I’m ready for some Global Warming

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe Polar Vortex has me thinking about global warming. No, not the reflexive, “How could the world be warming and still post the coldest temps in recent memory?” I’m on board with the scientific consensus on climate change and I’ve a healthy appreciation for the randomness of complex systems.  Most economist & weather forecaster jokes are interchangeable, after all. Read more »

Collateral Damage Revisited: The Minimum Wage

Posted by & filed under CGR Staff.

Kent GardnerOnce again, the Congressional Budget Office is weighing in on a current policy debate—in a just-released report, they have sided with the consensus view among economists that an increase in the minimum wage will eliminate jobs: “Most [low wage workers] would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.” If the minimum wage goes to $9/hour, CBO estimates job loss of about 100,000 in the second half of 2016, relative to what might otherwise have occurred. If the minimum wage rises to $10.10, they estimate the loss at about 500,000 jobs.

Every policy change has good and bad effects. If the goal is to maximize the number of jobs, we should eliminate the minimum wage entirely. But that would open up some workers to a level of exploitation most of us would find unacceptable, so we put up with some degree of job loss in exchange for this protection. And we counter the effects of the minimum wage on labor demand by putting more money into improving the employability of low wage workers, thus boosting the supply of workers who are more productive. Read more »

That’s why we call it “work”

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerTwo weeks ago, the Congressional Budget Office stirred up a hornet’s nest with its estimate of the impact of the Affordable Care Act (ACA) on jobs. Here’s the key sentence: “CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.” The annual reduction is estimated to be a headline-grabbing 2.5 million jobs.  Download the report here.

Critics of Obamacare greeted the news with barely disguised glee: “The CBO says that Obamacare is a job killer,” they crowed. That’s not what it said: “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.” The jobs aren’t eliminated—workers choose not to fill them. Read more »

Don’t underestimate the role culture plays in the economy

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerFew of us make decisions based on a purely rational assessment of our own self-interest. And thank goodness for that! Life with homo economicus, “economic man,” would be dreary indeed. There is a deep tradition in economics that considers the role that “institutions”—defined here as traditions, cultural mores and social organizations—play in society. A cultural value of honesty, for example, contributes to a more efficient economy. Traditions and cultural norms, even without any claim to morality, also bring societal benefit. Laws and explicit rules cannot create a good society unless they are built upon a strong cultural foundation. I illustrate this below in three spheres: the macroeconomy, government, and the firm. Read more »

Oops about OOPM: You really can’t keep your health plan

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe Tampa Bay Times Politifact has awarded its coveted “lie of the year” rating to President Obama’s oft-repeated “If you like your health plan, you can keep it” promise. I’m happy to chalk this one up to naiveté and the heat of the political moment(s).

As President Obama has noted, the reason that existing health insurance policies have been cancelled willy-nilly is because the plans don’t measure up to ACA’s standard for coverage. Supermarkets can’t sell unpasteurized milk. Health insurers can’t sell these plans.

It is not immoral to sell or buy noncompliant plans. Many consumers chose noncompliant plans on purpose because they were cheaper. Let’s look at one provision of ACA that has received little coverage—the out-of-pocket maximum (OOPM). ACA initially required that a 2014 individual policy must cover all costs above $6,350 for singles or double this, $12,700, for families (of any size) within the year. That’s the OOPM (now delayed to 2015). Read more »

Should we tax medical devices?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerLike most aging runners, my wife’s knees aren’t what they used to be. Fortunately, there is a solution to this problem—knee replacement has become nearly routine surgery.  The Agency for Healthcare Research and Quality reports 718,000 hospital stays in 2011 were due to “knee arthroplasty” or total knee replacement. The rate per 10,000 population nearly doubled from 1997. Yes, the aging of the population has something to do with the increase—yet even among 65-84 year olds the rate increased by 59% (http://www.hcup-us.ahrq.gov/reports/statbriefs/sb165.jsp). And yes, the rising rate of obesity explains part, but not all, of the trend.

We needn’t look to sophisticated studies for the reason as joint replacement surgery can significantly improve quality of life. A 2011 “meta analysis” of over 100 studies concluded that nearly 90% of artificial knees were still doing the job 10 years after surgery. As these studies necessarily involved surgeries that took place before 2000, results have almost surely improved. For most patients, an artificial knee (or hip) can be expected to last 15-20 years. Recovery time is getting shorter, too. Many patients are back to driving in a month. If you can’t walk without pain, an implant would seem to be an easy choice.  Provided you can convince your insurer to foot the bill.

Which brings us to the cost of artificial joints. Did you wonder why the medical device industry gets its very own tax under the Affordable Care Act? American health care’s dysfunction has enabled the medical device industry to earn very robust profits, thus making it a target for special treatment. Does this tax make sense? Read more »

The Challenge of Matching Jobs and Job Seekers

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThere is nothing more debilitating than unemployment—both for the individual and society. The jobless are deprived of the dignity of work and the community is deprived of the benefit of their labor. We look to workforce development programs and higher education to match jobs and job seekers and, often, to help the unemployed gain the skills that are needed in the workplace.

Recent attention has focused on “middle skills,” those positions requiring some postsecondary technical education and training but not a four year college degree. A recent Harvard Business Review article[*] found that nearly half of new job openings from 2010 through 2020 will be middle-skills positions in fields such as computer technology, nursing, and high-skill manufacturing. Community colleges (such as Monroe Community College) are particularly well suited to addressing the middle skills gap and are exploring how they can best fill that need.

This leads to a reasonably neat policy prescription: If we have willing workers whose skills simply fall short, then the public’s role is to provide a bridge to employment through training. Easy, right? As one of the Rochester area’s most strategic training providers, Monroe Community College is continuously seeking better information on the needs of its market. Read more »

Upstate NY vs. Toronto: A Lesson in Immigration & Tax Policy

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerRemember the Fast Ferry connecting Rochester and Toronto? Although the idea failed in execution, connecting with the vibrant “Golden Horseshoe” economy made sense then—and still does today. When we compare Rochester to, say, Charlotte or Atlanta or Austin, we can always blame the snow. But that doesn’t work when we look across the lake. What’s their “secret sauce?”

Job Growth 1996 - 2011We may be separated only by a bit of water and a line on a map, but it is clear that Canada’s Golden Horseshoe Region, powered by Toronto, has prospered while Upstate New York (defined here as Rochester, Buffalo and Syracuse) has just held its own. Although these neighboring regions share much—that climate, access to markets, and transportation infrastructure—since 1996 the Golden Horseshoe added more than a third to its employment base and a quarter to its population. Read more »

Financial Viability of Public Nursing Homes: NY Isn’t Only State Struggling

Posted by & filed under CGR Staff.

Erika Rosenberg New York isn’t alone in struggling with the financial viability of its public nursing homes. Across the country, public nursing home operators are weighing their options in an era of diminishing state and federal reimbursement. Many counties, especially those in the Northeast, are choosing to sell, or contract out management of the homes, in order to stem financial losses.

In New York, 92% of homes had operating deficits in 2010, as CGR detailed in our in-depth report, The Future of County Nursing Homes in New York State. Financial pressures have led 8 of the 33 remaining counties with homes to decide to sell them, and another 5 to actively consider it. If all those potential sales actually occurred, New York would be left with 20 counties with nursing homes, down from 40 just 15 years ago.

From 2005 to 2009, half of states had declines in the number of public nursing homes, compared to 28% that had increases (more recent data aren’t yet available).

Read more »

Rochester Has Lowest Monthly Premiums in the Affordable Care Act’s Exchange

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe health insurance mandate, probably the most visible outcome of the Patient Protection & Affordable Care Act (ACA or Obamacare), goes into effect in January. Enrollment in the health insurance exchanges opens October 1, so much attention has been focused on the premiums: Supporters of the law hope for lower rates; opponents have been widely predicting that rates would soar.

In July, premiums for New York State’s Health Insurance Marketplace were released and revealed two notable facts: First, premiums in the individual market are far below current rates. Second, Rochester has the lowest rates in the state. Read more »