Jobs in the US economy as a percentage of total.
01 May 2016 Leave a comment
in economic history, industrial organisation, labour economics, labour supply, survivor principle Tags: labour demographics
Does “Fair Trade” Help?
29 Apr 2016 Leave a comment
in applied price theory, development economics, economics, gender, growth disasters, growth miracles, labour economics, labour supply Tags: fair trade
Winning the lottery makes you into right-wingers
29 Apr 2016 Leave a comment
in labour economics, labour supply, Public Choice Tags: lottery winners, voter demographics
Does labor market regulation really protect the interests of workers?
29 Apr 2016 Leave a comment
in economics of media and culture, economics of regulation, industrial organisation, labour economics, occupational regulation Tags: employment law, employment protection laws, employment regulation
How to survive the wacky gender politics on campus
28 Apr 2016 Leave a comment
in discrimination, economics of education, economics of media and culture, gender Tags: gender politics, political correctness, safe spaces
Submission to Porirua City Council on proposed #livingwage
28 Apr 2016 Leave a comment
in labour economics, managerial economics, minimum wage, organisational economics, personnel economics Tags: expressive voting, living wage, local government, rational irrationality, The fatal conceit
A living wage at a local council will act as a hiring standard that stops low paid workers from being shortlisted for vacancies in the 129 council jobs affected by the proposed living wage increase.
The Council must hire on merit so only those who currently earn about $19 in other jobs will be shortlisted. That is the law. The Council must hire the best available applicant. The minimum wage workers who currently fill these minimum wage jobs simply could not cannot be lawfully shortlisted.
It is explicit in the living wage literature that a living wage improves the quality of applicants for future vacancies.
When a living wage job is advertised, more qualified applicants will apply. This will crowd-out the existing workers had who shortlisted for these Council jobs. They will have to apply for other minimum wage jobs but pay rates to fund council jobs they can never win.
There is no way around this because of the duty of the Council to hire on merit.
All future vacancies covered by the living wage increase will be filled by workers who are currently better paid than the existing applicants who won those jobs in the past.
Any employer who unilaterally introduces a living wage is simply raising their hiring standards saying they will not hire applicants who do not currently earn the equivalent of the living wage in their previous job.
A living wage will exclude low paid worker from council jobs in the future. I have attached a more detailed analysis of the economics of a living wage as proposed by the Wellington City Council.
“Bourgeois Equality” lecture
28 Apr 2016 Leave a comment
in applied welfare economics, development economics, economic history, economics, economics of regulation, entrepreneurship, growth disasters, growth miracles, history of economic thought, industrial organisation, poverty and inequality, survivor principle Tags: Deirdre McCloskey, industrial revolution, The Great Enrichment
@Economicpolicy shows that most minimum wage workers are adults who do not have children to support
28 Apr 2016 Leave a comment
@The_TUC confirm that motherhood penalty has nothing to do with employer discrimination @CHSommers
28 Apr 2016 1 Comment
in discrimination, gender, human capital, labour economics, labour supply, occupational choice Tags: asymmetric information, asymmetric marriage premium, British economy, employer discrimination, family wage gap, gender wage gap, marriage and divorce, marriage bar, motherhood penalty
Source: Trades Union Congress – The Motherhood Pay Penalty.
The British Trades Union Congress (TUC) has released the preliminary findings of research into the 1970 Birth Cohort Study. The union research into the gender wage gap finds that
The overall gender pay gap of 34 per cent for this cohort of full-time workers who were born in 1970. This gap is largely due to the impact of parenthood on earnings – the women earning less and the men earning more after having children.
Mothers in the 1970 Birth Cohort Study who are in full-time work earn 11 per cent less than full-time women without children at age 42. When factors such as education, region and occupational social class are taken into account, this motherhood pay penalty in full-work falls to 7 per cent.
This finding by the union research into the 1970 birth cohort is no surprise. For 40 years at least now it has been known that having children and and spacing those children over a longer period carries a career penalty for women.
Recent work finds that the motherhood penalty is larger for those women pursuing careers where long hours or rigid hours is required and if they wish to combine careers and motherhood. Much of that research is led by Claudia Goldin.
It is difficult for employers to discriminate against women if the gender wage gap is not only driven by motherhood but also by having their first child past the age of 33. Male chauvinistic employers simply do not have the necessary information about whether women are mothers and and whether they had their first child before or after the age of 33.
For employer discrimination to drive the gender wage gap, these male chauvinist employers must know:
- whether female applicants are mothers, and
- the age of female applicants who are mothers when they had their first child.
This information on the age of first motherhood is essential for employer discrimination to be driving the gender wage gap. This information about the age of first motherhood must be in the hands of the employer so that they do not shortlist and do not promote women who are mothers before age 33.
Of 534 occupations tracked by BLS, ONLY 7 pay women more than men ampr.gs/1oJzOrh http://t.co/XRunQkiav8—
American Progress (@amprog) January 29, 2015
It would be handy to know why why these male chauvinistic employers have such strong prejudices against women who are mothers before the age of 33 but have few prejudices against women who are mothers after age 33.
Another piece of useful information is how do male chauvinist employers get their hands on the partnership status of mothers when they had their first child. As the Trades Union Congress found
There is a bonus of 12 per cent for being in a couple when women had their first child.
If the gender wage gap is due to employer discrimination rather than the choices by women about motherhood, there seems to be a 12% wage bonus for single mothers who can successfully lie to male chauvinist employers about whether they are in a stable relationship when they had their first child.
Keeping up appearances for the sake of the children has a whole new meaning if there is 12% wage bonus in it if male chauvinist employers can be fooled. There is a wage bonus of several times that if mothers can keep their children secret from their discriminating employer.
When there is a marriage bar in the Australian Public Service, there were instances where women kept their children or marriages secret to avoid being sacked. One woman had four children before she decided to make an honest man of the father. She lost her job.
@The_TUC confirms motherhood penalty is nothing to do with discrimination @CHSommers
28 Apr 2016 Leave a comment
in discrimination, gender, human capital, labour economics, labour supply, occupational choice Tags: asymmetric information, asymmetric marriage premium, British economy, employer discrimination, family wage gap, gender wage gap, marriage and divorce, marriage bar, motherhood penalty
Source: Trades Union Congress – The Motherhood Pay Penalty.
The British Trades Union Congress (TUC) has released the preliminary findings of research into the 1970 Birth Cohort Study. The union research into the gender wage gap finds that
The overall gender pay gap of 34 per cent for this cohort of full-time workers who were born in 1970. This gap is largely due to the impact of parenthood on earnings – the women earning less and the men earning more after having children.
Mothers in the 1970 Birth Cohort Study who are in full-time work earn 11 per cent less than full-time women without children at age 42. When factors such as education, region and occupation are taken into account, this motherhood pay penalty in full-work falls to 7 per cent.
This finding by the union research into the 1970 birth cohort is no surprise. For 40 years at least now it has been known that having children and and spacing those children over a longer period carries a career penalty for women.
More recent work has emphasised the motherhood penalty is larger for those women pursuing careers where long hours or rigid hours is required and if they wish to combine careers and motherhood. Much of that research is led by Claudia Goldin.
It is difficult for employers to discriminate against women if the gender wage gap is not only driven by motherhood but also by having their first child past the age of 33. Male chauvinistic employers simply do not have the necessary information about whether women are mothers and and whether they had their first child before or after the age of 33.
For employer discrimination to drive the gender wage gap, rather than women’s choices about balancing career and motherhood, these male chauvinist employers must know:
- whether female applicants are mothers, and
- the age of female applicants who are mothers when they had their first child.
This information on the age of first motherhood is essential for employer discrimination to be driving the gender wage gap. This information about the age of first motherhood must be in the hands of the employer so that they do not shortlist, do not promote and do not hire women who are mothers before the age of 33.
Of 534 occupations tracked by BLS, ONLY 7 pay women more than men ampr.gs/1oJzOrh http://t.co/XRunQkiav8—
American Progress (@amprog) January 29, 2015
It would be handy to know why why these male chauvinistic employers have such strong prejudices against women who are mothers before the age of 33 but have no prejudices against women who are mothers after the age of 33. It would
Another piece of you useful information is how do male chauvinist employers get their hands on the partnership status of mothers when they had their first child. As the Trades Union Congress found
There is a bonus of 12 per cent for being in a couple when women had their first child.
Why are the prejudices of male chauvinist employers dampened when the mother is married or in a stable relationship when they had their first child? Why are these male chauvinist employers so prejudiced against in mothers?
There seems to be a 12% wage bonus for single mothers who can successfully lie to male chauvinist employers about whether they are in a stable relationship back when they had the first child.
Keeping up appearances for the sake of the children has a whole new meaning if there is a 12% wage bonus in it if male chauvinist employers can be fooled. There is a wage bonus of several times that if mothers can keep their children secret from their discriminating employer.
When there is a marriage bar in the Australian Public Service, there were instances where women kept their children or marriages secret to avoid being sacked. One woman had four children before she decided to make an honest man of the father. She lost her job.
Does it Feel Good or Does it Do Good?
27 Apr 2016 Leave a comment
in applied price theory, economics of media and culture, labour economics, minimum wage Tags: expressive voting, rational irrationality
Are gender roles a marker of true equality?
27 Apr 2016 Leave a comment
in discrimination, economics, gender, human capital, labour economics, labour supply Tags: gender gap
A Mall divided by different city minimum wage laws @SueMoroney @GreenCatherine
26 Apr 2016 1 Comment
in applied price theory, applied welfare economics, economics of regulation, labour economics, minimum wage, politics - New Zealand, politics - USA, Robert E. Lucas Tags: Alan Manning, city minimum wage laws, living wage, monopsony
The Westfield Valley Fair Mall is half in San Jose city and half in Santa Clara city. In 2012, San Jose raised its minimum wage from $8 to $10 per hour.
National Public Radio in 2014 had a brilliant broadcast on the implications of this new city minimum wage law on the Westfield Valley Fair Mall. As the broadcast said:
This change created two economic worlds within a single, large building. Employees doing more or less the same work, just steps away from each other, started making different wages.
The radio show discussed what happened on the $8 side of the Mall and then on the $10 side through interviews with employers and workers.
On the then $8 per hour minimum wage side of the Mall, employers quickly noticed that many of their employees quit to jobs elsewhere in the same Mall. These same employees found that the quality of job applicants also fell away seriously. There were noticeable differences in the personalities traits and dress standards presented by the $8 an hour job applicants and $10 an hour job applicants.
As is to be expected because information about job opportunities is costly, some of the minimum wage employees did not know that other parts of the Mall paid more.
(This change in job turnover rates and applicant pool quality subsequent to the minimum wage increase in San Jose has implications for the inequality of bargaining power between workers and employers. Minimum wage workers do keep an eye on competing opportunities and take them up when better options arise – JR aside).
Since 2012, the minimum wage rates in the Mall have changed again: Santa Clara’s minimum wage initially increased to $9 an hour – the state-wide minimum wage, which had increased from $8 per hour; San Jose’s $10.15 per hour.
Those city minimum wages were increased further this year to $11 in Santa Clara city and $10.30 in San Jose city respectively by the respective city councils.
The state-wide minimum wage in California is to increase to $15 per hour by 2020 under a law just passed. California’s current $10-per-hour minimum wage is already among the highest in the country — only Washington, DC, has a higher minimum wage at $10.50 per hour.
Getting back to what was said in the National Public Radio broadcast, the show then moved on to the Gap Store, which straddled the two city boundaries.
Source: Episode 562: A Mall Divided : Planet Money : NPR.
The Gap Store had the option of keeping a record of how much time employees spent in each city within its store and pay accordingly under each city law. The Gap raised everybody’s wage to $10.
There was then a fascinating interview with a Pretzels store owner. The question she asked herself every time she bought anything was how many pretzels se had to sell to cover the cost. She quickly concluded that she could not sell enough additional pretzels to cover the wage rise.
There is another Pretzels store just around the corner from her in the same mall but in the other city so she could not raise her prices by that much. She had a picture of that day’s menu and price list of the competing Pretzels store on her smart phone.
She instead took a cut in her profit. This flowed back to her employers because they received an annual bonus based on 15% of each year’s profit. They did not like that reduction in their bonus.
In a delicious irony, this same entrepreneur owned another Pretzels store in a different part of the Mall but which was in the other city subject to the lower minimum wage law. She owned two of the three pretzels stores in that Mall.
She solved the problem in staff morale by rotating her staff in alternate weeks between her two stores in the same Mall but different cities and paying them accordingly.
In my opinion, this NPR story is pretty much a vindication of standard microeconomics of minimum wage laws. Minimum wage workers are alert to their opportunities and take the best ones available to them but this is not perfect because of cost of information. As Manning observed in his superb book Monopsony in Motion:
That important frictions exist in the labor market seems undeniable: people go to the pub to celebrate when they get a job rather than greeting the news with the shrug of the shoulders that we might expect if labor markets were frictionless.
And people go to the pub to drown their sorrows when they lose their job rather than picking up another one straight away. The importance of frictions has been recognized since at least the work of Stigler (1961, 1962).
As George Stigler argued, information is costly to obtain in the labour market and this leads to price and wage dispersion with this variance related to the cost of searching for information. He concluded that the one-price (one-wage) market will occur only where the cost of information about the prices (wages) offered by buyers and sellers is zero.
Finally, minimum wages rises threaten the profitability of businesses and therefore their survival. That puts low-pay jobs at risk. As Bhaskar, Manning and To (2002) explain in their survey paper on monopsony:
Notice also that because a binding minimum wage reduces employers’ profits when there is free entry into and exit out of the labor market, some employers will be forced to exit. Employer exit has a negative effect on total employment through the loss of exiting employer payrolls.
That is, although establishments that remain after the imposition of a minimum wage increase their employment, some employers are forced out of business.
Thus, minimum wages have two opposing effects: the employment-increasing “oligopsony” effect and the employment-reducing “exit” effect. The overall effect of a minimum wage depends on which effect dominates.
An increase in the family tax credit puts no jobs at risk and is a superior alternative to minimum wage laws. Minimum wage increases throw some low page workers onto the social scrapheap.
Some look upon these large minimum state and city wage increases as worthwhile policy experiments. As Dube said:
… 30 to 40 percent of the California workforce will get a raise … This will be a big experiment. It’s far outside of our evidence base… If you’re risk-averse, this would not be the scale at which to try things.
On the other hand, if you think that wages are really low and they’ve been low for a really long time and we can afford to take some risks, doing things at this scale will get us more evidence.
“Big experiments” to use Dube’s words such as these with state and city minimum wages laws are wrong as Robert Lucas explained in 1988:
I want to understand the connection between in the money supply and economic depressions.
One way to demonstrate that I understand this connection–I think the only really convincing way–would be for me to engineer a depression in the United States by manipulating the U.S. money supply.
I think I know how to do this, though I’m not absolutely sure, but a real virtue of the democratic system is that we do not look kindly on people who want to use our lives as a laboratory. So I will try to make my depression somewhere else.
Utopia, you are standing in it! 
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