



via The unbelievable rise of single motherhood in America over the last 50 years – The Washington Post.
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
19 Dec 2014 Leave a comment
in applied welfare economics, labour economics, labour supply, poverty and inequality, welfare reform Tags: causes of poverty, single parenthood




via The unbelievable rise of single motherhood in America over the last 50 years – The Washington Post.
19 Dec 2014 Leave a comment
in entrepreneurship, human capital, industrial organisation, managerial economics, market efficiency, organisational economics, personnel economics, survivor principle Tags: firm size, modern human resource management, technology diffusion, The meaning of competition
Modern human resource management gained ground in the 1980s, slowly replaced the centralising of people management in personnel departments that was widespread by the 1960s.

Modern human resource management stressed rigorous selection and recruitment, more training at induction and on-the-job, more teamwork and multi-skilling, better management-worker communication, the use of quality circles, and encouraging employee suggestions and innovation.
The aim is a highly committed and capable workforce that pulls toward common goals. This drive for employer-employee unity is in contrast to the old days of detachment and formality with managers directing and controlling workers.
Modern human resource management replaced compliance with rules with genuine employee commitment and a unified corporate culture.
Modern human resource management is a technology and there is a long lag on the widespread adoption of any new technology.
The lag on the intra-industry diffusion of new technologies from 10% to 90% of users is 15 to 30 years long (Hall 2003; Grubler 1991). The literature on technology transfer is full of examples of the slow and costly diffusion of new technologies even with the on-site help of the original innovator and experienced consultants (Boldrin and Levine 2008).

New management practices are often complex and they are often slow and costly to introduce successfully without the assistance of consultants with prior experience with the new practices (Bloom and Van Reenen 2007, 2010).
Managerial innovations such as Taylor’s scientific management, Ford’s mass production, Sloan’s M-form corporations, Deming’s quality movement and Toyota’s lean manufacturing diffused slowly over decades. These technologies required large investments in learning, retraining, reorganisation, trial and error and adaptation and there were many failures (Bloom and Van Reenen 2010).
Bryson, Gomez, Kretschmer and Willman (2007) found that workplace voice and modern, high-commitment human resource management practices diffused unevenly across British workplaces. More employees, larger multi-establishment networks, public or for-profit ownership and network effects all increased the rates of diffusion of the new practices.
Large firms may invest more in skills because they are the early adopters of new management practices. Large firms are organisationally complex and they require more structured, explicit management practices to survive. Higher levels of worker skills have been linked with firms having better management practices (Bloom and Van Reenen 2007, 2010).
Employers who pay higher wages lose more if they mismanage or under-utilise well-paid workers. Large firms pay more, on average, so they lose more if they do not adopt good management practices in a timely fashion.
There are fixed costs to adopting new technologies and management practices, so large firms may be the first to find them profitable (Hall 2003). Later adopters may follow this lead when the new practices are more proven and, through experience and adaptation, cheaper to adopt.
The organisational disruption from switching to any new technology can reduce production and profits for several years and the new way of doing business may fail perhaps at a great cost (Holmes, Levine, and Schmitz 2012; Atkeson and Kehoe 2007; Roberts 2004).
These costs and uncertainties slow technology diffusion and explain why smaller firms use seemly out-of-date management practices. The new ways are not yet profitable for them. The pace of adoption of new technologies is driven by changes in the profitability of using the new technology as compared to the old (Karshenas and Stoneman 1993).
Firms of different sizes will invest in skills development and new management practices to the extent that is profitable to their circumstances.
On some occasions, large firms will find it profitable to invest in more skills development because this is part of the costs of investing in more capital per worker. On other occasions, skills development is necessary to reduce the costs of a growing corporate hierarchy.
No firm cannot invest in more skills development unless this growth is buoyed by market demand. Precipitate investments in skills development are fraught with risks.
19 Dec 2014 Leave a comment
in health and safety, health economics, labour supply, occupational choice, personnel economics Tags: compensating differentials, obesity
19 Dec 2014 Leave a comment
in human capital, labour economics, labour supply, politics - USA, population economics
Binyamin Appelbaum looks into the causes of the decline in America’s male work force:
Working, in America, is in decline. The share of prime-age men — those 25 to 54 years old — who are not working has more than tripled since the late 1960s, to 16 percent. … Many men, in particular, have decided that low-wage work will not improve their lives, in part because deep changes in American society have made it easier for them to live without working. These changes include the availability of federal disability benefits; the decline of marriage, which means fewer men provide for children; and the rise of the Internet, which has reduced the isolation of unemployment. …
The resulting absence of millions of potential workers has serious consequences not just for the men and their families but for the nation as a whole. A smaller work force is likely to…
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18 Dec 2014 Leave a comment
in discrimination, gender, human capital, labour economics, labour supply, occupational regulation Tags: employer discrimi, gender wage gap, sex discrimination
17 Dec 2014 1 Comment
in health and safety, labour economics Tags: health and safety
17 Dec 2014 1 Comment

17 Dec 2014 Leave a comment
in labour economics, labour supply, population economics Tags: ageing society, demographics, Japan
As its new parliament comes in, here's a look at Japan's longer-term economic challenges pewrsr.ch/1pjgZx5 http://t.co/StGWEGdNfi—
PewResearch FactTank (@FactTank) December 16, 2014
16 Dec 2014 Leave a comment
in business cycles, labour economics, macroeconomics, unemployment Tags: business cycles, labour hoarding

The fall and rebound in employment growth usually lags a few quarters behind the fall and later recovery in output growth in any recession because of labour hoarding. Hamermesh (1993) defined labour hoarding as
a less than proportionate decrease in worker hours in response to a negative demand shock
Firms may hoard or retain under-utilised employees despite falls in demand because of demand uncertainty.
Becker (1975) and Oi (1962) both refer to the fixed costs of employment as an incentive to retain experienced workers with firm-specific human capital during lulls in demand.

The fixed costs of employment are the costs of recruiting and training workers. These fixed costs meant that the demand for labour does not adjust instantly to changes in demand for the firm’s product:
The cyclical behaviour of labour markets reveals a number of puzzling features for which there are no truly satisfying explanations . . .
I believe that the major impediment to rational explanations for these findings lies in the classical treatment of labour as a purely variable factor (Oi 1962).
Hirings and layoffs are costly. Hiring costs include advertising vacancies, the time spent finding and screening applicants and training. Layoff costs include redundancy payments, legal procedures and, importantly, the capital loss of losing access to experienced employees with firm-specific training and then later having to train their replacements.
To reduce these current and capital costs early in recessions, employers will first adjust hours worked and rely on natural attrition of staff to defer laying off their more experienced employees. Only once these options have been exhausted, and demand for the firm’s product is still slack, the capital loss of laying off a worker may become necessary.

Labour hoarding is a speculative investment based on forecasts of demand. The decline in product demand must be seen as short. There will be more layoffs if the recession is expected to be deep or long.
If there is a quick recovery, unnecessary layoffs and the cost of training replacements are both avoided.
16 Dec 2014 Leave a comment
in economics of regulation, health and safety, transport economics Tags: health and safety

A tourist caught driving with a kayak tied cross-ways across his car roof told shocked police that he was just trying to preserve his vehicle.
via ‘What were you thinking?’: Police shocked at tourist driver – National News | TVNZ.
16 Dec 2014 Leave a comment
in economic history, income redistribution, labour economics, politics - New Zealand, Rawls and Nozick Tags: top 1%

Source: topincomes-parisschoolofeconomics
Note: top income share data for adults for New Zealand adults go back only as far as 1953.
To begin with, a large number of people who see themselves as middle class will have to reclassify themselves in terms of class membership.
More importantly, they will have to pick up on their class consciousness because they are either in the top 10% as any successful professional is because the average income of the top 10% in New Zealand is $128,000. With a bit of luck, these members of the ruling class will be able to afford a house in Auckland without having to borrow from mum and dad.
Pretty much every successful professional is in the top 5% in New Zealand, with an average income of $170,000.
These rich have a lot of people look down upon and order about as junior or senior members of the ruling class, even if they did know they were a member of the ruling class until they looked at the diagram above. Welcome to the ruling class. Goodbye to the middle-class. Get over it.
As for the top 1% in New Zealand, they have an average income in 2011 of $336,000. Once again, successful professionals, successful entrepreneurs and what’s left of the rentier class will have to accept that supreme power as the ruling class of the capitalist system is open to just about anybody who does well at university and enters the professions. Are there no standards?
As for the top 0.5%, data on the top 0.1% stopped in 1989, they earned an average of $457,000 a year in 2011. That is starting to look like good money, though you do have to brush shoulders with celebrities, athletes and more than a few successful small entrepreneurs, but at least you are starting to earn a lot more than your average suburban doctor who is a member of the top 10%.
The ruling class is not what it used to be – the rentier class, old money. That the rich of today – the ruling class of the capitalist system – is open to many ordinary people who are new rich or just plain urban professionals, athletes, musicians and celebrities is a common finding all round the world. As Piketty and Saez explained for the USA:
This rise in top income shares is not due to the revival of top capital incomes, but rather to the very large increases in top wages (especially top executive compensation).
As a consequence, top executives (the “working rich”) have replaced top capital owners at the top of the income hierarchy over the course of the twentieth century.
Many of the rich both in New Zealand and overseas are working rich who made their money themselves and came from middle class or upper middle-class backgrounds.
Many of these rich are well educated smart people rather than the inheritors of wealth. The working rich and most of the rich of the 21st century must be well educated because so many of them are professionals in occupations where you must succeed at university to get in the ground floor, or they are athletes, musicians and other celebrities who must work their way up from the bottom.
A large number of New Zealanders who regarded themselves as middle class action are part of the rich – the top 10%, top 5% and banging on the doors of the top 1% or better – so they better start carrying themselves about with the airs and graces of the ruling class. Better practice by putting a plum in your mouth.
p.s. There was a big spike in top incomes in 1999. It seems like a lot of people in New Zealand brought forward income in 1998 and 1999 in anticipation of the election of a Labour Party government in the 1999 New Zealand general election, and an immediate increase in the top tax rate from 33% to 39% for incomes over $60,000.
16 Dec 2014 Leave a comment
in discrimination, economic history, gender, labour economics, liberalism Tags: engines of liberation, gender, sex discrimination, The Great Fact
16 Dec 2014 Leave a comment
in economics of love and marriage, labour economics, labour supply, welfare reform Tags: child poverty, labour supply, poverty and inequality, welfare reform
The unambiguously favourable labour supply effects of work requirements are often contrasted with the ambiguous results of changes in benefit abatement regimes.
The twist is work requirements need to be accompanied by a categorisation of the welfare population into those who can work and those who cannot work. The latter do need welfare support because they are unable to earn a wage in the labour market or have carer responsibilities such as for pre-schoolers.
There is already a large population on other welfare benefits with short and long-term barriers to work because of sickness or invalidity classifications.
The favourable labour supply effects of work requirements depend on an ability to adequately categorise the welfare population into different groups. The large differences between otherwise comparable countries in the number on sickness and disability benefits suggest that this classification and sorting process is knowledge intensive and error prone.

The original support for negative income taxes from Friedman (1962) and Stigler (1946) was born of the notion that welfare bureaucracies are unable to adequately screen, categorise and tag welfare claimants by their capacity to work and diligent job search in a dynamic world with dispersed knowledge and moral hazard.

Negative income taxes were proposed as an administratively simple welfare reform to give adequate income support to the low paid, out of work and unable to work, while still providing reasonable work incentives for the low paid. The negative income tax was originally intended to replace existing welfare benefits for families at least.
The modern incarnations of negative income taxes manifest as in-work tax credits that supplement welfare benefits and reduce poverty among the working poor.

The ambiguous effect of negative income taxes on the net labour supply among the low-paid was acknowledged at the outset, and was borne out in experimental trials and experience with in-work tax credits.
The existing system of domestic purpose, unemployment, sickness and invalid benefits are all examples of screening, categorising and tagging of welfare claimants with varying degrees of success.
The tagging is based on relatively coarse screening devices such as job loss, sole parenthood and medical grounds.
Akerlof (1978) noted that the truly needy—those with low job skills who have extreme difficulty in becoming employed—can be partly identified by some measurable, observable characteristic, which he called tagging the poor. Some combination of indications of poor health, low levels of education and spotty employment histories might be indicators of low job skills.
If the government moves from a negative income tax, in which all those with income are paid benefits regardless of their characteristics, to a tagged system in which only the subset who have the particular set of characteristics indicating that they are needy are paid benefits, then higher benefits could be paid to the tagged individuals without changing total expenditure.
Depending on whether the welfare tag is job loss, sole parenthood, sickness or invalidity, different abatement regimes, benefit levels and work tests apply. ACC is another example of tagging with the screening based on accidental injury.
Most welfare systems tag Akerlof partly with family structure in mind as a characteristic, with benefits heavily concentrated on families with a single parent.
Family tax credits are based on tagging through the number of hours worked and the number of children that are dependent upon the wage earner.
Nichols and Zeckhauser (1982) argued that the imposition of “ordeals” on welfare recipients, of which work requirements were one example, but onerous application procedures and participation requirements are others, could serve to deter entry of the able-bodied.
The experience with tagging to date suggest that it’s not particularly accurate. social insurance systems for injury and illness have significant issues with moral hazard.
For example, before 15 July 1980, an employee injured in a workplace accident in Kentucky received compensations proportional to his or her wage with an upper limit of $131 per week.
On 15 July 1980, this limit was raised to $217 per week. The better paid wage-earners were substantially better compensated for accidents that occurred after that date.
The periods of convalescence of these better-paid workers grew 20 per cent longer. For accidents that occurred before 15 July, these employees had been off work for an average of 4.3 weeks; for accidents after 15 July caused the same employees to stay home for an average of 5.2 weeks.
The average convalescence period for injured workers who were less well paid was unaffected by the rise in the upper limit stayed the same before and after 15 July. It is absurd to suggest that workplace accidents had suddenly become more serious for these better-paid workers and only for them after 15 July 1980.
In the past three decades, the number of people who are on disability benefit has skyrocketed but incidence of disabling health conditions among the working age population is not rising. Autor (2006) found that disability rolls in the USA expanded because:
Autor found that the aging of the baby boom generation has contributed little to the growth of disability benefit numbers to date.
David Autor and Mark Duggan (2003) found that low-skills and a poor education is predictor of disability: in the USA in 2004, nearly one in five male high school dropouts between ages 55 and 64 were in the disability program; that was more than double that of high school graduates of the same age and more than five times higher than the 3.7 % of college graduates of that age who collect disability. Unemployment is another driver of disability.
The only major success in reducing beneficiary numbers anywhere has been time limits in the USA in 1996. Time limits on welfare for single parents reduced caseloads by two thirds, 90% in some states.

The subsequent declines in welfare participation rates and gains in employment were largest among the single mothers previously thought to be most disadvantaged: young (ages 18-29), mothers with children aged under seven, high school drop-outs, and black and Hispanic mothers. These low-skilled single mothers were thought to face the greatest barriers to employment. Blank (2002) found that
nobody of any political persuasion predicted or would have believed possible the magnitude of change that occurred in the behaviour of low-income single-parent families.
Rebecca Blank is the field leader on the economics of welfare reform and got as high as Acting Secretary of the Department of Commerce for Obama.
Employment are never married mothers increased by 50% after the US reforms: employment a single mothers with less than a high school education increased by two thirds: employment of single mothers aged of 18 in 24 approximately doubled.

With the enactment of welfare reform in 1996, black child poverty fell by more than a quarter to 30% in 2001. Over a six-year period after welfare reform, 1.2 million black children were lifted out of poverty. In 2001, despite a recession, the poverty rate for black children was at the lowest point in national history.

This great success of US welfare reforms was that after decades of no progress, poverty among single mothers and among black children declined dramatically.
The best solution to poverty is to move people into a job. Simon Chapple is also quite clear in his mid-year book with Jonathan Boston that a sole parent in full-time work, and a two parent family with one earner with one full-time and one part-time worker, even at low wages, will earn enough to lift their children above most poverty thresholds. Welfare benefits trap children in poverty.
The best available analysis, the most credible analysis, the most independent analysis in New Zealand or anywhere else in the world that having a job and marrying the father of your child is the secret to the leaving poverty is recently by the Living Wage movement in New Zealand.
According to the calculations of the Living Wage movement, earning only $18.80 per hour with a second earner working only 20 hours affords their two children, including a teenager, Sky TV, pets, international travel, video games and 10 hours childcare.
This analysis of the Living Wage movement shows that finishing school so your job pays something reasonable and marrying the father of your child affords a comfortable family life.
Blogs so far:
part-one-the-labour-leisure-trade-off-and-the-rewards-for-working
part-two-the-labour-supply-effects-of-welfare-benefit-abatement-rate-changes
part-3-abatement-free-income-thresholds-and-labour-supply
part-4-in-work-tax-credits-and-labour-supply
part-5-higher-abatement-rates-and-labour-supply
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Celebrating humanity's flourishing through the spread of capitalism and the rule of law
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Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
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