Staying Ahead of the Tax Man

The one bright spot in Wednesday’s dim gross domestic product report was a large jump in household income, welcome news given that incomes have been relatively flat in recent months after falling sharply in the previous few years.

As was confirmed Thursday in a release on December personal income, though, the boost to consumers’ pocketbooks is likely to be short-lived.

Most of the 2.6 percent increase in incomes last month involved companies that accelerated dividends, bonuses and other payments into 2012 before higher tax rates kicked in for 2013. Personal dividend income, for example, rose at a seasonally adjusted monthly rate of 34.3 percent in December versus 4.5 percent in November.

That’s the second-fastest monthly personal dividend ncome growth on record, after a huge spike of 54.8 percent in December 2004 (when Microsoft threw the whole trend out of whack by offering a one-time special dividend totaling $32 billion):

The Bureau of Economic Analysis estimated that in the quarter companies paid special or accelerated dividends of $39.5 billion, of which $26.4 billion was paid to individuals and so is included in personal income. The bureau also estimated that accelerated bonuses and “other types of irregular pay” probably gave a one-time boost to wages and salaries in the quarter totaling about $3.75 billion (or $15 billion at an annual rate).

We’ll almost certainly see a payback for! that accelerated income last month in the form of lower dividend and bonus payments early this year. Additionally, households will be receiving less in their employee paychecks this month than they did last year because payroll taxes rose at the start of 2013.

None of this is good for consumer spending.

On the bright side, though, the sell-off of various kinds of assets in December will probably be good for the government’s coffers.

As my colleague Floyd Norris has written, the increase in tax rates in 2013 will likely result in higher tax receipts (and a lower budget deficit) for the current fiscal year than would have otherwise been expected.

Jacob Lew, Mary Jo White and Dunbar\'s Number

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Jacob J. Lew, the president’s nominee for Treasury secretary, and Mary Jo White, the nominee for chairwoman of the Securities and Exchange Commission, are making financial reformers nervous. The issue is not so much their track record, because neither has worked directly on financial-sector policy issues; it is much more about whom they know.

Specifically, how many people do they know and trust outside the financial sector, away from the sphere of ifluence of the very large banks More pointedly, when it comes to thinking about financial-sector policy, who exactly is in their inner circle

Nobody knows a huge number of people, at least not well. In the language of anthropology and biology, the limit to a person’s social network is known as Dunbar’s Number - which is 147.5, although people often round it to 150. Our brains do not support the interactions required by larger social groups.

More precisely, the predicted size for most human groups, based mostly on the characteristics of our brains, is 100.2 to 231.1 people. For details and caveats, look at Robin Dunbar’s 1993 paper, “Co-evolution of neocortical size, group size and language in humans,” published in Behavioral and Brain Sciences (Issue 16, Pages 681-735). Or just think about the number of people you kn! ow well and would rely on for advice, particularly with complex and sensitive issues. When you get to know new people, you often lose track of your previous close colleagues or even good friends.

And what applies to ordinary mortals most definitely applies to the people elected or appointed to run the country. Whenever the world gets complicated - for example, because the financial sector has turned nasty - policy makers need trusted sources and established confidants in order to figure out which way is up and what needs to be done.

If most financial experts you know work at, for example, Citigroup, then you are more likely to see the financial world through their eyes. What is good for Citi (and its executives) will, in your mind, become close to what is good for the United States.

One of the most serious concerns about Treasury Secretary Timothy Geithner was that even though he had never worked in a bank, his social network was full of bankers, mostly because of his time at the Federal Rserve Bank of New York and his close connection with Robert Rubin, a former Treasury secretary and then a director of and senior adviser to Citigroup. In this network, many of Mr. Geithner’s deepest financial-sector connections appear to have been with people who were working at Citigroup in 2007-8. (See, for example, a 2009 article by Jo Becker and Gretchen Morgenson.)

This observation lines up remarkably well with the devastating critique of Mr. Geithner in Sheila Bair’s book, “Bull by the Horns.” The main concern of Ms. Bair, former chairwoman of the Federal Deposit Insurance Corporation, is that Mr. Geithner was too close to Citigroup and saw the world as its senior executives did.

As Treasury secretary, Mr. Geithner hired people from Citigroup - particularly people who had worked closely with Mr. ! Rubin (in! government or in the private sector or both). Now Mr. Lew, a Citi alum with a central position in the Rubin network, is on the verge of becoming Treasury secretary. How likely is Mr. Lew to confront the risks created by unstable global megabanks Does he personally know anyone who is concerned about the damage that Citigroup is likely to do in the future - or even has a critical view of what it has done in the past

While Ms. White’s reputation as a prosecutor is second to none, as a defense lawyer she represented executives at several of the largest banks and knows many prominent financial-sector executives. Her husband, John W. White, now a corporate lawyer, had a senior role at the S.E.C. when Christopher Cox was its chairman, a time when the S.E.C. was aiding and abetting excessive deregulation at every opportunity; Ms. White will need to step aside in actions against companies her husband has advised. To whom will Ms. Whte turn when she wants to understand how to make the financial sector safer

If confirmed, Mr. Lew and Ms. White face formidable policy agendas. They need to demonstrate both an impressive grip of the details of what works in financial sector reform, as well as the ability to ignore a great deal of whining and to resist other pressure from the megabanks.

The most prominent and urgent case-in-point is that regulators need to complete the Volcker Rule. Mandated by the Dodd-Frank financial reform legislation, this rule will limit the risk-taking of very large banks.

The hitch at this point is primarily the S.E.C. All kinds of excuses can be and have been offered. These have no merit. Congress passed Dodd-Frank more than two years ago, and the regulators have issued draft rules and considered all the comments ! imaginabl! e. The banking side of the equation - the Federal Reserve, the F.D.I.C. and the Office of the Comptroller of the Currency - is on board. The Commodity Futures Trading Commission will not stand in the way. Everyone is waiting for the S.E.C. to pull the trigger.

If Ms. White cannot get the S.E.C. unstuck, the issue will fall to Mr. Lew, who as Treasury secretary is chairman of the Financial Stability Oversight Council. The legislative intent of Dodd-Frank on this point is clear; I’ve confirmed this by asking legislators what they intended. If a single regulator gets hung up on an issue, the oversight council can override that regulator - to prevent the kind of impasses and lacunas that previously created vulnerabilities in the regulatory system.

Even Mr. Geithner, not the world’s most dynamic reformer, used the power of the oversight council to press the S.E.C. forward on changing the rules for money-market funds. (Interestingly, the Fed has long wanted these rules changed - and Mr. Geithnerâ€s social network obviously includes some top Fed officials.)

Is Mr. Lew willing to push the S.E.C. - perhaps by supporting Ms. White in a forceful fashion - on issuing and implementing the Volcker Rule Hopefully, this will be a central question in both their confirmation hearings (with the Senate Finance Committee for Mr. Lew and the Senate Banking Committee for Ms. White).

Senator Elizabeth Warren, Democrat of Massachusetts, writing recently for Politico, made the most important point: the administration will only get serious about financial reform when it appoints officials with different attitudes - and, I would say, different social networks - from those who were at Treasury and the S.E.C. over the last four years.

“Personnel is policy,” people in Washington often remark. The next round of appointments, including those at the deputy and under secretary level, is very important. At t! his point! , I am not optimistic about who will get these jobs.

Is the second Obama administration hiring people who understand and can implement financial reform Or is it again merely promoting people whose social networks are disproportionately tilted toward the big Wall Street banks

Jacob Lew, Mary Jo White and Dunbar\'s Number

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Jacob J. Lew, the president’s nominee for Treasury secretary, and Mary Jo White, the nominee for chairwoman of the Securities and Exchange Commission, are making financial reformers nervous. The issue is not so much their track record, because neither has worked directly on financial-sector policy issues; it is much more about whom they know.

Specifically, how many people do they know and trust outside the financial sector, away from the sphere of ifluence of the very large banks More pointedly, when it comes to thinking about financial-sector policy, who exactly is in their inner circle

Nobody knows a huge number of people, at least not well. In the language of anthropology and biology, the limit to a person’s social network is known as Dunbar’s Number - which is 147.5, although people often round it to 150. Our brains do not support the interactions required by larger social groups.

More precisely, the predicted size for most human groups, based mostly on the characteristics of our brains, is 100.2 to 231.1 people. For details and caveats, look at Robin Dunbar’s 1993 paper, “Co-evolution of neocortical size, group size and language in humans,” published in Behavioral and Brain Sciences (Issue 16, Pages 681-735). Or just think about the number of people you kn! ow well and would rely on for advice, particularly with complex and sensitive issues. When you get to know new people, you often lose track of your previous close colleagues or even good friends.

And what applies to ordinary mortals most definitely applies to the people elected or appointed to run the country. Whenever the world gets complicated - for example, because the financial sector has turned nasty - policy makers need trusted sources and established confidants in order to figure out which way is up and what needs to be done.

If most financial experts you know work at, for example, Citigroup, then you are more likely to see the financial world through their eyes. What is good for Citi (and its executives) will, in your mind, become close to what is good for the United States.

One of the most serious concerns about Treasury Secretary Timothy Geithner was that even though he had never worked in a bank, his social network was full of bankers, mostly because of his time at the Federal Rserve Bank of New York and his close connection with Robert Rubin, a former Treasury secretary and then a director of and senior adviser to Citigroup. In this network, many of Mr. Geithner’s deepest financial-sector connections appear to have been with people who were working at Citigroup in 2007-8. (See, for example, a 2009 article by Jo Becker and Gretchen Morgenson.)

This observation lines up remarkably well with the devastating critique of Mr. Geithner in Sheila Bair’s book, “Bull by the Horns.” The main concern of Ms. Bair, former chairwoman of the Federal Deposit Insurance Corporation, is that Mr. Geithner was too close to Citigroup and saw the world as its senior executives did.

As Treasury secretary, Mr. Geithner hired people from Citigroup - particularly people who had worked closely with Mr. ! Rubin (in! government or in the private sector or both). Now Mr. Lew, a Citi alum with a central position in the Rubin network, is on the verge of becoming Treasury secretary. How likely is Mr. Lew to confront the risks created by unstable global megabanks Does he personally know anyone who is concerned about the damage that Citigroup is likely to do in the future - or even has a critical view of what it has done in the past

While Ms. White’s reputation as a prosecutor is second to none, as a defense lawyer she represented executives at several of the largest banks and knows many prominent financial-sector executives. Her husband, John W. White, now a corporate lawyer, had a senior role at the S.E.C. when Christopher Cox was its chairman, a time when the S.E.C. was aiding and abetting excessive deregulation at every opportunity; Ms. White will need to step aside in actions against companies her husband has advised. To whom will Ms. Whte turn when she wants to understand how to make the financial sector safer

If confirmed, Mr. Lew and Ms. White face formidable policy agendas. They need to demonstrate both an impressive grip of the details of what works in financial sector reform, as well as the ability to ignore a great deal of whining and to resist other pressure from the megabanks.

The most prominent and urgent case-in-point is that regulators need to complete the Volcker Rule. Mandated by the Dodd-Frank financial reform legislation, this rule will limit the risk-taking of very large banks.

The hitch at this point is primarily the S.E.C. All kinds of excuses can be and have been offered. These have no merit. Congress passed Dodd-Frank more than two years ago, and the regulators have issued draft rules and considered all the comments ! imaginabl! e. The banking side of the equation - the Federal Reserve, the F.D.I.C. and the Office of the Comptroller of the Currency - is on board. The Commodity Futures Trading Commission will not stand in the way. Everyone is waiting for the S.E.C. to pull the trigger.

If Ms. White cannot get the S.E.C. unstuck, the issue will fall to Mr. Lew, who as Treasury secretary is chairman of the Financial Stability Oversight Council. The legislative intent of Dodd-Frank on this point is clear; I’ve confirmed this by asking legislators what they intended. If a single regulator gets hung up on an issue, the oversight council can override that regulator - to prevent the kind of impasses and lacunas that previously created vulnerabilities in the regulatory system.

Even Mr. Geithner, not the world’s most dynamic reformer, used the power of the oversight council to press the S.E.C. forward on changing the rules for money-market funds. (Interestingly, the Fed has long wanted these rules changed - and Mr. Geithnerâ€s social network obviously includes some top Fed officials.)

Is Mr. Lew willing to push the S.E.C. - perhaps by supporting Ms. White in a forceful fashion - on issuing and implementing the Volcker Rule Hopefully, this will be a central question in both their confirmation hearings (with the Senate Finance Committee for Mr. Lew and the Senate Banking Committee for Ms. White).

Senator Elizabeth Warren, Democrat of Massachusetts, writing recently for Politico, made the most important point: the administration will only get serious about financial reform when it appoints officials with different attitudes - and, I would say, different social networks - from those who were at Treasury and the S.E.C. over the last four years.

“Personnel is policy,” people in Washington often remark. The next round of appointments, including those at the deputy and under secretary level, is very important. At t! his point! , I am not optimistic about who will get these jobs.

Is the second Obama administration hiring people who understand and can implement financial reform Or is it again merely promoting people whose social networks are disproportionately tilted toward the big Wall Street banks

The Health-Care Law and Retirement Savings

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Because of its definition of affordability, beginning next year the Affordable Care Act may affect retirement savings.

Employer contributions to employee pension plans are exempt from payroll and personal income taxes at the time that they are made, because the employer contributions are not officially onsidered part of the employee’s wages or salary (employer health insurance contributions are treated much the same way). The contributions are taxed when withdrawn (typically when the worker has retired), at a rate determined by the retiree’s personal income tax situation.

Employees are sometimes advised to save for retirement in this way in part because the interest, dividends and capital gains accrue without repeated taxation. In addition, people sometimes expect their tax brackets to be lower when retired than they are when they are working.

These well-understood tax benefits of pension plans will change a year from now if the act is implemented as planned. Under the act, wages and salaries of people receiving health insurance in the law’s new “insurance exchanges” will be subject to an additional implicit tax, because wages and salaries will determine how much a person has to pay for health insurance.

While much about the Affordable Care Act is still being digested by! economists, they have long recognized that high marginal tax rates lead to fringe benefit creation. And the Congressional Budget Office has concluded that the act will raise marginal tax rates.

Were an employer to reduce wages and salaries (or fail to increase them) and compensate employees by introducing an employer-matching pension plan, the employee is likely to benefit by receiving additional government assistance with his health-insurance costs. The pension contributions will add to the worker’s income during retirement, except that the income of elderly people does not determine health-insurance eligibility to the same degree, because the elderly participate in Medicare, most of which is not means-tested.

Take, for exampl, a person whose four-member household would earn $95,000 a year if his employer were not making contributions to a pension plan or did not offer one. He would be ineligible for any premium assistance under the Affordable Care Act because his family income would be considered to be about 400 percent of the poverty line.

If instead the employer made a $4,000 contribution to a pension plan and reduced the employee’s salary so that household income was $91,000, the employee would save the personal income and payroll tax on the $4,000 and would become eligible for about $2,600 worth of health-insurance premium assistance under the act. (The employer would come out ahead here, too, by reducing its payroll tax obligations).

Even though the Affordable Care Act is known as a health-insurance law, in effect it could be paying for a large portion of employer contributions to pension plans. This has the potential of changing retirement savings and the relative living standards of older and working-age people.

The Health-Care Law and Retirement Savings

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

Because of its definition of affordability, beginning next year the Affordable Care Act may affect retirement savings.

Employer contributions to employee pension plans are exempt from payroll and personal income taxes at the time that they are made, because the employer contributions are not officially onsidered part of the employee’s wages or salary (employer health insurance contributions are treated much the same way). The contributions are taxed when withdrawn (typically when the worker has retired), at a rate determined by the retiree’s personal income tax situation.

Employees are sometimes advised to save for retirement in this way in part because the interest, dividends and capital gains accrue without repeated taxation. In addition, people sometimes expect their tax brackets to be lower when retired than they are when they are working.

These well-understood tax benefits of pension plans will change a year from now if the act is implemented as planned. Under the act, wages and salaries of people receiving health insurance in the law’s new “insurance exchanges” will be subject to an additional implicit tax, because wages and salaries will determine how much a person has to pay for health insurance.

While much about the Affordable Care Act is still being digested by! economists, they have long recognized that high marginal tax rates lead to fringe benefit creation. And the Congressional Budget Office has concluded that the act will raise marginal tax rates.

Were an employer to reduce wages and salaries (or fail to increase them) and compensate employees by introducing an employer-matching pension plan, the employee is likely to benefit by receiving additional government assistance with his health-insurance costs. The pension contributions will add to the worker’s income during retirement, except that the income of elderly people does not determine health-insurance eligibility to the same degree, because the elderly participate in Medicare, most of which is not means-tested.

Take, for exampl, a person whose four-member household would earn $95,000 a year if his employer were not making contributions to a pension plan or did not offer one. He would be ineligible for any premium assistance under the Affordable Care Act because his family income would be considered to be about 400 percent of the poverty line.

If instead the employer made a $4,000 contribution to a pension plan and reduced the employee’s salary so that household income was $91,000, the employee would save the personal income and payroll tax on the $4,000 and would become eligible for about $2,600 worth of health-insurance premium assistance under the act. (The employer would come out ahead here, too, by reducing its payroll tax obligations).

Even though the Affordable Care Act is known as a health-insurance law, in effect it could be paying for a large portion of employer contributions to pension plans. This has the potential of changing retirement savings and the relative living standards of older and working-age people.

Polls vs. Markets

In Italy and the United States, consumers are glum but stock prices have been rising at an impressive clip.

Inflation, Rare Coin Variety

Who says a dollar doesn’t hold its value

A 1794 silver dollar sold at auction last week for $10,016,875, according to Stack’s Bowers Galleries, an auction house.

It says that set a record for any coin, easily passing the 2002 record price of $7,590,020 for a 1933 double eagle, a $20 gold piece.

Stack’s Bowers Galleries The 1794 silve dollar sold at auction for $10,016,875.

It also reports that a 1792 “half disme” â€" worth five cents when issued â€" sold for $1,145,625, and a 1793 one-cent coin sold for $998,750.

The gain in price for that silver dollar amounts to a little more than 1 billion percent, but the half disme went up more than 2 billion percent and the penny climbed almost 10 billion percent. It makes the double eagle’s climb of almost 38 million percent sound puny.

But this is an example of the wonders of compound interest. The double eagle was only 69 years old when it was sold. That was a compound annual gain of 20.5 percent.

By contrast, the compound annual gains for the other coins â€" each more than 200 years old â€" are 7.6 percent for the dollar, 8.0 percent for the half-dime and 8.7 percent for the penny.

Inflation, Rare Coin Variety

Who says a dollar doesn’t hold its value

A 1794 silver dollar sold at auction last week for $10,016,875, according to Stack’s Bowers Galleries, an auction house.

It says that set a record for any coin, easily passing the 2002 record price of $7,590,020 for a 1933 double eagle, a $20 gold piece.

Stack’s Bowers Galleries The 1794 silve dollar sold at auction for $10,016,875.

It also reports that a 1792 “half disme” â€" worth five cents when issued â€" sold for $1,145,625, and a 1793 one-cent coin sold for $998,750.

The gain in price for that silver dollar amounts to a little more than 1 billion percent, but the half disme went up more than 2 billion percent and the penny climbed almost 10 billion percent. It makes the double eagle’s climb of almost 38 million percent sound puny.

But this is an example of the wonders of compound interest. The double eagle was only 69 years old when it was sold. That was a compound annual gain of 20.5 percent.

By contrast, the compound annual gains for the other coins â€" each more than 200 years old â€" are 7.6 percent for the dollar, 8.0 percent for the half-dime and 8.7 percent for the penny.

Outsourcing, Insourcing and Automation

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform â€" Why We Need It and What It Will Take.”

One problem that economists always have in analyzing the economy is separating cyclical effects, which are temporary, from structural effects, which have long-term implications. In real time, it is almost impossible to separate the two, yet the distinction is important because policies to deal with the wrong problem may be ineffective or even counterproductive.

This is especially a problem when analyzing the labor mrket. If the central problem is a lack of aggregate demand, then the vast bulk of the unemployed are jobless through no fault of their own. This macroeconomic problem requires a more expansive monetary and fiscal policy.

But if the problem is structural, increasing aggregate demand is unlikely to reduce unemployment and is more likely to raise the rate of inflation.

Structural unemployment is much more difficult to deal with. Workers may require extensive retraining because the businesses and industries that employed them no longer exist, and their skills no longer have the value they once did.

The distinction between cyclical unemployment and structural unemployment is further complicated by something called hysteresis, which, basically, is the process whereby cyclical unemployment is converted into structural unemployment.

The longer someone is out of work, the ! less likely that person is to find a job. Skills deteriorate, younger workers tend to be hired for available vacancies, jobs move to new geographical locations and so on.

Another factor that contributes to structural unemployment is automation â€" the replacement of human labor with machinery, computers and robots.

Economists have been concerned about this since the time of Adam Smith.
Perhaps the most famous anecdote in the history of economic thought is Smith’s discussion of the pin makers and the division of labor in “The Wealth of Nations.” One pin maker working by himself could barely make one pin per day in the 18th century. But a group of pin makers working together, each specializing in one aspect of pin-making, could manufacture 4,800 times more pins per day. Ten pin makers could manufacture 48,000 pins rather than just 10 pins per day.

Smith’s story also points to anothr problem in dealing with unemployment, which is that productivity growth is sometimes the worker’s enemy.

Generally speaking, higher productivity â€" that is, higher output per man-hour â€" is a good thing. That is what generally gives workers higher real wages over time and increases the standard of living for everyone.

But it is not obvious that higher productivity will lead to higher output rather than lower employment. In Smith’s tale, the owner of the pin-making shop could have decided to lay off all his workers after one day and simply sold off the massive inventory over a period of years.

Usually, this doesn’t happen. Increased productivity tends to lower prices and increase demand, thus leading to increased employment in industries where productivity is rising. But in the immediate aftermath of some productivity-enhancing improvement, the first-order effect may be to reduce! employme! nt.

Unfortunately for workers, productivity gains may take place during times when cyclical unemployment is high. Indeed, some economists contend that in the long run recessions have a positive effect on the trend rate of economic growth by forcing businesses to adopt labor-saving technology, purge redundant workers and invest in productivity-enhancing machinery.

It is small comfort to workers suffering simultaneously from cyclical and structural employment, as is the case today for many in the manufacturing sector, but preventing businesses from laying off workers or investing in robotics is penny-wise and pound-foolish. Jobs may be preserved in the short run at the expense of better jobs in the future.

It is especially important for advanced economies, like those in North America and Europe, to facilitate investment in labor-saving technology even if it leads to higher unemployment. Increasing output per hour is he key to competing with low-wage economies like China’s.

People who are not economists often believe, incorrectly, that the United States can never compete with countries like China, where labor costs are a fraction of those here. This leads them to think that tariffs and import restrictions are an appropriate policy response.

In fact, what businesses really care about is not wage rates but unit labor costs; that is, labor costs adjusted for productivity. Thus a country with a poor, uneducated, unskilled labor force with minuscule wage rates is not necessarily the best place for a business to set up shop. A highly skilled, well-educated and well-equipped labor force may well produce more output at a lower labor cost per unit.

Although many workers still worry about offshoring, or the outsourcing of their jobs to China, this is a fading problem, in large part because of automation and rising wages in China, which have eroded its cost advantage. Some companies, including Apple, that previously moved production to China are now bringing it back to the United States, as unit labor costs have risen in China and fallen domestically.

According to a recent report from the Congressional Research Service, other companies have found hidden costs in overseas production that offset the lower wages. These include quality, transportation, safeguards for intellectual property, loss of managerial control and other factors.Benefits of situating manufacturing in the United States include close proximity to research and development and falling energy costs.

Unfortunately for workers who may have lost their jobs to outsourcing, the return of these jobs to the United States is unlikely to benefit them, because they aren’t the same jobs. New factories are unlikely to be situated where the closed factories were and the newly hired workers aren’t going to have the same skill set.

Instead of doing manual labor, workers increasingly are using computers to! control robots or other sophisticated machinery. That raises productivity and allows well-paid American workers to compete with those working for a fraction of their wages in developing countries. But it also means that workers require more education and different skills, working with software rather than drill presses.

The goal of public policy should be to ease the transition to a more automated production process while cushioning the blow to those suffering through no fault of their own.

Labor Sees Bright Spots in Membership Trends

The American labor movement received some bitter news last week when the Bureau of Labor Statistics released its annual report on union membership - it showed a 398,000 overall decline in union membership, with the percentage of workers in unions dropping to 11.3 percent, the lowest rate in nearly a century.

But some union leaders saw some important silver linings in the gloomy report â€" especially the surprisingly strong growth in labor’s ranks in California. The bureau reported a jump of 110,000 in the number of union members in California, to 2.49 million (meaning that in the 49 other states, the overall loss was 508,000 members).

“There is a significant rganizing consciousness among unions in California that I haven’t seen in other parts of the country,” said Kent Wong, director of the Labor Center at the University of California, Los Angeles. “And a major factor in California’s success is there has been a very aggressive attempt on the part of many unions to organizing immigrant workers.”

The jump in union membership in California is tied to the one other bright spot for unions in the bureau’s report. While union membership among whites fell by 547,000 last year (to 11.3 million), union membership among Latinos jumped by 156,000 last year (to 1.98 million) while increasing for Asian-Americans by 45,000 (to 668,000) â€" although the percentage of Asian-American ! workers in unions actually dropped, to 9.6 percent, as the overall number of Asian-Americans employed jumped sharply.

In California, there are vigorous campaigns to unionize car-wash workers, recycling workers and the truck drivers who transport freight to and from the ports of Long Beach and Los Angeles. And in recent years, labor unions have organized about 200,000 home care aides in California.

Immigrants account for a high percentage of workers in those groups.

“The Latino population is growing in California,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, the federation of the state’s unions. “Latinos and other immigrants are more prone to join unions. A lot of Latinos developed a historic sense of economic and social justice in their home countries.”

Mr. Pulaski said a big reason that unions in California are doing better than those in other states is that California’s unions have built imprssive political power, helping the Democrats clinch a two-thirds supermajority in both houses of the state legislature. Thanks to their political power, California unions have, for instance, persuaded lawmakers in much of the state to make it easy for unions to organize the 200,000 home care aides.

And Mr. Pulaski said the organizing victories and progressive politics in California create a hospitable hothouse atmosphere for organizing, encouraging other workers to unionize.

Professor Wong said, “The unionization victories at four car washes in Los Angeles have gotten a lot of attention among Latinos. They have really resonated.”

(Union membership did rise in a handful of other states, but more modestly than in California. Those states included Georgia, Nevada, North Carolina, Oklahoma and Texas.)

All this is far different from what has happened in the Midwest over the last two years. Republicans in Wisconsin enacted a far-reaching law that curbed the collective bargainin! g rights ! of most of the government employees in that state - making many government workers conclude that there was little reason to remain in their union. Ohio Republicans enacted a similar law in 2011, but Ohioans repealed that anti-union law in a referendum in November of that year.

Indiana’s Republican-dominated legislature enacted a “right to work” law last February that is likely to reduce union membership, and in Michigan, the Republican-dominated legislature and the Republican governor also enacted a “right to work” law last month. “Right to work” laws bar any requirement that workers at a unionized workplace pay any dues or fees to the union. Such laws often encourage workers to quit their unions, because by quitting they no longer have to pay union dues or fees.

Barry T. Hirsch, a labor economist at Georgia State University, said the anti-labor offensive in the Midwest had taken a heavy toll on union membership there. In just five Midwestern states â€" Illinois, Indiana, Michigan Ohio and Wisconsin - union membership fell by 252,000 last year, according to the bureau’s report.

Professor Hirsch suggested that the reported drop-off in union members in the Midwest might be exaggerated because when questioners doing the household survey that was crucial to last week’s report went to workers‘ homes to interview them, some union members might have grown reluctant to acknowledge to the questioners that they belonged to a union because unions had taken such a public relations beating from government officials.

But Professor Wong of U.C.L.A. said he doubted that any union members questioned in the household survey would be too scared to acknowledge belonging to a union.

Mr. Pulaski, head of the California Labor Federation, foresees more unionization gains in California this year - including among port truck drivers and car washes and from the continued efforts by two of the nation’s most aggressive organizing unions, the Service Employees International Union and the California Nurses Association.

“I think we’re on the cutting edge of what unions are doing in the United States,” Mr. Pulaski said. In other words, he says, California unions have put together a silver linings playbook that unions in other states can learn from.

Labor Sees Bright Spots in Membership Trends

The American labor movement received some bitter news last week when the Bureau of Labor Statistics released its annual report on union membership - it showed a 398,000 overall decline in union membership, with the percentage of workers in unions dropping to 11.3 percent, the lowest rate in nearly a century.

But some union leaders saw some important silver linings in the gloomy report â€" especially the surprisingly strong growth in labor’s ranks in California. The bureau reported a jump of 110,000 in the number of union members in California, to 2.49 million (meaning that in the 49 other states, the overall loss was 508,000 members).

“There is a significant rganizing consciousness among unions in California that I haven’t seen in other parts of the country,” said Kent Wong, director of the Labor Center at the University of California, Los Angeles. “And a major factor in California’s success is there has been a very aggressive attempt on the part of many unions to organizing immigrant workers.”

The jump in union membership in California is tied to the one other bright spot for unions in the bureau’s report. While union membership among whites fell by 547,000 last year (to 11.3 million), union membership among Latinos jumped by 156,000 last year (to 1.98 million) while increasing for Asian-Americans by 45,000 (to 668,000) â€" although the percentage of Asian-American ! workers in unions actually dropped, to 9.6 percent, as the overall number of Asian-Americans employed jumped sharply.

In California, there are vigorous campaigns to unionize car-wash workers, recycling workers and the truck drivers who transport freight to and from the ports of Long Beach and Los Angeles. And in recent years, labor unions have organized about 200,000 home care aides in California.

Immigrants account for a high percentage of workers in those groups.

“The Latino population is growing in California,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, the federation of the state’s unions. “Latinos and other immigrants are more prone to join unions. A lot of Latinos developed a historic sense of economic and social justice in their home countries.”

Mr. Pulaski said a big reason that unions in California are doing better than those in other states is that California’s unions have built imprssive political power, helping the Democrats clinch a two-thirds supermajority in both houses of the state legislature. Thanks to their political power, California unions have, for instance, persuaded lawmakers in much of the state to make it easy for unions to organize the 200,000 home care aides.

And Mr. Pulaski said the organizing victories and progressive politics in California create a hospitable hothouse atmosphere for organizing, encouraging other workers to unionize.

Professor Wong said, “The unionization victories at four car washes in Los Angeles have gotten a lot of attention among Latinos. They have really resonated.”

(Union membership did rise in a handful of other states, but more modestly than in California. Those states included Georgia, Nevada, North Carolina, Oklahoma and Texas.)

All this is far different from what has happened in the Midwest over the last two years. Republicans in Wisconsin enacted a far-reaching law that curbed the collective bargainin! g rights ! of most of the government employees in that state - making many government workers conclude that there was little reason to remain in their union. Ohio Republicans enacted a similar law in 2011, but Ohioans repealed that anti-union law in a referendum in November of that year.

Indiana’s Republican-dominated legislature enacted a “right to work” law last February that is likely to reduce union membership, and in Michigan, the Republican-dominated legislature and the Republican governor also enacted a “right to work” law last month. “Right to work” laws bar any requirement that workers at a unionized workplace pay any dues or fees to the union. Such laws often encourage workers to quit their unions, because by quitting they no longer have to pay union dues or fees.

Barry T. Hirsch, a labor economist at Georgia State University, said the anti-labor offensive in the Midwest had taken a heavy toll on union membership there. In just five Midwestern states â€" Illinois, Indiana, Michigan Ohio and Wisconsin - union membership fell by 252,000 last year, according to the bureau’s report.

Professor Hirsch suggested that the reported drop-off in union members in the Midwest might be exaggerated because when questioners doing the household survey that was crucial to last week’s report went to workers‘ homes to interview them, some union members might have grown reluctant to acknowledge to the questioners that they belonged to a union because unions had taken such a public relations beating from government officials.

But Professor Wong of U.C.L.A. said he doubted that any union members questioned in the household survey would be too scared to acknowledge belonging to a union.

Mr. Pulaski, head of the California Labor Federation, foresees more unionization gains in California this year - including among port truck drivers and car washes and from the continued efforts by two of the nation’s most aggressive organizing unions, the Service Employees International Union and the California Nurses Association.

“I think we’re on the cutting edge of what unions are doing in the United States,” Mr. Pulaski said. In other words, he says, California unions have put together a silver linings playbook that unions in other states can learn from.

The Uneven Progress of Equal Opportunity

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.“

The central theme of President Obama’s inauguration speech was equal oppotunity and its refrain, “Our journey is not complete.”

He never referred directly to equal opportunity in employment, perhaps because his very election testifies to certain progress since the Civil Rights Act of 1964 outlawed discrimination on the basis of race and sex.

But looking at the United States labor force as a whole, how broad has that progress actually been Lack of systematic data on workplace segregation over time has long made that question difficult to answer. Recently, however, the  Equal Employment Opportunity Commission made available to researchers a rich legacy of private-sector employer reports known as the EEO-1 survey.

These data star in “Documenting Desegregation,” a new book by the sociologists Kevin Stainback and Donald ! Tomaskovic-Devey, which analyzes the trajectory of change in workplaces from 1964 to 2005 in careful detail. Their narrative reveals a jagged and uneven process of change driven by political mobilization, electoral outcomes and personnel-department practices, as well as specific legislative actions.

While the Civil Rights Act of 1964 destabilized a system of institutionalized obstacles to equal opportunity for both women and African-Americans, it failed to establish practical mechanisms that could guarantee steady progress toward equal opportunity.

From 1960 to 1972, many African-Americans, particularly men, moved out of segregated jobs. From 1972 to 1980, white women also began to gain access to new opportunities.

After Ronald Reagan was elected in 1980, however, the federal government backed off from activist equal-opportunity enforcement, and racial desegregation stalled. White women continued to make inroads based on increased access to professioal and managerial occupations, including human resource departments of major corporations, where they became an internal force for change.

The authors contend that increased education alone does not explain white women’s relative success, because African-Americans steadily improved their educational attainment relative to whites throughout the 1980s and 1990s, even as employment progress stalled. Further, for reasons that may be related to political and cultural backlash, white women’s movement out of gender-segregated work slowed in the 1990s and stalled after 2000.

Five years into the 21st century, the data reveal a surprisingly high level of job segregation in which African-American men, white women and especially African-American women only rarely worked in the same occupation in the same workplace as white men. In order to create a completely integrated private-sector workplace, more than half of all private sector workers would need to change jobs.

In most workplaces, the ! face of a! uthority looks predictable. As the authors put it, “White men are often in positions in management over everyone; white women tend to supervise other women, black men to supervise black men and black women tend to supervise black women.”

While overt discrimination based on race and sex is no longer culturally condoned, both covert bias and institutional inertia perpetuate inequality. Drawing on a wide range of social-science research, Professors Stainback and Tomaskovic-Devey contend we have shifted from a regime of “condoned exploitation” to one of “contested prejudice,” from a hegemonic regime of bright social boundaries to a fractured social world of blurry, criss-crossed lines.

In this world, remarkable successes like the election of an African-American president coexist with continuing failures, especially in domains where disadvantages based on race, gender and class coincide and collide.

The Civil Rights Act of 1964 might have led to steadier desegregation had we monitord its impact from the very outset, developing an analysis of institutional practices that could be renegotiated rather than relying largely on costly and contentious lawsuits based on particularly striking instances of discrimination.

Indeed, the Equal Employment Opportunity Commission has recognized the need to move toward a strategy of strategic enforcement, to examine industry-specific, regional and local patterns of occupational segregation and pay inequality.

The commission is currently barred from releasing data on the worst or best corporate citizens. By contrast the Environmental Protection Agency, the Occupational Safety and Health Administration and the Securities and Exchange Commission regularly make public company-specific data on the release of toxic chemicals, workpla! ce injuries and financial standing.

Professors Stainback and Tomaskovic-Devey suggest that a similar level of public accountability for equal opportunity in employment could positively influence future corporate behavior.

It could also speed the journey the president urged us to complete.

The Uneven Progress of Equal Opportunity

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.“

The central theme of President Obama’s inauguration speech was equal oppotunity and its refrain, “Our journey is not complete.”

He never referred directly to equal opportunity in employment, perhaps because his very election testifies to certain progress since the Civil Rights Act of 1964 outlawed discrimination on the basis of race and sex.

But looking at the United States labor force as a whole, how broad has that progress actually been Lack of systematic data on workplace segregation over time has long made that question difficult to answer. Recently, however, the  Equal Employment Opportunity Commission made available to researchers a rich legacy of private-sector employer reports known as the EEO-1 survey.

These data star in “Documenting Desegregation,” a new book by the sociologists Kevin Stainback and Donald ! Tomaskovic-Devey, which analyzes the trajectory of change in workplaces from 1964 to 2005 in careful detail. Their narrative reveals a jagged and uneven process of change driven by political mobilization, electoral outcomes and personnel-department practices, as well as specific legislative actions.

While the Civil Rights Act of 1964 destabilized a system of institutionalized obstacles to equal opportunity for both women and African-Americans, it failed to establish practical mechanisms that could guarantee steady progress toward equal opportunity.

From 1960 to 1972, many African-Americans, particularly men, moved out of segregated jobs. From 1972 to 1980, white women also began to gain access to new opportunities.

After Ronald Reagan was elected in 1980, however, the federal government backed off from activist equal-opportunity enforcement, and racial desegregation stalled. White women continued to make inroads based on increased access to professioal and managerial occupations, including human resource departments of major corporations, where they became an internal force for change.

The authors contend that increased education alone does not explain white women’s relative success, because African-Americans steadily improved their educational attainment relative to whites throughout the 1980s and 1990s, even as employment progress stalled. Further, for reasons that may be related to political and cultural backlash, white women’s movement out of gender-segregated work slowed in the 1990s and stalled after 2000.

Five years into the 21st century, the data reveal a surprisingly high level of job segregation in which African-American men, white women and especially African-American women only rarely worked in the same occupation in the same workplace as white men. In order to create a completely integrated private-sector workplace, more than half of all private sector workers would need to change jobs.

In most workplaces, the ! face of a! uthority looks predictable. As the authors put it, “White men are often in positions in management over everyone; white women tend to supervise other women, black men to supervise black men and black women tend to supervise black women.”

While overt discrimination based on race and sex is no longer culturally condoned, both covert bias and institutional inertia perpetuate inequality. Drawing on a wide range of social-science research, Professors Stainback and Tomaskovic-Devey contend we have shifted from a regime of “condoned exploitation” to one of “contested prejudice,” from a hegemonic regime of bright social boundaries to a fractured social world of blurry, criss-crossed lines.

In this world, remarkable successes like the election of an African-American president coexist with continuing failures, especially in domains where disadvantages based on race, gender and class coincide and collide.

The Civil Rights Act of 1964 might have led to steadier desegregation had we monitord its impact from the very outset, developing an analysis of institutional practices that could be renegotiated rather than relying largely on costly and contentious lawsuits based on particularly striking instances of discrimination.

Indeed, the Equal Employment Opportunity Commission has recognized the need to move toward a strategy of strategic enforcement, to examine industry-specific, regional and local patterns of occupational segregation and pay inequality.

The commission is currently barred from releasing data on the worst or best corporate citizens. By contrast the Environmental Protection Agency, the Occupational Safety and Health Administration and the Securities and Exchange Commission regularly make public company-specific data on the release of toxic chemicals, workpla! ce injuries and financial standing.

Professors Stainback and Tomaskovic-Devey suggest that a similar level of public accountability for equal opportunity in employment could positively influence future corporate behavior.

It could also speed the journey the president urged us to complete.

A Place That Makes New York Real Estate Look Cheap

Think it’s expensive to buy a home in New York Try moving to China.

Sources: International Monetary Fund, using CEIC Data; 8th Annual Demographia International Housing Affordability Survey; national statistical offices; and I.M.F. staff estimates. Note: Data for cities i mainland China (in red), Tokyo, and Singapore are calculated as the price of a 70-square-meter home divided by average annual pretax household income; data for other cities are the median house price divided by median pretax household income, as reported by Demographia.

That chart comes from the International Monetary Fund (and was brought to my attention by Torsten Slok, the chief international economist at Deutsche Bank). It shows the ratio of house prices to annual household income: that is, how many years’ worth of income it would take to buy the typical house in a given city.

As you can see, the median house price in New York was equal to 6.2 years’ worth of the median pretax household income in 2011. The most comparable data we have for an array of Chinese cities â€" shown in red above â€" suggests that homes in New York are a steal compared to those in urban parts of the Middle Kingdom.

Th! e Chinese data (which use a slightly different metric: the price of a 70-square-meter home divided by average annual pretax household income) show that in Shanghai it would cost 15.9 times the typical household income to buy a standard home. In Beijing, the ratio is even higher, at 22.3.

Real estate prices are so high in China, Mr. Slok explains, because people have few options for parking their savings.

The savings rate is phenomenally high in China. The consumer banking sector, however, is not nearly as built out as those in most developed countries, partly because the Chinese government restricts entry of foreign service-providing companies like financial institutions. So people have been investing their savings in a local sector that has had big returns â€" real estate â€" chasing home prices ever highr.

I should note, by the way, that housing prices in China began to fall in 2011 as the government tried to curb speculative real estate investment. Home prices then picked up again in the middle of last year and continue to rise.

New-Home Sales Soar - and Remain Low

New-home sales rose 20 percent in 2012, the government said Friday. That is the largest annual gain since 1983.

The year 2012 was the third-slowest year in terms of new-home sales since the government began tracking the number in 1983.

So it goes in the housing market these days. As my column in Friday’s paper noted, the housing market these days is not good. But it is getting better at an impressive rate.

The government estimated that 367,000 new homes were sold last year, up from 306,000 a year earlier. That year was the worst ever. The second worst was 2010. The fourth worst was 2009.

The five highest years were from 2002 through 2006, with 2005 the best. Sales in 2012 were less than 30 percent of that ecord level.

One statistic that is back to normal is the age of new homes that have been completed but not yet sold. The latest report puts it at 4.6 months, which is (just) within the range of figures reported before the crisis began. At the worst, in early 2010, the average such house was 14.4 months old.

The number of new homes for sale, including houses not yet built, is estimated at 151,000. That is up from the low of 143,000 reached last summer, but far below anything seen before the crash.

The headlines on Friday’s report say the sales rate slipped in December. That is based on seasonal adjustments that are are notably imprecise, and may not justify much attention.

Reader Response: Medicare Options and Quality of Care

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

My post last Friday explored the quality of care rendered Medicare beneficiaries under private Medicare Advantage plans and under the traditional, government-run Medicare program.

At the end of the post, I invited readers to apprise me of any study on the subject that my own search of the surprisingly thin literature on this issue might have missed.

One reader was kind enough to alert me to such a paper, although he also had not come upon it by a general Internet search. It isa paper by Bernard Friedman, H. Joanna Jiang, Claudia A. Steiner and John Bott, titled “Likelihood of Hospital Readmission after First Discharge: Medicare Advantage vs. Fee-for-Service Patients” and published in the November 2012 issue of the health policy journal Inquiry.

The authors estimate the likelihood of a hospital readmission within 30 days of discharge from a 2006 database maintained by the Agency for Health Care Research and Quality. As I noted in my previous post, such readmissions have come to be known as one dimension of “quality,” with higher rates denoting lower quality.

Without adjusting their estimates for the age and health status of Medicare beneficiaries in the two options, the authors find a slightly lower likelihood of readmission under Medicare Advantage plans than under traditional Medicare. They note, however, that Medicare Advantage en! rollees tend to be younger and less severely ill. After controlling for age and health status, enrollees in the Medicare Advantage plans are found to have “a substantially higher likelihood of readmission.”

The authors are well known and respected in the research community. Their approach is thoughtful and sophisticated and their findings persuasive. But they come to the opposite conclusion reached by the studies cited in my previous post.

So, to paraphrase Alexander Pope, who shall decide, when doctors (here, health services researchers) disagree, and soundest casuists doubt, like you and me

The answer is that a single study of this sort is rarely conclusive, because it is extraordinarily difficult to tease the truth out of noneperimental data â€" that is, data reported by operating entities for purposes other than the narrow purpose of a particular research study.

Medicare beneficiaries self-select into traditional Medicare or Medicare Advantage plans. They may differ systematically in characteristics that could indirectly affect readmission rates. Age and health status are two characteristics that can usually be measured and might be included in the available data set; but there may be others not included. Researchers try as best they can to make statistical adjustments for differences in the characteristics among self-selecting beneficiaries, as the authors of all of the studies cited in my previous post did. But the adequacy of these adjustments depends on the available data. Typically researchers acknowledge such limitation of their studies forthrightly in their reports.

A second point, perhaps not obvious to the uninitiated, is that a given data set can reveal different apparent “truths,” depending on ! the stati! stical methods used by researchers to tease out the truth. Dispassionate, objective researchers usually explore whether alternative statistical approaches would make a difference in their findings. On the other hand, researchers with an agenda can exploit this phenomenon to tease out of a data set the “truth” they may prefer. For that reason, scientific journals now go to great lengths to report researchers’ potential conflicts of interest, although the reported conflicts cannot and do not cover political ideology.

From which follows a third point, namely, that no one should ever take a single statistical study, or even a few, as a revelation of the truth. As I tell my students: “You can never trust a single statistical study in health policy. On the other hand, you can take the general thrust of many studies as in indication of what is likely to be true. And do check carefully who the authors are.”

All of which raises the overarching question: Given all these limitations of studies emrging from health services research, is it an effort worth the money spent on it

First of all, the total sum the United States spends each year on health services research is trivial if compared to total annual health spending. If one plots it in a pie chart, health services research is not a visible slice but just a line. Probably no economic sector in the economy performs as little operations research as does health care - and it shows in the sector’s performance.

For the most part, health policy in this country is based on accepted folklore, forged from the legislator’s personal experience or information brought to him or her by acquaintances or lobbyists. One can view health services research of the sort cited in this and the previous post as a sincere attempt to limit the wide and often wild terrain over which the folklore on a particular policy issue would otherwise range.

It is illuminating to compare health services research with another effort to structure information f! or decisi! on making: financial accounting. Modern economies spend a fortune on it. Throughout the year, the large accounting departments of enterprises assemble data for periodic reports on the financial condition and performance of the enterprise. External auditors are engaged to check the validity of these numbers. In the end, they usually attest that whatever is reported “fairly represents the financial condition of the XYZ Company, in accordance with generally accepted accounting principles.”

Yet, for all that effort and the money spent on it, does anyone believe that a company’s “statement of financial condition” (balance sheet) as of particular day of the year accurately summarizes its financial condition For anyone who believes that, I would invite attention to the recent saga of Hewlett-Packard, not to mention the financial reports produced by investment banks in the past decade or so.

In fact, a someone thoroughly familiar with both financial accounting and health services research, I will offer this brash assertion: In terms of worrying over biases in their estimates and the overall sophistication and quality of their work, health services researchers tower over business accountants. Accountants cannot even state that their estimates are unbiased, because they do not even attempt to avoid bias in their estimates.

But that said, it also is surely true that the world is much better off with financial reporting, dubious as it sometimes can be. Would anyone want to rely merely on folklore to assess the performance of businesses

Reader Response: Medicare Options and Quality of Care

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

My post last Friday explored the quality of care rendered Medicare beneficiaries under private Medicare Advantage plans and under the traditional, government-run Medicare program.

At the end of the post, I invited readers to apprise me of any study on the subject that my own search of the surprisingly thin literature on this issue might have missed.

One reader was kind enough to alert me to such a paper, although he also had not come upon it by a general Internet search. It isa paper by Bernard Friedman, H. Joanna Jiang, Claudia A. Steiner and John Bott, titled “Likelihood of Hospital Readmission after First Discharge: Medicare Advantage vs. Fee-for-Service Patients” and published in the November 2012 issue of the health policy journal Inquiry.

The authors estimate the likelihood of a hospital readmission within 30 days of discharge from a 2006 database maintained by the Agency for Health Care Research and Quality. As I noted in my previous post, such readmissions have come to be known as one dimension of “quality,” with higher rates denoting lower quality.

Without adjusting their estimates for the age and health status of Medicare beneficiaries in the two options, the authors find a slightly lower likelihood of readmission under Medicare Advantage plans than under traditional Medicare. They note, however, that Medicare Advantage en! rollees tend to be younger and less severely ill. After controlling for age and health status, enrollees in the Medicare Advantage plans are found to have “a substantially higher likelihood of readmission.”

The authors are well known and respected in the research community. Their approach is thoughtful and sophisticated and their findings persuasive. But they come to the opposite conclusion reached by the studies cited in my previous post.

So, to paraphrase Alexander Pope, who shall decide, when doctors (here, health services researchers) disagree, and soundest casuists doubt, like you and me

The answer is that a single study of this sort is rarely conclusive, because it is extraordinarily difficult to tease the truth out of noneperimental data â€" that is, data reported by operating entities for purposes other than the narrow purpose of a particular research study.

Medicare beneficiaries self-select into traditional Medicare or Medicare Advantage plans. They may differ systematically in characteristics that could indirectly affect readmission rates. Age and health status are two characteristics that can usually be measured and might be included in the available data set; but there may be others not included. Researchers try as best they can to make statistical adjustments for differences in the characteristics among self-selecting beneficiaries, as the authors of all of the studies cited in my previous post did. But the adequacy of these adjustments depends on the available data. Typically researchers acknowledge such limitation of their studies forthrightly in their reports.

A second point, perhaps not obvious to the uninitiated, is that a given data set can reveal different apparent “truths,” depending on ! the stati! stical methods used by researchers to tease out the truth. Dispassionate, objective researchers usually explore whether alternative statistical approaches would make a difference in their findings. On the other hand, researchers with an agenda can exploit this phenomenon to tease out of a data set the “truth” they may prefer. For that reason, scientific journals now go to great lengths to report researchers’ potential conflicts of interest, although the reported conflicts cannot and do not cover political ideology.

From which follows a third point, namely, that no one should ever take a single statistical study, or even a few, as a revelation of the truth. As I tell my students: “You can never trust a single statistical study in health policy. On the other hand, you can take the general thrust of many studies as in indication of what is likely to be true. And do check carefully who the authors are.”

All of which raises the overarching question: Given all these limitations of studies emrging from health services research, is it an effort worth the money spent on it

First of all, the total sum the United States spends each year on health services research is trivial if compared to total annual health spending. If one plots it in a pie chart, health services research is not a visible slice but just a line. Probably no economic sector in the economy performs as little operations research as does health care - and it shows in the sector’s performance.

For the most part, health policy in this country is based on accepted folklore, forged from the legislator’s personal experience or information brought to him or her by acquaintances or lobbyists. One can view health services research of the sort cited in this and the previous post as a sincere attempt to limit the wide and often wild terrain over which the folklore on a particular policy issue would otherwise range.

It is illuminating to compare health services research with another effort to structure information f! or decisi! on making: financial accounting. Modern economies spend a fortune on it. Throughout the year, the large accounting departments of enterprises assemble data for periodic reports on the financial condition and performance of the enterprise. External auditors are engaged to check the validity of these numbers. In the end, they usually attest that whatever is reported “fairly represents the financial condition of the XYZ Company, in accordance with generally accepted accounting principles.”

Yet, for all that effort and the money spent on it, does anyone believe that a company’s “statement of financial condition” (balance sheet) as of particular day of the year accurately summarizes its financial condition For anyone who believes that, I would invite attention to the recent saga of Hewlett-Packard, not to mention the financial reports produced by investment banks in the past decade or so.

In fact, a someone thoroughly familiar with both financial accounting and health services research, I will offer this brash assertion: In terms of worrying over biases in their estimates and the overall sophistication and quality of their work, health services researchers tower over business accountants. Accountants cannot even state that their estimates are unbiased, because they do not even attempt to avoid bias in their estimates.

But that said, it also is surely true that the world is much better off with financial reporting, dubious as it sometimes can be. Would anyone want to rely merely on folklore to assess the performance of businesses

Older, but Not Yet Retired

The labor force participation rate has fallen drastically in the last few years, partly because a huge chunk of the American population â€" the baby boomers â€" is rolling into retirement age. But the aging of Americans born from 1946 to 1964 has not actually had as big a drag on labor-force participation rates as demographers might have guessed a few decades ago.

That’s because it has become much more common for people over 65 to continue working.

According to a new Census Bureau report, in 2010, 16.1 percent of the population 65 years and older was in the labor force, meaning either working or actively looking for work. Two decades earlier, that share was 12.1 percent.

The increased labor-force participation rate for the most senior Americans is partly tied to more women joining the work force over time, though men hav shown large increases too:

Source: U.S. Census Bureau.

Source: U.S. Census Bureau.

Within the 65-and-over population, those from 65 to 69 had the biggest bump in labor-force participation. Across both genders in this narrower age range, the rate increased to 30.8 percent in 2010 from 21.8 percent in 1990, a 9 percentage point increase. (Interestingly, the share of people from 16 to 64 who! were in the labor force moved in the opposite direction during that time, falling to 74 percent in 2010 from 75.6 percent in 1990.)

People may be working longer because they are in better health in their late 60s and expect to live longer than their counterparts a couple of decades earlier. But they may also have greater financial responsibilities today than in the past.

In 2011, of workers who said they would be delaying their retirement, 13 percent explained that they had “inadequate finances or can’t afford to retire” and 6 percent gave the reason of “needing to make up for losses in the stock market,” according to the Employee Benefit Research Institute. The share of people who said they were having to retire later than expected has also been much higher in the last few years than it was when the economy was good.

Source: Employee Benefit Research Institute.

To put all these numbers in context, it’s worth remembering that labor-force participation rates for people over 65 used to be much higher in the late 1940s and 1950s:

Source: Bureau of Labor Statistics.

Additionally, people over 65 in the United States are far more likely to be in the labor force than people in most other developed countries, according to the Organization for Economic Cooperation and Develop! ment:

!

Source: Organization for Economic Cooperation and Development.

TimesOpen 2012: Behind the Music

We’re now far enough into 2013 that I’ve stopped mistakenly typing “2012.” That means the TimesOpen team is busy working on this year’s slate of events, plus some other plots and schemes you’ll be hearing about in due course.

In the meantime, we wanted to take a moment to look back on last year’s events. In particular, we thought you might be interested to hear about some changes we made in our approach and some risks we took, and how they worked out.

Best Year Ever

The biggest headline from last year’s events is how successful they were. We’ve had successful events every year, but 2012 stood out for attendance.

Riley Davis for The New York Times Full house for our Big Data event.

Every single event was very well attended. The Bigger Data and Smarter Scaling event was so successful, we had to bring in an emergency reserve of chairs â€" which were subsequently filled.

And then there was the science fair. We’ll get to that in a second.

It’s the Technology, Stupid

We try to play with the venue and the format. Certainly there is no shortage of tech talks in New York City and elsewhere. Since we sit squarely at the intersection of multiple cultures, we like to integrate some of these divergent interests.

Brad Stenger for The New York Times One of the few moments Tom Hughes-Croucher didn’t spend in the Terminal.

Over the years, we’ve tried out different formats, and we’ve explored softer technology topics, such as developer culture and privacy. These sessions ha! ve had mixed results. I went to some of them and enjoyed them. A challenge is that these sorts of events speak to different audiences that don’t entirely overlap with our mainline tech audience.

This year, we chose to focus solely on tech topics, and to push each topic and talk to be as technical as possible. I think just about every single presentation had code on the screen at some point. This approach allowed momentum to build: If you liked the last talk, the next one will be very much like it.

More fundamentally, the audience we reach is a tech audience that wants tech events and conversation. We chose to give the people what they want, and the people showed up in droves. Noted.

The Science Fair

There is no question, among attendees and our staff, that the Open Source Science Fair was the breakout event of the year â€" which is saying something, considering how successful the rest of our eventswere.

Rajiv Pant for The New York Times One of the many great display boards at our science fair.

The genesis of this event was as simple as one staff member (Joe Fiore) musing, “How about an open source science fair” Another staff member latched on to the idea, but we were left with a problem: What would you actually do What would that even be like Would you actually have a science fair With poster boards and ribbons Would this be symbolic Simply a theme Or a full-fledged fair And how, exactly, would that work

Rajiv Pant for The New York Times While the exhibitors ! set up th! eir booths, we kept attendees busy with open source emulators and hardware hacking kits.

We were so concerned that the whole concept might fail that a great deal of our planning effort centered on mitigating the risk. We agreed on the basics without much work: keep the fair portion relatively short, offer food, offer swag, have a slate of speakers. But the fair and speakers needed completely different room setups, so we needed to remove the audience from the room while the crew reset. Would that work Would people leave And the exhibitors would need time to set up their booths. Where would the audience be while that was going on

Before the doors opened, the staff felt certain the night would either be a roaring success or a boondoggle. To our great relief, the concept not only worked, it was a spectacular success. Rebecca Murphey, one of our speakers, was so impressed, she wrote a blog post praising the event and calling for more like it.

We allowed just 45 minutes of crowd time with exhibitors, and this was clearly not enough. We had to forcibly remove the audience from the exhibition hall, and we retained a full house for the following talks. (We fed the audience while we set up the room, then reopened the doors for the talks.)

Some lessons:

1. This was not easy to pull off. Tremendous amounts of prep work went into the event, more than any previous event. We’re thinking about ways to lower the effort level if we do this event again, but there was no escaping the up-front costs.

2. A good risk pays off more than you might expect.

3. Don’t say no to a great idea just because you don’t know how to do it. There was no plan for this event. We had absolutely no concept for what to do â€" it was just a cool idea. In a sense, I think the greatness of the concept caught hold of the team, challenged us and lifted us up to its ! level. It! ’s so very easy to just not try. Sometimes that’s the right move. But I’m glad we went for it this time.

4. If you hold yourself to the same old standard, you’ll produce the same old result. Which might be fine. But it’s a missed opportunity.

Onward

We are starting to flesh out plans for this year, and we appreciate any feedback or suggestions you may have. One big question is: Do we repeat the science fair Or would it be more in the spirit of TimesOpen to try a new bold idea We’ll let you know what we come up with.

Meanwhile, we wanted to thank all of you once again, for attending our events, for reading this blog, and for sharing a few drinks on a couple of weeknights. You made TimesOpen 2012 one for the record books.

Marci Windsheimer for The New York Times NYT dveloper Michael Laing showing off NYT Faбrik.