Article 43
Sunday, September 29, 2013
More Jobs Coming Back Home
Company Turns to IBEW and Brings Jobs Back from China
By Dennis Loney
AFL-CIO
September 27, 2013
Neutex Advanced Energy Group, a Houston-based maker of LED lights, light bulbs and fixtures, brought its core manufacturing operation from China back to the United States last year and turned to the Electrical Workers (IBEW) to staff its facility.
Paul Puente, assistant business manager of IBEW Local 716, approached John Higgins, president and CEO of Neutex, to discuss his needs and concerns and how they could work together.
Higgins agreed to make the facility an IBEW union shop, and the Electrical Workers agreed to provide training for its workers and help the company market its union-made products. Neutex will employ 250 to 300 IBEW members in its 15,000-square-foot facility.
“The partnership with the IBEW, it’s giving us credibility when were growing in leaps and bounds,” says Higgins. “We should be able to bring this [to the United States] and still be able to make a much better quality product, in better time and help our middle class.”
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Google sees advantage in making new gadget in USA
By Noel Randewich and Alexei Oreskovic
WHTC
July 2, 2013
When Google Inc decided to build its Nexus Q home entertainment device in Silicon Valley rather than in China, it was not fretting about the bottom line. It was fretting about speed.
“We wanted to innovate fast. This is the first end-to-end hardware product that Google has ever put out,” said John Lagerling, Google’s senior director of Android global partnerships.
The cost of building the orb-shaped Nexus Q, a cross between a streaming video box like Apple TV and a stereo amplifier, “was not the No. 1 priority,” Lagerling said. “We wanted to see if we could do fast (design iterations) rather than having our engineers fly across the world.”
“This is not this big initiative that things had to be made in the USA,” he said.
Google’s decision to go with a local manufacturer is a striking departure from the made-in-China model that Apple Inc and other consumer electronics manufacturers have long considered essential to their competitiveness.
Google’s move reflects a nascent trend of “reshoring” manufacturing operations to the United States. While such actions are largely driven by SOARING LABOR COSTS IN CHINA, other benefits of manufacturing locally are shorter lead times, more responsive partners and better protection of intellectual property.
The Nexus Q will also likely sell in limited quantities, which made finding the cheapest possible manufacturer less important. BGC analyst Colin Gillis said Google would probably not sell more than 100,000 of the devices, which he said are pricey compared with products like Apple’s set-top box.
Made In China, Revisited
China has become the world’s factory floor over the past decade as incentives, low wages and entry into the World Trade Organization made it a highly efficient workshop for everything from shoes to electronics.
An exodus of American manufacturing jobs has created political tension in the United States and put pressure on U.S. companies to at least acknowledge the issue.
In May, Apple Chief Executive Tim Cook said he would like to see more of the company’s products assembled in the United States instead of China, but he qualified that by saying there was a shortage of expertise in America in some areas.
Economics and not politics are likely to drive any larger shift in manufacturing, and wages in China could be the biggest factor. Hourly Chinese factory wages, which averaged 52 cents an hour in 2000, are expected to rise to $4.51 an hour by 2015, according to the Boston Consulting Group.
By 2015, the total labor-cost savings on manufacturing many types of goods in China will stand at around 10 to 15 percent.
Hal Sirkin, a senior partner at Boston Consulting, said that once logistics, supply-chain management and transport costs were factored in, the benefit of making things in China will become marginal for more companies, especially those making bulkier or heavy products.
A February survey by Boston Consulting of 106 U.S.-based manufacturing executives whose companies had annual sales greater than $1 billion showed that 37 percent of them were considering or planning on moving production back to the United States from China.
Still, the complex web of component suppliers that are an integral part of the electronics manufacturing process will help keep vendors such as Apple glued to China.
“The supply chain is so geared toward building that product in China that even with the labor rate up, it’s hard to reorient that big supply chain and say, ‘Oh yeah, we’re just going to build the entire thing here in the U.S.’,” said IHS iSuppli analyst Thomas Dinges.
Companies facing high shipping costs from China or making goods in small quantities are more likely than major consumer electronics makers to see benefits in returning to the United States.
Benefits Of Building Locally
Lagerling declined to say what it was costing Google to make each Nexus Q, but IHS iSuppli analyst Andrew Rassweiler estimated the company was spending $150 on components per item. Rassweiler cautioned that he had not personally examined the product.
Dinges estimated that a high-volume Asian manufacturer might have charged Google about $8 to assemble each device, while a smaller-lot U.S. contract manufacturer might charge double that amount. The device sells for $299.
Lagerling declined to say which contract manufacturer was making the Nexus Q, citing security and confidentiality, but the New York Times reported last week that the manufacturer was near Google’s Mountain View, California, headquarters.
Jeff Moss, co-owner of contract manufacturer Quality Circuit Assembly in San Jose, California, said many U.S. companies underestimate the sometimes fuzzy costs of moving their production abroad.
“The problem was people initially just looked at unit cost and not the total cost,” Moss said. “You have to take into account your additional lead times, your freight costs, and then the extra hand-holding it takes to deal with a supplier in Asia.”
LED lighting maker NeuTex is in the final stages of moving production of its core products to Houston, Texas. The family-owned company manufactured in China for more than four years. Among NeuTex’s considerations for making the switch were quality and goods damaged in transportation.
NeuTex will operate the U.S. plant to which it is moving its manufacturing operations. Cofounder John Higgins said that taking into account increased automation at the plant, he now spends about 30 percent more on labor than he did in China. But factoring in shorter shipping time, fewer defects and increasing automation, he expects to bring the overall additional cost of manufacturing in the United States down to about 4 percent.
He believes that demand created by “Made in the USA” on his products will more than offset additional manufacturing costs.
Peerless-AV, which makes wall mounts for TVs, recently moved its manufacturing to Chicago from China because the company grew tired of its designs be illegally copied.
“A lot of the increase in cost of wages has been offset by the money we’ve saved by having our design group here instead of going back and forth,” said Marketing Manager Mike Larmon.
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Pot and Deep Breathing
20-Year Study Found No Decline In Lung Function For Occasional Cannabis Smokers; Lung Function Of Most Marijuana Smokers Improves Over Time
Often, when people hear about the studies which have shown that smoking marijuana doesnt cause lung cancer, they’ll say something like, Well, inhaling any smoke, cancer or not, is bound to cause some breathing problems. Guess what? It doesnt do that, either.
A report published last year in the Journal of the American Medical Association shows that - over a 20-year period - marijuana smokers generally did not experience a loss in lung function. In fact, many actually had enhanced lung capacity, which one researcher speculated might come from the practice of “deep-lunging hits” to maximize their intoxicating effects.
Whatever the cause, the fact remains that the study showed the lung function of most marijuana smokers actually improved slightly over time.
"A healthy adult man can exhale about a gallon of air in a second, “according to researcher Stefan Kertesz, M.D., an assistant professor of medicine at the University of Alabama at Birmingham.
But cannabis smokers, on average, were able to blow out that gallon of air plus about 50 milliliters.
The average number of times marijuana users in the study said they smoked was two to three times per month but even in regular users, researchers said they still saw no evidence of breathing problems.
In fact, researchers estimated that lung capacity would stay slightly larger even if a person had smoked a joint a day for seven years, or two or three joints a day for three years.
Kertesz said the study should reassure people who smoke marijuana for medical reasons.
“This is a well-designed, well-described study,” said Jeanette M. Tetrault, M.D., an assistant professor of medicine at Yale School of Medicine in New Haven, Connecticut.
Researchers said this ‘’lung-stretching” property of cannabis may be due to the way people smoke marijuana - by taking and holding deep breaths with smoke than it does with any actual benefit of marijuana itself.
The study didnגt have a lot of light to shed on heavy smokers those who smoked the equivalent of a joint a day for 40 years, or smoked more than 25 times a month ח because the number of such users in the study was small, and the scientists werent sure if a possible trend indicating slight lung irritation from heavy smoking was valid or not.
There is, however, another study җ the largest of its kind ever conducted, in fact, by Dr. Donald Tashkin of the University of California at Los Angeles (UCLA) which shows that marijuana smoking, even heavy, long-term smoking, does not lead to lung cancer.
ashkin, medical director of the pulmonary function laboratory at the David Geffen School of Medicine at UCLA, who has spent his career studying the health effects of marijuana, said the new study is helpful because it was relatively large and followed people for a long time, which gives him confidence in the results.
דThe main thrust of the paper has confirmed previous results indicating that marijuana in the amounts in which it is customarily smoked does not impair lung function, he said.
His own study of heavy, habitual marijuana smokers ԗ people who smoked the equivalent of a joint a day for 50 years found no harmful effect on lung function.
Tobaccoגs Another Story
Tobacco smokers, on the other hand, were found to have less capacity in the amount of air they could exhale, and also in the speed at which they could empty air from the lungs. Cigarette smokers in the study saw their lung function drop steadily over the entire 20 years.
The study included more than 5,000 people in the United States. They were studied between 1986 and 2006.
Marijuana may have beneficial effects on pain control, appetite, mood and management of other chronic symptoms,” researchers from the University of Alabama, the University of California, and Northwestern University said in a statement.
“Our findings suggest that occasional use of marijuana for these or other purposes may not be associated with adverse consequences on lung function,” the researchers said.
“Over the 20-year period, researchers repeatedly checked two measures of lung function,” reports Brenda Goodman at WebMD. One was a test that measured the amount of air forcefully exhaled in a single second; the second test measured the total amount of air exhaled after taking the deepest possible breath.
These tests help doctors diagnose chronic, irreversible breathing problems like chronic obstructive pulmonary disease (COPD).
Cigarette smoking is a leading cause of COPD; researchers expected marijuana to irritate the lungs in a similar fashion, since it contains many of the same chemicals as tobacco smoke. But crucially, the cannabinoids in marijuana smoke seem to protect the lungs and pulmonary passageways from both irritation and from cancer.
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Saturday, September 28, 2013
Five Things You Might Have Missed on ‘Poverty Day’
Five Things You Might Have Missed on Poverty Day
By Greg Kaufmann
The Nation
September 27, 2013
The annual release of the US Census poverty data is the one day you can be sure the mainstream media will turn their attention to poverty. This year was no exception when Poverty Day arrived last Tuesday. Amidst the frenzy of coverage of the new data, here are five things you might have missed:
1) A Crisis for Children of Color Under Age 5
Melissa Boteach, director of HALF IN TEN YEARS, a campaign to cut poverty in half in ten years, NOTES “crisis levels of poverty” for children of color under age 5, including more than 42 percent of African-American children and 37 percent of Latino children living below the poverty line. The Childrens Defense Fund also highlighted DISTURBING STATISTICS across the nation regarding poverty levels of children of color under age 6.
Boteach points out that toxic stress associated with persistent poverty affects brain development in children, and leads to adverse outcomes in education, health and worker productivity when those children reach adulthood. We also know that modest investments in young children can offset some of those negative effects, but we currently are moving in the opposite direction.
Boteach references a new report from First Focus - a bipartisan organization that advocates for investments in children and familieswhich finds that in 2013 alone, sequestration will cut $4.2 billion of funding for children concentrated in the areas of education, early learning, and housing, and Congress is considering a budget plan that would lock in or deepen these cuts for next year. The report also finds that federal spending on children decreased last year by $28 billion, or 7 percent - the largest reduction since the early 1980s. Early education and childcare saw a particularly deep cut of 12 percent, and housing was cut by 6 percent.
“These data could not be timelier,” writes Boteach. “They show structural threats to our economic competitiveness owing to high rates of poverty among young children of color - who would be badly hurt by Congress locking in or deepening the sequester cuts.”
2) We Could End Child Poverty
Austin Nichols, senior research associate at Urban Institute, WRITES that a monthly benefit for every child is “now common across developed countries, with amounts of about $140 a month in the UK, $190 in Ireland, $130 in Japan, $160 in Sweden and $250 in Germany.” He suggests that a monthly benefit of $400 for every child in the US would cut child poverty by more than half.
“If we issued a $400 monthly payment to each child, and cut tax subsidies for children in higher-income families, we would cut child poverty from 22 percent to below 10 percent,” writes Nichols. “If we further guaranteed one worker per family a job paying $15,000 a year, and each family participated, child poverty would drop to under 1 percent.”
Nichols suggests that even a $150 per month child benefit would lower child poverty from 22 percent to below 17 percent; and adding the job guarantee would reduce child poverty to 8 percent.
While Nichols is aware that there is no chance for this kind of change at the federal level, he writes that “a few states could try out a new taxable child benefit paid to all families.”
3) Poverty’s Gender Gap and the Safety Net
Tim Casey, senior staff attorney at Legal Momentum, the nations oldest organization that advocates on behalf of the legal rights of women and girls, reports that WOMEN were 32 percent more likely to be poor than men, and had a poverty rate of 14.5 percent compared to 11 percent for men.
“About one of every seven women was poor, compared to about one of every nine men. Single mothers were 81% more likely to be poor than single fathers, aged women were 67% more likely to be poor than aged men, and employed women were 31% more likely to be poor than employed men,” writes Casey. “At every level of educational attainment women were substantially more likely to be poor than men.”
Elizabeth Grayer, president of Legal Momentum SAID that the “high poverty rate” and a “continuing gender poverty gap” point to “the need for a social safety net that is accessible and adequate.” She urges Congress to reject any food stamp cuts that would increase hunger and hardship, and to “enact sorely needed improvements in the TEMPORARY ASSISTANCE TO NEEDY FAMILIES (TANF) [cash assistance] program that would raise sub-poverty benefit levels and reduce the barriers that prevent eligible families from accessing benefits.”
CURRENTLY, for every 100 families living in poverty, approximately 27 receive TANF cash assistance; down from 68 in 1996.
4) Vicious Cycle of Long-Term Unemployment and Poverty
The Urban Institute’s Nichols and ZACH MCDADE, research associate, note that 4.2 million Americans - 37 percent of the unemployed - have been “jobless for longer than six months, the highest rate by far” in the last sixty years.
Nichols and McDade suggest that the relationship between growing long-term unemployment and poverty runs both ways, where “poverty can reinforce joblessness just like joblessness can increase poverty.”
“The longer one is unemployed, the harder it is to find work,” they write. “Skills erode, professional networks deteriorate, and workers become tainted by a perception of unemployability. Long-term unemployment begets longer-term unemployment. Throw poverty into the picture and it’s only worse. Long-term unemployed workers are much more likely to be poor. Poverty makes it more difficult to travel to interviews, pay for child care, or care for ones health, making the job hunt all the harder.”
Nichols and McDade argue that the cycle can be broken with some simple policy prescriptions. “Workforce development programs generally benefit workers with little education and experience (those who are most likely to be long-term unemployed). They also call for large-scale public works programs that help workers retain their skills, avoid the stigma of long-term unemployment and provide a regular income.”
5) Missed Opportunity: Unemployment Insurance and Poverty
Arloc Sherman, senior researcher at the Center on Budget and Policy Priorities, says that one significant REASON the poverty rate didn’t decline over the last two years is that “we pulled back too quickly on unemployment insurance (UI).”
“Poverty would have fallen from 2010 to 2012 had it not been for the SHRINKING ANTIPOVERTY ROLE of UNEMPLOYMENT INSURANCE,” he told me.
UI kept 1.7 million people above the official poverty line in 2012, down nearly half from the 3.2 million who were lifted above the poverty line in 2010. Sherman notes that UI benefits used to reach 67 workers for every 100 unemployed workers; now it’s just 48 for every 100.
“The poverty rate would have declined significantly, by about half a percentage point - and there would be a million fewer poor people todayif UI’s effect per unemployed person hadn’t weakened since 2010,” he said.
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41 Citizen Groups Tell Congress - Stop This Job-Killing Crisis
41 Citizen Groups Tell Congress: Stop This Job-Killing Crisis
Forty-one organizations, representing millions of Americans, have signed this letter to Congress, asking them to stand against those who would “hold our economy hostage in order to dictate the terms of the debate.” See the list of signers below.
Please read this letter and circulate it widely. We at the Campaign for America’s Future are proud to have played a leadership role in helping to writethe letter. And thank the Leadership Conference on Civil Rights and all the other groups who worked to forge a consensus on the statement and helped to get the attention of Congress in this important moment of real danger for our economy.
Principles for Debate on the Budget and the Economy
Dear Member of Congress:
As we head into another series of manufactured budget crises, the 41 undersigned organizations stand against those who want to hold our economy hostage in order to dictate the terms of debate. We urge you to:
End Job-Killing Sequestration Cuts
The greatest challenge facing our economy today is the continuing jobs crisis, not the deficit. Over 20 million people are in need of full-time work. Meanwhile, the annual deficit has been cut by more than half since 2009 as a portion of the economy, and is now falling faster than at any time since the demobilization after World War II.
The across-the-board budget cuts—called “sequestration”—that began in March of this year are making the jobs crisis worse and holding back economic growth. According to the Congressional Budget Office, simply repealing sequestration would generate 900,000 jobs. We call on Congress to end the sequester—period—and not replace it with other harmful cuts.
We reject threats by some extremists to shut down the government or cause a government default unless their ransom demands are met—including their demand to defund or delay the Affordable Care Act (ACA). Congress should lift the debt ceiling without conditions because the full faith and credit of the U.S. government is not—and should not be—negotiable.
Protect Medicare, Medicaid and Social Security
We urge you to oppose any cuts in Social Security, Medicaid or Medicare benefits, including the shifting of health care costs to beneficiaries. We should be improving Social Security, Medicaid and Medicare by expanding benefits, not cutting them, because working people need more economic security, not less.
Defend Core Programs for Those Most At Risk
Congress should defend the core security programs for those most at risk in this economy, such as impoverished women and children, the elderly, or the long-term unemployed. The savage cuts proposed for food stamps (SNAP, the Supplemental Nutrition Program) are unconscionable. Cuts now projected in education, housing, home heating, Head Start, infant nutrition and other programs vital to low-income families should be reversed.
Eliminate All Tax Incentives for Sending Jobs Overseas
Powerful corporations and the rich should pay their fair share of taxes. As a start, we call on Congress to eliminate all tax incentives that encourage companies to ship jobs abroad. Ending these tax subsidies would—by itself—increase investment and employment in the U.S. At the same time, it would generate hundreds of billions in revenue which could help rebuild our economy without increasing the deficit. This money could be used to launch a five-year plan to rebuild our outmoded infrastructure; to help ensure that the U.S. captures the lead in a green industrial revolution that is already generating growing numbers of good jobs; and to invest in education, from preschool to affordable college, to prepare our children to succeed in the 21st century. Congress should combine this with raising the minimum wage and reviving the right to organize to counter the extreme inequality so debilitating to our economy.
Sincerely,
AFL-CIO
AIDS United
American Federation of State, County and Municipal Employees (AFSCME)
American Federation of Teachers
Campaign for America’s Future
Caring Across Generations
Center for Community Change
Center for Effective Government
Coalition on Human Needs
Communications Workers of America
Community Action Partnership
Council for Opportunity in Education
CourageCampaign.org
Disability Rights Education & Defense Fund
Fair Share
Gamaliel
Green For All
Health Care for America Now
International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW)
Jobs with Justice/American Rights at Work
Leadership Center for the Common Good
The Leadership Conference on Civil and Human Rights
MoveOn.org Civic Action
NAACP
National Coalition for the Homeless
National Committee to Preserve Social Security and Medicare
National Employment Law Project
National Fair Housing Alliance
National Immigration Law Center
National People’s Action
National Women’s Law Center
NETWORK, A National Catholic Social Justice Lobby
Partnership for Working Families
PolicyLink
Racial and Ethnic Health Disparities Coalition
Service Employees International Union (SEIU)
Social Security Works
United Steelworkers (USW)
USAction
Wider Opportunities for Women
Working America
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Friday, September 27, 2013
Scarcity Makes You Stupid
By Tina Rosenberg
NY Times
September 25, 2013
“Scarcity” is a new book that does something that I didnt think possible: it says something new about why people are poor - and what to do about it.
Heres whatҒs not new: Poor people have more self-destructive habits than middle-class people. The poor dont plan for the future as much. Compared to middle-class people, the poor have less self-control and are quicker to turn to instant gratification. These habits perpetuate a cycle of poverty.
This is proven. The controversy is why it is the case. For conservatives, roughly speaking, these behaviors cause poverty. For liberals, also roughly speaking, poverty in many ways causes these behaviors. It is easy to see how the stresses of poverty weigh in. With eating habits, for example: fruit and vegetables cost more that many unhealthier foods, and might not be available in a poor neighborhood.
But there are behaviors the liberal view struggles to explain. Even when healthy foods are available and made cheap, for example, poor people take advantage of them far less.
Now Sendhil Mullainathan, a Harvard economist, and Eldar Shafir, a psychologist at Princeton, propose a way to explain why the poor are less future-oriented than those with more money. According to these authors, one explanation for bad decisions is scarcity not of money, but of what the authors call bandwidth: the portion of our mental capacity that we can employ to make decisions.
Worrying about money when it is tight captures our brains. It reduces our cognitive capacity - especially our abstract intelligence, which we use for problem-solving. It also reduces our executive control, which governs planning, impulses and willpower. The bad decisions of the poor, say the authors, are not a product of bad character or low native intelligence. They are a product of poverty itself. Your natural capability doesnt decrease when you experience scarcity. But less of that capacity is available for use. If you put a middle-class person into a situation of scarcity, she will behave like a poor person.
The authors and two colleagues had a team of researchers approach SHOPPERS at a mall in New Jersey. People were asked about their income and then classified (without their knowledge) as either poor or rich. Then they were asked a question: your car needs a repair that will cost you $150. You can take a loan, pay in full, or postpone service. How do you go about making this decision? After they answered, the subjects took tests that measured fluid intelligence and cognitive control.
Poor and rich people did equally well on the test.
But then the researchers changed one thing: instead of needing $150 for the repair, they would need $1,500. The rich subjects did as well on the intelligence and willpower tests as they had before. The poor group did not.
Their scores dropped the equivalent of losing 13 or 14 IQ points - larger than the drop experienced by people who had just stayed up all night. Thinking about how to come up with $150 didnt affect them. But thinking about coming up with $1,500 eroded their intelligence more than if they had been seriously sleep-deprived.
This result isn’t particular to New Jersey. The same team studied sugar cane farmers in India, testing their intelligence just after the harvest, when they were flush with cash, and before it, when they were poor. The same farmers got 25 percent more questions right on the intelligence test when they were rich, and made 15 percent more errors on the executive control test when they were poor.
Isn’t this just stress? We know how harmful stress can be. But Mullainathan and Shafir argue that the effects of scarcity go further. It’s capture of our brains leads people into a tunnel; your only focus is solving the emergency of the moment. If the rent is due, you use money that would have gone to the car payment. The fact that this will end in getting your car repossessed, and therefore losing your job, doesn’t really register. You take very little notice of whats outside the tunnel.
In this way, scarcity creates a vicious circle. Tunneling leads people to borrow to deal with the emergency expense. For the poor, borrowing is VERY COSTLY. They take high-interest PAYDAY LOANS, buy on installment, pay large credit-card fees and interest. They borrow by paying bills late, which means they pay a substantial portion of their income in late fees and reconnection fees. These consequences, however, lie outside the tunnel - until paying those bills becomes the new emergency.
The authors designed complicated games to simulate conditions of scarcity. One was a version of the TV game show Family Feud, played by Princeton students assigned at random to either have a lot of time to answer questions or just a little. When researchers allowed players to borrow time from their future rounds at high rates of interest, the time-poor players borrowed profligately, and their scores plummeted. When the loans could be rolled over - simulating real-world debt traps - the time-poor did even worse.
Mullainathan and Shafir writethat the same mentality of scarcity that applies to the cash-poor also applies to people who are overly busy and those who are DIETING.
People short of time also tunnel, borrowing time by postponing projects that are tomorrows emergency but not todays. And being hungry captures the mind in a way similar to being poor. People who are on strict diets spend a lot of their bandwidth thinking about food.
“The scarcity phenomenon is good news because to a certain extent, we can design our way around it. Awareness of the psychology of scarcity and the behavioral challenges it yields can go some way toward improving the modest returns of anti-poverty interventions,” Mullainathan and Shafir write.
Here are some examples:
Automate good decisions. Since we cant be counted on to make good choices when weԒre in the tunnel, we can make them automatic. One decision to automate your choices will eliminate all those future opportunities to screw up. One way is to switch the default. For example, instead of making enrolling in a 401(k) savings plan voluntary, make not enrolling voluntary. This simple change has produced spectacular increases in usage of 401(k)s, organ donation and AIDS testing. It can be used for many outside-the-tunnel decisions, like building savings: sign up to have part of your paycheck automatically deposited into a savings account. You can still get at it, but you have to take steps to do so.
Provide better options for borrowing. Employers of minimum wage workers often complain that these workers are unprepared for their jobs, unfriendly to customers and distracted. Part of the reason may be that they are devoting little bandwidth to their jobs because they are worrying about how to live on their wages.
The theories in Scarcity support the idea that paying them a living wage would increase productivity. But since some employers may balk at this, the book proposes a smaller step: remove some of the penalties that come with borrowing.
Since poor people often have an urgent need for small sums, they take a lot of payday loans. These loans, some of which have interest rates of more than 300 percent, cost workers hundreds of dollars in fees. They are a scam designed to trap people in cycles of debt 85 percent of payday loans go to people who take seven or more loans each year. (See this report (pdf) for a thorough explanation of their horrors, and this column by Tom Edsall.)
One solution is to spread credit unions. Another is to expand workplace-based financial counseling and services, like Neighborhood Trust’s innovative Employer Solution.
Employers can help by paying weekly instead of bi-weekly, and by offering loans themselves with reasonable interest rates. Better yet, a portion of the repayment could go automatically into a savings account for each worker, so they could eventually borrow from themselves.
Internationally, we now know that microcredit loans are often used to cover personal emergencies, not to start businesses. They are not well-suited to this, as they are usually too large and take too much time to get. (This is why even people with access to microcredit continue to go to pawn brokers and loan sharks.) Dhanei KGFS, a financial services provider in Orissa, India, pioneered a successful new product: small, low-interest emergency loans that clients of their bank had pre-qualified for and could get at any time of day or night, nearly instantly.
Design services for the poor to take up less bandwidth. We know the poor are short of cash; we design for that (most of the time). But we dont think about their scarcity of bandwidth, and that should influence services as well. One good model is Single Stop, which operates more than 90 sites around the country where low-income people can apply for benefits, do their taxes and get legal and financial advice.
Structure incentives to put them inside the tunnel. Since scarcity forces us to tunnel, and concentrate only on what’s inside that tunnel, incentives and penalties will work best when they can be inside, too. This means very short deadlines and quick rewards - perhaps in several installments.
Telling people they can be on welfare for only five years isn’t effective. That deadline might not become part of the tunnel until they hit four years and 11 months too late to start looking for a job. Mullainathan and Shafir call this the worst of both worlds: җit penalizes but fails to motivate, they write.
The same phenomenon explains why the death penalty, the three-strikes law and other harsh punishments fail to deter criminals. No matter how harsh they are, they are far enough away to lie outside the tunnel.
These design shifts Ӕ the authors and others propose more of them on the behavioral economics site http://www.ideas42.org are a small solution to a very big problem. But the theory is a new one. It needs more study ח but part of that exploration will be trying out different models of antipoverty services that take bandwidth scarcity into account. It is far from the only reason people are poor, of course, but whats particularly useful about the idea of scarcity is that it is overarching; ease that burden, and people will be better able to deal with all the rest.
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The Mental Strain of Making Do With Less
By Sendhil Mullainathan
NY Times
September 21, 2013
Doets dont just reduce weight, they can reduce mental capacity. In other words, dieting can make you dumber.
Understanding why this is the case can illuminate a range of experiences, including something as far removed from voluntary calorie restriction as the ordeal of outright poverty.
Imagine that you are attending a late-afternoon meeting. Someone brings in a plate of cookies and places them on the other side of the conference table. Ten minutes later you realize you’ve processed only half of what has been said.
Why? Only half of your mind was in the meeting. The other half was with the cookies: “Should I have one? I worked out yesterday. I deserve it. No, I should be good.”
That cookiethreatened to strain your waistline. It succeeded in straining your mind.
This can happen even with no cookiein sight. Dieters conjure their own cookies: psychologists find that dieters have spontaneous self-generated cravings at a much higher rate than nondieters. And these cravings are not the dieters only distraction. Diets force trade-offs: If you eat the cookie, should you skip the appetizer at dinner? But that restaurant looked so good!
Many diets also require constant calculations to determine calorie counts. All this clogs up the brain. Psychologists measure the impact of this clogging on various tasks: logical and spatial reasoning, self-control, problem solving, and absorption and retention of new information. Together these tasks measure “bandwidth,” the resource that underlies all higher-order mental activity. Inevitably, dieters do worse than nondieters on all these tasks; they have less bandwidth.
One particularly clever study went further. It tested how dieters and nondieters reacted to eating a chocolate bar. Even though the bar provided calories, eating it widened the bandwidth gap between dieters and nondieters. Nondieters ate and moved on, but dieters started wondering how to make up for the calories they had just ingested or, even more fundamentally, pondered, “Why did I eat the bar?”
In other words, diets do not just strain bandwidth because they leave us hungry. They have psychological, not just physiological, effects.
The basic insight extends well beyond the experience of calorie counting. Something similar happens whenever we make do with less, as when we feel that we have too little time, or too little money. Just as the cookietugs at the dieter, a looming deadline preoccupies a busy person, and the prospect of a painful rent payment shatters the peace of the poor. Just as dieters constantly track food, the hyper-busy track each minute and the poor track each dollar.
As Prof. Eldar Shafir at Princeton University and I argue in our new book, “Scarcity: Why Having Too Little Means So Much” (Times Books), a similar psychology of scarcity operates across these examples but with varying degrees of force. If a cookiecan tax our mental resources, imagine how much more psychological impact other forms of scarcity can have.
Take the case of poverty. In a paper published last month in Science, with Profs. Anandi Mani at the University of Warwick and Jiaying Zhao at the University of British Columbia, Professor Shafir and I waded into politically charged territory. Some people argue that the poor make terrible choices and do so because they are inherently less capable. But our analysis of scarcity suggests a different perspective: perhaps the poor are just as capable as everyone else. Perhaps the problem is not poor people but the mental strain that poverty imposes on anyone who must endure it.
One of our studies focused on Indian sugar cane farmers, who typically feel themselves to be both poor and rich, depending on the season. They are paid once a year at harvest time. When the crop is sold, they are flush with cash. But the money runs out quickly, and by the time the next harvest arrives they are stretched thin: they are, for example, 20 times as likely to pawn an item before harvest as after it. Rather than compare poor and rich farmers, we compare each farmer to himself: when he is rich against when he is poor. This kind of comparison is important because it addresses valid concerns that differences in psychological tests merely reflect differences in culture or test familiarity.
We measured farmers’ mental function on what psychologists call fluid intelligence and executive control ח one month before and one month after harvest. And the effects were large: preharvest I.Q., for example, was lower by about nine to 10 points, which in a common descriptive classification is the distance between averageӔ and superiorӔ intelligence. To put that in perspective, a full night without sleep has a similar effect on I.Q.
Bandwidth scarcity has far-reaching consequences, whether we are talking about poor farmers or affluent dieters. We all use bandwidth to make decisions at work, to resist the urge to yell at our children when they annoy us, or even to focus on a conversation during dinner or in a meeting. The diversity of these behaviors combined with the size of the measurable effects ח suggests a very different way to interpret the choices and behaviors of the poor. Just picture how distracting that cookiewas, and multiply that experience by a factor of 10.
For dieters, bandwidth scarcity has one particularly important consequence, illustrated in one study that gave people a choice between fruit salad and cake. Before choosing, half of the subjects had their bandwidth taxed: they were asked to remember a seven-digit number. The other half had a mentally less-demanding task: they were asked to remember a two-digit number. Those with less available bandwidth ate more cake: they were 50 percent more likely to choose cake than the others. There is a paradox here: diets create mental conditions that make it hard to diet.
This may sound defeatist. But there are positive lessons for how to manage the different kinds of scarcity.
The United States government, laudably, offers financial aid for low-income students to attend college. Qualifying for it, though, requires completing a densely packed 10-page booklet, mentally taxing for anyone. A one-page version would not only be simpler but it would also recognize that the poor are short on bandwidth as well as cash.
The same tactic economizing on bandwidth - can be used in dieting. Take the Atkins diet, which effectively bans many foods, including bread and a lot of desserts. A ban is less complex than the trade-offs and calorie accounting required by many other diets. While all diets require self-control, Atkins requires less thinking. This might explain its popularity, and even its effectiveness: a recent study shows that people persist longer with diets that require less thought.
The same study had another interesting finding: it was the perceived complexity of a diet - not its actual complexity - that determined persistence.
So keep this in mind the next time youre picking a diet to shed a few pounds. Try one that won’t also shed a few I.Q. points.
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