Carpe Diem

Giving Birth Latest Job Outsourced to India

The small clinic at Kaival Hospital in Anand, India matches infertile couples with local women, cares for the women during pregnancy and delivery, and counsels them afterward. Anand’s surrogate mothers (pictured above), pioneers in the growing field of outsourced pregnancies, have given birth to roughly 40 babies.
More than 50 women in this city are now pregnant with the children of couples from the United States, Taiwan, and Britain. Suman Dodia, a pregnant, 26-year-old, said she will buy a house with the $4,500 she receives from the British couple whose child she’s carrying. It would have taken her 15 years to earn that on her maid’s monthly salary of $25.

Experts say commercial surrogacy could take off in India for the same reasons outsourcing in other industries has been successful: a wide labor pool working for relatively low rates.

Read more here.

(HT: Sanil Kori)

Carpe Diem

Quote of the Day: Good Renters, Bad Homeowners

“Easy credit made bad homeowners out of good renters.”

~Los Angeles manager of rental property, from an article in today’s Mpls.-St. Paul Star Tribune
Fortunately maybe, the homeownership rate in the U.S., after rising by 5 percentage points (from 64% to 69%) between 1994 and 2004, has fallen over the last four years by the biggest amount (.80%) since the mid-1980s (see chart above). Hopefully, many of the bad homeowners of the last few years of easy credit and now rising foreclosures are becoming good renters again.
Carpe Diem

Global Capitalism Comes to Southeast Asia

Cheap Chinese products, like motorcycles that sell for only $440, are flooding China’s southern neighbors and consumers in Myanmar, Laos, Vietnam and Cambodia are laying out the welcome mat.

The products are transforming the lives of some of the poorest people in Asia, whose worldly possessions only a few years ago typically consisted of not much more than a set or two of clothes, cooking utensils and a thatch-roofed house built by hand.

As the first introduction to global capitalism, Chinese products are met with deep appreciation.

Read more of the IHT article “Chinese Goods Transform Life in Southeast Asia” here.

Watch a video “Change Arrives on a Scooter” here.

Note that globalization and trade are disproportionately benefiting the poor people of SE Asia, since the rich politicians and politically-connected elite already had their BMWs. Also, this story counteracts the myth that “globalization exploits the developing nations and their poor.” I don’t think the mountain villagers of Laos, who can now reach the nearest city in 2 hours on a scooter instead of walking all day, feel too “exploited.”

(HT: Sanil Kori)
Carpe Diem

Putting Subprime Mortgages in Perspective

According to Glenn Maguire, chief Asia economist for Societe Generale SA in Hong Kong:


The economic repercussions of the housing bust and mortgage woes are limited to a great extent because fewer than half of American families own a home with a mortgage. Almost a third of all families rent their house or apartment, almost a fourth own and have no mortgage and the vast majority with a mortgage are current in their payments. Even with about a tenth of all subprime mortgages now in foreclosure, only a small share of all American families — about 0.3% — own a home in foreclosure, he said.

It’s true: 55.5% of American households either rent their home or apartment (32%), or own a home with no mortgage (23.5%), see chart above. Then add in the 34.5% of homeowners with a prime mortgage, and the 4.2% of homeowners with a FHA or VA mortgage, and you’ve got more than 94% of American households who are NOT subprime borrowers, and fewer than 6% who are subprime borrowers. And the subprime fixed-rate mortgages are not really a problem, it’s only the subprime adjustable mortgages that are having problems with delinquencies and foreclosures.

Then consider that according to the Mortgage Bankers Association, the percentage of loans in the foreclosure process was 1.69% of all loans outstanding at the end of the third quarter 2007 (both subprime and prime). But because only 44.4% of all homes have a mortgages, that means that only about .75% of all American household own a home in foreclosure.

(HT: Marginal Revolution)

Note: I think that Glenn Maguire gets a figure of only .30% of homes in foreclosure by looking at the rate of loans entering the foreclosure process (.78%), and not the percentage of all loans in the foreclosure process (1.69%).
Carpe Diem

Target Clinics Open in Minnesota and Maryland

I have posted previously on low-cost, consumer-friendly, market-driven, walk-in retail health care clinics in retail stores like Walgreens, CVS and Wal-Mart, see here, here, here and here. Now Target has joined the market for retail clinics by opening Target Clinics in Minnesota (18 locations) and Maryland (5 locations).

Target Clinic’s medical professionals can help test and treat guests 18 months and older for many common illnesses and injuries. Cash fees for most services listed below range from $49-$69.

Minor Illnesses: Strep Throat, Earache, Cold, Flu, Sinus Infection, Conjunctivitis/Pink Eye, Cough or Bronchitis, Allergies, Mono, Bladder Infection, Splinter Removal

Minor Injuries: Minor Burn, Bruise, Insect Bite or Sting, Stitch Removal, Wound Check

Skin Treatments: Rash, Athlete’s Foot, Cold Sore, Skin Infection, Impetigo, Ringworm, Poison Ivy or Poison Oak, Shingles, Eczema, Acne

Other Services: Flu Vaccine, Pregnancy Test (must be 18+), Rapid Influenza Test, Blood Pressure Check, Tetanus and Tdap Vaccine, Cholesterol Screening, Camp and Sports Physicals

Bottom Line: Perhaps high-cost, bureaucratic, inefficient, socialized medicine isn’t the answer to reforming our health care system. Instead, perhaps we need more efficient, low-cost, market-driven, and consumer-friendly healthcare like Target Clinics to reform our health care system.

Milton Friedman once said something to the effect that forcing everybody to see a physician as the medical gatekeeper for even minor, routine health concerns was like forcing everybody to drive a Cadillac. The use of nurse practitioners and physician assistants at Target Clinics is a welcome change, and allows us to get health care at a Chevy standard when we don’t want, or can’t afford, the Cadillac standard.

Carpe Diem

Only 2 Out of 54 Economists Expect ’08 Recession

For 2008, the economic outlook is Topic No. 1 for almost all investors. Stock prices and bond yields already reflect recession worries, but an actual downturn would hit portfolios hard. To help get a handle on what to expect, BusinessWeek asked 54 forecasters for their views on everything from housing and the credit crunch to Fed policy and global growth. (Click here for full survey results.)

Bottom Line: The economists project, on average, that the economy will grow 2.1% from the fourth quarter of 2007 to the end of 2008, vs. 2.6% in 2007. Only two of the forecasters expect a recession, although it might feel like one if there’s sluggish growth over the next couple of quarters, as many predict.

Carpe Diem

Higher State Taxes = Lower Population Growth


The chart above shows graphically the negative relationship between state population growth using Census data available from the WSJ here, and state tax burden data available from The Tax Foundation here, both for 2007.

The OLS regression results above further verify that the negative relationship between state population growth and state tax burden is statistically significant at the 1% level (highest level generally reported).

Implication of the OLS Results: Based on the negative regression coefficient of -0.232, we could say that as the state tax burden increases by 1%, population growth decreases by about .23%. Alternatively, we could also say that for every one percent decrease in state tax burden, state population growth would increase by .23%. (For an overview of OLS/linear regression, go here.)
Bottom Line: States with lower tax burdens attract more businesses, workers and people, and states with higher tax burdens lose businesses, workers and people. In other words, these results confirm the theory that if you tax something, you’ll get less of it.

Thanks to Ben Cunningham for supplying the data. See First Trust Portfolio’s similar analysis “Voting With Our Feet”
here using the same data.
Carpe Diem

Q: Who Creates More Minority Wealth Than US?

A: Nobody.

From George Will’s most recent column:

McDonald’s exemplifies the role of small businesses in Americans’ upward mobility. The company is largely a confederation of small businesses: 85% of its U.S. restaurants — average annual sales, $2.2 million — are owned by franchisees. McDonald’s has made more millionaires, and especially black and Hispanic millionaires, than any other economic entity ever, anywhere.

(HT: Division of Labor)

From McDonald’s website:

1. McDonald’s Hispanic-owned restaurants generate estimated annual revenues in excess of $1.5 billion. Note: That is more than the annual GDP of the Central American country of Belize.

2. McDonald’s African-American-owned restaurants generate estimated annual revenues in excess of $2.4 billion. Note: That is about the same as the annual GDP of the African country of Rwanda.

Carpe Diem

H.S. Diploma in 1970 = 2+ Years of College Today

From the article: “More Grads, But Cognitive Ability Declines: Degrees and diplomas may not translate to on-the-job success,” in a recent edition of InsideRecruiting, a recruiting industry trade publication:

The good news: recruiters should see an increase in applicants with college degrees and high school diplomas; the bad news is that those applicants might not succeed on the job. A study conducted by Wonderlic, Inc. reveals a steady decline in the cognitive ability scores associated with specific education levels.

From Wonderlic’s press release about its study:

The explanation for this downward trend in cognitive ability by level of education is that more people with modest ability are remaining in school and graduating,” said Michael Callans, President of Wonderlic Consulting. “While remaining in school has obvious personal and societal benefits, it also impacts the relative meaning of a high school and college degree for employers.”

The study suggests that because the ability level of the average high school graduate has changed over time, finding job candidates with the same level of ability as 1970 high school graduates requires employers seek out applicants with two or more years of college training.

MP: Hey, but aren’t grades (and self-esteem) at an all-time high in both high school and college?

(HT: Jeff Perry)