When the first-day-back-from-holidays blues can be fatal

We all know the feeling. You take your annual leave and go on a terrific holiday. Perhaps some cultural time in the capitals of Europe. Perhaps a noodle and beer-intensive tour of South East Asia.

Then you return to work. The swivel chair sits forlornly awaiting your return. Hundreds or thousands of emails demand your attention.

You dive into work with a mixture of novelty and regret – this used to be very familiar, you think, and now it is not. At least until around midday, when it will seem as though your holiday never happened at all.

But it turns out there is clear evidence of the holiday. It can be measured in your performance. A recent working paper released by the US National Bureau of Economic Research finds that rather than refreshing your batteries, the holiday makes your performance worse.

And here’s the really bad news:

The study was done on surgeons.

Fatality risk increased for every day the surgeons took off between procedures.

In the study the mean mortality rate the first day after surgery was 0.62 per cent. Mortality rose by .05 percentage points for every extra day it had been since the surgeon held a scalpel. That is a 7.4 per cent rise in the risk of dying.

The study (Hockenberry and Helmchen) covered 56,000 patients and 188 surgeons and focused on a procedure called coronary artery bypass grafts. 

Hospitals prefer doctors who do a lot of surgeries, because they are more effective. Surgeons who did more than 100 of the procedure per year had lower one-day mortality outcomes (0.52 per cent), but for them, time off was even worse. For every day of rest, the morbidity rate of their next surgery rose by .09 percentage points.

The doctors did not perform worse on absolutely every measure. When they were back from a break, they apparently sped through the surgery, using less resources. Each day off correlated with a fall in the cost of surgery of 0.6 per cent.

But the saving was well below the value of life lost. In other words, society would prefer the doctors to spend more time and money. The researchers theorise that the cost effect and the morbidity effect are related – relaxed surgeons with their brain still on the golf course are failing to notice important complications and therefore closing up when they should be doing more work.

“After temporal breaks, surgeons may fail to identify and treat life-threatening complications.”

The effect was stronger for surgeons if they had had a lot of time off from surgery in general, rather than if it had been a long time since they undertook the specific procedure being studied.

The effect requires more study before we can determine a policy response.

If the depreciation of skill happens exponentially the longer doctors are on break, we could encourage them to take several two-to-three day breaks a year, rather than one four-week holiday. 

But if the depreciation of skill has a linear or decreasing relation to time away, doctors could be encouraged to take all their leave in a lump. General learning theory suggests most forgetting happens straight away, suggesting the latter solution would be preferred, but this study did not attempt to answer the question.

The research is part of a field of study that looks at human capital and how it erodes. It is well-established that the amount of time that elapses between repetitions of a task decreases the quality of outcomes.

This raises questions about a lot of training courses the modern office worker is encouraged to attend. Is the day off worth the meagre benefit if it also makes the worker less productive on their return?

The link between time off and productivity may also have negative implications for going part-time, buying extra leave, and taking career breaks. These issues are ever more relevant in the modern economy where parental leave is all the more common, where people change jobs often, and where jobs may encompass a wide range of tasks undertaken infrequently, rather than repetition of a few tasks.

There is room for a lot more research on this question, but for now, there is one clear lesson: Don’t choose a surgeon with a suntan.

 

 

How H&M can happily set up shop while Myer weeps.

Swedish clothing brand H&M is opening a new store in Melbourne today. It’s the latest big global clothing retailer to show up here, following Zara and TopShop.

Japanese brand Uniqlo is also set to launch here soon.  But why are they coming? The headlines have been full of bad news for all retailers.

Clothing retail looks especially terrible.  

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Growth has been stagnant for years. Why come to Australia?

The beginnings of our answer are overseas:

The value of clothing retailing fell in Canada last year by 0.6 per cent. The UK saw the same result.

People everywhere are spending far more on food than on clothing these days. And yet I don’t see people shuffling around in clothes that need repairing.

I had begun to suspect prices may have something to do with it, but the ABS inflation data for clothing was still a shock to me:

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Despite a 10 per cent hike at the time of the introduction of the GST, the price of clothing has risen only 1 per cent since 1993!

I remember 1993. I was 12 years old. For the first time it was possible to buy a pair of Nikes that cost over $100. The last time I went and looked at Nike sneakers, the price range was roughly the same (and I picked up a pair from the factory outlet for $30). If they’d followed the inflation path of food and beverages, sports shoes would all be over $200 now. But they haven’t and they aren’t.

Why not? The answer is not on the demand side. It’s not that in two decades something fundamental has changed in the way humans wear clothes. It’s about the supply side.

And that’s what’s interesting about H&M. It owns stores that sell its own brand. It makes only very limited attempts to stock fancy Italian or American brands. A bit like its Swedish retail older sibling, Ikea, it is vertically integrated and tightly focused on cost.

I bought a terrific shirt at H&M’s Sapporo outlet 10 days ago, for ¥500 (A$5.50). Even on the discount rack that is an absurd bargain. Only after I got it back home did I think to look for this tag, and it was as I suspected.

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There are moral issues when it comes to making clothes in Bangladesh. I don’t want the fact that this post doesn’t cover them to stand, in anyone’s mind, for the idea that they are unimportant.

The fact of the matter is that if you can control costs well enough, you can make big margins even as prices fall. That’s the difference between Myer and H&M. Cost control. Myer can’t do it so easily because while it has 66 stores, H&M has 2600. H&M can make or break people while Myer deals with suppliers that have options and won’t let their margins be crunched. 

A quick look in the H&M annual report shows just how good those margins are. More than half of the average price tag is mark-up. 

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And that’s why H&M‘s share price is up about 20 per cent over 3 years, while Myer’s is down around 30 per cent. 

MORE FACTS:

The H in H&M stands for Hennes (“for her”), the name of the original company that sold women’s clothing. The M stands for Mauritz Widforss, which was the name of a hunting apparel shop next door to the original Hennes, which H&M took over to develop a men’s line and become what it is today.

If you’re interested in knowing more about the business models of big clothing retailers, check out these very good Forbes profiles that highlight the differences between Uniqlo, Zara and H&M.

Economics is not about “money”

Like most people who care about economics, read about it or talk about it, from time to time people say this to me:
“I couldn’t get interested in economics. I just don’t care enough about money.”
They say it dismissively. As though economics was about money.
Economics is about people.
Take the latest work by one of my favourite economists, Professor Jeff Borland. He produces a “labour market snapshot” each month that he emails to interested parties. The April one was focused on the plight of the young.
“Employment prospect of the young in Australia have weakened considerably since the GFC,” he writes.
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The biggest fall in employment is among those who are not in full-time study.
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This is not an academic issue. It’s a goddamn human tragedy. Unemployment at this tender age correlates with worse outcomes on just about every measure.
“Unemployment while young can lead to long-term reductions in wages, increased chances of subsequent periods of unemployment and poorer health outcomes,” according to UK economists.
Brotherhood of Saint Laurence executive director Tony Nicholson: “And in our modern economy that means that they’re really being sentenced to a lifetime of poverty.”
“One in three (32 per cent) long-term unemployed youngsters have contemplated suicide and one in four (24 per cent) in this group admitted to self-harming,” according to a UK survey reported in early 2014.
This blog from the Peterson Institute for International Economics: “Considerable research suggests that less stable employment experiences of young people can lead to “scarring” that affects their future employment and earning prospects.”
The critics of economics implicitly accuse it of reification – that by creating ways of quantifying and measuring the material world they bring materialism to the centre.
There could be a germ of truth there. But to not study the material world in a systematic way would be to deny the real influence it has on humans’ experience of their lives.

Which Australian state is most entrepreneurial? And is that a good thing?

Entrepreneurialism – it seems – is not about the wild frontier nor about libertarian values. The most entrepreneurial state in Australia is its most densely populated and most left-leaning (arguably).

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The data comes from the ABS series Business Entries and Exits. They show not only that Victoria has (slightly) more businesses per capita than anywhere else, but also that it is extending that lead.

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Is that surprising? Victoria is not only a wealthy state, which allows residents the opportunity to strike out on their own, it is also a beacon for immigrants, who often open small businesses. Also it has experienced a lot of structural change as manufacturing businesses close, forcing people to create new opportunities for themselves. 

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The beginning of a Bin Hire empire for Ben?

(Another point of note is how the ACT is a laggard for total number of businesses, but mid-pack when it comes to opening new businesses. I’m imagining a lot of senior public servants applying for an ABN as they prepare to lose their jobs and become consultants under the Abbott government.)

But historically, the ACT is the worst place to start a business. More than half of them disappear within a few years. In fact, Tasmania and SA, with their seeming reluctance to start businesses, are rewarded by having the highest four-year survival rates.

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The failure rate of small business is not a mainstream topic of conversation. But I can’t help imagining all the life savings that get flushed away, and all the relationships that fail when small businesses disappear.

 

It’s the hidden underbelly of capitalism, in a way. We focus on the big businesses that put people out of work, but in those cases, workers have none of their own capital involved and governments guarantee their benefits. When your local milk bar goes down or a removals company runs out of money, nobody notices but the proprietors. They’re not just looking for a new job. They are dealing with the death of their dream. But nobody comes to interview them about their plight.

Governments go ga-ga over small business, calling it the backbone of the economy, etc, etc. But they are risky. The data show you are much safer working for or investing in a business with more than 20 employees.

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But if you believe in yourself, the carrot is there. Last year, 27 businesses went from having no 1-4 employees to having over 200 in the space of one short year. It’s a bit like buying a Tattslotto ticket – it is unlikely, but just possible that you will have a very exciting result.

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House prices – lessons from the huge differences between cities

Here’s what $1 million gets you in central Sydney. A functional two-bedroom apartment with around 100 square metres of floor space.

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Here’s what $1 million gets you in central Melbourne. A two-level, three-bedroom apartment with two carparks and a balcony that’s half as big again.

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Here’s what $1 million gets you in central Adelaide. A substantial house in the centre of town.

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The debate about house prices makes a lot of hay out of differences over time. Prices in Melbourne are 5.4 per cent higher than they were three months ago! That is generally seen as an argument that Melbourne prices must be set for a fall. 

But the difference in prices between Australian cities is even bigger.

Sydney’s median price for an attached house was at Melbourne’s current level in 2003 and has risen from there. Melbourne was at Adelaide’s current level in 2007 and has risen. Taking this perspective would seem to suggest there’s nothing to stop Melbourne house prices from going up further.

Obviously there are constraints. Wages differences between the cities are real. This chart shows $/week in the capital cities.

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But they are not as big as house price differences. (source: RPDATA)

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House price to income ratios in these cities show Melbourne and Sydney are similarly “unaffordable” and in Adelaide things are a bit easier. 

You could in theory argue that means Melbourne and Sydney prices are as likely to fall to Adelaide levels as Adelaide’s are to rise. I’ve argued before that expecting house prices to be a consistent multiple of income over time is a wrong expectation. 

The fact that house prices can be so different in Australian cities hints at the truth. There is no “correct” level for Australian house prices. We cannot rely on history to say where they should be, neither can we rely on price-to-income ratios. In fact, the concept of “Australian house prices” is suspect. Housing markets differ wildly by location. 

People like Christopher Joye and Steven Keen who publicly bet on house price falls regularly get egg on their face.

The only clear lesson of all this really, is that if you want a lot of house for your money, you should look outside the capitals. Here’s what $1 million buys on 10 acres near Ballarat.

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