Will migrants and #robots be competing for the same jobs? @wucker https://t.co/Qmfoanv7UH #tech #MigrantCrisis pic.twitter.com/IdcVryo7W0
— World Economic Forum (@wef) November 12, 2015
The robot revolution is overrated
22 Nov 2015 Leave a comment
in applied price theory, economic history, industrial organisation, international economics, labour supply Tags: automation, creative destruction, entrepreneurial alertness, industrial revolution, mechanisation, robots, technological unemployment
@economicpolicy gathers more evidence of a waning gender pay gap @joshbivens_DC @eliselgould
22 Nov 2015 Leave a comment
in applied price theory, discrimination, economic history, gender, human capital, labour economics, labour supply, minimum wage, occupational choice, poverty and inequality Tags: asymmetric marriage premium, Claudia Goldin, compensating differentials, economics of fertility, gender wage gap, marriage and divorce, power couples
As part of a large paper calling for massive government intervention, the Economic Policy Institute, impeccably left-wing, massed a considerable amount of evidence about the withering away of the gender wage gap and anomalies in what is left of that gap. None of these anomalies bolster the case for more regulation of the labour market.
The first of their charts showed the large reduction in the gender wage gap in the USA. Women’s wages have been increasing consistently over the last 40 years or so. The second of their tweeted charts shows that women of all races consistently outperformed men in wages growth, often by a large margin.
Their most interesting chart is about how the gender gap is not only highest among top earners, their pay gap has not fallen at all in the last 40 years. If anything, that gender wage gap is rising at the top end of the labour market albeit slowly. Progress in closing the gender gap been pretty consistent at the lower pay levels. That progress is certainly better than no progress at all.
The Economic Policy Institute didn’t enquire in any detail into why women with the most options in the labour market had made the least progress in closing the gender wage gap.
None of their solutions such as more collective-bargaining and a higher minimum wage will help the top end of the job market.
There is an anomaly in the Economic Policy Institute’s reasoning. The women who would suffer least from a purported inequality of bargaining power inherent in the capitalist system and have plenty of human capital have had least success in closing the gender pay gap. These women can shop around for better job offers and start their own businesses. Many do because they are professionals where self-employment and professional partnerships are common.
The better discussions of the gender wage gap emphasise choice. Women choosing at the top end of the labour market to balance career and family and choosing the occupation and education where the net advantages of doing that are the greatest. As the Economic Policy Institute itself notes:
In 2014, the gap was smallest at the 10th percentile, where women earned 90.9 percent of men’s wages. The minimum wage is partially responsible for this greater equality among the lowest earners, as it results in greater wage uniformity at the bottom of the distribution.
The gap is highest at the top of the distribution, with 95th percentile women earning 78.6 percent as much as their male counterparts. Economist Claudia Goldin (2014) postulates that the gap is larger for women in high-wage professions because they are penalized for not working long, inflexible hours that often come with many professional jobs, due in large part to the arrival of children and long-standing social expectations about the division of household labour between men and women.
What the Economic Policy Institute does not explain is why these long-standing social expectations about the division of household labour should be strongest among well-paid women with plenty of options.
Among these options of high-powered women in well-paid jobs is the ability to buy every labour-saving appliance, hire a nanny and ample childcare and acquire everything else on the list of demands of the Economic Policy Institute on closing the gender pay gap. Something doesn’t add up?
Of course, the Economic Policy Institute discusses the unadjusted gender wage rather than the adjusted gender wage. When you study the gender wage gap after making adjustments for demographic and other obvious factors, it is clear that this pay gap is driven by the choices women make between career and family.
Claudia Goldin did a great study of Harvard MBAs using online surveys of their careers. This is the very group that according to the Economic Policy Institute have made the least progress in bringing down patriarchy in the labour market. Specifically, the overturning of traditional expectations about the marital division of labour in childcare and parenthood.
https://twitter.com/alyssalynn7/status/669219008747610113
Goldin found that three proximate factors accounted for the large and rising gender gap in earnings among MBA graduates as their careers unfold:
- differences in training prior to MBA graduation,
- differences in career interruptions, and
- differences in weekly hours.
The greater career discontinuity and shorter work hours for female MBAs are largely associated with motherhood. There are some careers that severely penalise any time at all out of the workforce or working less than punishingly long and rigid hours.
A 2014 Harvard Business School study found that 28 percent of recent female alumni took off more than six months to care for children; only 2 percent of men did.
Claudia Goldin found one counterfactual that cancels out the gender wage gap amongst MBA professionals: hubby earns less! Female MBAs who have a partner who earn less than them earn as much as the average MBA professional on an hourly basis but work a few less hours per week.
The gender wage gap is persisted in high-paying jobs because career women have so many options. Studies of top earning professionals show that they make quite deliberate choices between family and career. The better explanation of why so many women are in a particular occupation is job sorting: that particular job has flexible hours and the skills do not depreciate as fast for workers who take time off, working part-time or returning from time out of the workforce.
Low job turnover workers will be employed by firms that invest more in training and job specific human capital:
- Higher job turnover workers, such as women with children, will tend to move into jobs that have less investment in specialised human capital, and where their human capital depreciates at a slower pace.
- Women, including low paid women, select careers in jobs that match best in terms of work life balance and allows them to enter and leave the workforce with minimum penalty and loss of skills through depreciation and obsolescence.
This is the choice hypothesis of the gender wage gap. Women choose to educate for occupations where human capital depreciates at a slower pace.
The gender wage gap for professionals can be explained by the marriage market combined with assortative mating:
- Graduates are likely to marry each other and form power couples; and
- There tends to be an age gap between men and women in long-term relationships and marriages of two years.
This two-year age gap means that the husband has two additional years of work experience and career advancement. This is likely to translate into higher pay and more immediate promotional prospects.
An interesting and informed look at the pay gap between men and women economist.com/blogs/freeexch… https://t.co/0nxtC9ILWo—
Charles Read (@EconCharlesRead) November 06, 2015
Maximising household income would imply that the member of the household with a higher income, and greater immediate promotional prospects stay in the workforce. This is entirely consistent with the choice hypothesis and equalising differentials as the explanation for the gender wage gap. As Solomon Polachek explains:
At least in the past, getting married and having children meant one thing for men and another thing for women. Because women typically bear the brunt of child-rearing, married men with children work more over their lives than married women. This division of labour is exacerbated by the extent to which married women are, on average, younger and less educated than their husbands.
This pattern of earnings behaviour and human capital and career investment will persist until women start pairing off with men who are the same age or younger than them. That is, more women will have to start marrying down in both income and social maturity.
Productivity and the National Living Wage
21 Nov 2015 1 Comment
in applied price theory, applied welfare economics, entrepreneurship, industrial organisation, labour economics, minimum wage, politics - New Zealand, poverty and inequality, survivor principle Tags: British economy, living wage
A brilliant point by @FlipChartRick in the reblog. What sort of single year labour productivity increase is required to cover a UK living wage increase. Basic arithmetic kills.
A 6.6% annual productivity growth would be required to fund a living wage. This will be far above trend and would be required in sectors such as services that are not at all known for rapid productivity growth because of Baumol’s disease.
A subsequent Twitter exchange updated a key chart to include Australia and New Zealand.
The CIPD and the Resolution Foundation are collaborating on a piece of research into the impact of the National Living Wage (NLW). According to their first study over half of the country’s employers expect to be affected by it. Around a third said they would meet the increased cost by improving productivity and 22 percent said they would take lower profits. Only 15 percent said they would lay off workers or slow down recruitment.
That all sounds promising but, as Matt Whittaker points out, the productivity increase needed to cover the cost of the NLW could be pretty steep. As you might expect, there is a strong relationship between rising minimum wages and rising productivity. Most countries in the OECD have not strayed very far from this line of best fit.
In the absence of any productivity growth, the proposed NLW would move some way from the line (the green circle) by 2016 and…
View original post 565 more words
Women executives earn more, are promoted faster! @greencatherine @janelogie
20 Nov 2015 Leave a comment
in gender, human capital, occupational choice
Source: Limor Golan.
The western environmental movement’s role in China’s one-child policy
19 Nov 2015 Leave a comment
in development economics, environmental economics, environmentalism, growth disasters, growth miracles, health economics, labour economics, labour supply, population economics Tags: China, cranks, doomsday profits, doomsday prophecies, one child policy
How labour and other markets work
18 Nov 2015 Leave a comment
in applied price theory, Austrian economics, entrepreneurship, human capital, industrial organisation, labour economics, labour supply, Milton Friedman, minimum wage, occupational choice, poverty and inequality, survivor principle, unions Tags: market process, The meaning of competition
Drifting to full-time – working hours of British mothers in couple households since 1998
17 Nov 2015 Leave a comment
in gender, labour economics, labour supply
More British mothers with partners and children under 14 are moving from semi full-time to full-time over the last 15 years.
Source: OECD Family Database.
The rise and rise of the German breadwinner – weekly hours worked of German fathers
17 Nov 2015 Leave a comment
in economics of love and marriage, labour economics, labour supply
Unlike their British compatriots, German fathers are working longer hours than in the past.
Source: OECD Family Database.
British post-war productivity growth
17 Nov 2015 Leave a comment
in economic growth, economic history, global financial crisis (GFC), labour economics, macroeconomics Tags: British economy, British history
Jihadists and the Nisei soldiers
16 Nov 2015 1 Comment
in economic history, economics of religion, occupational choice, politics - Australia, politics - New Zealand, politics - USA, war and peace Tags: British politics, counter-signalling, economics of oppositional identities, game theory, ISIS, New Zealand Greens, war against terror, World War II
Japanese Americans interned during World War II jumped at the chance to volunteer to fight. They saw it as their last chance to prove their undivided loyalty to their country.
One Japanese father, when saying goodbye to his son, stressed that showing his loyalty to his country, if necessary through the last full measure of devotion was far more important that his returning safely to his family.
The 442nd Combat Regiment Team was the most decorated unit in World War II. Its motto was “Go for Broke”. The 4,000 Nisei soldiers in April 1943 had to be replaced nearly 2.5 times. In total, about 14,000 men served, earning 9,486 Purple Hearts.
Migrants are a cut above regarding initiative and judgement. They pass many of these traits on to their children. These Japanese Americans, both migrants and native born knew that counter-signalling was required. They had to go out of their way to show their loyalty no matter how unfair any suspicions of disloyalty among Japanese Americans might have been at the time.
I am reminded of that counter-signalling by Japanese Americans during the darkest days of World War II when I read the remarks of Julie Anne Genter and Jeremy Corbyn. Both focused their pleas on the need to be inclusive and understanding why people join violent, radical groups. They and the rest of the Twitter Left had nothing to contribute regarding strategies to deter the next attack and disrupt those that are in the planning stage, but that is not new.
The notion that bad behaviour towards minority communities leads to more recruitment to the terrorists is overrated. There will be a few wind-bags who say harsh things after each terrorist attack, but if they cross the line, they will be dealt with by the police and courts in a democracy governed by the rule of law.
Acrimony towards your community following the latest terrorist attacks has little to do with the level of recruitment to these terrorist groups either now or in the past. As Alan Krueger explains:
One of the conclusions from the work of Laurence Iannaccone—whose paper, “The Market for Martyrs,” is supported by my own research—is that it is very difficult to effect change on the supply side. People who are willing to sacrifice themselves for a cause have diverse motivations. Some are motivated by nationalism, some by religious fanaticism, some by historical grievances, and so on. If we address one motivation and thus reduce one source on the supply side, there remain other motivations that will incite other people to terror.
Malcontents join the jihadists today for the same reasons they joined the Red Brigade, the Japanese Red Army Faction and Baader-Meinhof gang in the 1970s and 1980s.
Plenty of young people were attracted to communism in previous generations as a way of sticking it to the man. Now as then economic conditions were good as were political freedoms. Italy, Japan and Germany were all at the peak of recoveries from war. Japanese incomes are doubled in the previous decade. Germany and Italy were rich countries. As Alan Krueger explains:
Despite these pronouncements, however, the available evidence is nearly unanimous in rejecting either material deprivation or inadequate education as important causes of support for terrorism or participation in terrorist activities. Such explanations have been embraced almost entirely on faith, not scientific evidence.
Each generation has its defining oppositional identity. Radical Islam is the oppositional identity of choice for today’s angry young men and women. Mind you, they have to buy Islam for dummies to understand what they’re signing up for.
In previous generations, it was communism, weird Christian sects, eco-terrorism, animal liberationist terrorism and a variety of domestic terrorists of the left and right with conspiratorial motivations. Look at the level of diversity of the angry young men and women on the domestic terrorists list of the FBI. One jihadists when interviewed said that 30 years ago he would probably have become a Communist as his vehicle for venting his frustrations.
There is always an ample supply of troubled and angry people so trying to redress their grievances is overrated as Alan Krueger explains:
…it makes sense to focus on the demand side, such as by degrading terrorist organizations’ financial and technical capabilities, and by vigorously protecting and promoting peaceful means of protest, so there is less demand for pursuing grievances through violent means. Policies intended to dampen the flow of people willing to join terrorist organizations, by contrast, strike me as less likely to succeed.
The current appeal of radical Islam rests on what psychologists call personal significance. The quest for personal significance by these angry young men and women is the desire to matter, to be respected, to be somebody in one’s own eyes and in the eyes of others.
A person’s sense of significance may be lost for many reasons, including economic conditions. The anger can grow out of a sense of disparagement and discrimination; it can come from a sense that one’s brethren in faith are being humiliated and disgraced around the world.
Extremist ideologies, be they communism, fascism or extreme religions are effective in such circumstances because it offers a quick-fix to a perceived loss of significance and an assured way to regain it. It accomplishes this by exploiting primordial instincts for aggression, sex and revenge. MI5’s behavioural science unit found that
“far from being religious zealots, a large number of those involved in terrorism do not practise their faith regularly. Many lack religious literacy and could… be regarded as religious novices.” The analysts concluded that “a well-established religious identity actually protects against violent radicalisation”
Most evidence point to moral outrage, disaffection, peer pressure, the search for a new identity, for a sense of belonging and purpose as drivers of radicalisation. Anthropologist Scott Atran pointed out in testimony to the US Senate in March 2010:
“. . . what inspires the most lethal terrorists in the world today is not so much the Quran or religious teachings as a thrilling cause and call to action that promises glory and esteem in the eyes of friends, and through friends, eternal respect and remembrance in the wider world”. He described wannabe jihadists as “bored, underemployed, overqualified and underwhelmed” young men for whom “jihad is an egalitarian, equal-opportunity employer . . . thrilling, glorious and cool”.
Chris Morris, the writer and director of the 2010 black comedy Four Lions – which satirised the ignorance, incompetence and sheer banality of British Muslim jihadists – said “Terrorism is about ideology, but it’s also about berks”.
The decline of the British breadwinner – distribution of working hours of married fathers since 1998
16 Nov 2015 1 Comment
in economics of love and marriage, labour economics, labour supply Tags: asymmetric marriage premium, British economy, male labour force participation, marriage and divorce
The number of British fathers in a couple who worked more than 45 hours a week has dropped from about 60% to under 40% since 1998.
Source: OECD Family Database.
@JohnQuiggin on “How New Zealand fell further behind” @FairnessNZ
15 Nov 2015 1 Comment
in applied welfare economics, economic growth, economic history, economics of regulation, fiscal policy, labour economics, politics - New Zealand Tags: Australia, John Quiggin, lost decades
Leading Australian academic economist John Quiggin has just published an article arguing that New Zealand should not be a policy role model for anything. To quote Quiggin:
For most of the twentieth century, the New Zealand and Australian economies performed almost identically. New Zealand took a somewhat larger hit when Britain entered the European Common Market in the 1970s, but that impact has long since washed out. The real divergence came in the 1980s. Since then, New Zealand’s income per person has fallen 35 per cent behind Australia’s
He used Reserve Bank of New Zealand data going back to 1990, which is common starting point for most Reserve Bank data.
Source: John Quiggin “How New Zealand fell further behind”. Inside Story, 11 November 2015.
If he had taken that chart back to the 1970s and earlier using the Conference Board Total Database, Quiggin would have found that New Zealand economy diverged from Australia in the 1970s, not in the 1980s. His data from the Reserve Bank of New Zealand started at the low point in 1990 – at the end of that divergence that started in 1974. The New Zealand economy was depressed between 1974 and 1992. I label this Great Depression in New Zealand as New Zealand’s Lost Decades.
Source: Computed from OECD Stat Extract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
Real GDP PPP per working age New Zealander fell rapidly after 1974 (a 34% drop against trend) when that economy was a heavily regulated, highly taxed economy. This heavily regulated, highly taxed, economically stagnant New Zealand is the good old days in the eyes of the Twitter Left.
Source: Computed from OECD Stat Extract and The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
In the chart above, the base is 1974 which equals 100. A flat-line means annual growth equal to the trend rate of growth in the 20th century for the USA. A falling line means below trend growth; a rising line means above trend rate economic growth per working age Australian or New Zealander.
With the election of a National Party government in 1990 and a massive fiscal consolidation, New Zealand growth rate returned to the previous trend rate of 1.9% in 1992. Ruth Richardson’s horror budget of 1991 was so bad that the what became the Twitter Left called it the “Mother of All Budgets“.
What followed this massive fiscal consolidation where welfare benefits for cut severely was an economic boom that lasted until the GFC.
Source: Income Gap | New Zealand Council of Trade Unions – Te Kauae Kaimahi.
As shown in the chart conveniently compiled by the New Zealand Council of Trade Union, there was 20 years of real wage stagnation until the passage of the Employment Contracts Act in 1991.
Source: Income Gap | New Zealand Council of Trade Unions – Te Kauae Kaimahi with annotations.
What followed the passage of that Act was sustained real wages growth for the first time in two decades and the end of growing inequality under the previously highly taxed, heavy regulated economy that was good old days New Zealand if the Twitter Left is to be believed.
To do this, to paint pre-1984 New Zealand, pre-neoliberal New Zealand as a fairly egalitarian paradise, Max Rashbrooke is an example of that is had to ignore two thirds of the population and the inequalities they suffered:
“New Zealand up until the 1980s was fairly egalitarian, apart from Maori and women, our increasing income gap started in the late 1980s and early 1990s,” says Rashbrooke. “These young club members are the first generation to grow up in a New Zealand really starkly divided by income.”
Racism and patriarchy can sit comfortably with a fairly egalitarian society if you are to believe the vision of the Twitter Left as to their good old days. John Quiggin refers to the period in Australia known as the Menzies Era as part of his golden age of the mixed economy. The Menzies Era was most of the 23 years of uninterrupted conservative party rule between 1949 and 1972. The actual Menzies Era was the period up to 1966 when Liberal Party Prime Minister Sir Robert Menzies retired
The reforms of the 1980s known as Rogernomics stopped the long-term stagnation in real wages that started in about 1974. The reforms of the early 1990s under a National Party government including a massive fiscal consolidation and the passing of the Employment Contracts Act was followed by the resumption of sustained growth in real wages with little interruption since.
New work by Chris Ball and John Creedy shows substantial *declines* in NZ inequality.
initiativeblog.com/2015/06/24/ine… http://t.co/f94fw4Bhae—
Eric Crampton (@EricCrampton) June 24, 2015
This boom after two decades of minimal real economic growth per working age New Zealander benefited everyone. The unemployment rate fell to a record low of 3.5% about 2005. Maori unemployment was at a 20-year low of 8% in 2008. Maori labour force participation rates increased from 45% in the late 1980s to about 62% by the eve of the Global Financial Crisis.
The increase in percentage terms of Maori and Pasifika real household income is much larger than for Pakeha since the economic reforms of the 1980s and 1990s. As Bryan Perry (2015, p. 67) explains when commenting on table D6 sourced by Closer Together Whakatata Mai:
From a longer-term perspective, all groups showed a strong rise from the low point in the mid 1990s through to 2010. In real terms, overall median household income rose 47% from 1994 to 2010: for Maori, the rise was even stronger at 68%, and for Pacific, 77%. These findings for longer- term trends are robust, even though some year on year changes may be less certain. For 2004 to 2010, the respective growth figures were 21%, 31% and 14%.
Distribution of the male American, British and German number of working hours
15 Nov 2015 Leave a comment
in labour economics, labour supply, occupational choice Tags: British economy, compensating differentials, Germany, health insurance, labour force participation, male labour force participation, Obamacare, part-time work, social insurance
Few men work part-time. Many that do are teenagers. Two-thirds of male workers in America, Britain and Germany work at least 40 hours a week and another quarter worked 35 to 40 hours a week except in the USA. A surprising number of Americans, 11%, worked 20 to 29 hours. If they work that 30th hour, the employer must provide them with health insurance under Obamacare.
Source: OECD Family Database.
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