Tuesday, 23 May 2017

Asset sales and infrastructure funding

Christchurch's refusal to sell the Port during earthquake reconstruction was ridiculous. The city needed a pile of money for new infrastructure to cover uninsured losses. The Port had just received a giant insurance payout that, in some views, covered the harms of decades of deferred maintenance. There would never be a better time to sell the port than when it was set to be all fresh and shiny, before the next decades of deferred maintenance did their work.

Instead we had talk about not selling the family silver. Know when it's time to sell the family silver? When you need to rebuild the house because of a big stupid earthquake.

Auckland's position on asset sales hasn't been much different. Auckland needs a pile of new infrastructure to let it fund its continued growth. But it faces a strange debt constraint: rules on how much interest Council can pay as a fraction of its tax revenue. Debt-funded infrastructure then needs very quickly to provide a return well in excess of the debt's interest cost. Laying out trunk infrastructure with a century's lifespan that enables growth more than repaying the investment 10 years out doesn't work if it has to pay for itself faster than that. And that's part of the current mess.

Asset sales can then help. I covered it in last week's Insights newsletter. Subscribe at the link (it's free).
The macroeconomic effects of Auckland’s housing crisis are felt throughout the country. If Auckland could better accommodate growth, central government would reap the resulting income tax and GST revenues.

Immigrants pay more in tax, on average, than they receive in government services – but those estimates do not include the infrastructure costs that fall on local government. If Auckland’s infrastructure mess forces central government to close the door on immigration, that could easily be to the long-term detriment of central government finances.

But councils coming cap-in-hand to central government for help face a fair bit of scepticism for the simple reason that councils have not been making some of the harder choices necessary to finance their own growth.

During the Christchurch earthquake recovery, some of Christchurch City Council’s pleas for more central government funding rang a bit hollow. National campaigned in 2011 on a programme including partial privatisation of state-owned enterprises to help fund other programmes. Meanwhile, Christchurch Council refused to consider privatisation of Lyttelton Port of Christchurch or a host of other Council-owned assets.

From a central government perspective, some of the calls for help sounded a bit like your kid asking for financial help while refusing to replace his flashy car with a more thrifty model – after you have already traded yours in.

Phil Goff’s willingness to consider partial privatisation of the Ports of Auckland is then a very welcome first step. But Auckland Council could be bolder. The land under Auckland Council’s golf courses alone is worth over a billion dollars. Selling that land for housing development would not just provide more houses. It would also provide funds to service further intensification and further greenfield development.

And if Auckland were doing its share, we would hope that central government might consider doing its bit as well by passing on some of the benefits it receives from a thriving Auckland.

Monday, 22 May 2017

Regulatory incidence and housing

Knowing a bit about tax incidence is useful if you want to be able to figure out what policies might help with Auckland's housing affordability issues. Here's me in last week's NBR:

Auckland’s housing markets are a mess but they are not the hell of perfectly inelastic supply. The burden of taxes and regulation in housing markets are shared between buyer and seller. If we expect that housing will become relatively more elastic as the unitary plan takes effect and as central government policy around infrastructure improves, then effects of other policies change.

Measures like rental warrants of fitness could actually provide net benefits to tenants – if we do not expect supply conditions to improve. But as soon as regulations around housing and infrastructure shift to allow more supply, then those same rules flip to making tenants worse off.

When supply is working properly, tenants sort into the quality and price tier that best suits their preferences and budgets. Rental warrants of fitness then at best compel landlords to provide what tenants were already demonstrating that they wanted, and at worst make rental accommodation too expensive for some tenants.

And so politics makes for strange policy bundles.

Labour proposes fixing regulation so that more housing can be built: abolishing the rural-urban boundary and improving infrastructure financing. But Labour’s promised Healthy Homes Guarantee makes the most sense if housing supply issues are not addressed. And if zoning and infrastructure are sorted out, there is little need for the government to be directly involved in building more houses.

Meanwhile, National has spent the past nine years avoiding fixing the underlying urban planning and infrastructure financing problems. It has blamed coalition politics but has remarkably managed to fail to take up those opportunities that have arisen.

Its general preference to avoid undue intervention into rental markets should really be coupled with policies that would allow new development.

Tax incidence can yield counterintuitive conclusions about who benefits from policy. A simpler question for voters to ask: will this policy make it easier for new housing to be built? If it does, then builders could get on with the important task of exercising their comparative advantage: easing the housing shortage.
Do subscribe, but you can read the whole thing here.

Thursday, 18 May 2017

Coming to the nuisance

I simply don't understand the mentality that leads people to move next door to music venues then push Council to shut them down. Even more baffling is why we have developed institutional arrangements that give every jerk a veto right.

Just read it and weep.
The Barrytown Hall - a popular venue for New Zealand music for at least 40 years - has been shut down after a noise complaint from a neighbour.

The rural village hall is well known on the New Zealand and international music circuit as an alternative live music venue.

Hall committee chairman Roger Ewer said because of one complaint the committee was now having to jump through hoops to resume staging live performances.

It has already cancelled gigs through until at least August, including the latest Arts on Tour offerings, which incurred a $1000 financial penalty for cancellation.

"It's ridiculous. One person can do this. We've got one person able to complain to stuff things up," Mr Ewer said today.

"It is very frustrating when I've been involved in these types of things since 1972 and there's never been a problem."

When the hall began to host live music the surrounding environment was totally rural.

He said the noise complainant was a relatively recent arrival in Barrytown, living in one of the former railway houses that were shifted from Otira to a site opposite the hall about 18 years ago.
This is what you get when you abandon common law coming to the nuisance principles in favour of a stupid Resource Management Act.

It gets worse.
The hall committee had considered a legal challenge but decided instead to work with the council.

"They seem to be quite responsive about helping us through it. We've gone along with their requests rather than fighting it legally, which we could have done."

They had been working on the basis of "existing use rights".

"It's interesting. It's turned out that they can impose a residential noise limit on us after 9 o'clock at night, which is ridiculously low."

Mr Ewer said the hall had now applied to adjust the decibel level in its consent.

Two affected residents opposite the hall had assented to the hall's application.

Another two households had declined and the hall also had to get sign off from absentee property owners.

"It's really stuffed things up and is losing us a lot of money."
Folks who put houses next to an existing music hall, or who move into them, should not have standing to complain about noisy music.

If we're moving towards increased intensification in urban areas, we likely need to get existing neighbours' use rights written down in the LIMs for the surrounding area - both so that buyers have no way of pretending that they didn't know that they were moving next to a bar or music venue, and to diminish their standing to complain about things that predated their move.

HT: Darian Woods, who notes that he had a great time performing there in 2008. Pity the fool who complains about hearing this from next door.

Monday, 15 May 2017

Uber Me

Morgan Tait has a great writeup at Newsroom on Uber's third (NZ) birthday. She includes a couple of bits from me.
Dr Crampton said Uber was ultimately an example of how new technology and business models could very quickly show gaps between the intent of a law and its seemingly outdated execution.

“They want a level playing field, the taxi industry is saying everyone should have the same rules but we need to step back and look at what the purpose of those rules are.

“The existing sets of taxicab regulations, the point of them is to make sure people are comfortable and safe getting from A to B.

“A lot of the things that the regulations are trying to achieve are already being achieved by the Uber app.

“So you have to think, should a level playing field be in terms of regulation or be a standard that the regulation should bring everyone up to?”
I'd hit on a couple of related themes over in our Insights newsletter recently:
I’m a fan of classic episodes of The Simpsons. In Cape Feare, Sideshow Bob sneaks a ride under the Simpsons’ car, with murderous intent. After an unpleasant ride, he steps out from under the car, and onto a rake. And onto another. Every time a rake hit him in the face, it got just a little bit funnier.

Watching the Transport Select Committee’s handling of Uber is funny too, but not ha-ha funny.

Back in November, Uber faced the Transport Select Committee. They should have had a lot to talk about. A lot of the rules around taxis are there to solve problems that really do not come up with app-based systems – and impose a lot of costs at the same time. Working through those details would have been a pretty worthwhile use of the Committee’s time.

Instead, the Committee seemed baffled by even the simplest details of how Uber works. They wanted assurances that Uber would not be picking up passengers trying to hail cabs at taxi stands. Uber’s Richard Menzies had to explain, over and over again, that their cars can only be booked through their app.

The government took some well-deserved rakes to the face from the press after that debacle, with the Transport Minister having to defend his “clueless” committee.

Maybe you’re an optimist and thought they’d have learned from that. And maybe you’d have thought Sideshow Bob would have stopped at just one rake.

Last week, the Committee released its report on the Land Transport Amendment Bill. The Report promised to update the rules to respond to emerging technology. But they kept the rule requiring drivers to keep paper logbooks. That’s Sideshow Bob’s second rake to the face. And keeping the rule that would require multinational Uber to be based here in New Zealand if it wants to operate here – that’s the third rake.

Sideshow Bob stepped on nine rakes before he was done. I wonder what the Transport Select Committee might think of next. Requiring Uber hire people to walk in front of their cars with a red flag? Mandatory “I am not a taxi” signs on the roof? Making Uber legal, but only if you book using a Blackberry? Maybe Ubers could be forced to carry printers to provide hardcopy of the emailed receipts.

There are a lot of rakes yet out there. Get your popcorn. 
They could at least change the rule requiring Uber's CEO to move to New Zealand. 

Friday, 12 May 2017

Friday Fun

This week's Insights 3 column takes on the case for breaking up the Commerce Commission's Competition Policy conference into separate competing conferences. A snippet:
The Commission’s 2017 Competition Matters conference has a stellar line-up – and a price that more than matches it.

The Early Bird price for the two-day conference is $1175, with a $1295 fee for later registrations. If we take a perfect competition benchmark, this kind of price discrimination would be impossible. And any difference between blackboard models and the real world suggests something foul is afoot. Something in need of investigation – and potentially action.

The programme lists two parallel sessions of speakers. Has the Commerce Commission inappropriately merged what could have been two separate and competing conferences?

Even worse, there is evidence that New Zealand’s Commerce Commission has colluded with Australia’s in this anticompetitive activity. The Australian Competition and Consumer Commission (ACCC)’s Commissioner, Roger Featherston, will be presenting with the NZ Commerce Commission’s General Manager for Competition, Antonia Horrocks, in a panel session inappropriately tying the two separate conference streams together.

Quis custodiet ipsos custodes? Who ensures the Competition Commission is not behaving anticompetitively? What agency might break up their cartelised conference so competition consumers might have more affordable seminars?

Thursday, 11 May 2017

Bad Bus Equilibrium

I don't see any way of fixing this one, but maybe you do.

Current Wellington bus rules have cheaper fares for students for a reduced class of carriage: if the bus is full, full-fare passengers get to sit and students get to stand.

That's all fine, but the resulting equilbrium isn't. Students clog up the path near the rear exit of the bus. Empty seats are behind them. Adults queue up in front of them, unable to reach the empty seats. And then the driver sometimes breezes past bus stops because, from the driver's perspective, the bus is full.

There are ways of solving it, but none of them work:

  • Simplest would be a norm where adults sat at the back first, kids sat at the front first, and then kids start yielding to adults (starting near the back door) as the bus fills up. I don't know how you get there from here. Also, some adults would resent having to walk past the kids. I wouldn't because efficiency, but others might. 
  • If high school kids weren't idiots, they would get out of the way by sitting in closely adjacent seats, let the adults move to the empty seats at the back, then resume their prior position. And we would all have ponies too.
  • If kids had to yield to adults on request rather than having to stand if there are adults unable to take a seat, that could simplify things - and especially if adults were sensible and made the request of kids at the back first. But it would conflict with Kiwi politeness norms around asking them to yield their seat, which then in a politeness-jamming equilibrium with the kids standing anyway to avoid having to be asked to yield, and we're back where we started from. 
File under "Trivial but sad and likely non-remediable imperfections of a world that's still rather good on the whole". Or First World Problems. But it was frustrating watching the usual mess unfold from the back of the bus this morning. 

In related Helpful Efficiency Tips for a Better World: unless you have good reason not to, always choose the seat that is currently most difficult to reach when entering a room or bus if the table/room or bus is likely to be close to capacity. Your sitting in any other place means somebody else has an even more difficult time of reaching the currently most difficult to reach seat. 

Wednesday, 10 May 2017

Rebel with a cause

I love Roger Beattie.

Weka are endangered, but they breed easily on his farm at Banks Peninsula. He's just prohibited, by dumb rules, against breeding them for profit. Whether this is DoC bloodymindedness, Vogonity, or refusal to be shown up by somebody doing a better job of conservation that DoC is - that's anybody's guess.

And so, annoyed with silly DoC rules around farming weka, Roger's making a point. He's adding weka feathers to some hats and selling them.

I apologise for the poor quality scan below - it's all I've got.

Farmed species don't go extinct. 

I look forward to Roger's eventual book, the promised title of which is "Why Bureaucrats are Bastards." 

Update: the toque comes with two tags. Read 'em. 

New Zealanders should be known as 'Weka' because they are closer to our psyche than Kiwi. Weka are a vulnerable species of flightless bird endemic to New Zealand. They are cheeky, outgoing and vivacious. We are using Banks Peninsula as a base for the re-introduction of the Eastern Buff Weka back into Canterbury. We fully support the farming of the Weka as a means of saving them from extinction. No farmed species has ever died out.

The Weka feather in our Weka Woo Hat symbolises our support to them.

Weka Woo Hat 

Tuesday, 9 May 2017

Underappreciated benefits of economic growth - back to the bog

What's economic growth ever done for me? Consider this Twitter thread from last night.
I was sceptical. Who would wax toilet paper? Why? Wax paper at the store is more expensive than regular paper, and waxing sure wouldn't make it more effective. But a lot of others chimed in confirming things. And I don't think it was a standard Kiwi wind-up either.

 And Google Books found me this. Looks like it's a UK import.

So, better paper existed. But it wasn't purchased for use at public facilities because the UK, and NZ, were a lot poorer than they are now. Somehow, waxed paper was cheaper even if almost useless, and it was purchased because of the cost.

These kinds of quality improvements don't make it into the productivity statistics but they matter.

Monday, 8 May 2017

Wealth inequality

Radio NZ's Emile Donovan asked me for comment on the latest Rashbrooke wealth inequality paper on Wednesday last week. I'm not sure whether my reply's been of use there, but I'll copy it below.

Paper summary:

Rashbrooke et al use several waves of SoFIE data to look at inequality in asset holdings and mobility across net asset quintiles. They then provide several cross-tabulations of the data splitting things up by ethnicity, gender, and age. They show that there is greater mobility across quintiles over longer periods than over shorter periods, and that there is less movement from the top and bottom quintiles than from the middle ones. They also demonstrate that the bottom decile has net debt rather than net assets, and that net debt is dominated heavily for that cohort by student loan debt.


The paper does not tell us much that is not already known about wealth holdings. Statistics New Zealand regularly releases wealth inequality data, though that annual series is less detailed than that which can be obtained in the (now rather dated) SoFIE data, and that data is regularly well-canvassed. Credit Suisse similarly puts together annual estimates of household net asset holdings. Little prior work is cited in the paper, and little context is provided that would help in assessing whether the levels of wealth inequality and wealth mobility are higher or lower than in prior periods, or higher or lower than international benchmarks. What is the ‘right’ level of mobility or inequality? Rashbrooke appears to come at it from a perspective that existing levels are too high, but doesn’t provide any benchmark for assessing what the right level is. I tend to come at it from a more process-oriented perspective which suggests there is no particular ‘right’ level but rather right processes: if the mechanisms for generating wealth are fair, then the outcome is fair, but if wealth is generated through cronyism then resulting outcomes are unfair regardless of the percentage of wealth held by any particular cohort. But in either case, knowing whether wealth inequality in NZ is high or low in international context would be helpful. And the same for mobility.

If we start looking to international benchmarks:
  1. Le, Gibson and Stillman found that inequality in household net worth in New Zealand is broadly similar to that in most other countries for which data is available.
  2. Credit Suisse data suggests that wealth inequality is very low compared to other countries, but I note that there is a broad range of countries that have basically the same wealth inequality as New Zealand – I’ve attached that bit from their report [Table 3-1 here]. That Credit Suisse report echoed findings from Davies et al, NBER working paper 15508 (2009) showing that wealth inequality in NZ was lower than all but 19 countries in a dataset of 150 countries.
  3. Stats NZ has had the wealth share of the top 10% in NZ as consistent with a 19-country OECD average, and the proportion owned by the top 1$ matching the OECD average.

More worryingly, parts of the analysis suggest that the authors have not fully come to grips with the data they’re presenting. At page 25, they note that the poorest decile has $1.8b in housing assets but $6.1 billion in mortgage debt. It doesn’t seem to have occurred to them that this is odd. It is odd because banks tend not to lend 339% of the value of a house to the poorest households. That is what is implied by owning $1.8b in housing but having $6.1b in housing debt. LVR restrictions alone mean they can’t lend more than 80% of the value of the house, never mind 300%. There is something wrong in that data series. And it’s not a particular secret either. I talked with StatsNZ about it when they released their latest round of wealth statistics last year, and I blogged on it, and I had an NBR column on it. One of the problems is that Stats data can be years out of date while its mortgage data is up-to-date: that means it’s easy to get mortgage debt reported well above housing assets in a rising market because the asset values are a lagged measure – but that can hardly be all of it because house prices have gone crazy, but not that crazy. We should be hesitant to draw conclusions from the series because of this problem alone, but the authors seem not to have even noticed that it’s a problem.

Further, the cross-tabulations don’t provide anywhere near the value that they could have. For example, it is well known that Pasifica and Maori communities are disproportionately younger than Europeans, and that older cohorts are far wealthier than younger cohorts. That means you need to age-standardise anything looking at ethnic differences so that you’re not confounding ethnicity effects with age effects. But, again, the authors seem not to have noticed that this is a problem. It’s bizarre. They go from showing the differences in wealth by age to the differences in age by ethnicity, and nothing seemed to click that the two might be related. A 30 second Google search gave me the StatsNZ page showing that median age (as of Census 2013) for Europeans is 41 years, but median age for Maori is 23.9 years and for Pacific peoples is 22.1 years.

Similarly, if the Maori and Pacifica groups are disproportionately much younger, they’re disproportionately not going to be moving out of the lowest wealth quintile because that doesn’t happen until you’re older. A better approach would have sorted by both ethnicity and age so that they’d be comparing all ethnic groups restricted to those aged, say, 30-35. Or 50-55. Pick a few and then show the differences by ethnicity within those age cohorts.

You’d similarly want age-correction on the mobility statistics. The typical life-cycle has people starting with net debt, then building wealth, then dis-saving during retirement. So you get mobility upwards until retirement, then mobility downwards as assets get consumed. Nothing that the paper puts up tells us how much of the mobility they find is natural age progression stuff. Again, you’d want to age-stratify the cohorts so people are measured in each wave against their position in the life-cycle changes. This likely drives some of their findings of bunching in the top and bottom quartiles, but it’s impossible to tell how much without going in and redoing it myself.

What else. The authors correctly note that student loan debt muddies things. They don’t explicitly state why. If you buy a house and have a 100% mortgage on it, then that’s a net zero contribution to wealth: asset matches debt. If you take out a student loan and have higher expected future earnings, all of the debt counts against you but the expected future earnings don’t. Trinh Le’s work, cited earlier, finds that those with university degrees are three times wealthier than those without university degrees.

Finally, if we’re thinking about international comparisons, countries like NZ will look more unequal than they really are as compared to countries with private pension systems. The wealth inequality stats would count retirement savings. A lot of retirement savings in NZ is done through the state and NZ Super. The claim that everyone has on NZ Super is a substantial asset, equally owned across everybody (albeit with adjustment for differences in life expectancy). Leaving that out makes wealth in NZ look less equal than it really is.

Friday, 5 May 2017

Tobacco tax, CPI, and living costs at the bottom

Stats NZ has been putting together new price indices that track the prices of the bundles of goods commonly bought by people in different income and expenditure cohorts: Household Living-Costs Price Indexes. The basic method and background's here. 

The latest release found that higher cigarette and tobacco costs are hitting beneficiary households. The Stats NZ release makes it pretty obvious.
Beneficiaries experienced the highest inflation in the March 2017 quarter, Stats NZ said today. Their overall costs rose 1.4 percent, almost three times the rate of inflation experienced by the biggest spenders group (up 0.5 percent).

"Higher costs for cigarettes and tobacco had a greater effect on beneficiaries. About 5 percent of their spending went up in smoke, proportionally more than most other types of households spent," consumer prices acting manager Nicola Growden said.

Higher rents, which make up one-third of their total spending, also had a greater effect on beneficiaries.
Government's been hiking tobacco taxes. That it would be highly regressive is no surprise. Government restrictions on new building drive housing affordability problems too. Government transfers a lot of money to the poor, but also makes things pretty expensive for that cohort.

I rather like the chart we had in Jenesa's report, Health of the State.

Update: Reader mailbag brings me this rather nice chart from the Stats release. Happy coincidence as the email came in two minutes prior to this morning's 7am queued post.

Informed Reader's conclusion was similar to mine:
The most interesting are beneficiaries. The reason they have higher inflation is:
  • Cigarettes and tobacco that is mostly because of the tax regime
  • Rents whose cost is mostly covered by accommodation supplement and Temporary Additional Support (despite the name it is generally not temporary)
  • Energy that is high because of the policy to subsidise aluminium smelting.
Most of the real difference is down to government. This makes sense if you think about the economics. People with a tighter budget constraint are going to be more price inelastic, so the only place you would see prices rise more for the poor are where prices are not determined by a market.
 Income quintile 1 is more complicated, not least because it includes many people who have income that statistics New Zealand surveys don’t pick up e.g. people starting a business who have “no income”. If you look at Bryan Perry’s work on incomes, you will find he explicitly warns against using lowest decile data. But even here, if you take out the ones for beneficiaries, you are left with property rates from local government and interest which you could reasonably suspect is being paid by those who lenders are prepared to lend money to (e.g. people starting a business who have “no income”...)

Thursday, 4 May 2017

Good points on pay equity

Today's reader mailbag brings a few excellent points on the government's pay equity deal for homecare workers.
I think your discussion of pay equity (at least the bit you quote in the blog) does not clearly distinguish between two very different questions: (i) is there an equity issue (ie evidence of discrimination against women)? (ii) is government intervention likely to create more distortions than it solves. One of the reasons I think Hayek is very powerful (cf the "Constitution of Liberty" on anti-trust legislation) by being happy to allow there will be many distortions where real world markets do not deliver efficient outcomes. The force of his argument is that the justification for government intervention has to show how the intervention improves on than outcomes after intervention.

In this context, there is nothing inherent to the way markets operate that will deliver equity and if consumer (or government funding) preferences are racist and sexist, so will the outcomes be. You can demonstrate (as Becker did in the late 1950s) that people make themselves materially worse off by acting in this way, but this is just one of many examples of people trading material welfare to maximise utility (the other obvious ones are giving to charity, voting to pay higher taxes and paying to reduce risk).

But that is not enough to justify government intervention. To justify intervention, it needs to be shown that the outcomes are "better" after the intervention. For instance, if the care industry responds to additional funding by investing in human and physical capital that means many people currently employed in the industry lose their jobs, the outcome may be fairer in the sense of having removed gender inequity for those who are qualified, but have done so by punishing those unable to get qualifications and/or younger people. In fact, you will find in health and social care that occupational licensing has tended to do precisely this, but with a twist that many of the people on lower pay are simply reclassified. So nurses used to do a wide of range tasks. It is no longer worth employing a fully trained nurse to do the lower skilled tasks so "trainees" do some of them and others are done by people explicitly labelled for those lower skilled tasks (e.g. "cleaners").

Therefore my prediction of the impact of the legislation is this:
  • After the initial redistribution there will be a joint effort by health unions and employers to increase the training barriers to be eligible for the higher pay;
  • This will include an extended training period when younger people will be paid at a lower rate because they are "training". Much of the on-the-job component of training will be doing many of the lower skilled tasks previously done by everyone;
  • There will be a plethora of new job titles created, where all will have lower certification requirements than "fully qualified" carers and therefore have lower pay.
  • Most of the people in the lower qualified jobs will be women, earning slightly less than they would previously have earned. They will be disproportionately from poor backgrounds, more likely to be Maori and PI, and will find most practical means of promotion blocked because of the new licensing requirements...
I am not sure that counts as equitable...?
I agree with my correspondent that Becker models under-emphasise that the path to equilibrium can be slow. Taste-based discrimination only really holds up where the customers have a preference for discrimination (unlikely in the homecare case) or where there's a severe lack of competition - and that's the dominant funder problem that MBIE's RIS talked about.  

I fear that my correspondent is right about what comes next. I hope that what comes next is the DHBs shifting to allow more people to hire their carers through MyCare. It's better for the homecare clients and better for the workers and cheaper for the health system. But I'm a bit pessimistic there too - it would require back-end changes that DHBs seem to like throwing into a too-hard basket. 

Wednesday, 3 May 2017


I just can't get over the employment figures.

Migration is running hot: huge numbers of incoming workers. Incoming workers take time to find work. At the same time, the government's been pushing pretty hard on work-testing for beneficiaries - and that would have people responding to a labour force survey saying that they're looking for work even if they're not looking all that hard.

And yet, and yet... just look at this. Here's Household Labour Force data going back to 1987, annual March figures. I'm using HLF230AA for anyone wanting to check things in Infoshare.

The top green line is the working age population (age 15-64). That's had a reasonable recent rise mostly due to migration. If there were a lump of labour problem, we'd either have an increase in the number reporting not being in the labour force, or reporting being unemployed.

But that sure hasn't happened. Instead, we've had huge employment growth and actual declines in the number of people reporting being unemployed.

Just look at it. In 1995, there were 700,000 fewer working-aged people in New Zealand than there are in 2017. But there are over 5,000 fewer people reporting being unemployed in 2017.

Or compare it to the overheated mid-2000s. When unemployment was at its lowest ebb, in 2008, there were just under 80,000 unemployed people, 624,000 not in the labour force, and a working-age population of just under 2.8 million.

The 2017 figures have just over 280,000 more working-aged people than 2009 but a total labour force that's almost 300,000 people larger: 18,600 fewer people report not being in the labour force. 248,000 more people in employment. There are just under 51,000 more people reporting being unemployed now than there were then, but the labour force participation rate is 2.6 percentage points higher and the employment rate is 1.3 percentage points higher.

The employment rate among people aged 15-64 is 76.1%. There is no year, going back to 1987, that had it that high. The labour force participation rate for that age group is 80.3% - also the highest in the data going back 30 years. Only minor caveat is that hours worked are growing less quickly, although that wouldn't be surprising either if some shifting into the labour force are picking up part-time rather than full-time work.

We should be shouting from the rooftops about how superbly the New Zealand economy has grown to match the growth in those wanting to be employed here. Whatever your concerns about immigration, dey terk yer jerb shouldn't be one of them.

University reciprocity

Imagine that you and your high school buddy make a deal when you both start restaurants. He and his family can eat for free at your restaurant forever, and vice versa. Fast forward ten years. Your restaurant's better than his, and you're serving his family more than twice as many meals as he's serving yours. Fair deal?

More Kiwis study in Australia than vice-versa, so it shouldn't be surprising that Oz has been getting a bit annoyed with the reciprocal treatment deal. Here's Universities NZ (HT: Dave Guerin):
Universities New Zealand is disappointed by proposed changes by the Australian government that would see New Zealand citizens studying at an Australian university being charged the full-fee rate.

This would break the longstanding reciprocal arrangement between the two countries where students can study in each other’s universities at the domestic fee rate.

We oppose any move that would create a barrier to Australians and New Zealanders studying in each other’s countries.

Currently about 4600 Australian citizens are studying in New Zealand, including 1860 in universities, and over 10,000 New Zealand citizens study in Australian universities.
Australian universities are bigger and have a broader range of offerings, especially once you start getting into graduate studies. The equal-treatment deal would always be pretty likely then to have Australian taxpayers shelling out more to cover Kiwi students than vice-versa.

Rather than get into a huff about unequal treatment and threatening to do things to Australian students studying here, the government might consider offering to just pay the Australians. The government spends thousands of dollars per domestic student studying in New Zealand. Count the number of NZ university students in Australian, net from that the number of Oz university students in NZ, then offer to cut Australia a cheque for something like the NZ domestic tuition subsidy multiplied by the net number of NZ students in Australia.

Update: I've been viewing this entirely in the context of "NZ student moves to Oz for study, and vice-versa". If Oz is instead wanting to impose international student fees on kids who grew up in Oz to NZ parents, and whose parents pay tax in Oz, that's really not on. 

Pay and equity

I went through the government's proposed pay equity legislation in last week's NBR and in The Initiative's Insights newsletter. Some snippets:
The bill would ultimately have the authority decide on allowed wages – the price of labour – if employees brought a claim that they were underpaid.

It requires that remuneration in female-dominated occupations be no less than remuneration in male-dominated occupations with substantially similar skills responsibilities and services, where work is undertaken under substantially similar conditions, and where substantially similar degrees of effort are involved.

But that gets the workings of prices in competitive markets completely backward.

Value and price do not derive simply from the skill involved in some type of labour, or from the working conditions, or from inherent responsibilities. What matters instead is how much consumers value another bit of the final product or service, and how many people are willing to provide the labour to supply it.

If two jobs have, as far as an employment tribunal can tell, equivalent skills, equivalent working conditions and equivalent responsibilities, and one pays far more than the other, that price difference is important.

It says there is a surplus of workers in lower-paid jobs, relative to demand for their services – and a relative shortage in the higher-paid jobs.

For example, translation between Maori and English, or between French and English, may require equivalent skill, training and working conditions but no tribunal could improve on existing market prices to tell you which job should pay more in New Zealand.
I went on to talk a bit about the pay equity mess in Ontario in the 1980s. I hit that part more directly in the Insights column:
The Ontario Tribunal that had to decide on pay equity claims had to choose which professions provided the most appropriate comparison for the group that claimed to be underpaid. The result, as one evaluation later put it, was a “litigation nightmare.”

New Zealand will face similar and substantial problems in assessing which occupations have similar skills and responsibilities, similar working conditions, and require similar levels of effort. While Treasury made the job somewhat easier by providing a hierarchy for selecting appropriate comparators, it would be surprising if New Zealand did not face litigation nightmares of its own.

In short, New Zealand learned little from Ontario’s experience. Neither Tribunals nor Authorities are well placed to set pay relativities between different occupations.
In this coming Friday's Insights column, I'll cover a better way for better pay. If you haven't subscribed already, the sign-up link is at the bottom of the column.

I noted in the column an OIA request of Treasury on their advice regarding pay equity and whether they provided any warnings about the mess that Ontario encountered. Doesn't look like Ontario came up. Here's the first reply, and the rest of the documentation.

Tuesday, 2 May 2017

Police and Local Alcohol Policy: I Am The Law edition

Radio New Zealand reports today on the Police and Medical Officer of Health's shenanigans in Wellington alcohol licensing. Here's my piece from last week on it.

None of this is new. Wellington Council last year warned the Police about overstepping the mark. The cops were then also trying to impose one-way door policies by hassling publicans at licence renewals.

I'll be hitting this a bit more in this week's column at the National Business Review. It's getting to be time that the Police Minister has a word with Police about their behaviour.

Friday, 28 April 2017

Veto power is legislative power: police edition

The New Zealand police have been trying to usurp Councils' legislative role in setting local alcohol policy. It looks like there has been a systematic campaign by the police, often with the Medical Officer of Health, to object to license renewals unless the licensee agrees to conditions the police want to put on the renewal.

I was involved a bit in the Local Alcohol Policy process in Wellington in 2014, when I did a bit of expert witness work for the Hospitality Association around mandatory bar closing times. Wellington Council wanted a 5am closing time; the police appealed, wanting earlier closing times; and the Hospitality Association joined in in support of Council. The end result was Council here adopting national default closing times (4am for on-licence) where the measures they'd proposed as mitigating perceived harms from later closing times were ruled to be outside of Council's remit.

Anyway, the adoption of national default trading hours incorporated a fair bit of discussion around harms - Council decided to go with the national default after weighing up the kinds of things that councils should weigh up. National default times applied to on-license and off-licence premises.

Fast forward a couple of years. The police in Wellington, along with the Medical Officer, have been bullying bottle shops, threatening to object to licence renewals unless they agree to earlier closing times. If there were some issue where a particular licensee had incompetent staff later in the evening and regular problems with, say, selling to intoxicated people or to minors after 10pm, then objections would be fair enough. But it's really starting to look like the police just want all of downtown to have earlier closing times because they don't like the closing times that Council chose. They had their say during the LAP process, didn't get their way, and are trying to bully their way through by their power to make it tough for licensees to get their licenses renewed. The power to veto is the power to legislate.

And so I really really liked this ruling on Cuba Liquor World's license renewal appeal. Big hat-tip to Dominic Kelly at Hashigo Zake.

The Authority notes that there was no public opposition to the license renewal, and the licensing inspector did not oppose it either. But the Police and Medical Officer of Health objected. They couldn't show any harms from that licensee's late night trading other than one failed controlled purchase operation a couple years ago - the licensing inspector didn't object to the application, so whatever issue there was in that one case must have been resolved. And so the license was renewed.

The Police then appealed the renewal. Because of course they did. The Authority's ruling includes this gem:
Section 103 responsibilities

[77] Both appeals before the Authority relate to the appellants’ dissatisfaction with the DLC not imposing restricted trading hours by way of a condition imposed on the licence. It is clear from their submissions that they opposed this application, in large part, because the licensee did not agree to shorter opening hours, notwithstanding that they accepted other conditions put to them.

[78] The Authority would be concerned if both the Police and the Medical Officer of Health went into the DLC hearing because they failed to negotiate a 9.00 pm closing time to achieve, as the second appellant put it, a “goal to reduce accessibility”.

[79] Reporting agencies should be careful to avoid ‘negotiating’ conditions with an applicant in exchange for those agencies not opposing the application. Doing so risks creating the impression that they have used their statutory reporting function under s 103 to achieve their own ends. While the interests of reporting agencies are undoubtedly of significant importance, and it is for that reason that they have been given a function under s 103, the Authority would take a dim view if opposition turned on whether an applicant agreed with reporting agencies’ recommendations on conditions. The role of the Police and the Medical Officer of Health under s 103 is clear. They are to inquire into the application and if they have any matters in opposition, to file with the DLC a report on those matters. The evaluative exercise under s 131, and the imposition of conditions, is for the DLC alone and not for the Medical Officer of Health or the Police. It would be an improper use of their reporting role in s 103 if that was used in a way that effectively usurped the DLC’s licensing function.
Emphasis added.

The Police risk creating the impression? I expect this is judicial talk for "stop abusing your power you pillocks."

A few fun questions then:

  • Where licensees have only agreed to conditions because of police threats to bully them through the appeals process, and if the Authority is now starting to glean that the police have been bullying licensees around licence conditions, should there be any mechanism for reversing conditions that were only agreed to under extortionate threat?
  • At what point should the Police Minister be involved in this mess? The Police Minister should generally stay out of operational matters, but if the Police are in fact behaving in the way that the Authority says the Police risk creating the impression that they are behaving, well, that does sound like something that the Police's boss ought to be doing something about.
Here's Dominic on the mess - and he's sticking his neck out here because the Police could yet punish him for speaking up about it come his next licence renewal [Update: that's my take not his]:
For a while now, some of us have been observing how alcohol licences are issued in Wellington, with a bit of concern for one particular aspect. And that is the practice of the Police telling applicants that they will oppose their applications unless they agree to certain conditions being written into the licences.

If and when Police object, the application goes to a hearing and everyone takes their chances with the District Licensing Committee. From what I've seen, the DLC overrules the objections of the Police (and the Medical Officer of Health) with surprising frequency. Nevertheless, for a lot of applicants the hearing and the time taken for it to happen are unpalatable, especially if they're applying for a new licence and any delay in the licence might delay their opening. (It's different if you're applying for a renewal.) So applicants tend to pay very close attention to any suggestions the Police have for avoiding a hearing.
He continues:
From what I know of these things, the behaviour that the New Zealand Alcohol Regulatory and Licensing Authority is saying should be avoided sounds an awful lot like the way Wellington licensing has been operating for the last two or three years. For example the 2015 decision regarding an off-licence application here incorporates extracts from a succession of emails that must pretty much fit the dictionary definition of a "negotiation". (Paragraphs 12-17, on pages 5 and 6.)

So if the New Zealand Alcohol Regulatory and Licensing Authority is saying that this kind of practice is against the intent of the 2012 Sale and Supply of Alcohol Act, but this practice has been routine for several years, what does it say about the licences that have been granted in this time? Do they need to all be reconsidered by the Wellington District Licensing Committee?

Getting more extreme, if a bar or liquor store felt coerced into accepting shorter trading hours, can they sue the Police for loss of income?
Meanwhile, Liquor King Kent Terrace had its licence renewal subject to shorter trading hours. It's appealed, arguing that Police and Medical Officer evidence on "Here are the number of late night arrests in a wide area around Courtney Place" and "Here are the number of late-night ED presentations from a wide area around Courtney Place" say nothing about harms relating to their trading hours. Full disclosure: I did a minor review of that evidence for Lion.

The Police and Medical Officer evidence was around an incremental strategy to get reduced trading hours for the downtown as a whole by curbing hours at each licensee in turn - there was no causal nexus between any particular store's hours and harms, but an assertion that you'd have reduced harms with shorter overall hours implemented store-by-store. But setting trading hours for downtown as a whole isn't the darned job of the Police or Medical Officer - it's what Council did when it set the local alcohol policy in the first place, and both of those had their say at that point. 

Thursday, 27 April 2017

Uber hero to Uber zero

I think the main lesson here is that if you do something nice for somebody, never tell a journalist.

Yesterday, Frances Cook reported on an Uber driver who saved the day for an American couple who were stranded in Auckland due to the cyclone. They needed to get to Wellington for a business trip, and the flights were cancelled. So he drove all night and they made their meeting. Uber Hero!

Soon after, a bevy of control freaks started tweeting about how the ride was likely illegal due to maximum shift duration rules. NZTA has been looking for ways to knife Uber, so they got in on it too.

And so, a few hours later, Frances Cook had another story: the driver might leave New Zealand rather than face the courts for having helped the American couple while breaking NZTA rules. Uber zero!

It's worth keeping in mind that if the jetlagged couple had rented a car and driven all night, on the wrong side of the road, knowing nothing about NZ driving conditions, it would have been far riskier - but totally legal.

A couple bottom lines:
  • Be wary about talking to reporters, even if you think you've done good. The law might not be on your side - especially if you're an Uber driver. 
  • Rules on logbooks and maximum driving shifts are a bit silly relative to a first best: penalties for impaired driving that include driving while fatigued. The latter would cover people who drive themselves or friends for free as well as commercial drivers. 
Update: Another useful way of checking whether the maximum hours rules do any good would be just to check whether any Uber drivers have been involved in any fatigue-related accidents while working. Shift requirements for Uber drivers don't make any sense anyway, as somebody who's 8 hours into a driving day that started driving that morning will be less fatigued than somebody who's 2 hours into a driving shift that started after a normal work day. Are there disproportionate fatigue-related accidents for Uber drivers?

Do read the second Cook story. Uber's competitors sure are appalled. 

Saturday, 22 April 2017

Canadian Milkroad Trilogy

Three great reads on the insanity of Canada's dairy supply management system:

Trevor Tombe explains the consequences of supply management:
According to recent estimates from the OECD, the artificially high agricultural prices in Canada transfer $3.5 billion from consumers to producers annually — nearly $3 billion from milk alone. Spread over the 8 billion litres of annual production, it’s effectively a hidden milk tax of 37 cents per litre.

For producers, this is a big deal. At the end of 2015, there were just under 11,500 dairy farms in Canada. The $3 billion that supply management allows them to extract each year is equivalent to $260,000 per farm. Much of this is capitalized into the value of the quotas they are required to hold. A single one in BC and Alberta, for example, is currently worth roughly $40,000; in Ontario and Quebec, they go for $24,000. With nearly one million dairy cows in Canada, quotas are collectively worth tens of billions of dollars, an important cause of our country’s higher production costs.

This kind of system is highly regressive. The average dairy farmer had a net worth of more than $3.7 million in 2015, according to data from Statistics Canada, and poultry and eggs farmers were typically worth nearly $6 million. Meanwhile, low-income consumers face a heavy burden.

In recently published research, University of Manitoba economists Ryan Cardwell, Chad Lawley, and Di Xiang show that supply management costs the typical household the equivalent of $450 per year—and nearly $600 per year among households with children. For the poorest 20 per cent among us, that’s roughly 2.4 per cent of income; for the richest 20 per cent, it’s barely 0.5 per cent. Let that sink in. Those concerned about poverty, inequality, or living standards of the middle class (every politician’s favourite group) should oppose Canada’s milk tax.
Tombe sees an opportunity in Trump's push to level the playing field for American dairy farmers. So does Andrew Coyne:
That governments have been so unwilling to set aside a policy that is responsible for Canadian families paying two and three times the world price for basic food items, all to benefit a dwindling number of wealthy and aging, farmers (young farmers face a formidable barrier to entry, in the form of the cost of quota: more than $25,000 per cow) is one of the great dilemmas of public policy. If we have to enlist Trump to save us from ourselves, so be it.

We should not be too eager, however, given Trump’s view of trade: not as win-win but I win-you lose. To satisfy his need for conquest — and to show the domestic industry how doggedly it had fought for its interests — the government should protest in the most extravagant terms how much it would pain it to give it up. I envisage Canada’s negotiating stance here as resembling that of the submissive partner in an S&M role-playing game: “Oh, NOT supply management, Mr. Trump! You brute! Anything but THAT! No, DON’T ask that of us again, we BEG you…”

If we are very clever, we might pair this with a proposal for an offsetting “concession” on the American side. For example, the Montreal Economic Institute has suggested a deal (I see Maxime Bernier has lately taken up the same idea) in which, in return for Canada giving up supply management, the U.S. would cease its endless campaign of harassment of our softwood lumber exporters, including the threatened 25-per-cent tariff.
Finally, Colby Cosh finds some use for Canada's anachronistic 1970s system: reminding the kids about the horrors of socialism.
I hasten to add that I am not seriously playing the “Won’t someone think of the children” card so beloved of politicians, newspaper columnists, and other shameless scum. The four-year-old will get over it [not getting better yogurt to which she'd grown accustomed while abroad]. She’ll grow up in a free-trade Canada in which she does not have to accept a world of consumer second-bests, simulacra, and make-dos, except possibly in the dairy section. She can have no personal memory of Seventies Canada — never know what it is like to switch from Eaton’s to The Bay just to buy slightly different versions of the same low-quality, unfashionable crap. The question I grew up with was “Why does Canada have seemingly permanent poorer living standards than the U.S.?”; now it is just “Why are the cheese sections in our grocery stores so pathetic?”

It is almost enough to make one wonder: is there a political utility to keeping the ’70s dairy supply management system in place? Does it serve as a useful reminder — a subconscious warning — of what awaits us if we turn back to quotas and protectionism in our other industries? The cheese section may induce despair, but imagine, young folk, if the whole grocery was like that, and every other store too.
Cosh may be onto something. There's far too little appreciation in New Zealand of the 1980s reforms - all the benefits are taken for granted.

A gratuitous piece of non-dairy Canadiana as chaser:

Friday, 21 April 2017

Trumpitunity - skilled migration edition

My piece in today's Herald argues that people working in the US on an H-1B visa should have an easier time getting New Zealand work visas.
There are no practical routes allowing a skilled migrant to move to New Zealand without a job offer in hand. Counting the salary that comes with a job offer means the system will better recognise skills, but still requires that the migrant have a job offer before getting here.

And that can be difficult.

Put yourself in the position of an employer considering an applicant based abroad. You need to hire soon.

A candidate who was born in India but who has lived and worked in America on an H-1B visa for a decade has applied.

The candidate beats anybody available domestically, and will have enough points to be granted the visa on being given the job offer.

But the candidate will not be eligible to work until the visa comes through. And getting the visa requires getting a police background check from the candidate's country of citizenship, even if the applicant has not lived there in decades.
There aren't really many NZ visa options that don't require the migrant to have a job offer in hand. But you won't get the job offer in the first place if the employer thinks it'll take months for you to clear police background checks in whatever country you left to get the U.S. H-1B.

There are a few ways to solve it, but they'd all either involve a limited duration work visa without home country police background checks for those working in the US on an H-1B (if they'd been in the US for more than a trivial amount of time), or exempting those who've made it through America's system from having to get police background checks in their home countries as well.

A country that admits millions of tourists per year without police background checks can afford to be a bit less precious about police background checks for those wanting work visas.

Meanwhile, Andrew Little wants maximum net migration numbers that are far lower than the number of Kiwis and Australians who moved to New Zealand last year and can move here by right. I wonder if he's set to start deporting people in Auckland who have Chinese-sounding names.

And while the government's shift to include salary as a way of demonstrating skill for skilled migrant visas could be a great complement to the existing system for catching those whose skills are underrecognised by MBIE's lists, it would be rather less hot if they also knocked out skilled entry for those on the current lists but on lower salaries. And the stand-down periods that would basically end consecutive work visas are inhumane. Someone comes here and starts building a life, and you kick them out for a few months every time they want a new visa? Gets harder to convince people to move to the far end of the world if you're going to treat them like that. And, worse, it gets harder for migrants to start thinking of themselves as Kiwis. That's been one of the really great things here - that immigrants aren't treated like garbage. In the middle of the biggest opportunity to attract skilled migrants to New Zealand, we've got an election campaign that seems set to have the parties compete on who can be most horrible to migrants. On the one hand, it makes me want to get my citizenship sorted out as a way of buying immunity; on the other hand, it makes it a bit yuckier.

Mandatory labelling - again

Twitter suggests there's a pretty common fallacy out there that needs a bit more thorough treatment. Here's how it looks:

  1. Free markets require informed choices
  2. Therefore the government should compel companies to label their products about things that I happen to care about. Otherwise how can people make informed choices?
Why is this an error? There's an infinite array of things that could show up in (2) as basis for labelling because different people care about different aspects of products. 

In the absence of mandatory labelling, consumer demand combined with labelling costs ultimately drive what gets put on a label. Consider country of origin labelling. Some suppliers specialise in a pure NZ product - and proudly say so on the label. Others will shift supply depending on what's going on in different markets: some disease outbreak might hit pork from Thailand but not from the Philippines and so processors will shift from one place to another if their customers don't care so much about the product's country of origin. And others will proudly label their product as Danish butter or Swiss chocolate. 

In that set-up, companies will provide information about whatever they think will help them make sales. Some will make a big point about their country of origin, targeting customers who care about that. Others will make a big point about animal welfare. Others will highlight that the product doesn't have gluten. And, importantly, customers aren't idiots. If one package of bacon has a pile of credible labelling about that the bacon was grown cage-free in New Zealand and processed here, another says it's cage-free and from Denmark, and the other one says nothing about either cage status or about country of origin, then it's pretty likely that the last one comes from caged pigs in places that are either too complicated to tell you about (constantly shifting supply chain), or from places that they think you'll not like it to come from. Equilibrium in those kinds of games is that everyone discloses except for the ones with the least desirable characteristics - but it can also be the case that, for that brand, customers just don't value the information as much as it would cost to provide it. 

What do I mean? It is really easy for casual observers to say "Oh, it wouldn't cost them much to label products about X." Take again country of origin labelling. It sounds cheap, right? But what if your supply chain includes suppliers from dozens of countries and you shift among them depending on time of year and local market conditions? You then have two options: more expensive products where the company has to add in a constantly varying label or sticker, or a rather less useful label saying "Our product may contain wheat grown in Canada, the United States, New Zealand, Australia, India, the Ukraine, Pakistan, Egypt, Argentina, Serbia, Morocco, Turkey, France, Germany, Uzbekistan and Kazakhstan, and may contain strawberries sourced from New Zealand, Australia, the United States, (or dozen other countries) depending on the time of year." And then you have to change the label again if trade embargoes on Russia change. 

Like, it's not technically impossible: HAACP batch labelling would link back to where that batch's component parts came from, and you could imagine setting up more expensive labelling kit that would generate stickers from the batch label - but it is more expensive, and suppliers could already be doing it if customers valued it. If your basic model of the world is that suppliers are all colluding to keep valuable information from customers, then you should quit your job and start up a company that fills the gap. The profit opportunity must be huge. Be the firm that has the more expensive labels and profits by telling everybody! 

Meanwhile, a speciality producer whose customers care about New Zealand sourced product can easily self-identify with a big "Made in New Zealand with New Zealand grown ingredients" label to attract those customers that care about it. And people who want that can and do pay extra for it.

Some underappreciated points about markets:
  1. What consumers want drive what firms provide;
  2. What consumers say they want can differ from what they're willing to pay for;
  3. Companies are best placed to know their own cost structures;
  4. Markets are really pretty good at providing what people are willing to pay for. Entrepreneurs in free markets are constantly looking for opportunities to provide things that people value and that can be supplied profitably. 
Some underappreciated points about politics:
  1. Regulators are really good at mandating things that voters say they want but that voters, as consumers, are unwilling to pay for. Whenever they do this, they destroy value;
  2. Mandatory labelling guidelines depend on political demand, not economic demand;
  3. Voters are far more protectionist and anti-foreign when they're voting than when they're buying things. 
I can see cases for compulsory labelling about allergens. If a small set of consumers would experience huge costs from inadvertently eating peanuts, for example, then the niche of "Guaranteed Peanut Free" products would be pretty small, and the downside costs are very large. Beyond that, though, it's real hard to see the case for expanding the set of compulsory labels. 


Thursday, 13 April 2017

Hypothesis testing: open data edition

The graph looked plausible. It didn't really fit my experience, but it didn't seem implausible either.

So I took a 5 minute jaunt over to Berkeley's SDA engine, which draws on US GSS data. First I ran a basic regression of happiness on age, age squared, with a high score in wordsum (a vocabulary test) as my nerd interaction term.

Berkeley lets you run the regression right in the website. I'm not sure I've got this one right - can't guarantee that I properly excluded where they used a code for missing data.

Then I downloaded the data to plot things a bit more nicely in Excel, because you can generate custom data extracts on the fly. I'd not done that before; learning how to do it took 5 minutes (mostly because I forgot to include the happiness variable the first time through). Deleted all the missing data lines. Then a quick pivot table let me plot average happiness for the top wordsum scorers against the average of all wordsum scores on happiness, by age:

The orange line is noisier - as you'd expect as there are fewer observations over which it averages at each age group.

What do we take from this? Happiness is not quadratic in age. Maybe wellbeing is, but I don't think that's in this dataset. And I can't made diddly out of any difference between top scores and the average. I'm sure there are plenty of refinements that people could make: there's great educational attainment data and other stuff in there that could better identify nerds, and maybe there is something in there that's closer than happiness is to well-being. But I didn't have more than 10 minutes to play with it.

Quick and simple real data test of a plausible-looking hypothesis. And there are plenty of reasons why splitting happiness data up by education, or vocabulary, and by age would be of more serious research interest.

Here in New Zealand, getting access to the Confidentialised Unit Record File from Statistics New Zealand would take a 3-week application process and signing a pile of forms and promising to delete the data when done with it and making sure the data is stored securely and checking with them before publishing and results from it.....

Tuesday, 4 April 2017

Data Envy

America often gives me data-envy. This is an older New York Times piece, but just look at the data visualisation that's there possible. Because every child in the country writes the same maths and reading tests, there's data on how far each school is ahead or behind others. And it can be mapped against parents' socioeconomic status, and sorted by race.

I can't do it justice here. Click over and hover over the graphs. They're all interactive.

Here's educational attainment mapped against parents' SES. Cullman City, highlighted, is achieving outcomes that would be about what would be expected among schools where the family income is $103,000, not Cullman's $43,000. Why are they able to achieve those outcomes? Americans can start asking those questions and figuring out what lessons Cullman City can teach other schools, because they have that data.

They've other graphs showing the differences across races within the same school, again mapped onto parents' SES. Unfortunately, those charts only compare White, Hispanic and Black students; it would be very interesting to add Asian students in as well. 

Being able to identify well-performing and poorly performing schools, with proper adjusting for the kids' background characteristics, seems rather important in identifying well-performing and poorly performing schools.


Monday, 3 April 2017

In Praise of Bryce Wilkinson

How to overcome this petty uniformed busy-bodyism plague? One answer is never to put a short man in a uniform. That’s an old maxim, borne out by the oft observed fact of so many of history’s notorious dictators being short.

Some years back as guest-speaker at the Police school passing out dinner I remarked to the Commissioner about some conspicuously short graduates, this leading to an angry outburst about bloody equal rights nonsense. He was right of course as any run-in I’ve ever had with the police has invariably featured a very short copper. Think of American police TV comedies over the past 50 years. Without exception, they featured a comical very short, swaggering policeman acting the tough guy.

When in uniform ...

I know lots of talented and excellent company short blokes but have no doubt what would happen if you banged them in a uniform. Take respected, popular economist and occasional NBR contributor Bryce Wilkinson, who’s very short and seemingly perpetually happy. Subject him to a flogging and he’d laugh throughout and thank you afterwards, such is his benevolent outlook on humankind. But put him in a uniform and it’s odds on he, Jekyll and Hyde like, would transform into a raging, trouble-seeking wild beast.
Sir Bob's right about the factual Bryce Wilkinson. I'm not sure he's right about the counterfactual Bryce Wilkinson. Those who seek a uniform because they're compensating for something differ from those who have the uniform thrust upon them.

Friday, 31 March 2017

Not everything has to be mandatory

Back in the days of dial-up, my mother-in-law had a really cheap ISP service. She didn't pay very much, and the ISP put ads on top of everything. There was some kind of ad bar at the bottom of the browser no matter what site she was on. But the ads didn't bother her and she wanted a cheap service. They bothered me whenever I used internet when visiting at her place, but I wasn't the one paying for it.

It was totally legal to have that. Did every ISP do it? No. Just that one. Everybody else signed up with other ISPs and didn't have that - just the normal ads. But imagine if it had been banned, then somebody proposed removing the ban. It's easy to imagine horror stories about every ISP doing that, until you think through the logic of it.

And so I don't get the fooferah around the American legal changes around ISPs and client privacy. Some people who don't care about their browser trails will be able to get cheaper internet service in exchange for their ISPs being able to sell on their histories to advertisers for better targeted ads. Others won't. I didn't sign up for my mother-in-law's ISP but I'm glad she was able to; I wouldn't sign up for a less privacy-friendly ISP but am happy enough for others to, if that's their preference.

I talked with NBR Radio about it Thursday; I expect it'll go up sometime soon if it isn't already. There are some details about the American proposal that I don't know about and that do matter. If the ISP can sell your prior browser history without your knowing about it or consenting, that would be bad. But so long as it only applies on a forward-looking basis, then the market will segment between those who care about browser privacy and those who don't. And even if it doesn't, consumer backlash against selling prior history surely will also matter if people actually care about it that much.

I'd expect this even in the case of cities where broadband competition is limited. Even a monopolist does better by segmenting the market - although in that case, the ISP could extract more than it ought to be able to from privacy conscious consumers. In competitive broadband markets, it shouldn't matter.

A policy letting ISP clients choose lower cost packages in exchange for less privacy worries me a lot less than policies mandating that ISPs keep years of client data on file for the government to snoop through without the browser's consent.

Thursday, 30 March 2017

To H-1B or not to H-1B: the skilled migrant visa question

Bottom line: it would be darned hard for a skilled worker in the US on an H-1B visa to land a New Zealand Skilled Migrant Visa without a job in hand here.

Immigration New Zealand screens these things using a points system. They're currently accepting Expressions of Interest from those with point totals higher than 160.

What's required to get 160 points? Here's the calculator.

Suppose that you're 29 years old. You received your tertiary education in the US and received your PhD in an area of absolute skills shortage when you were 27. You worked your way through university, always in that same area of absolute skill shortage, and you're working now in the States.
  • Age 20-29: 30 points (the highest for the category)
  • Level 9 or 10 postgrad degree: 60 points (the highest for the category)
  • Qualification in an area of absolute skills shortage: 10 points
  • 10+ years experience in a comparable labour market or in an area of absolute skill shortage: 30 points
Ok, that gets you to 130 points. The minimum is 100, but they're not considering EOIs less than 160.

A skilled employment job offer in NZ is worth 50 points. I can't see how you get past 130 without that offer in hand. You can bump it up to 150 total by having a partner with a recognised qualification of Level 7 or more (20 points), but that's about it. Having the job offer in hand is critical to getting over the current points threshold.

And so there are a pile of qualified, productive people in the US on H-1B visas who potentially would love to come here given what's going on there. They'd be good for the tech sector here. But without a job in hand, they can't really do it. And flying out to New Zealand on a job-hunting tourist trip is risky if you're on an H-1B and getting back into the US is dicey. 

Meanwhile, employers vary in ability to deal with immigration issues. The base mechanics aren't rocket science: here's Immigration New Zealand's summary:
Offering a job
You’re allowed to offer a job to someone who doesn’t have a visa but your offer should be conditional on that person getting a visa.
We use a points system to decide who we’ll invite to apply for residence under the Skilled Migrant Category.
For your candidate to be able to claim points for their job offer, it must be for:
  • a skilled occupation
  • full-time work (at least 30 hours a week)
  • permanent employment for 12 months or more, or on a contract basis, if your candidate can show us they have a history of consistent contract work, a current contract for services, and that the work’s likely to be ongoing 
  • an employer who has good workplace practices and complies with immigration, employment and other laws.
Applicants whose jobs are on one of the skill shortage lists or are in an identified growth area are more likely to be successful.
Nevertheless, an employer could easily be put off by the process: if the visa issuance is conditional on the job offer, and the job offer is conditional on the visa, then the employer may worry about Immigration limbo until the visa is approved after the job is offered. They could have Schrodinger's Employee: both hired and not hired, until the paperwork clears Immigration.

Even where Immigration NZ is doing a great job and moving fast, there's still risk: foreign governments can take a long time to process police background checks if NZ insists on them. The FBI is fast, but if somebody's in the States on an H-1B visa, they might need to get a police certificate from India (for example). And then everything waits on that.*

Some potential solutions?
  • Count possession of an H-1B as being worth 40 or 50 points towards a skilled migrant visa.
  • Deem anyone on a current H-1B visa to have passed the relevant police background checks as they would have passed them to get the H-1B in the first place and would have been deported from the US and had their visa revoked if they'd committed crimes while in the States. 
  • Set a temporary visa category for those in H-1B visas letting them move here and work here for a year, with automatic transition to the skilled migrant category on receiving employment. Put in big print on the visa form that regardless of the expiration date on the visa, any employer offering a job can be assured that the migrant will be given a longer term skilled migrant visa immediately on an employment offer being extended. Heck, print it all really clearly on an official looking sheet of A4 so the visa holder can give copies of the paper to any potential employers worried about immigration hassles. 
  • Coordinate with NZ tech employers to run some recruitment fairs up the US West Coast, with an immigration official along for the ride and able to issue visas on-site for any US H-1B holder who's been extended a job offer from a Kiwi employer. 
New Zealand suffers from shallow talent pools in too many areas. This is something simple the government could do right now to improve things. It targets entry to the kinds of skilled migrants that even NZ xenophobes claim that they want here. It's a pool of talented people many of which are likely ready to jump ship and come over. 

The government seems to be shying away from this one for fear of giving Winston a stick to beat them with, but this seems the kind of immigration drive that even NZ First should love. 

* Simple personal story on that one. When Canterbury extended me the job offer in March 2003, they said I could take up the offer anytime before February 2004 when classes started. So I spent a few months in Germany as a post-doc at ZEI at the University of Bonn. I put in my police background checks with the FBI and the RCMP really early, long before we left for Germany. And I also sorted my medical checks too. The FBI processed things quickly, because they're geared up to run fingerprint checks quickly. I think the RCMP at the time had two 80 year olds using magnifying glasses and checking applications against a big printed record of criminal fingerprints. Anyway, the RCMP took so freaking long to process my background check that my medical certificate expired. And so I needed to get a new medical check in Germany. 

Immigration NZ moved hellafast to make sure everything was in order for me to be able to fly out to Christchurch to take the job, once I was able to get them the RCMP paperwork, but there was SFA they could do while waiting on the paperwork. I had my American Green Card already, and a sane process would have just said that the Canadian check I'd done to get my American Green Card was sufficient for NZ purposes because I hadn't lived in Canada since 1998 anyway.

Now imagine all of that from the perspective of a private sector employer instead of a university that's happy for me to just show up sometime over the 10 months after the job offer was extended.