This Week in Ridiculous Regulations

The coronavirus outbreak began to infect financial markets as well as people, with stock markets having their worst week since at least 2008. The number of new regulations in 2020 also reached 500 on Friday. Meanwhile, agencies issued new final regulations ranging from portable bed rails to Canada goose permits.

On to the data:

  • Last week, 86 new final regulations were published in the Federal Register, after 53 the previous week.
  • That’s the equivalent of a new regulation every one hour and 57 minutes.
  • Federal agencies have issued 500 final regulations in 2020. At that pace, there will be 3,125 new final regulations. Last year’s total was 2,964 regulations.
  • There were also 57 proposed regulations in the Federal Register last week, for a total of 363 on the year. At that pace, there will be 2,269 new proposed regulations in 2020. Last year’s total was 2,106 proposed regulations.
  • Last week, agencies published 494 notices, for a total of 3,445 in 2020. At that pace, there will be 21,532 new notices this year. Last year’s total was 21,804.
  • Last week, 1,938 new pages were added to the Federal Register, after 1,551 pages the previous week.
  • The 2020 Federal Register totals 12,206 pages. It is on pace for 73,343 pages. The 2019 total was 76,288 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Two such rules have been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations ranges from net savings of between $180 million and $4.69 billion. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 16 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 97 new rules affect small businesses; six of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new final regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

The Minimum Wage Tax Increase

By far the most common criticism of minimum wages is that they cost jobs. This is incomplete—the data often show smaller job losses than one would expect after minimum wages go up. This is because workers earn more than wages—they also get non-wage pay such as insurance, free food and parking, and more. When regulations cause wage pay to go up, employers cut non-wage pay to pay for it. Job cuts happen, but they tend to be a last resort. I recently wrote a paper on these underappreciated tradeoffs.

The most underappreciated minimum wage tradeoff is a tax increase on the poor, which for some people would exceed $2,000. When untaxed non-wage pay is converted to taxable wages, workers pay higher taxes, without necessarily making more money. If a $15 minimum wage passes, it could cost some workers more than $2,000 in taxes, in addition to all the other non-wage pay cuts that come with a minimum wage increase.

I try to shine some light on this in an op-ed for Inside Sources:

To afford higher wages, employers cut back on other benefits, like health insurance, workplace leave flexibility, free meals, free parking or tuition reimbursement. That’s a real loss to workers, considering that non-wage pay is mostly tax-free.

By incentivizing employers to convert nonwage benefits to wages,  minimum wage advocates are, probably unknowingly, proposing a massive tax increase on the poor.

For some workers, this would mean a tax increase of up to $2,370 per year at a $15 per hour minimum wage. Depending on which state a worker lives in and other factors, shifting untaxed non-wage pay over to taxable wages could also expose some minimum wage earners to income tax liability, sales taxes and other taxes.

Read the whole thing here. My paper “Minimum Wages Have Tradeoffs” is here.

Book Review: A.J. Liebling – The Earl of Louisiana

Review of A.J. Liebling, The Earl of Louisiana (Baton Rouge: Louisiana State University Press, 1961)

A colorful book by a colorful author. I read this as preparation for a work event in New Orleans, which I had not previously visited. Liebling was a journalist for The New Yorker who was assigned to write about Earl Long’s 1959 campaign for governor of Louisiana. Liebling’s enthusiasm for food and drink were legendary, and his accounts of his and his interviewees’ restaurant meals are almost unbelievable. Earl Long, the younger brother of the legendary Huey Long, had a mental breakdown during the campaign and was forcibly institutionalized in Texas for a time before returning to the campaign trail.

Liebling gives a vivid portrait of Long. But he paints an even more vivid portrait of Louisianan politics and culture. As CEI founder and Louisiana native Fred Smith likes to say, people in Louisiana don’t expect their politicians to be corrupt; they insist upon it. The people Liebling meets, whether high-ranking officials or ordinary man-in-the-street types, speak to this truth, often hilariously so. Liebling draws frequent parallels between Louisiana’s political system and Middle Eastern oil dictatorships. There are obvious differences, but also enough parallels to give one pause.

Book Review: Steven Strogatz – Infinite Powers: How Calculus Reveals the Secrets of the Universe

Review of Steven Strogatz – Infinite Powers: How Calculus Reveals the Secrets of the Universe

This book is really, really good. It should be required supplemental reading for math teachers, who should assign relevant portions to their students. Most math pedagogy consists of memorizing procedures. It’s mostly how, with only a little bit of what or why. There is rarely much of any unifying theme that ties the separate problem-solving procedures together in a way that makes sense. Strogatz provides all that, and in a compelling way, complete with examples ranging from medicine to astronomy.

Strogatz also explains terminology, which is another common weak spot in classrooms. Why are calculus’ two main concepts called derivative and integrals? I didn’t learn that in undergrad. Nor in a high-quality graduate economics program. Instead, I learned it from Strogatz’s popular-level book in my late 30s.

Another fun bit of etymology is that the word “calculus” is derived some the world for rock. It shares a root with calcium, chalk, calcite, and other similar words. This is because in ancient times, people did their counting by sliding stones along an abacus’ strings.

The concept of infinity is key. Calculating the area of a circle is hard because of the curves. Slicing it into quarters, like a pizza, makes it a little easier. The wedges are kind of triangle-like, but there is still plenty of curved surface on the outside. Cutting into 8, 16, and 32 slices makes the curve progressively less important. Tending the number of slices towards infinity sends that tricky curved area towards zero. Long before infinity, it reaches deep decimal territory, where the accuracy of the calculation is good enough to satisfy even the most exacting engineers. Infinite parts are simpler than a complex whole. This view of infinity is the key to understanding calculus.

Differentiating is taking a complex whole, like a circle, and converting into many different parts, which are easier to calculate accurately. Derivatives are parts derived from a larger whole. Integrals take these differentiated parts and integrate them back together. Calculus is essentially the math of moving from a whole to its parts and back, as needed to accomplish the task at hand.

This is simple stuff that is so obvious to veteran instructors that they never bother to teach it to rookie students. This kind of larger context and purpose should be taught on day one of any course, and regularly reinforced as new material is introduced.

In high school, I spent months memorizing procedures for calculating sines and cosines, but never really learned much about their significance, or knew that they had anything to do with calculus. Moreover, why does it matter that the same curved shape is shifted horizontally? More than twenty years later, I finally learned why. The sine wave is interesting because of its continually changing slope. And a sine wave’s derivative is… it’s cosine. And now I have a greater appreciation of everything from the changing length of daylight during the seasons to how sound waves interact with each other. The rate of change in daylight as the calendar moves from solstice to equinox is a sine wave. The rate of change is slowest at the solstice (about 40 seconds), and fastest at the equinox (more than two minutes). Figuring out the rate of this change at any given point can be figuring out the derivative. In the special sine wave case, this is simple—just figure out the cosine.

Again, this is basic stuff that high schoolers deserve to know. GPAs would likely be measurably higher, and understanding measurably greater, by teaching a little bit more of this big-picture context and a little less rote memorization.

Needless to say, I will be reading Strogatz’s other books in short order. Infinite Powers would pair well with David Salsburg‘s The Lady Tasting Tea, which accomplishes a similar task with statistics.

This Week in Ridiculous Regulations

During the four-day week, Lawrence Tesler passed away. The underappreciated inventor created the cut, copy, and paste functions on computers. The Hair Club for Men also lost a client. Meanwhile, agencies issued new final regulations ranging from “biological products” to land erosion taxes.

On to the data:

  • Last week, 53 new final regulations were published in the Federal Register, after 66 the previous week.
  • That’s the equivalent of a new regulation every three hours and 10 minutes.
  • Federal agencies have issued 414 final regulations in 2020. At that pace, there will be 2,958 new final regulations. Last year’s total was 2,964 regulations.
  • There were also 41 proposed regulations in the Federal Register last week, for a total of 306 on the year. At that pace, there will be 2,186 new proposed regulations in 2020. Last year’s total was 2,106 proposed regulations.
  • Last week, agencies published 358 notices, for a total of 2,951 in 2020. At that pace, there will be 21,079 new notices this year. Last year’s total was 21,804.
  • Last week, 1,551 new pages were added to the Federal Register, after 1,271 pages the previous week.
  • The 2020 Federal Register totals 10,268 pages. It is on pace for 73,343 pages. The 2019 total was 70,250 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. One such rule has been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations is currently zero. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 13 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 81 new rules affect small businesses; four of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new final regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

This Week in Ridiculous Regulations

Spring Training began for all 30 Major League Baseball teams, bringing joy across the nation. Meanwhile, agencies issued new final regulations ranging from grains ounce equivalence to inactive fishing boats.

On to the data:

  • Last week, 66 new final regulations were published in the Federal Register, after 60 the previous week.
  • That’s the equivalent of a new regulation every two hours and 33 minutes.
  • Federal agencies have issued 361 final regulations in 2020. At that pace, there will be 2,912 new final regulations. Last year’s total was 2,964 regulations.
  • There were also 61 proposed regulations in the Federal Register last week, for a total of 265 on the year. At that pace, there will be 2,138 new proposed regulations in 2020. Last year’s total was 2,106 proposed regulations.
  • Last week, agencies published 410 notices, for a total of 2,593 in 2020. At that pace, there will be 20,912 new notices this year. Last year’s total was 21,804.
  • Last week, 1,271 new pages were added to the Federal Register, after 1,536 pages the previous week.
  • The 2020 Federal Register totals 8,715 pages. It is on pace for 70,283 pages. The 2019 total was 70,250 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. One such rule has been published this year. Four such rules were published in 2019.
  • The running cost tally for 2020’s economically significant regulations is currently zero. 2019’s total ranges from net savings of $350 million to $650 million, mostly from estimated savings on federal spending. The exact number depends on discount rates and other assumptions.
  • Agencies have published 11 final rules meeting the broader definition of “significant” so far this year. 2019’s total was 66 significant final rules.
  • So far in 2020, 71 new rules affect small businesses; four of them are classified as significant. 2019’s totals were 501 rules affecting small businesses, with 22 of them significant.

Highlights from last week’s new final regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

The Spectrum Case against AB5

California’s Assembly Bill 5 (AB5) is intended to classify more independent contractors as formal employees. The goal is for workers to get higher wages and benefits. It is aimed mostly at rideshare and food delivery companies like Uber, Lyft, and GrubHub, but thousands of other workers are losing their jobs in other fields from journalism to entertainment to business consultants. These unintended consequences are almost exactly what Ryan Radia predicted in a CEI study published shortly before AB5 came into effect.

Part of AB5’s problem is that it comes from a fundamental misunderstanding of the labor market. It treats workers as either contractors or formal employees, but that is not an either/or question. The labor market is a wide-ranging spectrum, not a simple binary. There are all kinds of in-betweens, nuances, and complications.

AB5 uses what is called an ABC test to determine if a worker is an independent contractor or a formal employee. It consists of three questions:

  1. How closely is each worker supervised or directed? Do they check in with a boss every day? Or do they work mostly on their own and have wide discretion on how to do their job?
  2. Is their work part of the company’s core business? For an Uber driver, the answer is yes. For an accountant or a maintenance worker, maybe not.
  3. Is the hiring company the contractor’s sole or dominant customer? Is the job mostly in the contractor’s area of specialty or expertise?

The bill text is vaguely worded. In practice, nearly any freelancer qualifies as a formal employee under AB5. But a lot of job arrangements are somewhere in between.

Legislators have come up with two categories to describe a spectrum with countless categories. AB5 is a clunky piece of legislation, and thousands of workers are paying the price.

Take actors, for a classic California example. Acting is a classic gig-oriented job. But some actors have steady gigs. Filming a one-off movie or commercial is almost surely in the independent contractor category. But what if an actor has repeat dealings with the same studio? In the old days, many actors had exclusive contracts with a studio, and were likely employees under most reasonable definitions. But what if an actor has a non-exclusive contract but still appears in multiple films in the same movie franchise, like the Marvel Cinematic Universe? Where should that fall on the ABC test? It could go either way. Under AB5, politicians make the decision, not the employee.

What if an actor works on two or more unrelated films with different producers and directors, but that are produced by the same studio? Or multiple movies with the same production team, but released by different studios? Are those treated differently than the Marvel movie actor under the ABC test? Workers don’t get to make that choice under AB5.

What if an actor becomes a regular go-to person for an advertising agency and does regular commercials for them, but never signs a contract and does other acting work, too? At what point on this broad spectrum does the actor pass from one category to the other? It will take years of case-by-case political decisions, and likely many lawsuits to give clarity to AB5’s broad wording. Many workers just don’t have the time or money to be without work while these new problems wind through the court system.

And it’s more than Hollywood actors. The Los Angeles Times reports about how AB5 is affecting fine artists:

We received more than 120 responses from artists across California — jazz and classical musicians, directors of arts nonprofits, magicians, costume designers, actors, a burlesque dancer and freelance food stylist, among others.

The overwhelming majority said AB5 is hurting their careers. Many are unsure how to comply with the law. Others are cutting back on programming or canceling services because of the cost required to convert independent contractors to employees.

This is the same spectrum problem. Rather than trying to fit real-world people into tidy regulatory categories, policy should allow workers to choose their own work arrangements.

The old workplace ideal of the 1950s doesn’t apply in the 2020s. Back then, the ideal was to have a Monday-to-Friday job, first shift, always at the same office, with everyone on the same company insurance and pension plan. And where possible, the gig was often intended to be for life, or at least until retirement.

Today’s workers want more diverse choices than their parents and grandparents had. Some people like the traditional model; it’s still there for them. Other people like being able to work from home or from a café some days. Other people like the kinds of jobs available in big cities like New York, but don’t necessarily want to live there. According to GlobalWorkplaceAnalytics.com, the number of telecommuters increased 173 percent from 2005 to 2019.

Not everyone wants to work traditional hours. For people with young kids or other family responsibilities, or who are in school, that is often not possible. Other workers do want a 40-hour schedule, but prefer to work four 10-hour days instead of five eight-hour days to get an extra day at home with kids.

Many rideshare drivers are retirees who want to have something to do, but don’t want scheduled hours. Others are people who are between jobs and use ridesharing as a way to make ends meet while they look for their next 9-to-5 gig. AB5’s rigid categorization hurts these workers at various places along the contractor-employee spectrum.

Other workers want more flexibility with their benefits. Don’t like the company health insurance plan? Would you prefer a different retirement savings plan? Tough, say AB5 supporters. Some workers prefer higher wages with fewer benefits. Other workers prefer the opposite. It is much more difficult for employers to accommodate diverse preferences under AB5.

That’s the main reason why independent contracting is becoming more popular. The old model doesn’t fit everybody, so everybody shouldn’t be fit into it. Contractors can choose an insurance and retirement plan that fits their family’s needs and that they can take with them wherever their career takes them. Under the traditional model, if you lose your job, you lose your insurance at the worst possible time. Formal employees who frequently change jobs have to endure hours of unnecessary paperwork changing benefit plans. Independent contractors are spared those headaches.

Californians are learning the hard way that the labor market is a diverse spectrum, not a simplistic two-lump model of contractors and formal employees. Unfortunately, the rest of the country might soon  copy California’s mistake. New York is mulling its own version of AB5. The House of Representatives recently passed the PRO Act, which contains a federal version of AB5’s ABC test. After seeing California’s experiment, hopefully legislators will reconsider.