What did anyone think would happen to social care with the national living wage?

This is very bad apparently, really, terribly bad:

The cost of social care rocketed over the last year, even as the proportion of services ranked good or outstanding fell, according to a new analysis.

Social care services directory TrustedCare.co.uk found that the price of a week in a care home jumped by almost a quarter over the last year, from an average of £557.86 a week to £686.32, while the cost of a nursing home rose more than a third from £692.17 per week to £924.82. The price per hour of care visits also rose, from £15.01 to £17.02.

The analysis was based on data from providers registered on TrustedCare, as well as calls made by its researchers to more than 100 services in each English county over the last four months.

Social care in the UK is provided through a mixture of individuals and government payments. However, concerns are growing over the system’s ability to cope with an ageing population and pressures on local government and NHS budgets.

TrustedCare’s researchers also looked at data from the Care Quality Commission (CQC), which regulates and monitors social care, and found a 9% drop in the proportion of services ranked as either good or outstanding from 88.9% in 2015 to 79.8% over the past year.

Social care is one of those things where a very large portion of the costs is the minimum wage - and also where a very large portion of the people doing it make minimum wage.

Therefore a rise in the minimum wage is going to bite here and bite hard. And when a minimum wage level does bite there are only four options. Profits, prices, productivity and people.

We raise the costs of performing some activity - something has to give to pay for that. In the public sector there are no profits, thus they cannot take the strain. No one has offered these services more money so public sector prices cannot change. Productivity of course cannot be changed because after years of austerity and decades of pressure on the public sector it all works as productively as possible. There simply is no room for improvement as every Labour party member and every union official tells us.

Thus what we do get - a rise in that portion of the costs carried by the private sector and a decline in either the number of people providing the service or the time in which they have the ability to provide it.

The thing is this is obviously what will happen when a wage rise in this sector is mandated. So why the Hell is everyone surprised when it does?

But what about that Cuban health care, eh?

We're not the only people to have muttered that there seems to be something not quite right with various of the statistics about Cuba floating around out there. For example, the World Bank estimations of the economy seem to have the place about as rich as Croatia, even near the Czech Republic. And when we hear that Cubans are struggling to find a plate of beans and rice a day that just doesn't seem believable. Or that the island is richer than Costa Rica, again, not something really according to other evidence.

Or take that vaunted health care system with its incredibly low infant mortality rate. Well, yes:

Normally, the ratio of late fetal deaths to early neonatal deaths should be more or less constant across space. In the PERISTAT data (the one that best divides those deaths), most countries have a ratio of late fetal to early neonatal deaths ranging from 1.04 to 3.03. Cuba has a ratio of more than 6. This is pretty much a clear of data manipulation.

They're lying about the numbers that is. And even the World Bank doesn't believe the World Bank's GDP numbers:

Out of 30 countries, Cuba is the 25th, with Guatemala, Guayana, Nicaragua, Honduras y Haiti behind.

Out of 12 Caribbean islands, Cuba is the 11th, with only Haiti behind.

On the one hand, we have World Bank’s estimate, that WB itself doubts. On the other hand, we have estimates from Ward-Devereux, Maddison, and UNCP. These three sources seem to approximately coincide on what the actual Cuba GDP is. This triple coincidence, versus the questionable values from WB, would make us choose the former values, and so accept that Cuba is a poor country within Latin America.

What everyone does seem to forget is that all such statistics are provided to the international bodies by the domestic government. And Cuba is a communist dictatorship, recall? 

As the system unravels, for unravel it will, we will find that ever more numbers are simply outright lies.


We simply do not understand this enthusiasm for minimum alcohol pricing

It's rather Chris Snowdon over at the IEA who is the policy wonk to talk to on the issue of minimum pricing for alcohol. The general view seeming to be that the public health wallahs have got the bit between their teeth and they're not going to listen to anyone else on the matter at all.

For us, over and above the more normal points about being liberals, so therefore everyone gets to do what they want to do even at risk to their own health, the bit we cannot understand here is the insane economics of the proposal

New evidence commissioned by the government from its own health advisers has concluded that ministers should introduce minimum unit pricing of alcohol to tackle the grim medical, economic and social toll of drink-related harm.

The in-depth study has found that drink is now the biggest killer of people aged between 15 and 49 in England. It accounts for 167,000 years of lost productivity every year and is a factor in more than 200 different illnesses.

It leads to such huge harm that the lost economic activity it produces, through early death and disability among workers, is more than that for the 10 most common cancers combined, the review found.

Its publication, by Public Health England (PHE), is an embarrassment for ministers because it says they should embrace a policy that they have rejected due to an alleged lack of evidence.

Assume, as we don't, that these dire predictions of looming disaster are correct. And also ignore the point that if people wish to drink until their livers explode instead of surviving to drool the last years of their lives away in a nursing home well, that's up to them. Let us follow the argument to where raising prices will reduce intake - we are really very sure that this is the way demand curves work, that people buy less of more expensive things (something the minimum wage fanatics would be advised to understand).

We are thus going to, deliberately, make alcohol more expensive. Why would we do this with minimum pricing and not tax rises? For consider the effect of the two.

A tax rise raises the price. And the tax then flows into government coffers enabling either more spending or, if people are being sensible, less taxation of other nice things. Seems like a reasonable result.

Minimum pricing raises the price that a manufacturer must charge. But it does not increase said manufacturers' costs in the slightest. Minimum pricing thus fattens the profit margins of the producing industry. And what possible public purpose is served by making one specific industry more profitable?

That is, even if all of the lead up to, the logic supporting, something must be done about booze pricing, minimum pricing is still the wrong answer. So, why is it that so many are gaga for it?  

If we were in a more corrupt country than Britain is we would assume that PHE was in fact a false flag operation paid for by the manufacturers of cheap gut rot - yes, some of us have lived and worked in places where that would be the logical assumption. Britain isn't that corrupt, it's, amazing though it may seem, one of the least corrupt places on the planet. Thus PHE are simply in error, victims of some strange groupthink perhaps.

But why is it that their solution involves fattening profit margins not the Treasury?

And here is Chris Snowdon on the subject:

At least taxes have the virtue of financing government expenditure. Minimum pricing, by contrast, is a deadweight cost. It raises prices and clobbers the poor while benefiting no one. That is why governments of both left and right have quite sensibly rejected it.

Quite is. So why is minimum pricing so bloody popular?

Shelter commits Worstall's Fallacy once again

One of us has been banging on about this so often and for so long that it has been termed Worstall's Fallacy. The point being that we cannot decide how much more we must do about something until we account for what we already do about that thing.

For example, the American poverty numbers are calculated before taking account of much of what is done to reduce poverty. Only cash income is considered. But much American poverty alleviation is delivered through the tax system (the EITC) or goods and services in kind (Medicaid, Section 8, Snap and so on). The published official poverty rate is thus around 14% of the population, the number after alleviation more like 4% or so.

We cannot then go around shouting that 14% in poverty is terrible thus we must spend more on the EITC, Snap, Medicaid and Section 8. It may well be true that more should be spent - possibly even less - but the relevant number to be looking at is the 4%, after the effects of what is already done.

And so it is with Shelter's estimations of how many homeless people there are in the UK. They tells us there are 250,000 unfortunates in that position:More than a quarter of a million people are homeless in England, an analysis of the latest official figures suggests.

For the very first time, Shelter has totted up the official statistics from four different forms of recorded homelessness.

These were:

national government statistics on rough sleepers
statistics on those in temporary accommodation
the number of people housed in hostels
the number of people waiting to be housed by social services departments (obtained through Freedom of Information requests)

Temporary accommodation, hostels, those are things we do about homelessness as most of us understand the word - that rough sleeping. This is to commit Worstall's Fallacy, to count as not yet done the very things we are doing to solve the problem.

It's entirely true that hostel living isn't as desirable as a safe and secure home to call one's own. But it's an entirely viable solution to rough sleeping, or homelessness.

The importance of the fallacy is that only by proper measurement can we work out what the next step in our solution should be. Absent serious mental health or addiction problems (and the occasional expression of choice) the problem of rough sleeping is largely solved. For we do have those hostels and people don't have to sleep on the streets, something that was not true say two centuries ago.

What we don't have is those safe and secure homes that all can call their own. And thus that is the problem that should be concentrated upon. And fortunately we know the solution there, blow up the Town and Country Planning Act and successors.

Well done students but you've entirely missed what Martin Shkreli did

An interesting report out of Australia:

A group of Australian high school students have managed to recreate a life-saving drug that rose from US$13.50 to US$750 a tablet overnight after an unscrupulous price-hike by former hedge fund manager Martin Shkreli.

The Sydney Grammar students reproduced the drug, Daraprim, used to treat a rare but deadly parasitic infection, in their high school laboratory with support from the University of Sydney and global members of the Open Source Malariaconsortium.

Dr Alice Williamson, a postdoctoral teaching fellow with the university’s school of chemistry, said she could not stop dwelling on the story of Shkreli, who acquired Daraprim last year through his company, Turing Pharmaceuticals, and almost immediately and exorbitantly hiked the price. The drug is used to treat malaria and to prevent toxoplasmosis infection in people with HIV.

OK, well done those students.

“I couldn’t get this story out of my head, it just seemed so unfair especially since the drug is so cheap to make and had been sold so cheaply for so long,” Williamson said.

“I said ‘Why don’t we get students to make Daraprim in the lab’, because to me the route looked pretty simple. I thought if we could show that students could make it in the lab with no real training, we could really show how ridiculous this price hike was and that there was no way it could be justified.”

Which is to entirely miss what Martin Shkreli actually did. The drug is indeed simple enough to make, it's long and well out of patent and yes, perhaps it should be a $1 a tablet or whatever. As, to some level of accuracy, it is here in Europe and elsewhere in the world. So, it wasn't a patent and it wasn't making the drug that allowed the price rise.

Instead, it was and is the near insane rules that the Federal Drug Administration places upon the manufacture of drugs. Which is why the price rose in the US and did not and has not risen elsewhere.

Shkreli wriggled his way through the regulatory system - it's the regulatory system at fault therefore. The solution is thus a change in the regulatory system, not demonisation of Shkreli nor students making the drug in labs. Because however many Australian or other students show how easy it is to make in a lab the FDA won't allow Americans to take it.

Fix the FDA therefore, nothing else.

Good news from New Zealand

Alex Tabarrok at Marginal Revolution has drawn my attention to an unequivocally excellent bill set to pass with cross party support in New Zealand.

“The Bill effectively removes what is known to be one of the single greatest barriers to live organ donation in NZ,” Mr Reid says. “Until now the level of financial assistance (based on the sickness benefit) has been insufficient to cover even an average mortgage repayment, and the process required to access that support both cumbersome and demeaning. The two major changes that this legislation introduces – increasing compensation to 100% of lost income, and transferring responsibility for the management of that financial assistance being moved from WINZ to the Ministry of Health – will unquestionably remove two major disincentives that exist within the current regime.”

Readers of this blog will no doubt be aware that when there is a chronic shortage of something (as is tragically the case with kidneys) typically the price will increase, and this will incentivise new production. Of course, with kidneys that's not allowed to be the case. It's illegal almost everywhere (not Iran). In fact, it's even worse than that - donating a kidney is extremely costly, it means taking nearly a month off work. Many otherwise very altruistic people simply can't afford to donate, this bill will help them donate. It's not a full incentive, but it does mean that people don't have to go into debt to save a life (or ten thanks to the work of game theorist Alvin Roth). 

Interestingly, how compensation is framed seems to play a lot of the role in whether or not lawmakers get on board. In Iran, they're not buying kidneys but "rewarding altruism". In New Zealand, the bill got support because it was framed as compensating donors for lost wages rather than for selling their kidney.

This is objection to sales is typically based on two plausible but wrong objections.

First, some (particularly religious objectors) argue that allowing money to change hands commodifies the human body. The problem is that this is based on an incredible simplified form of Kantianism. Kant objects to people being treated as merely a means to an end– the merely is the key part. We can't go throughout our day without treating some people as means to an end - e.g. bus drivers, shop assistants, and call centre workers. What matters and is morally problematic is when those people are merely seen as means to an end and not as autonomous individuals.

But it's clearly not the case that by buying and selling kidneys we turn people into mere commodities. For example, take pets. Many beloved family pets were at one point bought and sold in pet shops, but they clearly haven't become mere commodities. 

Second, some object that poor people will be exploited under this system. But, this too is easily dealt with. Exploitation typically is a result of desperation, but it's the buyer and not the seller who's the truly desperate one. Perhaps, sellers might be pressured into the decision in order to pay off a debt collector knocking on the door. If that's the case, then simply legislate that donors have 6 months or more to back out of the decision, that rules out those caught out in a moment of desperation. Others feel uncomfortable that sellers will be mostly drawn from the poorest groups in society, but this shouldn't worry us. The solution here is not to ban poor people from making money from their non-essential organs, but to tackle the underlying poverty through policies that boost the incomes of the poorest.

I'm a little pessimistic on the prospects of proper compensation for kidney donors making its way into law. But, New Zealand's experience shows that gradual reforms can succeed. Hopefully, these reforms will, as economic theory and Iran's experience predicts, save lives. And if they work, maybe that'll be the first step to more experimentation with compensating donors. 

How remarkable, we actually seem to have a conservative minister

We are not Conservatives around here, nor even conservatives. But it is still possible to think that the past had found the correct solution to some point or problem and to thing that progressing beyond that might not have been a very good idea. At which point we find that we do in fact have a conservative Minister in this country - even one that is a Conservative:

Hospital patients could be treated by apprentice nurses under plans to be announced by Jeremy Hunt, sparking a new row about how the government is tackling shortages of health professionals.

The health secretary will say on Wednesday that student nurses can train on the job rather than having to complete a university degree.

The move could allow as many as 1,000 apprentice nurses to join the NHSannually and work alongside fully qualified nurses and “nursing associates”.

This is of course how all nurses, every single one of those NHS Angels, was trained until just a few short years ago. It's also a rather good way of training people to do what is after all a hands on job. Possibly even one of these apprenticeship things which are all the rage, again, these days.

We most certainly do not believe that a general turning back of the clock is appropriate, the world is a very much better place now than it was in the past. But that does still leave room for some of the solutions of the past to have been the correct ones. As, we think, here.

Why Scotland can't afford the EU

In the immediate aftermath of the EU Referendum the SNP reopened the issue of Scottish independence, arguing that since Scotland voted to remain, it should become independent and continue its membership of the EU. It's since become clear that automatic continuation would not be permitted, so Scotland would have to apply from scratch. However, any application would expose a fundamental problem - that its economy and public finances are in no fit state to join.

All new applicant countries must accept the 35 chapters of the EU acquis, including a commitment to join the Euro at some point, and adherence to the Growth and Stability Pact. That imposes two fiscal rules – that government deficits are kept below three percent of GDP, and government debt below 60 percent. Scotland fails both tests. Its deficit last year was 9.4 percent of GDP, over three times the limit, and substantially higher than any existing EU member including Greece. Its debt was around 90 percent, less excessive but still be way too high.

True, other countries have been admitted to EU membership and the Euro despite being in breach of the Pact. Cyprus and Malta were in breach of both rules when they joined, and before that Italy, Spain, Portugal, and Greece all joined the Euro while in breach. However, subsequent events have highlighted the risk of such concessions, both to the applicant country and to existing members. On top of that, Scotland's fiscal record since devolution has been abysmal, with deficits every single year – even when the oil price was at record highs.

The reality is that Scotland is living well beyond its means and its finances have only been propped up by its continuing subsidy under the Barnett Formula. To have any chance of EU membership an independent Scotland would first need to balance the books. And whereas a rebound in oil prices might once have helped, the North Sea is now heavily depleted with production down by two-thirds since its peak. Onshore tax increases are a possibility, but the required scale would be deeply damaging to the economy (eg a doubling in VAT or the standard rate of income tax). More realistically, Scotland could and should cut its high level of public spending, which continues to run 20 percent above English levels.

Of course, the situation would be transformed if Scotland's economy could be strengthened, and the SNP have appointed a Growth Commission to come up with proposals. It should start by recognising that the burden of public spending needs to be reduced, and that needs to happen whether or not Scotland seeks independence and EU membership.

For more detail see Scotland's Overspending Problem, TaxPayers Alliance, October 2016

A possible Labour future

Many left-wingers despair of ever being able to influence events.  With an unelectable leader, a divided party, and the Parliamentary Party in conflict with the constituency members, they fear annihilation at the next election.

I am happy to provide them with a scenario that offers hope.  A Labour MP resigns his safe seat, possibly with the covert promise of a future peerage.  Ed Balls stands as candidate and is chosen, riding the wave of his popularity gained on Strictly Come Dancing.  He is returned with a massive majority in the by-election and promptly challenges for the leadership.  He runs on a left-wing, but electable platform.

He wins the votes of ordinary Labour supporters, and some on the left who want a leader who can lead and can win.  He wins, and as leader he unites the party and runs an effective opposition against the Tories.  Come the next election the choice is between an electable Labour Party with a coherent programme and a charismatic leader and a Tory Party seen as competent and a safe pair of hands, with the kudos of a successful withdrawal from the EU.

It could be a close-run thing.

Because it's our money to spend as we wish

There's a simple answer to this latest little campaign about executive pay:

The government is to outline moves later to make companies justify high levels of executive pay.

Among the measures under consideration are pay ratios, which would show the gap in earnings between the chief executive and an average employee.

Shareholders would also be handed more powers to vote against bosses' pay, while workers would have a "voice" on boards, under the consultation plans.

Theresa May has made tackling corporate excess one of her priorities in office.

There's a complicated answer as well of course:

Though Japanese firms benefit from a high-quality workforce and invest in R&D as much as their US counterparts, they fall behind US firms in terms of their earning power. This column suggests that corporate structures in the two countries could be an explanation for this phenomenon. The findings indicate that CEOs of US firms aim to maximise profits, whereas CEOs of Japanese firms prioritise long-term corporate survival.

American CEOs get paid very much more than Japanese. American CEOs also appear to do a very much better job than Japanese. Our complicated answer would therefore be that higly paid CEOs are worth being highly paid.

However, our simple answer is that up there in the headline. It is not up to the government to tell us what we may do with the money in our pockets. Whether my £5 is to be transferred into a pint, a bumper car ride, a pork pie or a nice healthy salad is up to me. For it is my money.

The money inside a company belongs, after the payments to those with other legal rights to it, to the shareholders. How they wish to deploy that residual, that profit, is up to them because it is their money. If they wish to send it to starving babies in Africa, so be it. Or pay it out as dividends, or build a yogurt knitting factory, or offer it as however much pay they desire to offer to the person running their company for them.

The only justification a company needs to offer to the government or anyone else is: It's our money to spend as we wish.