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Thursday, December 22, 2016

Healthcare and Self-employment

Most of the world's developed countries have a government sponsored single payer medical insurance system, separating entitlement for medical services from employment. A single payer system allows for better distribution of population risk pools and facilitates better cost control of medications and medical services. Demographic studies show that in all the countries where a single payer, government sponsored medical insurance exists, population life expectancy has been constantly on the rise.

The only exception in the developed world in its approach to healthcare is the United States. Interestingly, life expectancy of the U.S. population is the lowest (31st. place) in the developed world, according to the latest World Health Organization survey (see: https://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy). Further, a recent articles published in the Wall Street Journal claims that life expectancy for certain groups of the U.S. population is on the decline (see: Life Expectancy for White Americans Declines).

Unfortunately, the closest effort to controlling runaway medical costs, while serving the population healthcare needs, has been the Affordable Care Act (ACA), otherwise known as "Obama Care". Since the U.S. spends more than any other developed nation in the world on healthcare (17.3% of GDP in 2014) there is big money to be gained (or lost). Since these costs are expected to increase dramatically, as the Baby Boomer population is entering retirement age, congress must deal with cost controls or face bankrupting the U.S. economy in the next decade. Interestingly, Canada with its single-payer healthcare system is managing to spend almost half as much as the U.S., while maintaining a 12th place in population life expectancy vs. the U.S., which is in 31st place.

(Click on image to enlarge)

In spite of poisonous rhetoric that was frequently blasted by politicians during the last U.S. elections cycle,  Government sponsored medical insurance coverage seems to be more popular than ever before, even at its currently less than perfect form. It is becoming clear that as the number of self-employed individuals who are too young to be covered for medical insurance under Medicare, is increasing, popularity of the Health Exchange is rising. Such individuals are not covered through a large employer risk pool and therefore are forced to pay the very high premiums that most insurance companies charge for their individual coverage plans. Demographic studies show that the "freelance" (self-employed) segment of the U.S. domestic workforce, is rapidly rising and is constantly being under-served. With the expectation of rising automation in the workplace, due to Robotics and Artificial Intelligence the number of workers joining the ranks of the self-employed will balloon over the next 10 years. What will Congress do to deal with this population?

A recent New York Times article covers the issues associated with the rising popularity of the Health Exchange. The article is entitled: Health Exchange Enrollment Jumps, Even as G.O.P. Pledges Repeal.

To quote the article:
About 6.4 million people have signed up for health insurance next year under the Affordable Care Act, the Obama administration said Wednesday, as people rushed to purchase plans regardless of Republican promises that the law will be repealed within months.


The 6.4 million number represents an increase of 400,000 over a similar point last year. This data may contradict the notion of a "popular national mandate" to dismantle the Affordable Care Act , in favor of a GOP replacement plan. The increase in popularity of ACA medical insurance, facilitated through the Health Exchange, becomes even more interesting in view of almost across the board 2017 premium rate hikes that were imposed by most medical insurance providers, throughout the Nation.

In another NY Times article, ROBERT H. FRANK who is an economics professor at the Johnson Graduate School of Management at Cornell University covers the reality associated with too much political meddling with the current working model of Obama-care. you can read all about it at the following link:
Want to Get Rid of Obamacare? Be Careful What You Wish For.

It is clear that the two dominant parties are going to fight over the implementation of healthcare policies. At 17.5% of the current  GDP, there is too much money in this basket for any lobbyist to ignore. Will the new administration and the GOP controlled Congress and Senate be able to implement a solution that will serve our national needs, the needs of the people? Is there truly a reasonable solution, other than a single-payer system that can fix the system?

(Click on image to enlarge)


I highly recommend looking at the National Chart-book of Health Care Prices, published in 2016 by the Healthcare Cost Institute. The report shows the distribution across all individual states for specific medical treatment. This is a perfect example of "one nation divided under GOP"...

References:

Your comments are welcome. Please share with your friends and relatives, by clicking on the icon(s) of your favorite social network.

All the best and happy holidays!

--Dr. Flywheel

Monday, December 19, 2016

Who is Going to Watch the Government?
The Future of Journalism


Watch this video. In spite of the sad reality and the seriousness of the subject matter, this video becomes funnier by the minute...

--Dr. Flywheel

Saturday, December 17, 2016

Is it Truly the End of the "American Dream"?

Lately there has been a lot of talk about the end of the "American Dream", namely the ability of younger generations to climb up the economic ladder and do better than their parents generation. It seems like populist campaign slogans like Donald Trump's "Make America Great Again" resonated well with people who voted in the last Presidential Election. However, beyond the political debates and the spin doctor speeches, is there real reason to believe that there facts behind the perception by majority of Americans that the economic future of their children is gradually fading away?

Are there facts behind the public notion that income inequality is rising to the point that a new oligarchy is replacing Government, by owning most of the wealth in our country?



 A freshly published research paper by the NATIONAL BUREAU OF ECONOMIC RESEARCH, may shed better light on debated facts. The paper authors: Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, are world renowned researchers, who are known for their meticulous studies of complex economic issues.

The title of this study is:
DISTRIBUTIONAL NATIONAL ACCOUNTS:
METHODS AND ESTIMATES FOR THE UNITED STATES

Here is the paper Abstract:

This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.

Below are some of the more meaningful charts, showing the income distribution trends of the bottom 50% of American tax payers, vs. the top 10% vs. the top 1%.  You can click on each one of the images below to enlarge the details.






I highly recommend reading the full report, which is available in PDF format at this link:
http://gabriel-zucman.eu/files/PSZ2016.pdf

Your comments are welcome. Please share with your friends and relatives, by clicking on the icon(s) of your favorite social network.

All the best.

--Dr Flywheel

Wednesday, December 14, 2016

Diane Bryant joining United Technologies Board of Directors

According to an article in PR Newswire Diane Bryant, Of Intel Corporation, To Join United Technologies Board Of Directors effective January 1, 2017.


Apparently, Intel Corp. brisk Data Center business is running so extremely well, leaving Intel's top executives with plenty of spare time to make money on the side.

--Dr. Flywheel


Tuesday, December 13, 2016

Wave of the Future -- Be Your Own Boss

In July 2013, Stanford University published a report regarding the economic effects of the U.S. workforce aging. Though the report does not directly address causality, it is not a new revelation that companies continue to eject employees who are paid at the upper-end of the pay-scale, in order to show more "beautiful" numbers on the quarterly reports, without regard to maintaining functionality or productivity. Cannibalization of the workforce is an easy way for corporate management to retain the stock value in times when their lack of insight and risk aversion seem to rule the day, and their resulting ability to demonstrate growth are close to nil.

The enormous gap between top management compensation and worker compensation entices company executives to focus on their bonuses and "golden parachute" exit plans by putting the business emphasis on short-term financial reports, frequently at the cost of risking the stability and long term future of the business. Too many times we see a publicly traded company that demonstrates long-term positive income stream, however lacks a daily claim for short-term growth, being considered a stock market failure.

The prediction of flat growth curve in world economy for the next decade and beyond has been discussed in many newspaper articles and books; therefore I will not cover this issue here. The common factor coming out of most report published on these subjects is that employers will not continue to offer generous benefits plans on top of increasingly higher salaries to their employees and most companies will resort to cost cutting measures including automation and reduced in-house employment.

For those of you who are willing to exercise free will and take some risk there is the avenue of self-employment. The charts below (taken from the Stanford Report) demonstrate that the future is leading us into this direction, whether we like it or not.

(click on the diagram to enlarge)


The most striking information that I learned from the last two years of studying the subject, is that it looks like the U.S. and the rest of the developed nations are going to face a shortage of skilled labor force over the next decade or two, due to the massive retirement of the Baby Boomer generation. This irreversible demographic trend will present us with some upheaval, as well as a lot of new opportunities, for those who are willing to pursue them. I highly recommend reading the report composed by the Conference Board at this link: What Labor Shortages Mean for Your Business.

The maps below show how skilled labor demand, due to major demographic changes are going to affect the job market for continental U.S.

(Click on image to enlarge)


Skill level and ability to put common sense into a complex business situation is typically better handled by older and more experienced workers. If company executives are getting rid of older employees in order to cut on payroll and employee benefit programs today, they may find themselves in trouble tomorrow.

The lack of long-term perspectives and practical experience gathered over the years, gives older employees a business advantage that cannot be easily matched by younger and inexperienced employees. This fact can be easily established when reviewing all recent job listings on the market--employers are looking for "experienced" employees, yet expect them to also be young, cheap, and peppy all at the same time. This "wishful thinking" approach will not stand the test of reality for very long. Employers will get what they pay for.

I contend that what this situation translates to is creation of new opportunities for experienced workers who are adept and highly productive and are wiling to forgo the typical corporate employee benefit plans in favor of high hourly wage and independence from any particular employer. In other words--highly compensated freelance work.


Click on the above to view TED Talk video, covering skilled labor shortages on YouTube

For those of you who are interested in reading the full Stanford report, it is available at: THE AGING US WORKFORCE -- A Chartbook of Demographic Shifts
Your comments are welcome.

All the best.

Sunday, December 4, 2016

Populism is no Cure for Cancer
Long Term Unemployment is Here to Stay

The focus of this article is on Long Term Unemployment and the demographic forces that have shaped and will continue shaping the domestic U.S. economy in the years to come. Population demographics presents us with facts that are almost as sound as the laws of physics. Demographic trends cannot be denied by politicians, unlike climate change theories.

During the last U.S. National elections and particularly after the 2016 Presidential elections, the issue of Globalization and domestic job creation took center stage. I decided to examine if besides (significant no less) issues like global cost of labor, overproduction, planned obsolescence and deflationary pressures on the world economy, there are other factors affecting employment. Due to lack of quantifiable information, I also chose to defer examination of the latest AI scare messages, coming from Stephen Hawking:
Instead, I tried to understand what is the underlying dominant factor, affecting the U.S. domestic job market.

The official unemployment statistics, tracked by the U.S. Government, are shown in the interactive chart below. As of November 2016 the tracked unemployment rate is measured at 4.6%. The unemployment statistics shown in the graph are used to evaluate the degree of the U.S. job market tightness and is utilized by the Federal Reserve Bank (among other factors) as an indicator for controlling interest rates and keeping inflation in check. It is however, clear that the measured values only represents short term unemployment which is limited to a running window of 26-week. The 26-week period is dictated by the terms of the U.S. national unemployment insurance program and the data tracked by this program only covers active unemployment claims. Currently there is no reliable way to track the unemployment term of workers who exhausted their 26-week benefits, because they are not required to report their status and the U.S. Government has no means to feel this information gap. 


In an article published in U.S. News, entitled "Long-Term Unemployment: The Economy's 'Secret Cancer'", Andrew Soergel wrote about the reality of today's job market and the distorted statistics that hides a severely endemic problem namely, long term unemployment. In his article, Soergel quotes the results of the recent Harris Poll of 1,500 people unemployed Americans, with the poll results shedding new light on factors that are typically not reflected in officially published job market statistics. For example, the majority of those surveyed in Harris Poll have had no job interviews since 2014. To the question, “When was the last time you went on an interview?” 
  • 51 percent said 2014 or before
  • 6 percent said Jan, Feb, March 2015
  • 5 percent said April, May, June 2015
  • 9 percent said July, August, Sep 2015
  • 8 percent said Oct, Nov, Dec 2015
  • 18 percent said Jan, Feb, March 2016
  • 3 percent said April, May 2016
Even though the reality reflected from the surveyed answers should not come as a big surprise to most of us, I still highly recommend reading the Harris report summary, retrievable through the links provided at the bottom of this article.

Regardless of populist rhetoric, of which we hear an earful after the 2016 November elections, I believe that none of the current political parties, or for that matter, no U.S. President, can offer a practical solution that will provide a lasting cure to long term unemployment. Not without enacting fundamental changes that would be unpalatable to most of the U.S. population. Not unless a major crisis like a major epidemic or WW-III situation develops.

The underlying facts leading to long-term unemployment as a permanent feature of the American (and the world) economy are derived from demographic growth limits. The golden age of the American economy came after WW-II, when the U.S. industry was fully mobilized, women entered the job market in significant numbers and the decimated economies of Europe and Japan depended on U.S. financing through the Marshall Plan. Economic growth came from the tremendous expansion of demand due to high birth rate of a young worker population and the consequent generation of commodities, goods, and services, consumed by the ever-rising tidal wave of the Baby Boomer generation.


Expansion of demand for a higher standard of living allowed domestic markets to continue growing and as long as younger population continued to surge behind the leading edge. However, this growth could not be sustained forever, since at some point in time, after several decades of dominating the labor market, the baby Boomers began retiring. The high birth rate of the Boomers era was not repeated in subsequent years and as a result, as a the chart below demonstrates, 25% of the labor force will be over 55 years old by 2020. This represents more than double the aging population growth rate, compared to 1990.


The interesting phenomenon in the U.S. doemestic job market is that over the years we are witnessing a constant decline of job-to-job transitions. An article entitled "Job-to-Job Transitions in an Evolving Labor Market", published in FRBSF ECONOMIC LETTER co-authors  CANYON BOSLER and NICOLAS PETROSKY-NADEAU claim that statistical evidence indicates that the U.S. domestic labor force becomes gradually less portable as the years go by. This is an interesting phenomenon, since the "pride and joy" of various factions in American politics, claiming the superiority of the American economic system, was the argument of ultimate job market freedom and portability.


Even more interesting is the indication that job portability actually declined over the years, even faster for young workers, compared with their older peers. As we can see from the chart below, job portability for 35 year old workers was currently reduced to under two percent of the total workforce. Is this an indication that the vast majority of the jobs that the domestic American economy can produce are already taken? Who is going to support the needs of the aging population while the job market is ruled by stagnation of income, due to lack of competition and job portability?


Luckily, as Americans our job market stagnation are not as bad as they are in the rest of the developed world. In addition, as the chart below indicates, most of our aging population will not live as long as will the population of many other developed countries, like Japan, Germany, Italy, France and many others.

We could possibly thank our "free market" healthcare system and our stressful work life for shortening our life expectancy. At least from a contemporary perspective, supporting an even greater number of octogenarians to their last day on earth seems to be more of a Japanese and European problem than an American problem...


The Stanford Report provides an extensive coverage of the aging U.S. domestic workforce with information that is easy to read and digest. I highly recommend fetching the PDF version of the report through the link provided at the bottom of this article.

As the chart below indicates, with about two million Americans living beyond their 90's by 2050 and over 50 million people between the age of 65 and 85, the American economy is not ready for the imminent future.


Note that you can enlarge the detail level of all images provided in this article, by clicking on them.

Your ideas, comments and reservations are welcome. If you like this article, please share with your friends and relatives on your favorite social networks. Click on the social network icon of your choice, located below each article, for sharing content of articles on this web site.

All the best.

--Dr. Flywheel

References:
Related:

Friday, December 2, 2016

One Large Step for Mankind- the Megaprocessor

In the Summer of 1975 I built my first computer, using TTL logic parts (Small Scale Integration). Though my 9-bit creation was not very useful for practical purposes, I was very proud of my achievement when I finally made it to work and learned a lot from the design and building process. This project, eventually led me to focusing on computer architecture and research computer technology on a more professional basis.

Nowadays that microprocessors are so ubiquitous, very few people actually know how they work. One person made his life goal to bring this knowledge to the masses. James Newman, a Brit living in Cambridge, England committed may years of his life and about $50,000 to build a complete 16-bit computer, made of discrete transistors, resistors, LEDs and other components. The Megacomputer as James refers to his creation, weighs about 500 Kg and consists of 42,400 transistors, 50,500 resistors, 10,500 LEDs, and 272,300 hand-soldered joints. The Megacomputer is a fully functional machine that is running at the whooping clock frequency of 8 KHz while performing 16-bit integer calculations.

For those of you who can appreciate OCD, here is a YouTube video in which James is talking about his creation:



For complete information about the Megaprocessor, refer to this web site:
http://megaprocessor.com/

Have fun.

--Dr. Flywheel