Category Archives: labor market

Recessions and Structural Change

Posted on by

Ryan Avent writes,

Examining patterns of polarisation in America, Nir Jaimovich and Henry Siu find that displacement of routine work is not a gradual process but occurs almost entirely during recessions. Since the mid-1980s, roughly 92% of job loss in middle-skill, routine jobs has taken place during or within a year of recessions (as dated by the National Bureau of Economic Research). This pattern is linked to the phenomenon of “jobless recoveries”, which followed the recessions of 1990-1, 2001, and 2007-9 but not earlier downturns.

Pointer from Tyler Cowen. My first thought is that this makes it hard to sort out cyclical and structural change.

Avent’s hypothesis is that low inflation raises real wages and induces labor-saving substitution.

I think that there might be a number of hypotheses to explain the phenomenon. For example, what we call a recession could just be a bunching up of the process of shedding ZMP workers. In theory, ZMP workers should be let go at a steady rate, but it could be that firms come to a common realization that it is time to face reality.

But read Avent’s post. It is obvious that he would regard the UK in recent years as supporting his hypothesis more than mine.

Are We Near Full Employment?

Posted on by

Timothy Taylor writes,

We have now returned to an economy where those who leave their jobs are more likely to have done by quitting voluntarily than by being laid off or discharged involuntarily

Read the whole thing. One interpretation of the data is that the labor market has now divided. There are active workers, who are exhibiting fairly typical patterns of working, quitting, and being laid off. And there are inactive workers, who have either officially or unofficially left the labor force. If this interpretation is correct (and I am not confident that it is), then we may be close to full employment.

Paragraphs to Ponder

Posted on by

Two pointers from Reihan Salam.

Michael Schrage wrote,

America doesn’t have a jobless recovery; it has a hireless recovery. Don’t confuse them. After all, you first have to get hired to have a job. Organizations may be desperate to grow, but they overwhelmingly lack the desire to hire. Fewer people are working longer, harder and (presumably) smarter hours. So many firms have proven so productive even after several rounds of layoffs, that serious economists wonder if, in fact, large slices of the workforce actually offer ZMP — Zero Marginal Productivity — to their enterprise. In other words, the Great Recession reveals many employees not just to be worth less but economically worthless. Ouch.

For most organizations, people are a means and medium to an end. They’re not hiring employees, they’re hiring value creation.

One point I am starting to harp on is that many workers are not concurrently productive. That is, the work they do helps the firm be more productive in the future. That means that when firms think about hiring they have a lot of discretion (we can meet the demand for widgets today without adding new people) and they face a lot of uncertainty (will these social media marketers really deliver us new customers?).

Schrage again:

What’s structurally changed is not the job but why people get hired. In other words, is hiring someone really essential to getting the job done? Just as important, as we look at employment costs, risks and uncertainties over the next five years, is hiring someone the most cost-effective way to get the job done?

David Levinson wrote,

[in the year 2030] Firms also are not interested in paying for training, so most people now go through a 10-year unpaid internship while simultaneously attending school online and engaging other pursuits on a more or less random schedule.

Explain This

Posted on by

Jaison R. Abel, Richard Deitz, and Yaqin Su write,

the broader V-shaped pattern in the underemployment rate over the past two decades is also consistent with new research arguing that there has been a reversal in the demand for cognitive skills since 2000. According to this research, businesses ramped up their hiring of college-educated workers in an effort to adapt to the technological changes occurring during the 1980s and 1990s. However, as the information technology revolution reached maturity, demand for cognitive skill fell accordingly. As a result, during the first decade of the 2000s, many college graduates were forced to move down the occupational hierarchy to take jobs typically performed by lower-skilled workers.

They refer to a paper by Beaudry, Green, and Sand.

This is an important observation. Some possible explanations:

1. The empirical finding is mistaken. If you do the analysis correctly, the demand for cognitive skills has not reversed. Perhaps jobs that are classified as not requiring a college degree in fact have become much more cognitively challenging. [note: I am not claiming that the empirical analysis is incorrect. I just want to include that as a possibility.]

2. Assume that the distribution of jobs in terms of skill requirements has remained approximately fixed. Assume, perhaps reasonably, that college selects students on the basis of cognitive ability, but it does nothing to change the distribution of skills or ability. As more students go to college, this means more low-ability students go to college, and they wind up in the same jobs that they would have obtained without going to college.

3. There has been an actual deterioration in the quality of college education, at least relative to the needs of employers. An individual who graduated in 1995 was more likely to have gained skills in writing and thinking than if that same individual had graduated in 2005.

Future Job Growth

Posted on by

From the WSJ;

Personal-care aide will be the fastest growing job from 2012 to 2022, among categories with more than 25,000 positions, the Labor Department said in a new report. The field will grow by nearly 50% to 1.8 million jobs.

I could envision a scenario in which personal services of all sorts become more important. For example, here is an idea from IBM.

by next year, Watson will be your personal shopping assistant. Store associates will also have similar intelligent tech providing them instant product information, customer loyalty data, sales histories, user reviews, blogs and magazines, so that when you do need to talk with another human, they know exactly how to help.

IBM thinks in terms of technology it can sell to large enterprises. I tend to think in terms of disintermediation, in which large enterprises are no longer needed.

So IBM thinks about adding personalization to an existing classroom. I think about getting away from classrooms and going back to tutors. Imagine a world with tutors instead of schools.

Schools keep you kids around all day, and thereby waste most of the day. For parents, that is as much a feature as a bug, because they need schools to supervise their kids. But if you were to re-organize schooling into a day-care component and a tutoring component, you might find benefits in getting rid of the enterprise that we call a school.

So we might find that in the future there are fewer school administrators and fewer classroom teachers, but there are a lot more day-care supervisors and tutors.

Occupations of the Future

Posted on by

David Brooks writes,

Millions of people begin online courses, but very few actually finish them. I suspect that’s because most students are not motivated to impress a computer the way they may be motivated to impress a human professor. Managers who can motivate supreme effort in a machine-dominated environment are going to be valuable.

Actually, I think that a big reason that people drop online courses is that those courses are a misfit for them. An advantage of a typical live course is that most of the students have been selected to have similar abilities and experiences. A lot of people sign up for online courses who otherwise would be discouraged from doing so. That is not necessarily a problem with online learning.

However, that is why MOOCs are not the answer, in my view. My line is that we need instruction that is many-to-one, not one-to-many. Indeed, Jonathan Haber suggests that MOOCs might be a step backward, and he links to something I wrote in 2002.

suppose that we had all of the highly-touted electronic technologies for distance learning, and then someone came along and invented the book. My guess is that the book would be greeted as a technological marvel–easy to hold, convenient to carry, outstanding resolution, and so forth. This thought experiment leads me to suspect that electronic distance learning is a fad.

On the subject of the future, my joke is that the ideal occupation will be a yoga instructor working in an old-age home. That lines up with the trends toward more spending on health care, education, and leisure, along with an older demographic.

A Famous NYT Columnist Looks at the Minimum Wage and Income Inequality

Posted on by

He tries to offer a balanced view.

The federal minimum did not change from 1981 to 1990, causing its inflation-adjusted value to fall 30 percent during that time. Wages in the bottom of the income distribution fell sharply, even more sharply than they have in the last decade. The inflation-adjusted wage of a worker at the 20th percentile of the distribution dropped 9.5 percent from 1981 to 1990, according an analysis of government data in the forthcoming book “The State of Working America, 12th Edition,” by the Economic Policy Institute.

…Since 1990, though, the minimum wage has risen. If you’re trying to understand why every income group except for the affluent has taken an income cut over the last decade, you probably shouldn’t put the minimum wage at the top of your list of causes.

And if you are trying to guess which NYT columnist wrote this, you probably shouldn’t put Paul Krugman on your list of possible authors. Cross off Tyler Cowen, also, although he did link to the column. Continue reading →

And Yet They Stay in Yuma

Posted on by

The WSJ reports,

The October unemployment rate was a staggering 31.9% in the metro area of Yuma, Ariz., and 25.2% in El Centro, Calif., according to a Labor Department report released Thursday. They had the highest unemployment rates, which aren’t seasonally adjusted, among the 372 metro regions measured by the Labor Department’s monthly report.

Other regions — namely, those benefiting from a natural resources boom — are humming. Bismarck, N.D., for example, had the nation’s lowest unemployment rate in October at 1.7%.

I think we know how those on the right would try to explain why people stay unemployed in Yuma rather than move to Bismarck. What is the explanation that comes from the left? Mark Thoma? Brad DeLong? Anyone?

I am quite serious. I do not want sarcastic answers from people on the right. I would like someone on the left to offer a reasonable counter to the obvious story that someone on the right would tell.