A fascinating new field experiment may cast light on the effectiveness of Ivanka Trump’s prospective mandated paid leave and child care initiatives.

In the Acting Wife study, researchers asked elite Masters in Business Administration (MBA) students questions about their job preferences. Students were told that the answers would be provided to the school’s career center and used to place the students in internship roles.

When single women thought that their responses would be public to their peers, they answered the career center’s questions differently – for example, by indicating they desire $18,000 less in annual compensation, are willing to travel 7 days less per month, and are willing to work four hours less per week than the control group. They also reported lower levels of career ambition and less leadership ability when they knew that peers could access the information.^[1]

In the observational portion of the study, 73% of single women and 61% of non-single[2] women reported that they had avoided behaviors that they believed would help their career — like speaking up in meetings or asking for a raise or promotion — because they were worried about looking too ambitious. In other words, women are wary of sending signals that damage their social image.

According to the researchers, the results 

“…suggest that single women avoid actions that would help their careers because of marriage market concerns. Many schooling and initial career decisions – such as whether to take advanced math in high school, major in engineering, or become an entrepreneur – occur early in life when most women are single. These decisions can have labor market consequences that last long after these women get married.”

Though not addressed directly in the study, it seems probable that women that signal faux professional apathy to male peers in the marriage market may have difficulty renegotiating when domestic responsibilities become material later in the relationship. This may partially help explain why 43% of highly-qualified women with children leave their careers or off-ramp for a period of time.^[3]

Although Ivanka’s $300 billion solution to women’s professional dilemmas are well-intentioned, mandated paid leave and tax deductions for child care are not a panacea. In fact, short of re-programming women and their prospective mates, the most consequential barriers to women’s professional success appear difficult to overcome through government policy.

div^[2] Where “non-single” indicates a woman who is in a relationship, cohabiting, engaged, or married.
div^[3] According to Sheryl Sandberg’s Lean In.

In case you missed it, Ben Carson has been labeled as being “at odds with fair housing.” During his senate confirmation hearing last week, Carson was required to defend his position on Affirmatively Furthering Fair Housing (AFFH), the Department of Housing and Urban Development’s (HUD’s) controversial 100-page-plus contemporary interpretation of the Fair Housing Act.

It may sound appalling that anyone anywhere would be against fair housing. Still, there are sane reasons to object to the rule. Carson suggested a couple of possibilities; for example, he worries about Washington, D.C. administrators demanding that local communities “go looking for a [racial] problem” when no evidence of such a problem exists a priori.

If you don’t like intemperate federal agencies running riot, there is another process-related objection that Carson missed: AFFH may insert the federal agency into policy areas not even remotely authorized by the legislation it purportedly interprets.

The table below provides a comparison of the original Fair Housing Act language and AFFH language, so that you can decide for yourself:

HUD believes the rule merely implements the Fair Housing Act’s intent. You can form your own view.

Last week, President-Elect Trump received a visit from none other than Robert F. Kennedy Jr., who our colleague Walter Olson refers to as America’s Most Irresponsible Public Figure. Keeping with this title, Kennedy will be joining the Trump team on a panel to vet vaccine safety.

This, like many of Trumps moves, will create international debate. For example, the most prominent advocate in Britain of the idea that there is a link between vaccinations (in his case the MMR or measles, mumps and rubella vaccine) and autism was Dr. Andrew Wakefield, whose 1998 Lancet paper (now retracted) attracted vast global interest. But Dr. Wakefield’s conduct of the research behind that paper was judged so unacceptable by the regulatory body, the General Medical Council, that his license to practice medicine was revoked. In that vignette we see a microcosm of the whole debate, because too many of the anti-vaccination advocates are not citing evidence and science at the highest level. And such episodes matter because if public confidence in vaccination falls too low, the rate of uptake of the vaccines will fall, herd immunity will fall, and epidemics of preventable yet dangerous disease will recur.

Much anti-vaccination anxiety focuses on the role of the mercury-based chemical thiomersal, which was once widely used to helped preserve vaccines but which is used less today. Nonetheless systematic reviews of the field have repeatedly affirmed that there is no evidence to suppose that thiomersal precipitates autism (see M Maglione et al, 2014, Pediatrics, 134: 325–337.)

Autism is a serious condition, which deserves serious investigation. No harm need come from this new Trump-inspired investigation as long as it is not in itself used to damage the credibility of existing vaccination protocols.

Kratom is a plant indigineous to Southeast Asia that, according to users, relieves pain more effectively—and with fewer side effects—than opioids. The FDA and the DEA have nevertheless proposed banning Kratom; see here for excellent background and discussion. One fact in particular caught my attention:

The U.S. government didn’t pay much attention to kratom until July 2013. That month, three advocacy groups sent a one-page letter to Daniel Fabricant, who was then the director of the FDA division that oversees the dietary supplement industry, which has annual revenues of $30 billion or more. The letter was co-signed by the heads of the United Natural Products Alliance, the Council for Responsible Nutrition, and the Consumer Healthcare Products Association, organizations representing dietary supplement producers and marketers such as Herbalife, Bayer, and Pfizer—but not, notably, any kratom vendors. “Given the widespread availability of kratom,” the letter said, “the dietary supplement industry is concerned about the potential dangers to consumers who may believe that they are consuming a safe, regulated product when they are not.” The organizations asked the FDA to “deter further marketing of kratom under the mistaken belief that it is a legitimate product.”

In other words, the U.S. government responded to complaints from competitors—not from consumers—in initiating its investigation of kratom.

***

This is a recent Cato Daily Podcast on the DEA’s effort to ban Kratom, featuring Andrew Turner:

An important part of Donald Trump’s health care agenda is his pledge to let consumers and employers avoid unwanted regulatory costs by purchasing insurance licensed by states other than their own, a change that would make health insurance both more affordable and more secure. The Congressional Budget Office has estimated that allowing employers to avoid these unwanted regulatory costs would reduce premiums an average of 13 percent. That’s a nice contrast to what Bill Clinton calls ObamaCare’s “crazy system where…people [who] are out there busting it, sometimes 60 hours a week, wind up with their premiums doubled and their coverage cut in half.”

A reporter recently wrote to me: “I’ve talked to many people — health policy experts, regulators, industry leaders — and none of them think it is a good idea. They worry that the policy would promote a race to the bottom, with insurers consolidating in states with the most lenient regulations. They say state regulators would lose their power to protect consumers. They argue that healthy people may save money by selecting cheaper plans, but sick people would end up paying more and/​or have trouble accessing care.” Below is my response.

—–

What you have stumbled across is a grand conspiracy against consumers by industry, regulators, and left-wing ideologues.

The big, incumbent insurers like banning out-of-state purchases, because that protects them from competition.

Providers and patient groups like government mandates that force consumers to buy coverage for their products (mental health coverage, contraceptives coverage, acupuncture coverage, etc.). The freedom to purchase insurance licensed by other states would allow consumers to avoid those unwanted costs.

State insurance regulators like banning out-of-state purchases, because they are in the business of providing consumer protections, and the ban gives them a monopoly. Little wonder they produce what monopolies always produce: a high-cost, low-quality product.

The ideologues want to impose Gruber-style hidden taxes on consumers. The freedom to purchase insurance licensed by other states would allow consumers to avoid those hidden taxes.

It would be embarrassing if these groups said any of this explicitly, so they describe the prospect of losing their privilege as a “race to the bottom.”

Nonsense. There would be no race to the bottom. It would be a race to what consumers want: affordable, secure health coverage.

If letting people purchase insurance licensed by other states would lead to a vastly different health-insurance market than we have right now, it merely illustrates how far astray these groups have led us from the sort of health insurance consumers want.

Last week I wrote about the unintended consequences of the proposed DC family leave benefit, which is to be financed by a payroll tax on all employers in the District. 

My objections were that the tax increases the cost of operating in the District and that this will likely push some businesses contemplating opening in DC to Maryland or Virginia instead. The other objection I had was that it specified a benefit to be provided that not all companies may want to provide. In an ideal world companies would pay wages to workers and then allow workers to get their own insurance, pensions, transportation, food, and the like on their own and not have these things provided by their workplace. Today, the tax breaks afforded most fringe benefits behoove companies to give many of these things to their workers in lieu of wages, and that’s not efficient. 

I received a surprising amount of feedback from my article, most of which was positive—a first for me—and some readers suggested that I missed a couple issues relevant to the benefit. The first is that while tying the tax to payroll may make sense as far as this benefit is concerned, it also tends to make it more difficult for people to understand the true cost involved. 

A tax that’s .62% of payroll may not seem like a lot, but for a restaurant that has $1 million of revenue that translates to a tax of $2,100 a year, assuming that payroll is one-third of total revenue. For businesses other than restaurants, where payroll typically equals two-thirds of revenue, double that number. That amounts to 2.2% instead of 4.4% of profits, on top of the 8.95% DC corporate profits tax on revenue over $1 million. If they expand the tax to cover medical leave as well—which is on the table—that would add another thousand dollars or so to a restaurant’s cost of doing business. In fact, a better way to see this is as a 50% increase on the tax on business profits, except that this doesn’t vary much with the business cycle.

The other point a restaurant owner suggested to me is that their workers are typically young and part-time, and often have another job. In short, they see this as a benefit few of their twenty-something employees would claim, yet they still would be paying for it. Fortune 500 companies may find the tax easy to swallow, but not so for businesses like my local kebab house that are on the verge of hanging on. This tax, combined with a sharply higher minimum wage and other government mandates—such as the city’s inexplicable refusal to charge for-profit food trucks to use city-owned property for their business, increasing restaurants’ competition further—are hurting their bottom lines, and life is getting more precarious for businesses on the margins. 

Businesses that want to offer this benefit can already do so. A new company called Freya Solutions allows them to purchase insurance to cover such a benefit for their employees, and the company has the ability to tweak the replacement rate and the length of the benefit so as to maximize the bang for the buck the business gets from the service in terms of employee recruitment and retention. 

David Brunari wrote today in the Washington Business Journal that this tax will generate $420 million a year—or about how much the corporate income tax currently raises for the District. He also noted that a majority of the benefit would go to people who live outside of Washington DC.

Governments interfere too much in compensation decisions as it is. Mandating an entirely new benefit exacerbates an already-difficult problem for employers in the District

As the Washington DC City Council prepares to vote on a bill that would provide workers in Washington, DC up to 11 weeks of paid family leave upon the birth of a child, a fundamental question remains unanswered: how much should government intervene in how employers compensate workers?

The federal government does so quite a bit at present. By exempting employer-provided health insurance from income taxes, our tax law is responsible for the fact that a majority of Americans get their health insurance from their employer. The exemption is also largely responsible for the fact that so many of these employers have what can only be described as overly generous health insurance plans, which can cover health care expenses both routine and exceptional.

The tax code also nudged American businesses to provide pensions as well, since the money set aside in a defined benefit plan generally isn’t taxed. When pension law created the tax breaks for employer-provided health insurance these spouted up instead.

In the heyday of unionism, labor union leaders pushed for more fringe benefits for their workers, often more fervently than they sought out wage increases. They did so in part because of the tax break—why not get a tax-free benefit for workers rather than have workers pay for the same benefit with after-tax wages, they reasoned—and partly because such benefits could be made more durable than other forms of compensation. For instance, the UAW contracts in the 1970s-1990s typically provided health insurance for laid-off workers for up to a year after they were let go, and sometimes longer.

This wasn’t necessarily a good thing for the U.S. economy. Rigid compensation meant that companies resorted to overtime when demand picked up rather than hire more workers. While it also deterred them from laying off workers when there was a downturn in demand since the attendant cost savings would be slight, the short-term stability was an ephemeral benefit to workers. There were fewer jobs available as a result and it did nothing to encourage employment growth in such industries.

Some of these benefits were jettisoned—or at least scaled back—after the bankruptcy of GM and Chrysler in 2008—fifteen years after at Caterpillar—and today the manufacturing workers in a union are much more likely to have a 401k, health insurance with co-pays, deductibles and a monthly contribution, and modest ancillary benefits.

Unions changed course only in part because of their reduced leverage after the diminution of manufacturing in the U.S. economy. They also perceived that their workers would rather have money than an additional benefit. Also, the realization that many workers’ manufacturing jobs may be less permanent than a generation ago also helped change demand. A long-term benefit means little for someone who worries that their job may not exist after the next recession.

More flexible compensation that is directly tied to a worker benefits the economy in the long run. Firms find it less expensive to contract and expand, which should increase employment in the long run. It should also increase wages, if and when we return to a full-employment economy—the tremendous wage gains in the bottom quintiles of the income distribution in the late 1990s should be the goal of every administration of both parties.

Now the DC government is countering this trend by providing a new benefit, financed not by the companies directly but via a tax of .62 percent on corporate profits. To its credit, there has been some thought put into how to efficiently create this benefit, and the Council concluded that by having the government finance it rather than having the employer pay for it directly removes any disincentive that such a benefit would have towards hiring expectant parents. It also reduced the cost, along with the attendant tax increase, by capping the benefits at roughly $1,000 a week, so it’s a little more egalitarian than it would otherwise be.

But the new benefit is still a mistake. It will end up increasing the cost of doing business in DC and will likely end up pushing a few businesses that are trying to decide between DC or Virginia or Maryland to head to one of the other states. To suggest that it’s too small of a tax to matter may sound intuitively appealing, but the notion that costs do not really matter is becoming a tired trope. It is the reason why the left says the minimum wage will not decrease employment, land-use restrictions don’t increase housing costs, or that unemployment insurance benefits don’t lengthen unemployment spells. One can argue about the degree of the impact, but to pretend firms can “swallow” costs ad infinitum is just facile.

If the DC City Council wants to do more about the plight of the working poor, it should focus more on how to encourage them to acquire a better education. DC’s aggressive embrace of charter schools has paid dividends in that respect, as I have observed firsthand. Additionally, the federal government should take steps to reduce the disincentives to work that exist in the tax code. University of Chicago economist Casey Mulligan has found in his research that most working Americans earning between $30,000 and $50,000 face an implicit marginal tax rate in excess of 50 percent.

A narrowly-focused benefit such as paid family leave will be a costly solution with unintended consequences, the least of which is serving as a harbinger for other taxes for other benefits.