 2016

An Economist Chews Over Thanksgiving

As Thanksgiving preparations arrive, I naturally find my thoughts veering to the evolution of demand for turkey, technological change in turkey production, market concentration in the turkey industry, and price indexes for a classic Thanksgiving dinner. Not that there's anything wrong with that. [Note: This is an updated and amended version of a post that was first published on Thanksgiving Day 2011.]

The last time the U.S. Department of Agriculture did a detailed "Overview of the U.S. Turkey Industry" appears to be back in 2007, although an update was published in April 2014 . Some themes about the turkey market waddle out from those reports on both the demand and supply sides.

On the demand side, the quantity of turkey per person consumed rose dramatically from the mid-1970s up to about 1990, but since then has declined somewhat. The figure below is from the website run by the National Turkey Federation. Apparently, the Classic Thanksgiving Dinner is becoming slightly less widespread.

On the production side, the National Turkey Federation explains: "Turkey companies are vertically integrated, meaning they control or contract for all phases of production and processing - from breeding through delivery to retail." However, production of turkeys has shifted substantially, away from a model in which turkeys were hatched and raised all in one place, and toward a model in which the steps of turkey production have become separated and specialized--with some of these steps happening at much larger scale. The result has been an efficiency gain in the production of turkeys. Here is some commentary from the 2007 USDA report, with references to charts omitted for readability:

"In 1975, there were 180 turkey hatcheries in the United States compared with 55 operations in 2007, or 31 percent of the 1975 hatcheries. Incubator capacity in 1975 was 41.9 million eggs, compared with 38.7 million eggs in 2007. Hatchery intensity increased from an average 33 thousand egg capacity per hatchery in 1975 to 704 thousand egg capacity per hatchery in 2007.
Some decades ago, turkeys were historically hatched and raised on the same operation and either slaughtered on or close to where they were raised. Historically, operations owned the parent stock of the turkeys they raised while supplying their own eggs. The increase in technology and mastery of turkey breeding has led to highly specialized operations. Each production process of the turkey industry is now mainly represented by various specialized operations.
Eggs are produced at laying facilities, some of which have had the same genetic turkey breed for more than a century. Eggs are immediately shipped to hatcheries and set in incubators. Once the poults are hatched, they are then typically shipped to a brooder barn. As poults mature, they are moved to growout facilities until they reach slaughter weight. Some operations use the same building for the entire growout process of turkeys. Once the turkeys reach slaughter weight, they are shipped to slaughter facilities and processed for meat products or sold as whole birds.
Turkeys have been carefully bred to become the efficient meat producers they are today. In 1986, a turkey weighed an average of 20.0 pounds. This average has increased to 28.2 pounds per bird in 2006. The increase in bird weight reflects an efficiency gain for growers of about 41 percent."
The 2014 report points out that the capacity of eggs per hatchery has continued to rise (again, references to charts omitted):
"For several decades, the number of turkey hatcheries has declined steadily. During the last six years, however, this decrease began to slow down. As of 2013, there are 54 turkey hatcheries in the United States, down from 58 in 2008, but up from the historical low of 49 reached in 2012. The total capacity of these facilities remained steady during this period at approximately 39.4 million eggs. The average capacity per hatchery reached a record high in 2012. During 2013, average capacity per hatchery was 730 thousand (data records are available from 1965 to present)."
U.S. agriculture is full of examples of remarkable increases in yields over perionds of a few decades, but they always drop my jaw. I tend to think of a "turkey" as a product that doesn't have a lot of opportunity for technological development, but clearly I'm wrong. Here's a graph showing the rise in size of turkeys over time from the 2007 report.

The production of turkey remains an industry that is not very concentrated, with three relatively large producers and then more than a dozen mid-sized producers. Here's a list of top turkey producers in 2014 from the National Turkey Federation:

In the last couple of years, the US turkey industry has at times been affected by an outbreak of HPAI
(Highly Pathogenic Avian Influenza). In the November 17, 2015 issue of the "Livestock, Dairy, and Poultry Outlook" from the US Department of Agriculture, Kenneth Mathews and Mildred Haley offer some details.
U.S. turkey meat production in third-quarter 2015 was 1.35 billion pounds, down 9 percent from a year earlier. This continued the downward path for turkey production in 2015 ... The third-quarter decline was due to both a lower number of turkeys slaughtered and a drop in their average live weight at slaughter. The slaughter number fell to 57.5 million, 6 percent lower than a year earlier, while the average live weight at slaughter declined to 29.3 pounds, a drop of 3 percent from the previous year. Since April the average live weight at slaughter has been lower than the previous year, for a period of 6 consecutive months—reflecting the impact of the HPAI outbreak, which caused processors to slaughter birds somewhat earlier than they normally would in order to maintain supply levels. ... Lower turkey meat production during third-quarter 2015 helped to lower overall turkey stocks, which, in turn, put upward pressure on whole bird prices. ... Turkey meat production in 2016 is forecast at 6 billion pounds, which would be an increase of 8 percent from the HPAI-reduced production of the previous year; much of the increase will come in the second half of the year. ... Prices for whole frozen hen turkeys at the wholesale level averaged $1.36 per pound in October, up from $1.16 per pound the previous year (17 percent). ... The quarterly price for frozen whole hens in 2016 is forecast higher through the first half of the year, but then to average below year-earlier levels in the second half, as higher production mitigates traditional seasonal price increases.
For some reason, this entire post is reminding me of the old line that if you want to have free-flowing and cordial conversation at dinner party, never seat two economists beside each other. Did I mention that I make an excellent chestnut stuffing?

Anyway, the starting point for measuring inflation is to define a relevant "basket" or group of goods, and then to track how the price of this basket of goods changes over time. When the Bureau of Labor Statistics measures the Consumer Price Index, the basket of goods is defined as what a typical U.S. household buys. But one can also define a more specific basket of goods if desired, and since 1986, the American Farm Bureau Federation has been using more than 100 shoppers in states across the country to estimate the cost of purchasing a Thanksgiving dinner. The basket of goods for their Classic Thanksgiving Dinner Price Index looks like this:

The cost of buying the Classic Thanksgiving Dinner actually declined by a bit in 2016, compared with 2015. The top line of the graph that follows shows the nominal price of purchasing the basket of goods for the Classic Thanksgiving Dinner. The lower line on the graph shows the price of the Classic Thanksgiving Dinner adjusted for the overall inflation rate in the economy. The line is relatively flat, which means that inflation in the Classic Thanksgiving Dinner has actually been a pretty good measure of the overall inflation rate.

Thanksgiving is a distinctively American holiday, and it's my favorite. Good food, good company, no presents--and all these good topics for conversation. What's not to like?

Origins of the Thankgiving Holiday: George Washington, Sarah J. Hale, Abraham Lincoln

Thanksgiving is a day for a traditional menu, and I take a holiday by reprinting this annual column on the origins of the day:

The first presidential proclamation of Thanksgiving as a national holiday was issued by George Washington on October 3, 1789. But it was a one-time event. Individual states (especially those in New England) continued to issue Thanksgiving proclamations on various days in the decades to come. But it wasn't until 1863 when a magazine editor named Sarah Josepha Hale, after 15 years of letter-writing, prompted Abraham Lincoln in 1863 to designate the last Thursday in November as a national holiday--a pattern which then continued into the future.

An original and thus hard-to-read version of George Washington's Thanksgiving proclamation can be viewed through the Library of Congress website. The economist in me was intrigued to notice that some of the causes for giving of thanks included "the means we have of acquiring and diffusing useful knowledge ... the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best."

Also, the original Thankgiving proclamation was not without some controversy and dissent in the House of Representatives, as an example of unwanted and inappropriate federal government interventionism. As reported by the Papers of George Washington website at the University of Virginia.
The House was not unanimous in its determination to give thanks. Aedanus Burke of South Carolina objected that he “did not like this mimicking of European customs, where they made a mere mockery of thanksgivings.” Thomas Tudor Tucker “thought the House had no business to interfere in a matter which did not concern them. Why should the President direct the people to do what, perhaps, they have no mind to do? They may not be inclined to return thanks for a Constitution until they have experienced that it promotes their safety and happiness. We do not yet know but they may have reason to be dissatisfied with the effects it has already produced; but whether this be so or not, it is a business with which Congress have nothing to do; it is a religious matter, and, as such, is proscribed to us. If a day of thanksgiving must take place, let it be done by the authority of the several States.”

Here's the transcript of George Washington's Thanksgiving proclamation from the National Archives.
Thanksgiving Proclamation
By the President of the United States of America. a Proclamation.
Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor—and whereas both Houses of Congress have by their joint Committee requested me “to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness.”
Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be—That we may then all unite in rendering unto him our sincere and humble thanks—for his kind care and protection of the People of this Country previous to their becoming a Nation—for the signal and manifold mercies, and the favorable interpositions of his Providence which we experienced in the course and conclusion of the late war—for the great degree of tranquillity, union, and plenty, which we have since enjoyed—for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted—for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.
and also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions—to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually—to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed—to protect and guide all Sovereigns and Nations (especially such as have shewn kindness unto us) and to bless them with good government, peace, and concord—To promote the knowledge and practice of true religion and virtue, and the encrease of science among them and us—and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.
Given under my hand at the City of New-York the third day of October in the year of our Lord 1789.
Go: Washington
Sarah Josepha Hale was editor of a magazine first called Ladies' Magazine and later called Ladies' Book from 1828 to 1877. It was among the most widely-known and influential magazines for women of its time. Hale wrote to Abraham Lincoln on September 28, 1863, suggesting that he set a national date for a Thankgiving holiday. From the Library of Congress, here's a PDF file of the Hale's actual letter to Lincoln, along with a typed transcript for 21st-century eyes. Here are a few sentences from Hale's letter to Lincoln:
"You may have observed that, for some years past, there has been an increasing interest felt in our land to have the Thanksgiving held on the same day, in all the States; it now needs National recognition and authoritive fixation, only, to become permanently, an American custom and institution. ... For the last fifteen years I have set forth this idea in the "Lady's Book", and placed the papers before the Governors of all the States and Territories -- also I have sent these to our Ministers abroad, and our Missionaries to the heathen -- and commanders in the Navy. From the recipients I have received, uniformly the most kind approval. ... But I find there are obstacles not possible to be overcome without legislative aid -- that each State should, by statute, make it obligatory on the Governor to appoint the last Thursday of November, annually, as Thanksgiving Day; -- or, as this way would require years to be realized, it has ocurred to me that a proclamation from the President of the United States would be the best, surest and most fitting method of National appointment. I have written to my friend, Hon. Wm. H. Seward, and requested him to confer with President Lincoln on this subject ..."
William Seward was Lincoln's Secretary of State. In a remarkable example of rapid government decision-making, Lincoln responded to Hale's September 28 letter by issuing a proclamation on October 3. It seems likely that Seward actually wrote the proclamation, and then Lincoln signed off. Here's the text of Lincoln's Thanksgiving proclamation, which characteristically mixed themes of thankfulness, mercy, and penitence:

Washington, D.C.
October 3, 1863
By the President of the United States of America.
A Proclamation.
The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God. In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consiousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom. No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union.
In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.
Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.
By the President: Abraham Lincoln
William H. Seward,
Secretary of State

Wednesday, November 23, 2016

Paying Bone Marrow Donors

US law says that "organ" donors, like those donating a kidney or part of their liver, can't be legally paid. However, most of the US supply of blood plasma comes from paid donors; indeed, the US exports blood plasma to other countries. While the US supply of blood for transfusions primarily comes from unpaid donors, a number of other countries (for example, in Latin America) rely on paid blood donors. Donors of eggs and sperm, as well as surrogate mothers, can be legally paid. But is bone marrow an organ, or is it more similar to blood plasma?

The answer to the question is a matter of life and death. About 275 American die every year because they have a disease like leukemia or certain kinds of anemia that sharply reduces the ability of their bone marrow to generate red blood cells--and they can't get a transplant. Offering payment of perhaps $2,000 to donors could potentially save those lives. Samuel Hammond makes the case in "Bone Marrow Mismatch:How compensating bone marrow donors can end the transplant shortage and save lives," written as a discussion paper for the Niskanen Center (November 15, 2016).

Developments in medical technology have given the arguments over paying bone marrow donors an extra twist. It used to be that bone marrow was extracted from donors by inserting a needle into a large bone, which was apparently even more painful than it sounds. But it's now possible to collect the cells through a technique called "apheresis," in which the cells are taken out of blood. The donor takes a drug a few days beforehand to stimulate production of these cells. Then the donor is connected to a machine so that some of their blood passes through the machine, which extract the needed cells and then returns the rest of the blood to the person.

About 70% if donations of the needed cells for bone marrow transplants now happen through the apheresis method.  The cells that are extracted by this method are just as good for bone marrow transplants as those from the big-needle-extraction approach. For donors, a Mayo Clinic study found that the frequency of adverse reactions by donors is lower than it is for standard donations of whole blood.

Thus, a federal court in 2011 ruled that apheresis was more similar to blood plasma donation than to donating a kidney, and thus donors could be paid. However, the federal government, through the Health Resources and Services Administration (HRSA) is now proposing a rule that would treat all all hematopoietic (that is, blood forming) stem cells as "organs," regardless of whether they were extracted by needle or by apheresis.

Here's a figure from Hammond that illustrates the situation. Transplants of HSC cells (that is,m hematopoietic stem cells) have risen from almost zero in 1990 to more than 6,000 per year. Extraction of the cells from apheresis, or from umbilical cords, is providing the additional source of cells for these transplants.

Peripheral blood stem cells

Hammond's report cites statistics that each year, about "30,000 people in the U.S. are diagnosed with a life threatening blood diseases like leukemia, of whom only 30% find a match within their family. For the remaining 70% who must find an unrelated donor," Although 6,000 procedures are carried out each year, another 10,000 are on the waiting list for such proposals. Several hundred of these people are dying each year while waiting for a HSC cell transplant.

There's a considerable literature of arguments most focused on blood donors and kidney donors, on whether paying donors is a good idea. Hammond offers an overview of these arguments, and they have arisen in various earlier posts here concerning blood and plasma, kidneys, and human breast milk. Interested readers might consult:

I won't try to review the arguments here, but several points are especially salient to me in this case. First, pretty much everyone else involved in HSC cell procedures gets  paid--doctors, nurses, equipment-makers, administrators--while the actual donors get a congratulatory lecture about doing their civic duty and a hearty handshake. Second, the volunteer system for signing up donors for HSC cell donation isn't providing a sufficient supply, and people are dying while the government writes new regulations.

Tuesday, November 22, 2016

More on the Rise of "Alternative" Work Arrangements

One major change for US workers in recent years is the rise of alternative work arrangements, which is an intentionally broad category that includes jobs like driving for Uber or Lyft, but more broadly includes all forms of jobs where the employee doesn't expect to have an ongoing regular and full-time connection to the employer that extends into the future: thus, it includes contingent jobs, temporary jobs, contract work, part-time work, on-call work, jobs in the "sharing economy," and other arrangements. By some estimates, as I've pointed out, "All the Job Growth is in `Alternative' Jobs" (April 11, 2016). Indeed, "Nonstandard Employment Around the World" (November 16, 2016) is an issue everywhere. Three other discussions of this issue, with varying perspectives, have crossed my desk in the last couple of weeks.

Lael Brainard gave a nice overview talk on "The "Gig" Economy: Implications of the Growth of Contingent Work," (November 16, 2017). She notes some of the underlying economic forces that drive alternative work arrangements, how the changes will affect various macroeconomic measures, and the social tradeoffs that arise:
If market forces and technology are driving the growing prevalence of gig work, these trends will likely continue, and policymakers must better understand these changes. ... One possibility is that new technologies, by lowering the barriers to workforce entry, could raise employment and labor force participation. Because there are fixed costs to obtaining and maintaining a job--such as searching for the job, learning about the job, and traveling to the job site every workday--the traditional work arrangement embeds incentives for individuals to work only one job, thus minimizing these fixed costs. And for those individuals who desire to work relatively few hours, these fixed costs in the past may have led to a decision to remain out of the labor force. But if technology makes it less costly for individuals to find work, manage multiple work relationships, and flexibly work more or fewer hours as their schedule permits, this could significantly increase workers' options and have important effects on labor market behavior. Importantly, any such increases in participation and employment would likely be structural, not cyclical, enabling the economy to run at a sustainably higher level.
New technologies could also make it easier for individuals' actual hours to match their desired hours of work in a day or a week. Instead of seeing hours per week bunched around 40, we may see greater variation in the hours that individuals work. Lower barriers to workforce entry may make it more attractive for more individuals to work only a few hours a week if they desire--and can afford--to do so. At the same time, by making it easier to find additional work, new technologies may lead to more individuals working greater-than-full-time hours every week. In addition, we may see individuals changing the number of hours they work more frequently, as these changes become less costly. ...
The increasing prevalence of gig work may also affect the unemployment rate and productivity. To the extent that gigs provide an easy entryway to employment, unemployment may decrease. However, if gig work is less stable, it may increase job loss. The net effect on unemployment is, thus, unclear. Regarding productivity, gig work could lower aggregate productivity to the extent that it requires less human capital or specialized knowledge than traditional jobs, or if it primarily increases hours worked by lower-skilled individuals. That said, gig work, especially when enabled by new technologies, may allow hours to respond more flexibly to changes in demand and individuals to more easily connect with many different clients or employers. As a result, workers' downtime and the time required to acquire new clients and manage existing clients may decrease, in which case resource utilization and productivity may increase.
It is also possible that the increasing prevalence of gig work will cause the cyclical behavior of unemployment, participation, and the workweek to change, with implications for how we assess the amount of slack. We know that contingent work increases when the economy worsens. If new technologies make it easier to find gig work, then we could see unemployment rise less in recessions, to the extent that gig workers are counted as employed. However, it could be that individuals who are able to avoid unemployment through contingent work would still be underemployed if it is difficult to cobble together enough gigs to achieve full-time employment. This would likely show up as lower average workweeks and higher levels of involuntary part-time employment during downturns. As a result, cyclical changes in resource utilization could be reflected less in movements in the unemployment rate and more in variation in hours per worker.
Beyond the behavior of macroeconomic variables, it is unclear how the growth of different types of gig work affects the welfare of workers. Welfare should increase in cases where gig work meets the needs of workers by providing a low-barrier means of accessing employment and by allowing workers to better match actual hours worked with desired hours of work, especially if the gig work is available at times and in places where traditional work opportunities are in short supply. There is some evidence that this has, indeed, been the case. ...
However, there are likely many workers who would prefer regular full-time traditional work to contingent work, particularly if much of the power in determining hours worked in alternative work arrangements belongs to the employer. Technological advances have enabled firms to use just-in-time strategies for their employees, making them in effect on-call workers. This is a rising trend in industries such as retail and food preparation. Several recent articles describe the challenges faced by these just-in-time workers, who must conform their hours to the daily and even hourly ebbs and flows of business, often not knowing whether they will have work on a given day until they call in that morning to inquire. These arrangements can leave workers scrambling to patch together child care, elder care, and transportation to meet the often unpredictable demands of their workplace, while making it difficult to engage in regularly scheduled activities to enhance their income and opportunities, such as a second job or career training. While such workers often are not given full-time work, they often must make themselves available to work full-time hours. According to one survey, 71 percent of retail workers in New York stated that their hours fluctuated from week to week, while half said their employers could change their hours at will. It is also notable that the increase in contingent work over the past decade has coincided with an increase of one-third in the share of employees working part time but who would prefer to work full time from 3 percent prior to the Great Recession to close to 4 percent today.
In addition, contingent workers may receive lower wages, less training, and fewer benefits than their counterparts with traditional jobs. Typically, the wages of low-skilled employees within a company are boosted by social norms regarding pay equity, and nonpecuniary benefits are often equalized across a company's employees, in certain cases as mandated by law. However, the wages that contractors receive are unlikely to reflect the same equity considerations. Moreover, contingent work generally does not offer employer-based benefits and workplace protections that come with traditional employment opportunities, like overtime compensation, minimum wage protections, health insurance, family leave, employer-sponsored retirement plans, workers' compensation, and paid sick leave. As a result, for some, contingent work may entail greater risks than in traditional full-time employment, with more variable and less predictable hours and earnings. ...
These findings suggest that employers, policymakers, and workers should seek ways to help individuals better manage the risks inherent in most forms of contingent work. For example, we may need to enhance social safety net programs, such as unemployment and disability insurance, to better support some types of contingent work. Another possibility is to make benefits, such as health insurance and retirement saving, portable across different employers. We may also want to encourage the additional saving that many contingent workers need to ensure that their basic consumption needs are not sacrificed when demand for their work declines, perhaps by providing monetary or other types of incentives.
The Pew Foundation has just published a report on "Gig Work, Online Selling and Home Sharing" (November 17, 2016). "a new Pew Research Center survey of U.S. adults finds that a relatively substantial share of the public has earned money recently from a digital commerce platform. In the context of gig employment, nearly one-in-ten Americans (8%) have earned money in the last year using digital platforms to take on a job or task. Meanwhile, nearly one-in-five Americans (18%) have earned money in the last year by selling something online, while 1% have rented out their properties on a home-sharing site. Adding up everyone who has performed at least one of these three activities, some 24% of American adults have earned money in the “platform economy” over the last year."

Here's a figure from the report that I found interesting, focused on the 8% who earned money using a digital platform. Of that group, more than half--that is, about 4% of US workers--view these earnings as "essential or important." Also, the biggest activity for this group is

Differences between casual ‘gig workers’ and those who are more financially reliant

Finally, the Federal Trade Commission has published "The “Sharing” Economy: Issues Facing Platforms, Participants & Regulators," which is a report that summarizes various issues and viewpoints from a mid-2015 workshop, as well as over 2,000 responses to an FTC "request for comments." The report is an even-handed discussion of various issues: for example, how digital platforms might deal with trust issues through methods including rating mechanisms; how the regulations for such firms might differ from those for incumbent competitors in, say, the taxi or hotel business; what the rise of these platforms could mean for competition policy. Here's a snippet (footnotes omitted for readability):
PricewaterhouseCoopers estimates that sharing economy marketplaces in five sectors – peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing, and music/video streaming – generated $15 billion in revenues worldwide in 2013, and projects that these revenues will rise more than twentyfold to $335 billion by 2025. The magnitude of the sharing economy’s impact has registered in the financial world as well. Some of the largest companies in this space have gone through multiple rounds of funding, in some cases reflecting valuations in the tens of billions of dollars. Based on a round of funding in December 2015, Uber was valued at $62.5 billion, while a November 2015 financing placed Airbnb’s valuation at $25.5 billion. Etsy, the peer-to-peer marketplace for handmade or vintage items, went public in April 2015 and opened with a value of nearly $4 billion. Incumbent businesses are also providing financing to sharing economy marketplaces – partnering with, investing in, or acquiring sharing economy platforms. Since the beginning of 2015, General Motors made a $500 million investment in Lyft, valuing Lyft’s equity interest at $5.5 billion, and Apple invested $1 billion in Didi Chuxing, China’s biggest for-hire transportation platform. Hotelier Hyatt has purchased a stake in British accommodations platform OneFineStay, while Expedia paid $3.9 billion to acquire the lodging site HomeAway.
Two sectors of the travel industry have been at the epicenter of the explosion of sharing economy activity: short-term lodging (specifically, rental stays like those provided by hotels and bed-and-breakfasts) and for-hire transportation service (specifically, services akin to those provided by traditional taxis and limousines). Airbnb has become a leading platform for facilitating short-term rental transactions. Started in 2008 by roommates who rented out space in their apartment during a local convention, Airbnb reported over two million listings in over 34,000 cities, and a cumulative total of 60 million guests by the end of 2015.  Platforms facilitating the provision of for-hire transportation service are often referred to as transportation network companies (or “TNCs”). The leading TNC, Uber, began operations in 2009 in San Francisco, and as of 2014 reported providing 140 million rides (including one million rides per day by year-end) and a driver base of over 162,000. Pew Research Center found that by 2015, 11 percent of American adults had used an “on-line home-sharing service” and 15 percent had used “ride-hailing apps.” ...
[T]he sharing economy has expanded well beyond the accommodation and transportation sectors. A panelist observed that a start-up tracking site lists “about 600 peer-to-peer startups.”One expert has developed an infographic “honeycomb” describing 16 broad sectors and approximately 40 subsectors in which sharing economy platforms operate, and specifying the location of 280 platforms within these categories. His research reveals that the sharing economy model now extends to small businesses or individuals providing a wide range of goods and services, including, but by no means limited to: preparing meals, shipping or storing goods, renting tools or clothing, performing household tasks, providing health services, ordering custom-made goods, and obtaining funding for projects. And the expansion continues, as new platforms arise, each vowing to become the “Uber” or “Airbnb” of some other market sector.