Thursday, April 21, 2016

Are Millennials Buying Cars Again?

See Millennials are finally arriving in the car market by DEE-ANN DURBIN of AP. Excerpt:
"DETROIT (AP) — Millennials were once a source of panic in the auto industry. Dubbed the "go nowhere" generation, they weren't getting driver's licenses, never mind buying cars. Headlines declared it was "The End of Car Culture."

New data suggests at least some of that worry was misplaced. Millennials — especially the oldest ones — are these days buying cars in big numbers. They just had a late start.

Now the largest generation in the U.S., millennials bought 4 million cars and trucks in the U.S. last year, second only to the baby boomers, according to J.D. Power's Power Information Network, which defines millennials as those between 21 and 38 in 2015. Millennials' share of the new car market jumped to 28 percent. In the country's biggest car market, California, millennials outpaced boomers for the first time.

Industry watchers say it's been hard to get a read on millennials because the generation is big and diverse, ranging from recent college graduates to settled-down suburbanites. Automakers were also unsure about the impact of new transportation choices, like ZipCar and Uber, which helped millennials delay car buying. But as they got jobs and started families, millennials headed into car dealerships just like previous generations.

"This whole idea that they're not going to need cars is absolutely ridiculous," said Steven Szakaly, the chief economist for the National Automobile Dealers Association. "The new car buyer age is just happening much later."

It's a very different story from 2010, when millennials — who make up around 30 percent of the population — bought just 17 percent of new cars. Auto executives wondered aloud if the trend would be permanent.

In 2011, a University of Michigan study showed a steady decline in the number of young people getting their driver's licenses. In 1983, the survey found, 87 percent of 19-year-olds had a license. By 2010, that had fallen to 69 percent. Millennials told the study's authors that they were too busy to get licenses and were happy to hitch rides from others.

But there was more to the story. The advent of graduated licensing laws — which make teens practice driving in stages before granting a full license — was one reason millennials were getting their licenses later. An even bigger reason? The economy.

For many millennials, the Great Recession hit just as they were getting their first job or graduating from college. By 2010, millennials' unemployment rate reached 13 percent — four percentage points higher than the national average — according to a report by the White House Council of Economic Advisers. For teens, things were even worse. The teen unemployment rate rose from 15 percent to 26 percent between 2006 and 2012.

Millennials' unemployment rate has improved to around 8 percent. Add low interest rates and low gas prices to the mix and the car market suddenly looks more enticing to young buyers."
Another interesting article is The baffling reason many millennials don’t eat cereal by Roberto A. Ferdman of The Washington Post.

Friday, April 15, 2016

Anxious? High Strung? You Might Be The Ideal Worker

There was an interesting article a few years ago in the New York Times magazine called Understanding the Anxious Mind by ROBIN MARANTZ HENIG. It discusses a study of anxiety that looks at subjects from birth as they age. Here is one interesting excerpt:
"LOOKING AT THE neurology of anxiety raises the inevitable question of why a trait that causes so much mental anguish would have evolved in the first place. For the species as a whole, it is most likely an advantage to have some group members who are hypervigilant and who see everything as a threat, always ready to sound an alarm and leap into action. For the individual, though, being inhibited can mean having fewer mating opportunities, not to mention the psychic burden, wearing yourself ragged with a brain that’s always on high alert.

In the modern world, the anxious temperament does offer certain benefits: caution, introspection, the capacity to work alone. These can be adaptive qualities. Kagan has observed that the high-reactives in his sample tend to avoid the traditional hazards of adolescence. Because they are more restrained than their wilder peers, he says, high-reactive kids are less likely to experiment with drugs, to get pregnant or to drive recklessly. They grow up to be the Felix Ungers of the world, he says, clearing a safe, neat path for the Oscar Madisons.

People with a high-reactive temperament — as long as it doesn’t show itself as a clinical disorder — are generally conscientious and almost obsessively well-prepared. Worriers are likely to be the most thorough workers and the most attentive friends. Someone who worries about being late will plan to get to places early. Someone anxious about giving a public lecture will work harder to prepare for it. Test-taking anxiety can lead to better studying; fear of traveling can lead to careful mapping of transit routes.

Kagan told me that in the 40 years he worked at Harvard, he hired at least 200 research assistants, “and I always looked for high-reactives. They’re compulsive, they don’t make errors, they’re careful when they’re coding data.”
He said he would bet that when the United States sends people up in space, the steely, brave astronauts were low-reactive as infants, and the mission-control people down on the ground, doing the detail work that keeps the craft aloft, were high-reactive.

An anxious temperament might serve a more exalted function too. “Our culture has this illusion that anxiety is toxic,” Kagan said. But without inner-directed people who prefer solitude, where would we get the writers and artists and scientists and computer programmers who make society hum? Kagan likes to point out that T. S. Eliot suffered from anxiety, and that biographies indicate that he was a typical high-reactive baby. “That line ‘I will show you fear in a handful of dust’ — he couldn’t have written that without feeling the tension and dysphoria he did,” Kagan said."
Here is the link to the letters about the original column

Friday, April 08, 2016

This was a commercial back in 1986. It paints a bleak picture of America in the future, presumably caused by the growing national debt ($2 trillion then, it will be about $19.43 trillion when the fiscal year ends on Sept. 30, according to the White House Office of Management and Budget). I think this thing is way over the top but there may be some real dangers from the debt that I mention below. You might have to watch a brief commercial for some product first. We have been covering the deficit and debt this week in my macro classes. If the embedded video does not appear, use the link below it.

Ridley Scott - W. R. Grace Deficit Trials

Real problems the national debt might cause
1
. About 34% of the debt is owed to foreign citizens. When they get paid back, they come and buy American goods. That leaves fewer goods for Americans (who can't afford to buy as much due to higher taxes that were needed to pay back the debt). BUT THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE.

People borrow money all the time to buy houses and cars. Then they pay it back to a person outside of their family or household. We don’t consider this a burden since the money was put to good use. Right after World War II, the national debt was 120% of the GDP. This was much higher than it is now and we survived. No one complains that we borrowed to win the war.

2. Raising taxes might hurt economic incentives. At higher tax rates, people might want to work and invest less. Fewer businesses might expand and fewer new ones created since you will get to keep less profit. But again, THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE. Also, if taxes only go up a little, and the debt is slowly paid off each year (like after WW II), it may not hurt too much.

3. We may have fewer government services in the future if we pay back the debt by lowering government spending. But this means that we are trading more government services today for fewer in the future. THIS IS NOT NECESSARILY A BAD THING IF THE MONEY IS SPENT WISELY (which everyone not might not agree on).

If taxes and interest rates are higher in the future due to the debt, that will lower our future economic growth rate. We will still probably grow, but not as much.

Friday, April 01, 2016

Should your company or insurer reward you for meeting exercise goals?

See Let your boss track your fitness, get an Apple Watch by ANICK JESDANUN of the Associated Press.

This reminds me of what economists call "asymmetric information." This is a situation in which the seller knows more about a product than the buyer (sometimes the buyer knows more about something important like how healthy or risky they are as it relates to insurance). These markets do not operate optimally. If insurance companies don't know how healthy or risky you are, they can't be sure of how much your premiums should be. But with fitness tracking, they learn more about you. My students might recall I discussed this after we played the supply and demand game in class. A good example is the used car market. Sellers usually know alot more about the product than the buyers.

Excerpts from the article linked above:
"You know you need to exercise more, but there's always next week, or the week after. To entice you to stop procrastinating, your company or insurer might soon reward you for wearing a fitness device to track your steps, heart rate and more.

For instance, in one program announced Wednesday, some workers can buy a $350 Apple Watch for just $25 by meeting exercise goals for two years. Miss goals, and see your discount shrink. Vitality, a provider of disease-prevention and lifestyle programs, is initially bringing the offer to U.S. employees at three companies, along with John Hancock life-insurance customers. It has been testing the program in South Africa since December.

Other programs let you redeem points from fitness activities for gift cards and other rewards. Submit to biometric screenings and nutrition classes, and in some cases you can earn insurance discounts."

"Adrian Gore, CEO and founder of Vitality parent company Discovery Group, says that for many people, the benefits from exercise might not be apparent for a few decades. Reward programs make the payoff more immediate."

"On Tuesday, health insurer UnitedHealthcare started offering up to $1,460 a year in credits toward deductibles for meeting daily goals while wearing a custom tracker. Oscar, which sells health insurance directly to consumers, has been giving out free Misfit trackers for opportunities to earn up to $100 a year in Amazon gift cards. Fitbit works with employers such as Indiana University Health and Emory University in Atlanta to subsidize fitness trackers for their staff."

"These programs are typically voluntary, but you must be willing to share data to earn the most rewards and insurance discounts.

Sound creepy? Program officials say that data from fitness trackers typically go to outside administrators, such as Fitbit or Vitality. Employers and insurers get only broad totals to verify eligibility and not details on heart rate and sleep. But participants need to trust that these systems won't get hacked.

Mike Doughty, president and general manager of John Hancock Insurance, says premiums won't rise if a screening uncovers higher blood pressure or other risks. Rather, he says, wellness incentives are about promoting longer lives — and collecting life-insurance premiums longer.

There's no proof that providing fitness trackers directly lowers health care costs, but there's plenty of evidence that exercise leads to better health, which in turn can improve productivity and reduce absences. Michael Staufacker, Emory's director of health management, describes the thinking as a "value of investment and not a hard-dollar return on investment as it relates to medical or pharmacy costs.""

"Programs from Vitality and others typically won't let you earn insurance discounts simply by exercising. You'll need to earn additional points by completing questionnaires and getting flu shots. You sometimes get bonus points simply by staying within recommended limits for cholesterol, blood pressure and other measures. Smokers can also get points for joining programs to help them quit.
"You change one thing about your behavior, and you can be more motivated to work on these other aspects," says Tammy Smith, who manages the employee wellness program at IU Health.

DaVita HealthCare Partners says health care spending by its employees slowed significantly after it offered tracker-based incentives through Vitality. But DaVita also increased the deductible on claims and started such initiatives as Fresh Fruit Wednesday. That makes the effect of the fitness program difficult to isolate.

With the Apple Watch program, you must pay back Vitality each month you miss your fitness goals, which typically call for four substantial workouts a week. The goals are meant to be achievable, but tough enough to change habits."

Some research shows that if the reward is not delayed, people are put in groups where only those succeeding get rewarded (since people hate to see others get a prize they could have had) and if the participants lose money if they don't meet the goal (called loss aversion), the policy is more successful. See Paying Employees to Lose Weight.

Older posts on similar topics:

Should Overweight People Pay More For Health Insurance?

Should We Pay People To Adopt A Healthy Lifestyle?

Friday, March 25, 2016

The more we build our human and financial capital, the more prepared we are when a downturn comes or to capitalize on other opportunities

See Oil layoffs are not because companies are greedy. From The San Antonio Express-News, by Christopher E. Baecker, who manages fixed assets for Pioneer Energy Services and is an adjunct lecturer of economics at Northwest Vista College in San Antonio. Excerpts:
"Our employment is at-will — meaning we are as free to leave the company as it is to eliminate our position or terminate our employment. It works both ways, and many people forget that when bemoaning “big evil corporations interested only in making a buck.”

Our labor market flexibility is one thing that makes the U.S. economy better than most, with fewer regulations on freedom of movement and deployment of resources. It’s a big reason we typically have a lower unemployment rate than other countries.

After the first such round of workforce reductions a year prior, the same daughter (the most inquisitive of my four) asked if I had a backup plan. I pointed to my efforts to sharpen my Spanish, among other things. I’ve had the pleasure of knowing many individuals who are proactive in that regard.

In addition to her speech pathology work, my sister, whose husband works in our industry, recently started selling cleaning supplies. One friend with whom I work is now an Uber driver in her free time. Another colleague at a previous job saved enough to open her own haircutting franchise. Many of the people working in the field have commercial driver’s licenses and experience in construction.
The more we build our human and financial capital, the more prepared we are when a downturn comes or to capitalize on other opportunities. Such behavior and farsighted use of spare time makes this possible — that’s why the best job security is job insecurity.

I have found that differentiating between cyclical unemployment (shifts in the business cycle from growth to downturn and back) and frictional unemployment (voluntary movements) is not terribly difficult for my college students to grasp in the abstract. But when it happens to you in real life, it naturally tends to have an adverse emotional impact.

There are various forms of temporary assistance available to people who find themselves swept up by large macroeconomic forces. Many companies offer severance packages. As a society, we have deemed it appropriate to offer unemployment insurance funded by taxes levied on employers. There’s COBRA and Medicaid for those qualifying to help with health expenses.
In December, the government helped by possibly flipping the script on the other type of unemployment — structural — when Congress and President Barack Obama lifted the ban on crude oil exports." 
"Also in the budget is a proposal to enhance unemployment insurance.

Assistance for workers who can prove they lost their job as a direct result of liberalized trade has always had support. It helps smooth acceptance of changes that will benefit our country as a whole. The proposed changes would pay a person a portion of the difference between the job lost and a lower-paying new job.

These modifications, however, would numb the incentives of the good habits spurred by job insecurity.

Current Federal Reserve policies don’t help, as they discourage folks from saving, a cruel irony given that those very same policies play a role in the boom and bust nature of our industry.

There have actually been a few calls to “bail out” the oil industry, but that’s the last thing that needs to happen.

We should be bailing out fewer companies, not more. What those employed in our industry, and likely laborers in general, would probably appreciate more than anything is stable policy from Uncle Sam, so they can shape and direct their lives on their own terms."

Friday, March 11, 2016

Do Some Sellers on eBay Have an Edge Over Other Sellers?

See Male Sellers on eBay Have an Edge Over Women, Study Finds. By PAM BELLUCK of the NY Times. Excerpts:
"on average, when men and women with equal selling reputations sold the same products, women received lower prices than men."

"The difference was far less pronounced for used items: Women sellers received about 97 cents for every dollar men received. But with new items, where the authors say direct comparison is easier, women received about 80 cents on average for every dollar men sellers received."

"“The basic point — that people have different expectations of women versus men and so we treat them very differently in the world — it’s fascinating and depressing,” said Linda Babcock, an economics professor at Carnegie Mellon University, who was not involved in the study."

"The study did not paint a universally negative picture for women. For some items, like toys and pet products, women received somewhat higher prices than men. And women tended to have better reputations as sellers, although they tended to have less selling experience.

Nor did the study, which controlled for seller reputation, experience, number of photos, use of bold lettering and other elements, indicate that buyers were actively or even consciously discriminating. Male and female buyers appeared to treat women sellers the same, the authors said."

"We actually think that most of it is unconscious,” said Tamar Kricheli-Katz, a professor of law and sociology at Tel Aviv University, who conducted the study with Tali Regev, an economist at IDC Herzliya."

"the researchers conducted an experiment to see if people could tell the gender of sellers from user profiles. People guessed correctly in 1,127 of 2,000 cases, wrong in 170 and did not know the rest.
In another experiment, the researchers asked people to place value on a $100 Amazon gift card sold by someone named either Alison or Brad. On average, Alison’s gift card was valued at $83.34, while Brad’s was valued at $87.42.

Claudia Goldin, a Harvard economist and expert on gender wage gaps, said the study was intriguing but needed more analysis. “Just perceiving that somebody’s a woman, what exactly does it mean?” she asked. “It’s got to mean something about the quality of the good or service or something that’s not captured in the data that they have.”"

Friday, March 04, 2016

Amusement Park Changes Its Pricing Strategy

See Disneyland 'demand pricing' will cost you $5 less on slow days and $20 more when it's busy.  I'm skeptical about Disney saying this not being about maximizing profits. Everything firms do is about profits, especially if they see demand being different on different days. When demand increases, price goes up. Excerpts:
"Walt Disney Co. is adopting a new pricing policy at Disneyland and other U.S. theme parks that would reduce ticket costs on low-demand days and boost entrance fees for more popular times.

Starting Sunday, anyone willing to drop in on a typically slow day — maybe a Wednesday in September — will pay a few dollars less than previously. But for most days of the year, expect to spend more for a daily ticket.

Disney is portraying the move to peak pricing as a crowd-management technique rather than a push to maximize profits.

Airlines and hotels do it during spring break and other high-demand times; Uber and Lyft also charge more when the need for ride-hailing services surges, such as New Year's Eve.

"The demand for our theme parks continues to grow, particularly during peak periods," Disneyland spokeswoman Suzi Brown said. "In addition to expanding our parks, we are adopting seasonal pricing on our one-day ticket to help better spread visitation throughout the year."

Disneyland and Disney California Adventure have been charging $99 for a one-day ticket. Under the new policy, each day on the calendar will be designated a "value" day, a "regular" day or a "peak" day. The new price will be $95 for a value day, $105 for a regular day and $119 for a peak day."