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January 7, 2015

Latest Posts from Economist's View

Latest Posts from Economist's View


Links for 01-07-15

Posted: 07 Jan 2015 12:06 AM PST

'Job Quality is about Policies, not Technology'

Posted: 06 Jan 2015 11:52 AM PST

This was in the daily links not too long ago, but just in case it was missed (it is from the Growth Economics blog):

Job Quality is about Policies, not Technology, by Dietz Vollrath: Nouriel Roubini posted an article titled "Where Will All the Workers Go?"... The worry here is that technology will replace certain jobs (particularly goods-producing jobs) and that there will literally be nothing for those people to do. They will presumably exit the labor market completely and possibly need permanent income support.
Let's quickly deal with the "lump of labor" fallacy sitting behind this. ... We've been creating new kinds of jobs for two hundred years. ... The economy is going to find something for these people to do. The question is what kind of jobs these will be.
Will they be "bad jobs"? McJobs at retail outlets... We can worry about the quality of jobs, but the mistake here is to confound "good jobs" with manufacturing or goods-producing jobs. Manufacturing jobs are not inherently "good jobs". There is nothing magic about repetitively assembling parts together. You think the people at Foxconn have good jobs? There is no greater dignity to manufacturing than to providing a service. Cops produce no goods. Nurses produce no goods. Teachers produce no goods.
Manufacturing jobs were historically "good jobs" because they came with benefits that were not found in other industries. Those benefits – job security, health care, regular raises – have nothing to do with the dignity of "real work" and lots to do with manufacturing being an industry that is conducive to unionization. The same scale economies that make gigantic factories productive also make them relatively easy places to organize. ... To beat home the point, consider that what we consider "good" service jobs – teacher, cop – are also heavily unionized. Public employees, no less.
If you want people to get "good jobs" – particularly those displaced by technology – then work to reverse the loss of labor's negotiating power relative to ownership. Raise minimum wages. Alleviate the difficulty in unionizing service workers.
You want to smooth the transition for people who are displaced, and help them move into new industries? Great. Let's have a discussion about our optimal level of social insurance and support for training and education. ...
Any job can be a "good job" if the worker and employer can coordinate on a good equilibrium. Costco coordinates on a high-wage, high-benefit, high-effort, low-turnover equilibrium. Sam's Club coordinates on a low-wage, low-benefit, low-effort, high-turnover equilibrium. Both companies make money, but one provides better jobs than the other. So as technology continues to displace workers, think about how to get *all* companies to coordinate on the "good" equilibrium rather than pining for lost days of manly steelworkers or making the silly presumption that we will literally run out of things to do.

Turning Back the 'Forces of Equality'

Posted: 06 Jan 2015 10:27 AM PST

John Kay at the FT:

In 1920, the 1 per cent ... accounted for 15-20 per cent of total gross income in developed countries. ... In the 50 years that followed, the share of the 1 per cent fell almost everywhere by about half... During that half century, public spending on health, education and especially social benefits increased; taxation became more burdensome and more progressive. The forces of equalisation were powerful indeed. ...

From 1970, the egalitarian trend came to an end everywhere ...  principally the result of two interrelated causes: the growth of the finance sector; and the explosion of the remuneration of senior executives. ...
These effects have not been seen in countries, such as France and Germany, that have proved more resistant to financialisation. It is in Britain and the US, which have experienced the most extensive growth in the sector, where they have made their greatest impact.

Speaking of France and attempts to turn back the forces of equality such as public spending on education, health, generous social insurance, and highly progressive taxation:

About That French Time Bomb, by Paul Krugman: ... It's really amazing how much bad press France gets — and not just from goldbugs and the like. It was the Economist that declared, on its cover more than two years ago, that France was the time bomb at the heart of Europe. And of course the inflationistas were even more certain that France faced imminent doom; for example, John Mauldin proclaimed that France was in fact worse than Greece.
Now that time bomb — which has actually had better economic growth since 2007 than Britain — can borrow at an interest rate of only 0.8 percent.
It seems obvious to me that the bad-mouthing of France was and is essentially political. Of course France has big problems; who doesn't? But the real sin of the French body politic is its refusal to buy into the notion that the welfare state must be sharply downsized if not dismantled; hence the continuing warnings that France is doomed, doomed I tell you.
And this in turn reflects the larger issue of what calls for austerity are really about. Can we imagine a clearer demonstration that they're not really about appeasing bond vigilantes?

'Grown-Up Business Cycles' and Jobless Recoveries

Posted: 06 Jan 2015 10:26 AM PST

An hypothesis about jobless recoveries:

 Grown-up business cycles, by Benjamin Pugsley and Aysegul Sahin, FRBNY: We document two striking facts about U.S. firm dynamics and interpret their significance for aggregate employment dynamics. The first observation is the steady decline in the firm entry rate over the last thirty years, and the second is the gradual shift of employment from younger to older firms over the same period. Both observations hold across industries and geographies. We show that, despite these trends, firms' life-cycle dynamics and business-cycle properties have remained virtually unchanged. Consequently, the reallocation of employment toward older firms results entirely from the cumulative effect of the thirty-year decline in firm entry. This "start-up deficit" has both an immediate and a delayed (by shifting the age distribution) effect on aggregate employment dynamics. Recognizing this evolving heterogeneity is crucial for understanding shifts in aggregate behavior of employment over the business cycle. With mature firms less responsive to business cycle shocks, the cyclical component of aggregate employment growth diminishes with the increasing share of mature firms. At the same time, the trend decline in firm entry masks the diminishing cyclicality during contractions and reinforces it during expansions, which generates the appearance of jobless recoveries where aggregate employment recovers slowly relative to output. [Download Full text.]

This may be part of the explanation for jobless recoveries, but I suspect there is more to it than this.

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