(p. 183) We have argued that the remarkable transformation of the German economy from the “sick man of Europe” to a lean and highly competitive economy within little more than a decade is rooted in the inherent flexibility of the German system of industrial relations. This system allowed German industry to react appropriately and flexibly over time to the demands of German unification, and the global challenges of a new world economy.
Category: Labor Economics
Nobel-Prize-Winner Views Success as Rigged (Except for Nobel Prizes)
(p. 245) . . . , Solow interprets the evidence on intergenerational mobility as showing that the economy is not very meritocratic. (Oddly, he exempts the economics profession. He seems to believe that lack of success is often the result of bad luck or a rigged system, unless you are an economist, in which case it’s your own fault.) Although I noted in my article that those born into extreme poverty face particularly difficult obstacles, I view the rest of the economy as more meritocratic than Solow does. In addition to the Kaplan and Rauh study, I recommend a popular book called The Millionaire Next Door (Stanley and Danko 1996). Written by two marketing professors who extensively surveyed high net worth individuals, the book reports that the typical millionaire is not someone who was born into wealth but rather is someone who has worked hard and lived frugally.
Source:
Mankiw, N. Gregory. “Correspondence: Response from N. Gregory Mankiw.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 244-45.
(Note: ellipsis added; italics in original.)
The Stanley and Danko book that Mankiw praises (and I use in my Economics of Entrepreneurship seminar) is:
Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. First ed. Atlanta: Longstreet Press, 1996.
HR Regulations and Fear of Lawsuits Keep Managers from Firing Workers Who Do Not Work
(p. 1B) The biggest problem in your workplace has a name. His name is Jeff. . . .
Jeff sits two cubicles down from us, or three, or four. His real name may be John, Juan or Joan. He gets to the widget factory late, he leaves early and always mucks up his part of any group project. He complains, loudly, about the smallest things, and when you bring doughnuts for your birthday he probably takes three and then talks with his mouth full, too.
. . .
(p. 2B) . . . , morale suffers greatly when most of a company’s employees perceive that their supervisor is failing to deal with their low-performing co-worker, month after month, year after year.
For this, Hoogeveen blames a corporate culture that is so concerned about HR regulations, and the often-imagined threat of litigation, that bosses often fail to take into account how the trouble employee affects the larger climate.
. . .
. . . if Jeff doesn’t improve, he needs to be fired. This is perhaps the worst part of a boss’s job, Hoogeveen thinks. His eyes mist as he recalls firing an employee whom he liked, but who was simply a bad fit at QLI.
It’s human nature to avoid this conflict, to maintain the status quo and let Jeff be, he says. That’s what can and does happen at most Omaha companies.
But it’s bad for the employees, and it’s bad for business.
“A lot of this stuff is incredibly easy to understand,” says Omaha’s workplace mechanic [Kim Hoogeveen]. “It’s incredibly difficult to live.”
For the full story, see:
Hansen, Matthew. “Workplace Guru: Don’t Let Problem Worker Slide.” Omaha World-Herald (Mon., July 21, 2014): 1B-2B.
(Note: ellipses, and bracketed name, added.)
(Note: the online version of the article had the title “Hansen: Don’t let Jeff — the problem worker — slide, workplace guru says.”)
Entrepreneur Gutenberg’s Press Creatively Destroyed the Jobs of Scribes
(p. 32) Poggio possessed . . . [a] gift that set him apart from virtually all the other book-hunting humanists. He was a superbly well-trained scribe, with exceptionally fine handwriting, great powers of concentration, and a high degree of accuracy. It is difficult for us, at this distance, to take in the significance of such qualities: our technologies for producing transcriptions, facsimiles, and copies have almost entirely erased what was once an important personal achievement. That importance began to decline, though not at all precipitously, even in Poggio’s own lifetime, for by the 1430s a German entrepreneur, Johann Gutenberg, began experimenting with a new invention, movable type, which would revolutionize the reproduction and transmission of texts. By the century’s end printers, especially the great Aldus in Venice, would print Latin texts in a typeface whose clarity and elegance remain unrivalled after five centuries. That typeface was based on the beautiful handwriting of Poggio and his humanist friends. What Poggio did by hand to produce a single copy would soon be done mechanically to produce hundreds.
Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.
(Note: ellipsis, and bracketed word, added.)
Countries that Protect Jobs Stifle Economic Growth
(p. 240) In an “Interview” conducted by Jessie Romero, John Haltiwanger discusses changing patterns of job creation and destruction: “But now we’re seeing a decline in the entry rate and a pretty stark decline in the share of young businesses. . . . But it’s also important to recognize that the decline in the share of young firms has occurred because the impact of entry is not just at the point of entry, it’s also over the next five or 10 years. A wave of entrants come in, and some of them grow very rapidly, and some of them fail. That dynamic has slowed down. . . . If you look at young small businesses, or just young businesses period, the 90th percentile growth rate is incredibly high. Young businesses not only are volatile, but their growth rates also are tremendously skewed. It’s rare to have a young business take off, but those that do add lots of jobs and contribute a lot to productivity growth. We have found that startups together with high-growth firms, which are disproportionately young, account for roughly 70 percent of overall job creation in the United States. . . . “I think the evidence is overwhelming that countries have tried to stifle the [job] destruction process and this has caused problems. I’m hardly a fan of job destruction per se, but making it difficult for firms to contract, through restricting shutdowns, bankruptcies, layoffs, etc., can have adverse consequences. The reason is that there’s so much heterogeneity in productivity across businesses. So if you stifle that destruction margin, you’re going to keep lots of low-productivity businesses in existence, and that could lead to a sluggish economy. I just don’t think we have any choice in a modern market economy but to allow for that reallocation to go on. Of course, what you want is an environment where not only is there a lot of job destruction, but also a lot of job creation, so that when workers lose their jobs they either immediately transit to another job or their unemployment duration is low.” Econ Focus, Federal Reserve Bank of Richmond, Second Quarter 2013, pp. 30-34. http://www.richmondfed.org/publications/research/econ_focus/2013/q2/pdf/interview.pdf.
Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.
(Note: italics, ellipses, and bracketed word, in original.)
Forecasts of Mass Unemployment from Robots Were Wrong
(p. 215) Frank Levy and Richard J. Murnane consider the interaction between workers and machinery in “Dancing with Robots: Human Skills for Computerized Work.” “On March 22, 1964, President Lyndon Johnson received a short, alarming memorandum from the Ad Hoc Committee on the Triple Revolution. The memo warned the president of threats to the nation beginning with the likelihood that computers would soon create mass unemployment: ‘A new era of production has begun. Its principles of organization are as different from those of the industrial era as those of the industrial era were different from the agricultural. The cybernation revolution has been brought about by the combination of the computer and the automated self-regulating machine. This results in a system of almost unlimited productive capacity which requires progressively less human labor. Cybernation is already reorganizing the economic and social system to meet its own needs.’ The memo was signed by luminaries including Nobel Prize winning chemist Linus Pauling, Scientific American publisher Gerard Piel, and economist Gunnar Myrdal (a future Nobel Prize winner). Nonetheless, its warning was only half right. There was no mass unemployment–since 1964 the economy has added 74 million jobs. But computers have changed the jobs that are available, the skills those jobs require, and the wages the jobs pay. For the foreseeable future, the challenge of “cybernation” is not mass unemployment but the need to educate many more young people for the jobs computers cannot do.” Third Way, 2013, http://content.thirdway.org /publications/714/Dancing-With-Robots.pdf.
Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.
(Note: italics in original.)
French Protest Amazon, but Buy There for Low Prices
(p. B1) LONDON — On weekends, Guillaume Rosquin browses the shelves of local bookstores in Lyon, France. He enjoys peppering the staff with questions about what he should be reading next. But his visits, he says, are also a protest against the growing power of Amazon. He is bothered by the way the American online retailer treats its warehouse employees.
Still, as with millions of other Europeans, there is a limit to how much he will protest.
“It depends on the price,” said Mr. Rosquin, 49, who acknowledged that he was planning to buy a $400 BlackBerry smartphone on Amazon because the handset was not yet available on rival French websites. “If you can get something for half-price at Amazon, you may put your issues with their working conditions aside.”
For the full story, see:
MARK SCOTT. “Principles Are No Match for Europe’s Love of U.S. Web Titans.” The New York Times (Mon., JULY 7, 2014): B1 & B3.
(Note: the online version of the story has the date JULY 6, 2014.)
The Noise of Open-Office Plans Destroys Concentration
Source of book image: DWIGHT GARNER. “Books of The Times; The Office Space We Love to Hate.” The New York Times (Fri., APRIL 25, 2014): C21 & C31.
(p. C3) Open-office plans–then as now–mean noise, both visual and aural. People used to private offices couldn’t concentrate because of all the chatter and typing. For all the supposed egalitarianism of the office landscape, managers usually allotted themselves more space than junior staff, and the creative use of screens and extra plants often let them carve out ad hoc private offices for themselves. By the 1970s, European workers’ councils had rejected open-office plans, insisting that employees across the continent be granted private offices.
In the U.S., however, the open-plan remained unchallenged–until Propst. He concluded that office workers needed autonomy and independence–and therefore offered a flexible, three-walled design that could be reshaped to any given need.
. . .
Many workers I’ve spoken to in open offices find concentration and privacy elusive–and often miss their cubicles.
For the full commentary, see:
NIKIL SAVAL. “When Office Cubicles Looked Like Progress.” The Wall Street Journal (Sat., May 10, 2014): C3.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date May 9, 2014, and has the title “A Brief History of the Dreaded Office Cubicle.”)
For more of Saval’s observations on the cubicle, see:
Saval, Nikil. Cubed: A Secret History of the Workplace. New York: Doubleday, 2014.
Occupational Licensing Hurts Poor and Restricts Innovation and Worker Mobility
Source of book image: http://www.upjohn.org/sites/default/files/bookcovers/soor_0.JPG
(p. A31) In the 1970s, about 10 percent of individuals who worked had to have licenses, but by 2008, almost 30 percent of the work force needed them.
With this explosion of licensing laws has come a national patchwork of stealth regulation that has, among other things, restricted labor markets, innovation and worker mobility.
. . .
Occupational licensing, moreover, does nothing to close the inequality gap in the United States. For consumers, there is likely to be a redistribution effect in the “wrong” direction, as higher income consumers have more choice among higher quality purveyors of a service and lower income individuals are left with fewer affordable service options.
. . . , government-issued licenses largely protect occupations from competition. Conservatives often see members of the regulated occupation supporting licensing laws under claims of “public health and safety.” However, these laws do much more to stop competition and less to enhance the quality of the service.
Also, all consumers do not demand the same level of quality. If licensure “improves quality” by restricting entry into the profession, then some consumers will be forced to pay for more “quality” than they want or need. Not everyone wants a board-licensed hairdresser.
For the full commentary, see:
MORRIS M. KLEINER. “Why License a Florist?” The New York Times (Thurs., MAY 29, 2014): A31.
(Note: the online version of the commentary has the date MAY 28, 2014.)
Kleiner’s most recent book on occupational licensing is:
Kleiner, Morris M. Stages of Occupational Regulation: Analysis of Case Studies. Kalamazoo, Michigan: W.E. Upjohn Institute, 2013.
When Labor Markets Are Flexible, Workers Need Not Fear New Technology
(p. 6) Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in “The Second Machine Age,” a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, “Average Is Over.” The upshot is that machines are often filling in for our smarts, not just for our brawn — and this trend is likely to grow.
How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.
. . .
Labor markets just aren’t as flexible these days for workers, especially for men at the bottom end of the skills distribution.
. . .
Across the economy, a college degree is often demanded where a high school degree used to suffice.
. . .
The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don’t need such laws for, say, barbers or interior designers, although they are commonly on the books.
. . .
Many . . . labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn’t always know who their worst workers were, or didn’t want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions — and the axes fell. The financial crisis thus accelerated what would have been a much slower process.
Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren’t always fair, but that stigma isn’t easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.
For the full commentary, see:
TYLER COWEN. “Economic View; Automation Alone Isn’t Killing Jobs.” The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date APRIL 5, 2014.)
The Brynjolfsson and McAfee book mentioned is:
Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.
The Cowen book that Cowen mentions is:
Cowen, Tyler. Average Is Over: Powering America Beyond the Age of the Great Stagnation. New York: Dutton Adult, 2013.