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The coming collapse of New York City

It has been a month since I last wrote a post about this topic. Since then, I have become even more pessimistic about the future.

To remind you of the basic thesis, although they say that New York City has many industries like finance and banking, business services, media and publishing, etc., in fact this can be generalized to say that New York City has only one industry: people working in office buildings. If that industry leaves New York City because everyone who used to work in office buildings is working from home, then I can’t see any other future for New York City besides a total collapse, maybe even worse than the collapse of Detroit because, as the proverb goes, the bigger they are the harder they fall.

New York City is a special case, because it has more density and is more dependent on public transportation than any other city in the United States, plus it’s also the most expensive city in the United States. The pandemic won’t cause mass migration out of Phoenix, Arizona (the 10th most-populated metropolitan area in the U.S.) which is more like a really big suburb than a city in the way that New York is a city. People have to live somewhere, so there’s no particular reason for people to move out of the Phoenix area even if they are working from home instead of working in the office.

New York City is like a Ponzi scheme that requires a constant influx of corporate jobs and gentrifiers and construction projects in order to balance its budget despite having the highest tax collection per capita of anywhere else in the United States. As businesses and rich people move out, budget cuts and reduction in services will make New York City an even a crappier place to live and more will move out. Garbage is already piling up, the presence and aggressiveness of homeless are increasing, shooting incidents have doubled since a year ago.

The big question is, when will people return to the office? Will they ever? The last report on this from the New York Times indicates that less than 10% of workers have returned to the office, primarily in real-estate and banks, two industries that are especially worried about a collapse in commercial real estate (with banks having lent lots of money to big construction projects) and are trying to set a “good example” for other industries. (With a “good example” actually being a bad example for public health.)

The reason I have become more pessimistic is because it now seems to me that the pandemic is not going to have a magical neat ending. I think people are imagining that everyone is given a vaccine and Covid-19 disappears never to return again. This is unlikely to be the case. Most worrying, to me, is that during the previous two weeks there has been a rise in cases in the Hasidic neighborhoods. The Hasidim have not been social distancing for months, so why are they suddenly getting sick again now? My answer is that immunity to Covid-19 begins to fade after five to six months.

My other thought is that there will probably be an outbreak of Covid-19 AFTER we start vaccinating people. I think it’s pretty predictable that, after receiving the vaccine, people will think they can go back to normal, take off their masks, go to crowded indoor places. But if the vaccine is only 75% effective, and only 75% of the people have been vaccinated, that’s a recipe for an outbreak. There are flu outbreaks every year despite vaccines and people having had the flu before.

I think that in order for the virus to go away, we need to force EVERYONE to get vaccinated, and I don’t think we have the political will to do that, just as we don’t have the political will to make everyone wear masks in places where they should be wearing them. Robert Redfield pissed off the virus-denier-in-chief when he said that masks may be more effective at stopping spread of the virus than a vaccine. But it’s probably true.

I don’t foresee the other 90% of New York City office workers going back to the office until Covid-19 is gone. Until then, people don’t want to take crowded trains and subways, ride crowded elevators, so they can stay cooped up indoors for 8+ hours where one infected person could infect dozens of their coworkers. Corporations don’t seem to be willing to make people do that given that remote work has been working well enough, and will probably get better as people learn how to adapt it.

If Covid-19 is not gone, even after a vaccine is widely available, I don’t see New York City ever recovering. Even if Covid-19 completely disappears next summer, New York City may not be able to survive because the work-from-home model has been proven to be successful and if 20% of office workers continue to work from home, that might be enough to continue the death spiral that leads to the collapse of New York City. But given my prediction that Covid-19 will NOT completely disappear within another year or two, the collapse of New York City is inevitable.

Written by Lion of the Blogosphere

October 4, 2020 at 12:49 PM

Addressing various work-from-home issues

(1) People really like working at an office

Well “work-from-home” is probably the wrong term. It should be called everyone-working-remotely.

I’ve previously made fun of WeWork, saying that it’s where people without real jobs go to feel like they have a real job. And WeWork took a huge hit from the pandemic. But once the pandemic ends, companies like WeWork can fill the void for people who don’t want to work in the same building where they sleep. But instead of long commutes into Manhattan, you could live in a small city with lower housing costs and drive a short distance to the nearest WeWork office.

Perhaps a common feature of new planned residential communities will be a shared office space in the community.

(2) Cheaper labor in India or other countries will take your job if it can be done remotely.

From the perspective of whether WFH becomes permanent, this makes it more likely. The purpose of corporations are to make profits for the CEOs and Wall-Street types, not to make life good for the lower-level workers.

Likely, people who have jobs will keep them, at least for a while if not longer, but it will make it a lot harder for people to find new jobs because they will be competing against the entire world and not just people in commuting distance from the job in question.

(3) You employer will lower your salary if you can work in less expensive places remotely.

See #2 above.

(4) Managers hate WFH, they like to micromanage their employees.

This is a gross generalization. Sure, some managers are like that.

But the only managers that count are the C-suite level, and if they feel the company will be more profitable with permanent WFH (thus making their stock options worth more money), then the middle managers who don’t like it won’t have any say in the matter.

Right now, the word from the news media is that the vast majority of companies find that work from home isn’t harming productivity, or at least not enough to outweigh the potential savings of not having to rent expensive office space.

(5) Sales can only be done face-to-face

This is only a problem for the people doing the selling, not a problem for the buyers. So I don’t see how this makes mass-adoption of permanent WFH less likely. Sales will have to evolve to the new reality.

On the other hand, I see this being an overall benefit for the economy is if buying decisions are made more logically in the absence of face-to-face salesmen.

(6) How will new people be bought into the remote team if they never meet anyone face-to-face?

My company has been doing it, and life has gone on. So it’s not the major roadblock that’s imagined.

(7) Can so many jobs really be done remotely?

It has now been proven that something like 99% of the jobs people are doing in office buildings in Manhattan (not including the janitors and security guards and blue-collar people like that) can indeed be done remotely.

Written by Lion of the Blogosphere

June 25, 2020 at 3:48 PM

Posted in Labor Markets

Work-from-home means the end of cities?

The ability to work from home as easily as we work from the office is a pretty new phenomenon. The technology that makes it so easy just wasn’t there in the 1990s, and only somewhat there in the naughts.

The development of work-from-home technology didn’t lead to an immediate exodus from the office. Not at all. No major company wanted to be the first. People always had to go to the office to work, and big companies don’t like radical change.

But according to an article in today’s NY Times, not only are companies finding that workers are just as productive at home, in many cases companies have found that the workers are MORE productive at home!

So now that companies have been forced to go WFH and they’ve discovered that it works just as well as working from the office, maybe even BETTER, plus they can SAVE MONEY by not having to pay for expensive office space in big cities, why not make it permanent?

When the factories left Detroit, Detroit went into a death spiral. Office buildings are the factories of major cities today, and if those factories move from the office building into peoples homes, then why won’t cities like New York or San Francisco also go into death spirals?

On top of that, there are two other important trends that spell doom for cities;

(1) There’s the virus itself. There’s the perception that dense cities aren’t safe. (And certainly, crowded rush hour subways are not safe during a pandemic, so the perception isn’t false.) I have no doubt that after a few years go by, this perception will fade away, but by the time it fades away it will have already done its damage to cities.

(2) The BLM protests will lead to soft-on-crime policies that will cause crime to come roaring back. I remember the 80s when people had the perception that cities were dangerous places because of crime, that perception will return. The riots and the subsequent boarded-up windows have already given Manhattan a very dystopian feel to it.

Thus we have the perfect storm of factors that will spell doom for cities. Once things start spiraling downwards, it’s very hard to reverse course. Detroit couldn’t do anything to save itself. Neither will New York City be able to save itself.

Written by Lion of the Blogosphere

June 23, 2020 at 7:10 PM

Law school

A reader asked me about law school.

Bad idea. Unless you can get into a top law school. I’m not sure if the Top 14 is still a thing or not, so to be safe, go for a Top 7 law school.

Also, helps to come from a rich family, even better if your mom or dad is a lawyer, which gives you an in with potential employers. Don’t go to law school in a distant city unless it’s for a Top 7 law school.

An interesting thing about law is that, while everyone else is going to go to a work-from-home arrangement, lawyers need to be near the courts, so you can’t work for a NY law firm while living in Hawaii. This is an unappreciated downside to a career in law.

You’re better off getting an MBA. That Amy Cooper woman, who appears to be off her rocker and a very annoying person, has an MBA from Chicago and consequently she had a pretty good job as a “Vice President” at Franklin Templeton (before she got fired for being a racist).

Written by Lion of the Blogosphere

June 17, 2020 at 5:37 PM

Posted in Labor Markets, Law

Careers in pharmacy

This is what I wrote 10 years ago:

You are essentially a highly paid retail clerk, and you’re limited to two employers: CVS and Walgreen. If you decide you don’t like it, you’re screwed because there’s nowhere else to go. There’s no career advancement and no opportunity for moving up the ranks. CVS just needs you to man the pharmacy area because a government regulation says that you have to be there.

On the positive side, pharmacy jobs have a median salary in the high $90s [allegedly now the low $130s], which is a really good salary for a safe career. You’re pretty much guaranteed that if you get through the program and pass the licensing tests. Pharmacy jobs are located wherever there are people living, so it’s great if you want to live in a non-SWPL place such as the Midwest. There aren’t very many tickets to a high $90s job [allegedly now the low $130s], and this is one of them. And if you don’t want to work at a retail store, you can also work at a hospital.

It’s clearly a much better career than plumber or auto mechanic. It’s higher paying and you don’t have to stick your hands into pipes full of sh**.

The only thing I don’t understand is why people don’t flood into the field, bringing down the salaries? Why are there five times as many law students as there are pharmacy students, when pharmacy seems like a better deal?

* * *

Note that becoming a Pharmacist requires up to 8 years of education, 4 for an undergraduate degree and 4 for a Pharm.D. degree, but there are accelerated programs, and I would highly recommend young people get into one of those programs rather than waste more time in school (which means racking up more student loans). A young person should find the least expensive school possible, because all Pharm.D. degrees are the same.

Written by Lion of the Blogosphere

November 19, 2019 at 10:25 AM

Posted in Labor Markets

Raising the minimum wage helps the low-wage workers

I’ve been saying so for a long time, and this NY Times article provides proof backing me up.

Simplistic supply-and-demand-curve-based macroeconomics is wrong about a lot of stuff. As I’ve stated over and over again, Michael Porter’s book Competitive Strategy or one of its derivatives, taught at every MBA program, is a much better book for understanding how the economy works than an economics textbook.

Although the economics textbooks do have a term to explain why supply and demand doesn’t work, and it’s called “elasticity of demand.” So if demand for low-wage workers is “inelastic,” then increasing the price of low-wage workers through a government-mandated minimum wage doesn’t cause the demand to become lower by a significant amount, because the demand is “inelastic.”

But if you want to understand why demand is inelastic, then you need to turn to Michael Porter. Compared to workers, businesses have a lot more bargaining power, so although they would hire 10 workers for $12/hour if that were the going rate, they can get away with paying them $7/hour because of their superior bargaining power. The goal of minimum wage laws, therefore, should be to find the correct minimum wage so that workers are getting their fair share of profits without causing unemployment or other disruptions to the market.

Written by Lion of the Blogosphere

November 13, 2019 at 9:36 AM

Suntans and work

Classically, suntans were low class because they meant working-class outdoors jobs. But then, when air travel meant that rich people could go on vacation in warm sunny climates, suntans became high class. I am pretty sure that the invention of tanning salons has caused them to become prole again. Jersey Shore types typically sport fake tans.

It is the same with work and leisure. Certain commenters have wrongly asserted that being rich means not having to work, but that’s outdated by a century. With welfare and other public assistance making non-work more viable than ever for the lower classes, the higher classes distinguish themselves with their work ethic.

Of course people don’t want to do just any sort of work, they want work that’s meaningful and that increases their status. And being able to obtain that sort of job requires elite educational credentials and the right connections. So we are moving from a world in which poor people work because otherwise they will starve to death, to a world where working is a privilege for the rich and well connected while poor people will live off of Andrew Yang’s “Freedom Dividend.”

Work becomes not just a source of income that’s used to buy positional goods, but a positional good in its own right.

Written by Lion of the Blogosphere

March 29, 2019 at 2:40 PM

Posted in Bobos, Labor Markets

The Class Ceiling

The Atlantic article headlined The Class Ceiling says what I’ve been writing in my blog for years.

1. It’s beneficial for a young person to have rich parents willing to pay their rent in an expensive city like London (this is a UK-biased article) where the best careers are, so they can work their way up to high-paying self-actualizing jobs. Young people without that parental support likely to get stuck in second-tier careers in second-tier minor cities.

2. Hanging around other upper-middle-class kids when young helps a person pick up an upper-middle-class way of thinking and behaving that makes it much easier to fit in, get along, and be liked by management at upper-middle-class professions. This is one of the major benefits of sending your kids to private school.

Written by Lion of the Blogosphere

February 27, 2019 at 5:06 PM

Posted in Labor Markets

College, part 3

While the rest of the world is convinced that college helps people make more money, strangely I have to convince certain blog commenters, because there’s a belief among some in the HBD-sphere that IQ is everything, and therefore someone with a high IQ would make just as much money without a college degree.

There’s also an idea, which is more mainstream, that it doesn’t matter what school you go to, any school is the same. That’s also absurdly false, I don’t know how anyone can believe it. I know from personal experience that if you want to get hired as a lawyer, you had better have the most elite degree possible, because if your degree is outside of the Top 14, you’ll never get hired by a big firm and it’s a lot harder to even get hired by small firms. It’s unlikely you’ll have Michael Cohen’s luck to get hired by Donald Trump, and if anything Michael Cohen disproves that IQ matters above all else, because that guy doesn’t seem all that bright to me.

There is indeed a correlation between high IQ and having a higher income, but my own research into this matter is that people with higher IQ are able to obtain better educational credentials, and then the better educational credentials (if they are lucky and have other necessary things going for them) enable people to get into a higher-paying career track. Without the degree, no one will want to hire you into any good career tracks.

People like to say that employers only care about your experience at prior jobs and not your education, but the problem is that without education you can only get hired for crappy jobs like retail or working at call centers, which only gives you experience to work at other crappy jobs.

Even if you are lucky enough to get hired (for example some people with hot in-demand computer skills have been known to get good jobs without a college degree), you’ll eventually hit a glass ceiling for people without college degrees.

None of this is to say that there is anything intrinsic in years of formal education that makes people better employers or better at making money, but because our society is set up so that only formal learning with a degree is valued, and self-learning is not valued, that’s the way it is. And it’s why I called education a positional good in my recent Lionomics post. The benefit of a degree is that it gives you a positional advantage over people without a degree, and a prestigious degree gives you a positional advantage over people with a degree from a directional state school.

Written by Lion of the Blogosphere

January 11, 2019 at 11:53 AM

The asylum statute

https://www.law.cornell.edu/uscode/text/8/1158

8 USC § 1158(1) reads:

Any alien who is physically present in the United States or who arrives in the United States (whether or not at a designated port of arrival and including an alien who is brought to the United States after having been interdicted in international or United States waters), irrespective of such alien’s status, may apply for asylum in accordance with this section or, where applicable, section 1225(b) of this title.

I don’t know what Trump’s legal team’s counterargument is, but this statute seems pretty clear to me.

There are many things that Trump could do by executive order to hasten the processing and denial of these people so they can be quickly deported, but I have to agree with the judge that he can’t stop them from applying in the first place.

And that’s why we need a Wall, to prevent them from becoming physically present in the first place. (Or we could just get Congress to change this statute, which would be less expensive than building a Wall, but it’s politically more feasible to just build the Wall.)

Written by Lion of the Blogosphere

November 20, 2018 at 1:38 PM

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