Monday, September 3, 2018

Some Economics For Labor Day

For those who need the sweet and savory flavor of economics to accompany their end-of-summer Labor Day picnic (and really, don't we all need that?), here are links to some posts on labor market topics, mostly from earlier this year.

1) Rebalancing the Economy Toward Workers and Wages (March 5, 2018)

I quote John Bates Clark , probably the most eminent American economist of his time in his 1907 book, Essentials of Economic Theory
"In the making of the wages contract the individual laborer is at a disadvantage. He has something which he must sell and which his employer is not obliged to take, since he [that is, the employer] can reject single men with impunity. ... A period of idleness may increase this disability to any extent. The vender of anything which must be sold at once is like a starving man pawning his coat—he must take whatever is offered."
Are there some ways to tip the balance a bit more toward workers? Jay Shambaugh and Ryan Nunn have edited an ebook, Revitalizing Wage Growth: Policies to Get American Workers a Raise, with nine chapters on causes of wage stagnation and policy proposals to address it

2) "The Job Guarantee Controversy" (April 30, 2018)

With Senator Bernie Sanders in the forefront, some Democratic members of Congress are planning a bill to guarantee jobs that pay $15 per hour, not including mandatory benefits packages, for all Americans. Legislative details have not yet been announced (!), but several sets of plan have been published recently, including on the website of the Sanders Institute, which was founded by Jane O'Meara Sanders, wife of the senator. Here, let's run through a couple of the more prominent plans, and then list on criticisms that have been bubbling up--with a focus on critiques from writers typically identified as being on the political left. ...

Ultimately, it feels to me as if proposals for a federal job guarantee proposal are a cry of despair, erupting from an exhausted patience. To me, the underlying message is: "Stop being distracted by small-scale arguments and day-to-day political compromises, drop the cautious incrementalism, and pay the money to help those who want to work. Stop quibbling, and just make it happen!" Righteous exasperation always has a rhetorical appeal. But the real world is full of costs and tradeoffs, and if the US political system wants to make some dramatic moves to help US workers, considerably better options than a federal job guarantee are available.

3) "The Rising Importance of Soft Skills" (January 30, 2018)

Leading tech companies like Google have found that their most productive and valuable employeees are often not those with the most technical skills or cognitive ability. Instead, the most valuable employees have the soft skills in communication, teamwork, and seeing the big picture.

The evidence for the rising importance of soft skills goes beyond the anecdotal. David J. Deming provides an overview of economic research on this topic in "The Value of Soft Skills in the Labor Market" (NBER Reporter, 2017 Number 4). Deming cites evidence that for the US economy as a whole, the number of STEM (science, technology, engineering, mathematics) jobs rose rapidly from 1980 to 2000, but has declined since then. Moreover, the labor market returns to higher levels of cognitive skill have declined, too.
"While cognitive skills are still important predictors of labor market success, their importance has declined since 2000. An important recent paper finds significantly smaller labor market returns to cognitive skills in the early and mid-2000s, compared with the late 1980s and early 1990s. ... In a 2017 study, I replicate this finding and also show that returns to soft skills increased between the 1979 and 1997 NLSY waves. ... We are not witnessing an end to the importance of cognitive skills — rather, strong cognitive skills are increasingly a necessary — but not a sufficient — condition for obtaining a good, high-paying job. You also need to have social skills. Between 1980 and 2012, social skill-intensive occupations grew by nearly 12 percentage points as a share of all U.S. jobs. Wages also grew more rapidly for social skill-intensive occupations than for other occupations over this period."

4) The Modern Shape-up Labor Market (July 23, 2018)

The “shape-up” system of hiring was described by journalist Malcolm Johnson in his Pulitzer-prize winning articles about crime on the docks of New York City in the late 1940s (Crime on the Labor Front, quotation from pp. 133-35). The description is perhaps best-remembered today for how it was depicted in the 1954 movie “On the Waterfront.” But it's a scenario that I think also captures some of the concerns of modern workers in the "gig" economy, where more and more workers are dependent on finding a new gig every month or week or day. Johnson described the process for a longshoreman of seeking and getting a job back in the 1940s in this way:
“The scene is any pier along New York’s waterfront. At a designated hour, the longshoremen gather in a semicircle at the entrance to the pier. They are the men who load and unload the ships. They are looking for jobs and as they stand there in a semicircle their eyes are fixed on one man. He is the hiring stevedore and he stands alone, surveying the waiting men. At this crucial moment he possesses the crucial power of economic life or death over them and the men know it. Their faces betray that knowledge in tense anxiety, eagerness, and fear. They know that the hiring boss, a union man like themselves, can accept them or reject them at will. He can hire them or ignore them, for any reason or for no reason at all. Now the hiring boss moves among them, choosing the man he wants, passing over others. He nod or points to the favored ones or calls out their names, indicating that they are hired. For those accepted, relief and joy. The pinched faces of the others reflect bleak disappointment, despair. …
“Under the shape-up, the longshoreman never knows from one day to the next whether he has a job or not. Under the shape-up, he may be hired today and rejected tomorrow, or hired in the morning and turned away in the afternoon. There is no security, no dignity, and no justice in the shape-up. … The shape-up fosters fear. Fear of not working. Fear of incurring the displeasure of the hiring boss.”

5) "Four Examples from the Automation Frontier" (February 12, 2018)

Cotton pickers. Shelf-scanners at Walmart. Quality control at building sites. Radiologists. These are just four examples of jobs that are being transformed and even sometime eliminated by the newest wave of automated and programmable machinery. Here are four short stories from various sources, which of course represent a much broader transformation happening across the global economy.

Paying unemployment insurance is a "passive" labor market policy. Assistance with job search and training is an "active" policy. Compared with other high-income economies, the US does relatively little "active" labor market policy--and should consider doing more. See also this follow-up post, "Improving How Job Markets Function: Active Labor Market Policies" (December 30, 2016)

The welfare reform legislation of 1996 overall seemed to benefit many families that were fairly close to the poverty line--but it has worsened the condition of families in "deep poverty." Robert A. Moffitt and Stephanie Garlow write:

"The welfare rolls indeed plummeted under the influence of welfare reform. If anything, some of the early studies underestimated the causal effect of welfare reform itself (as against the effects of economic expansion). Did it increase employment? Although there remains some ambiguity on the relative importance of the EITC and welfare reform in accounting for changes in employment, it is clear that welfare reform played an important role. In the initial years after reform, many more women joined the labor force than even the reform’s most ardent supporters had hoped. Did it reduce poverty? There are two sides to the answer to this question. It would appear that, while welfare reform assisted families with incomes close to the poverty threshold, it did less to help families in deep or extreme poverty. Under the current welfare regime, many single mothers are struggling to support their families without income or cash benefits. Even women who are willing to work often cannot find good-paying, steady employment."
The Winter 2018 issue of Pathways, published by the Stanford Center on Poverty & Inequality, offers nine short and readable essays by social scientists and a few politicians on what happened with the 1996 welfare reform, and what should happen next