Labor Economics – Page 64 – artdiamondblog.com

Most New Jobs Created in Opportunistic Newcomer Cities

Over the past 15 years, it has been opportunistic newcomers — Houston, Charlotte, Las Vegas, Phoenix, Dallas, Riverside — that have created the most new jobs and gained the most net domestic migration. In contrast there has been virtually negligible long-term net growth in jobs or positive domestic migration to places like New York, Los Angeles, Boston or the San Francisco Bay Area.

. . .

Fortunately the jobs are headed in the same direction. After all, companies depend not only on elite MBAs but upon on the collective skills of middle managers, technicians and skilled laborers. Most companies also tend to be more mindful of basic costs, taxes and regulations than the average hedge-fund manager or trustafarian.

This perhaps explains why the largest companies — with the notable exception of Silicon Valley — have continued to move toward the more opportunistic cities. New York and its environs, for example, had 140 such firms in 1960; in 2006 the number had dropped to less than half that, some of those running with only skeleton top management. Houston, in contrast, had only one Fortune 500 company in 1960; today it is home to over 20. Houston companies tend to staff heavily locally; this is one reason the city was able to replace New York and other high-cost locales as the nation’s unchallenged energy capital. Another example of this trend is Charlotte’s rise as the nation’s second-ranked banking center in terms of assets, surpassing San Francisco, Chicago and Los Angeles, indeed all superstar cities except New York.

For the full commentary, see:

JOEL KOTKIN. "The Myth of ‘Superstar Cities’." The Wall Street Journal (Tues., February 13, 2007): A25.

(Note: ellipsis added.)

Schumer Surprised at No Increase in Job Volatility

Source of graph: online version of the NYT article cited below.

(p. C1) Last week, the Congressional Budget Office released a study that was arguably the fullest picture of (p. C12) economic volatility anyone has yet put together. Although some academics have taken a crack at the topic in recent years, they have had to rely on surveys in which people are asked how much money they make. The study by the C.B.O., as the budget office is known, used Social Security Administration records, which cover many more people than the surveys and are more reliable.

If you read the C.B.O. report, you can tell that its authors knew they were dealing with a delicate subject. The summary starts by noting that a “significant number of workers experience substantial variability in their total wage earnings,” which is certainly true. Only later do you come to the surprising part: there is the same amount of variability now that there was in the 1980s and 1990s. In journalism, this is known as burying the lead.

“Intuitively, you would think volatility is increasing,” said Senator Charles E. Schumer, Democrat of New York, who along with Senator Jim Webb of Virginia requested that the study be done. “But it isn’t, which I guess shows that the American economy has always been very flexible.”

Mr. Schumer’s point about intuition is an important one. We can all tick off reasons that the economy feels so volatile. Hardly a week goes by without another big corporation — the Tribune Company, Citigroup, DaimlerChrysler — announcing a big job cut. The number of temporary jobs, meanwhile, has mushroomed. Globalization and technological innovation are causing many of these changes, and labor unions are too weak to prevent them.

But there is also a whole set of other forces, harder to see and pushing in the other direction. Manufacturing, where furloughs and layoffs have always been the norm, accounts for a much smaller part of the work force than it used to, while more stable industries, like health care, have grown. This is one reason that recessions, and the job cuts they bring, haven’t happened as often as they once did.

. . .

In fact, research by Henry S. Farber, an economist at Princeton, has found that job loss rates have followed a cyclical pattern since the early ’80s, peaking around the same highs during recessions and falling to similar lows during expansions. (The rate has risen for workers who went to college and fallen a bit who those who didn’t.)

Americans, looking at their own jobs, realize that there hasn’t been a big change: in a recent Gallup Poll, 12 percent of respondents said it was very or fairly likely they would be laid off in the coming year. In the 1970s, ’80s and ’90s, at similar points in the business cycle, the percentage was virtually identical.

For the full commentary, see:

DAVID LEONHARDT. "ECONOMIX; What’s Really Squeezing the Middle Class?" The New York Times (Weds., April 25, 2007): C1 & C12.

(Note: ellipses added.)

Neglect of the Important Issues, Is the Opportunity Cost of Pursuing the Cutely Clever

The Wall Street Journal summarizes an April 2, 2007 article by Noam Scheiber in The New Republic:

A new generation of economists has become so addicted to cleverness that dull but genuinely useful research is under threat.

"Freakonomics," the 2005 best seller that sought to explain the mysteries of everyday life through economics, is only partly to blame, writes Noam Scheiber. The deeper roots lie in a 1980s crisis of faith over economists’ ability to reliably crunch numbers. Influential economist H. Gregg Lewis kicked it off by demonstrating that a host of broad, worthwhile empirical surveys of unions’ impact on wages came to opposite conclusions, mostly thanks to the differing original assumptions by the studies’ authors.

As a result, some economists retrenched, opting to focus on finding "solid answers to modest questions."

For the full summary, see:

"Informed Reader; Economics; How ‘Freakonomics’ Quashes Real Debates." The Wall Street Journal (Weds., March 28, 2007): B11.

“Roosevelt Warned us of Fearing Fear Itself; Now We Fear Life Itself”

Source of book image: http://ec1.images-amazon.com/images/P/159523005X.01._SCLZZZZZZZ_V46468787_SS500_.jpg

I saw Todd Buchholz on C-Span and on CNBC, and I enjoyed hearing his views, so I decided to buy his Bringing the Jobs Home. I don’t like the title, because it sort of implies that the job market is a zero-sum-game, in which one country’s gain implies another country’s loss. Us true-blue free marketers believe that the market is a non-zero-sum game in which everyone everywhere can have jobs, and have better ones over time.

But Buchholz’s little book is fun to read, and says much that is plausible about how the government hurts the worker and reduces the efficiency of the labor market.

Read the following excerpt for part of his rousing conclusion to the book.

(And, Aaron, I agree with you that Buchholz is wrong to say the American spirit is "innate.")

(p. 177) . . . : Since the 1960s, each year we’ve lost a little nerve, gained another bureaucrat, another lawyer, another layer of protection against life’s uncertainties. We have gotten used to a government that aims to coddle us but ends up both preventing us from growing and dampening the innate American spirit. The spirit still stirs but gets buried under the weight of the nanny state.

. . .

(p. 178) American government officials today cannot put our standard of living in a lockbox to preserve, protect and defend us. Franklin D. Roosevelt warned us of fearing fear itself; now we fear life itself.

. . .

(p. 179) To paraphrase Churchill, Americans did not sail the perilous Atlantic, scale the Appalachians and struggle past the Rockies because we were made of cotton candy.

Source:

Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis–and How We Can Fix It. New York: Sentinel, 2004.

Even France Recognizes English as the Language of Business

The story below provides further evidence that those who are working hard to make English the mandatory language of the United States, should find themselves a real problem to worry about.

PARIS, April 7 — When economics students returned this winter to the elite École Normale Supérieure here, copies of a simple one-page petition were posted in the corridors demanding an unlikely privilege: French as a teaching language.

“We understand that economics is a discipline, like most scientific fields, where the research is published in English,” the petition read, in apologetic tones. But it declared that it was unacceptable for a native French professor to teach standard courses to French-speaking students in the adopted tongue of English.

In the shifting universe of global academia, English is becoming as commonplace as creeping ivy and mortarboards. In the last five years, the world’s top business schools and universities have been pushing to make English the teaching tongue in a calculated strategy to raise revenues by attracting more international students and as a way to respond to globalization.

Business universities are driving the trend, partly because changes in international accreditation standards in the late 1990s required them to include English-language components. But English is also spreading to the undergraduate level, with some South Korean universities offering up to 30 percent of their courses in the language. The former president of Korea University in Seoul sought to raise that share to 60 percent, but ultimately was not re-elected to his post in December.

In Madrid, business students can take their admissions test in English for the elite Instituto de Empresa and enroll in core courses for a master’s degree in business administration in the same language. The Lille School of Management in France stopped considering English a foreign language in 1999, and now half the postgraduate programs are taught in English to accommodate a rising number of international students.

Over the last three years, the number of master’s programs offered in English at universities with another host language has more than doubled, to 3,300 programs at 1,700 universities, according to David A. Wilson, chief executive of the Graduate Management Admission Council, an international organization of leading business schools that is based in McLean, Va.

“We are shifting to English. Why?” said Laurent Bibard, the dean of M.B.A. programs at Essec, a top French business school in a suburb of Paris that is a fertile breeding ground for chief executives.

“It’s the language for international teaching,” he said. “English allows students to be able to come from anyplace in the world and for our students — the French ones — to go everywhere.”

For the full story, see:

DOREEN CARVAJAL. "English as Language of Global Education." The New York Times (Weds., April 11, 2007): A21.

Blinder on Free Trade

Source of graphic: online version of the WSJ article cited below.

For awhile, during the Clinton administration, many Democratic economists, such as Alan Blinder, seemed to solidly support free trade as an engine for economic growth. But now several Democratic economists, such as Blinder as described in the excerpt below, seem to be returning to the usual Democratic protectionist policies.

If the goal is economic progress and growth, such policies remain ill-advised, no matter how effective they are at helping Democrats to win elections. To whit: Ed Leamer provides the arguments and evidence against worries about outsourcing in his long, but excellent, review of Thomas Friedman’s hand-wringing in The World is Flat. (See way below for the reference.)

(p. A14) Mr. Blinder’s job-loss estimates in particular are electrifying Democratic candidates searching for ways to address angst about trade. "Alan, because of his stature, provided a degree of legitimacy to what many of us had come to feel anecdotally — that the anxiety over outsourcing and offshoring was a far larger phenomenon than traditional economic analysis was showing," says Gene Sperling, an adviser to President Clinton and, now, to Hillary Clinton. Her rival, Barack Obama, spent an hour with Mr. Blinder earlier in this year.

Mr. Blinder’s answer is not protectionism, a word he utters with the contempt that Cold Warriors reserved for communism. Rather, Mr. Blinder still believes the principle British economist David Ricardo introduced 200 years ago: Nations prosper by focusing on things they do best — their "comparative advantage" — and trading with other nations with different strengths. He accepts the economic logic that U.S. trade with large low-wage countries like India and China will make all of them richer — eventually. He acknowledges that trade can create jobs in the U.S. and bolster productivity growth.

But he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge. He wants government to do far more for displaced workers than the few months of retraining it offers today. He thinks the U.S. education system must be revamped so it prepares workers for jobs that can’t easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.

His critique puts Mr. Blinder in a minority among economists, most of whom emphasize the enormous gains from trade. "He’s dead wrong," says Columbia University economist Jagdish Bhagwati, who will debate Mr. Blinder at Harvard in May over his assertions about the magnitude of job losses from trade. Mr. Bhagwati says that in highly skilled fields such as medicine, law and accounting, "If we do a real balance sheet, I have no doubt we’re creating far more jobs than we’re losing."

. . .

He was silent when his former Princeton student, N. Gregory Mankiw, then chairman of President Bush’s Council of Economic Advisers, unleashed a political firestorm by reciting standard theory but appearing indifferent to pain caused to those whose jobs go overseas. "Does it matter from an economic standpoint whether items produced abroad come on planes and ships or over fiber optic cables?" Mr. Mankiw said at a February 2004 briefing. "Well, no, the economics is basically the same….More things are tradable than…in the past, and that’s a good thing."

Mr. Blinder says he agreed with Mr. Mankiw’s point that the economics of trade are the same however imports are delivered. But he’d begun to wonder if the technology that allowed English-speaking workers in India to do the jobs of American workers at lower wages was "a good thing" for many Americans. At a Princeton dinner, a Wall Street executive told Mr. Blinder how pleased her company was with the securities analysts it had hired in India. From New York Times’ columnist Thomas Friedman’s 2005 book, "The World is Flat," he found anecdotes about competition to U.S. workers "in walks of life I didn’t know about."

Mr. Blinder began to muse about this in public. At a Council on Foreign Relations forum in January 2005 he called "offshoring," or the exporting of U.S. jobs, "the big issue for the next generation of Americans." Eight months later on Capitol Hill, he warned that "tens of millions of additional American workers will start to experience an element of job insecurity that has heretofore been reserved for manufacturing workers."

At the urging of former Clinton Treasury Secretary Robert Rubin, Mr. Blinder wrote an essay, "Offshoring: The Next Industrial Revolution?" published last year in Foreign Affairs. "The old assumption that if you cannot put it in a box, you cannot trade it is hopelessly obsolete," he wrote. "The cheap and easy flow of information around the globe…will require vast and unsettling adjustments in the way Americans and residents of other developed countries work, live and educate their children." (Read that full article.)

. . .

Diana Farrell, head of the McKinsey Global Institute, a pro-globalization think-tank arm of the consulting firm that has done its own analysis of vulnerable jobs, calls Mr. Blinder "an alarmist" and frets about the impact he is having on politicians, particularly the Democrats who see resistance to free trade as a political winner. She insists many jobs that could go overseas won’t actually go.

Ms. Farrell says Mr. Blinder’s work doesn’t take into account the realities of business which make exporting of some jobs impractical or which create offsetting gains elsewhere in the U.S. economy. He counters he is looking further into the future than McKinsey — 10 or 20 years instead of five — and expects more technological change than the consultants do "even without the Buck Rogers stuff."

For the full story, see:

DAVID WESSEL and BOB DAVIS. "JOB PROSPECTS; Pain From Free Trade Spurs Second Thoughts; Mr. Blinder’s Shift Spotlights Warnings Of Deeper Downside." The Wall Street Journal (Weds., March 28, 2007): A1 & A14.

(Note: ellipses added.)

For Leamer’s wonderful riff on why we need not worry about outsourcing, see:

Leamer, Edward E. "A Flat World, a Level Playing Field, a Small World after All, or None of the Above? A Review of Thomas L. Friedman’s the World Is Flat." Journal of Economic Literature 45, no. 1 (March 2007): 83-126.

Alan S. Blinder. Source of photo: online version of the WSJ article cited above.

54 Year-Old Auto Worker Writes Three Novels After Taking Voluntary Buyout

Source of graphic: online version of the NYT article cited below.

(p. 1) TALK to Kenneth Doolittle about General Motors, where he once supervised a team of assembly line workers, and he readily speaks with pride about his job and the self-esteem it provided. “I loved all of it — the people, the work,” he says. “I was in a position finally where people listened to me when I spoke. I wasn’t just a Joe-Nobody. I contributed.”

Talk to Mr. Doolittle a little longer and he gradually describes why he decided to take a buyout from G.M. — joining more than 80,000 Big Three employees in the largest exodus of workers from a single American industry in decades.

. . .

The exodus that Mr. Doolittle is joining is voluntary. Some have changed their minds. More than 3,000 workers who signed up over the last year to leave Ford and G.M. subsequently decided to stay. These are, after all, the highest-paying blue-collar jobs left in America. Even so, workers are departing from the auto industry en masse, escaping — as they put it in interviews — increasingly difficult working conditions at companies they fear will desert them.

. . .

(p. 9) When G.M. decided to close his plant in 2005, Mr. Doolittle’s seniority gave him every right to transfer to a much newer factory right next door, where G.M. is building a popular Cadillac sedan and is likely to do so for as long as Mr. Doolittle might have wanted a job. But he balked because of the change in stature that would accompany the switch.

Since his departure last year, he has struggled to occupy his time. Divorced, with four grown children, he divides his days between an apartment in Lansing and a trailer parked on a small lakefront plot that he owns north of the city. He has typed out on a laptop three novels “about my life experience.” And to make up some of his lost income — his $36,000 pension is 60 percent of his old pay — he works 20 hours a week, at $10 an hour, doing maintenance at Sears stores.

“That is just enough to keep me from watching Jerry Springer every day,” he said. “I don’t want to sit in front of a TV; I’m too young for that.”

. . .

Across America, more than 30 million people have been forced out of jobs since the early 1980s, the Bureau of Labor Statistics reports, and regaining lost incomes has not been easy. Nearly 50 million new jobs have been created over that same period, according to the bureau, so there are always new opportunities but more often than not at lower pay. Among those who have lost work, only a third held new jobs two years later that paid as well as those that were lost, according to the bureau’s surveys of displaced workers. Another third of those displaced were in jobs that paid, on average, 15 to 20 percent less than their previous employment — while the final third had dropped out of the labor force entirely.

The Census Bureau reported a jump in net migration out of Michigan last year: some 42,300 people left, up from 29,700 in 2005. That was far and away the largest outflow from the state since 1984, during the Rust Belt crisis, census data show. . . .

. . .

The exodus is reminiscent of the Dust Bowl migration from the prairie states in the 1930s, when unemployed farmers gave up and trekked west to California. The Dust Bowl migration, on its face, was much more brutal — the number of displaced Okies, as they were called, was far greater than the current number of departing auto workers, and there were not corporate and public subsidies at the time to soften the hardship.

“The Okies did not know whether they would get to their destination before they starved to death,” said Daniel Luria, an economist at the Michigan Manufacturing Technology Center. “The labor market prospects for the auto workers are not good, but they have assets. They are not in danger of immediately falling into poverty.”

For the full story, see:

UCHITELLE, LOUIS . "The End of the Line as They Know It." The New York Times, Section 3 (Sun., April 1, 2007): 1, 9, & 10.

(Note: ellipses added.)

Novelist Kenneth Doolittle. Source of photo: screen capture from online version of the NYT article cited above.

The Safety Net in Europe and the United States

Source of graphic: online version of the NYT article cited below.

FROM issues of crime and punishment to the proper domain of the spiritual and temporal powers, Americans and Europeans have long cast a skeptical eye at one another across the Atlantic.

Perhaps nowhere has the gaze been more jaundiced than in the area of work. From the perspective of Western Europe, American employers have a relatively free hand to hire and fire, coupled with meager and short-lived unemployment benefits. America’s deregulated labor markets seem to provide hardly any safety net when it comes to economic dislocations of workers.

Americans, by contrast, have found it hard to resist a touch of schadenfreude at the joblessness stoked by European governments’ intervention in labor markets, with rules on everything from wages to layoffs, on top of generous unemployment benefits.

For the full commentary, see:

EDUARDO PORTER. "Economic View; A Bridge Over the Atlantic, in Labor Policy." The New York Times, Section 3 (Sun., April 1, 2007): 5.

Internet Increases Labor’s Options

A "local" Phoenix talk show host, Joe Crummey, broadcasts from his home in California. Source of photo: online version of the NYT article cited below.

The Internet is sometimes viewed as labor’s enemy because it reduces the cost of outsourcing. But it goes both ways: labor can offer its services to a wider world because of the Internet.

LOS ANGELES, March 27 — When people hear the radio host Joe Crummey on Phoenix’s popular KFYI murmur sarcastically, “We don’t have enough human rights activists in this town,” they know he means Phoenix.

Ditto for when he offers to assess the “east side west side traffic right now.”

As it turns out, Mr. Crummey, whose favorite talk show topics include immigration, patriotism and Arizona politics, is indeed reporting for duty in the valley. Just not in the Phoenix Valley.

Rather, it is here, in the San Fernando Valley, where he works via the Internet from his home on the top of a hill in the Studio City section of Los Angeles. Listeners in Phoenix are none the wiser.

Armed with four computers, a digital recorder, a constant stream of Fox News and a professional microphone, Mr. Crummey holds court for three hours each weekday during Phoenix’s drive-home time slot — from about 400 miles away in a neighboring state.

For the full story, see:

JENNIFER STEINHAUER. "Live, From Station KFYI in …Well, That’s Complicated." The New York Times (Weds., March 28, 2007): A11.

Google Hires “Interesting” “Geniuses” & Provides Them a Workplace Where Interesting Geniuses Want to Be

A break lounge at Google’s Manhattan offices. Source of photo: online version of the NYT article cited below.

You could be forgiven for not knowing that a satellite Google campus is growing in downtown Manhattan. There is no Google sign on the building, and it’s hard to catch a glimpse of a Googler, as employees call themselves, on the street because the company gives them every reason to stay within its candy-colored walls.

From lava lamps to abacuses to cork coffee tables, the offices may as well be a Montessori school conceived to cater to the needs of future science-project winners.

. . .

“These are power geniuses,” said Jane Risen, a statuesque brunette who works in training for the sales staff and is considered among the best dressed on campus — she was wearing a brown blazer from the Gap. “If they don’t have the same social skill or style sense, they’re extremely interesting people or else they don’t get hired.”

. . .

The strategy of keeping employees happy and committed to spending endless hours on campus seems to be working. Richard Burdon, 37, an engineer who joined Google two years ago, has been staying past midnight to prepare for the introduction of a project. (Google’s Manhattan engineers have been responsible for developing Google Maps and are working on some 100 other projects.)

“Google is about as interesting as starting your own startup because you can really follow your own ideas,” said Mr. Burdon, who previously worked for Goldman Sachs, Sony and I.B.M. The only time he could remember leaving the office during the workday was to buy a friend a birthday present.

For the full story, see:

DEBORAH SCHOENEMAN. "Can Google Come Out to Play?" The New York Times (December 31, 2006).

(Note: ellipses added.)

Work and non-work at Google’s Manhattan offices. Source of photos: online version of the NYT article cited above.