Minimum wage and overtime pay regulations

June 18th, 2017


The Minimum Wage and Overtime Pay have opposite effects. Minimum Wage laws encourage concentrating work in less people, while Overtime Pay penalises the concentrating of work. For overtime pay laws to help the worker, you have to believe that businesses benefit from concentrating work. This could be due to labor productivity and experience curve effects – overtime laws would then be decreasing labor productivity in order that more of the gains go to the worker instead of the business.

Minimum Wage

Supply and Demand

By mandating that the hourly wage be above $5 dollars, the government affects businesses that are currently paying workers $4 an hour. Within the framework of supply and demand curves, where price and quantity are the only considerations, businesses can either

  1. Pay workers $5 instead, and make less profit
  2. Fire those workers

(2) is a negative effect, while (1) is a zero-sum effect.  (1) is the desired effect, and (2) is the cost of achieving that goal.

Other possibilities

Outside of supply and demand, there are more possibilities. Businesses can find ways to increase wages, by either investing in training or in more automation.

Assuming that businesses were maximising profitability before the change, in the immediate term the profitability of businesses is expected to go down – otherwise the business would have been irrational to not have invested in training or more automation before the regulatory change.

However, I can imagine a scenario in which this leads to a better longer-term outcome. If the low productivity environment is a coordination problem, where everyone wants to invest in productivity but the first to invest is severely punished by poaching and copycats, then you might find that adding a constraint ends up boosting productivity in the longer run. Let’s say a factory wants to train its workers better, but knows that those better workers would then be stolen by competitors – then yes it would be possible for a raise in the minimum wage to cause everyone to invest in education and training at the same time and help the companies get out of that trap. This is the more complex scenario, however, and if you choose to believe this will happen then that burden of proof is on you.

Overtime Pay

Supply and Demand

Minimum wage regulations concern the absolute level of wages. Overtime regulations are about the relative levels of wages for regular and overtime work. Before wages adjust, it acts as a higher price floor for overtime work. Wages will adjust – we expect regular wages to go down and overtime wages to go up, and regular employment to go up while overtime employment to go down.

Overtime pay laws have an effect opposite that of the minimum wage. Whereas the minimum wage encourages you to concentrate labor costs in less people, overtime wages encourage you to spread the labor out amongst more people. Thus

  1. Pay workers overtime and maintain the same level of work concentration
  2. Hire more workers and spread out the work amongst more people

Other possibilities

For the same reasons as above, in the immediate term profitability is expected to go down. Spreading out work decreases productivity – experience curve effects run in the other direction. You are forcing businesses to pay more in order to hold on to labor productivity. A manager that wanted to invest in training one employee to be more productive might now choose to employ two untrained employees instead, as having the trained employee work longer and make more money at a higher rate is now no longer an option. With regard to experience curve effects, (1) is the desired effect, and (2) is the cost of achieving that goal.

Given that overtime pay penalises the concentration of work, I can’t imagine a scenario in which it encourages investment in labor productivity. Training is a fixed cost per person, and its benefits accrue to the company on a per person basis – overtime pay forces each person to have a lower utilisation than before. This means that in every scenario, training has now become a less effective choice than before.

Generating a uniform distribution

May 25th, 2017

If you want to get N points uniformly distributed on some interval, but want to generate the randomness point by point.

We can teach children to be more effectively empirical

May 22nd, 2017

We can teach children to smell bullshit – Vox

A good critical thinker is able to keep track of assumptions made when evaluating evidence, and over time builds up a collection of powerful and general assumptions that accelerate their accurate modelling of reality.

Double-blind tests make the least assumptions, but are not the mechanism by which most knowledge is obtained. Teaching children to avoid assumptions altogether is misguided – what they need is to introspect and make more aspects of their own thinking explicit and hence improvable.

Introspecting into motivations and detecting unrealistic wishful thinking is a large part of this. For example, someone with a privileged background has to account for their own propensity to adopt meritocratic world views that tell them they deserve what they have, and someone with a disadvantaged background has to be cautious about attributing too much to bad luck.

Powerful implicit motivations feed the spread of bullshit. Why is bullshit so attractive? What makes something feel like a good explanation? Confirmation of existing beliefs? Simplification of reality? These have to be balanced against “changing your mind” and “accepting that the world is complex and messy”, depending on the strength of the evidence.

Nested condition variables are fun!

May 19th, 2017

That release and acquire surrounding the wait are how you allow one of the timelines to start slipping relative to the other one.

Condition variables

Managing cost centers by making them profit centers

May 16th, 2017

Why Amazon is eating the world

Amazon benefits not only from the revenue from externalising its internal services,  but also from the efficiency and oversight induced as a result.

This is similar to the export-driven growth described in Joe Studwell’s How Asia Works – East Asian countries gave domestic industries protected markets, conditional on their ability to export and hence prove that they were making goods that were competitive in international markets.

Housing transaction costs are really high!

April 22nd, 2017

For Singapore, it’s around 5%. In Taiwan, it’s north of 10%. This is a ridiculous hurdle for an investment. If you bought an apartment in Singapore and pay a 20% downpayment, transaction costs wipe out 5% of asset value right away, setting you back 25% of your equity.

Cython is awesome

January 27th, 2017

Wrote a Cython program to analyse a board game. 2 trillion combinations counted in ~30min on one 4GHz i7 core. 113 lines of Cython code. I’ve forgotten how fast C is.

Cheap entertainment and unmotivated young men

November 24th, 2016


Prior to 1985, leisure patterns were increasing for both higher-educated and lower-educated workers. So–for both men and women. So, men were taking more leisure, usually by working less, in the 1960s and 1970s. Women were taking more leisure by working more in the market but working much less in the home sector. Kind of like we were talking about before–the increases in home production technology might have freed up some time for women to both work more and take more leisure. So, higher skilled and lower skilled–at least measured by education–higher educated and lower educated men and women were tracking each other very closely in their leisure time, up through about 1985. After 1985, that breaks. And when it breaks, it’s right around the same time period–people have tried to estimate it–that the skill premium started to change. And this isn’t my work but work by Larry Katz and David Autor and Kevin Murphy–a whole bunch of people show that the earnings of the higher educated have been growing faster. So, Mark and I have been puzzled: Do we believe that income effects or substitution effects are important in determining labor supply? What do I mean? If your wage goes up, do you work more or less?

It scares me how much of this I see in myself (the video games, not the education). I spend a lot of time online, and much of the entertainment I consume on a daily basis is dirt cheap. I think back to when I was single in Hong Kong and working on my startup – the very thing that allowed me to tolerate such low expenditure was the cheap/free entertainment. 80 hours of Skyrim, watching the entirety of Band of Brothers in a week.

Corporate Intellectualism

November 19th, 2016

Corporate Intellectualism is a bizarre imitation of Academic Intellectualism, embracing badly constructed abstractions and peddling platitudes which confer a vague sense of insight and understanding but do nothing to improve the quality of judgments.

Popular business education overemphasises Thought Leadership, the addition of structure to problems and facilitating effective analysis. It’s pretty high up the Maslow’s hierarchy, and rarely what is most needed. There are many more basic yet more important activities involved in running a business:

  • fostering a culture of accountability, with explicit commitments and commensurate payoffs
  • defining job responsibilities more robustly
  • formulating clear policy about day-to-day actions
  • encouraging goal ownership and intrinsic quality control
  • being aware of the nature of engagement and motivation

All those are difficult to get right, more explicit, addressable, and more directly connected to success.

Throat clearing

October 18th, 2016

My written voice is a separate part of my consciousness. It slumbers for months at a stretch, roused by emotional outbursts every few months. Others are driven to drink, I am driven to write.

I have the impulse to write about the follies of others, how clear things are to me and how hopelessly muddled it is to them. It isn’t a pretty impulse, and writing was easier when I was younger and less concerned with appearances. That voice IS genuine – underneath I am every bit as arrogant and unmeasured as what I sound like when I speak with my loudest voice.

With age, I have lost space. The known world shrank and shrank as the unknown beyond proved its limitless depths again and again. I know so little, so little is certain. The simple logic games and puzzles still delight me, but appear to me as nostalgic toys and not the bludgeoning weapons I once thought they were. Words matter only if people care. Words persist only if they are supported by clarity of thought. Without the company of minds for which clarity is a virtue, these two goals tug in different directions.

The resulting strain makes for much confusion. I am no sophist, I will not corrupt my logic just so you will listen. I am no hermit, I have not the independence of mind to hide away for decades nursing a novel proof. Such is my human condition.