Asymmetrical Information

Many the small farmers in Polka Country northwest of Milwaukee work the winters at John Deere Horicon Works, making garden tractors for the following summer. Deere may well have chosen the site, or whoever they bought out may have been succesful, because of the readily available seasonal labor supply.

lacklustre? labour?

I thought you were home from London...

Gregory Kurtzon of the BLS has just written a paper which demonstrates that the "Wage gap" (wage rate of "educated"/wage rate of "less educated") can move arbitrarily without ANY increase in the return to skill (i.e., it is explainable via signalling). (His argument is too involved to go into here, but it is nonetheless valid.) Since signalling can explain this movement, perhaps there is not so much evidence that the returns to skill have been rising.

Otherwise, this is a provocative post.

However, if your argument is valid, this would influence cyclical unemployment as well, I think: given a shock, it would now take longer to recover to the (now higher) steady-state structural level.

Of course, this view is a bit difficult to reconcile with evidence that the natural rate has actually fallen substantially.

I live in western WI. About 1997 a car load of people showed up on my farm. One of them was a very old lady, who told me that her parents used to own the place, but lost it during the depression. I showed her around and let her tell me stories about when she lived there. I let her inside the house, which she said had changed quite a bit, and then we moved to this room, which is now the computer room. She looked at the northern window and said she remembered her grandmother was laid there for viewing and condolences after she had died. Then she turned around and said this about the back wall: "This is where my father embalmed her". Now, you tell me this, who knows how to do that anymore. You had to be flexible back then, I guess.

Is it inherently as hard for workers to adjust to demand shifts as it now appears to be?

Let's look at some of the obstacles.

Some of the high-end professions have licensing requirements. That right there throws a big roadblock in the reallocation of labor resources.

Everyone hiring high-end labor requires a university education of some sort. Part of the reason is that the high school diploma's real signalling value has gone into the toilet. Part of it is that they can't give IQ tests. Part of it is that if you hire someone without the sheepskin and someone else of another color with a sheepskin gets upset, they can haul your butt into court. Part of it is that if you "take a chance" on someone and he turns out to be a dud and you have to get rid of him, you've got some time-consuming and expensive hoops to jump through... so you only go for the "sure thing" and not the smart guy whose industry disappeared on him and is looking to transition.

'as to why job creation has lagged in the current recovery. This is not quite a new phenomenon--remember the "jobless recovery" in the early Clinton years?'

Which means this recovery isn't lagging. In fact, it's done a little better than the previous recovery. Most of the criticisms of the Bush recovery are based on comparisons to what was happening in 2000. Even by people who claim to have Phds in Economics.

I seem to recall from my good-old Macro 101 course that, at least in our economy, a structual unemployment level of 5% was normal, accounting for those workers willing and able to work that were either recently laid off and looking for jobs, re-training or re-educating themselves for different fields, or those stuck in the middle of a transitioning/downsizing industry (I guess the same as being laid off). If so, one can look at the last decades levels of employment (4% unemployment or less) as a bit of an oddity, and possibly unsustainable.

It occurs to me that as our society has moved to more "specialized" labor, we have also moved to less "necessary" labor. I think of necessity on a scale from producing food to doing doggie perms, with writing computer software closer to the doggie perm end of the scale. The result is that in a downturn, the less necessary jobs are more easily eliminated and slower to return.

Allen: would that have been a rural area back at the time the woman was recalling? If so, back then (limited refrigeration, limited transportation, limited selection of suitable chemicals, limited undertaker services) I expect that either someone in the family knew how to embalm, else there was no viewing period, and likewise a very quick burial.

anony-mouse, yes and it's still a rural area. According to this woman, her father knew how to do it. At the time she was recalling, there was no running water in the house and no electricity. I doubt if they had any "extra" money to spend on a funeral parlor. I wouldn't be surprised to find out that the Amish still know how to do this.

In the course of his life, my grandfather had the following occupations: farmer, soldier, plumber, bricklayer, carpenter(he built his and my grandmother's house by himself), hunting guide, and saloon owner. He was about the most competent guy I ever knew, and he had a few tales to tell.

Computer code is a doggie perm?

Guess it depends on what the code is for. I wouldn't call Office a doggie perm program, nor the gazillion other programs that increase efficiency in ways that are hard to grasp anymore. I know a thing or two about how much effort used to be involved in the day to day operations of an insurance company. The programs that changed that have made vast improvements in efficiency. Whatever genius invented the mail merge has benefited the human race immensely. I think, and this is just me, that the reason that there are too many computer programmers these days is for the following reasons (not a complete list)

1. No more Y2K. Remember when every frigging computer in the country had to be updated? That drove up demand.
2. The boom--- the internet was doubling exponetially every 6 months. That's a lot to do. Include the bubble in this.
3. The hype. It seems like there's always some super-hot profession guaranteed to make new recruits buco bucks. Once upon a time it was laywers, then it was computer programmers. So tons of people who just want a career go into the field, flooding it. Combined with the precipitous drop-off in demand from 1 and 2, it means you've got a dog-eat-dog competition amongst the survivors of the bust and the poor unfortunates who graduated with a computer science degree a month after the bubble popped. Which is why it's damned hard to find a job for these people, and so many programmers have inflated senses of the wages they deserve to get. Makes for a lot of unhappy people.

Jobs I've held: farmhand, lumberjack/sawmill worker, dishwasher/cook/chef, census clerk, warehouseman, janitor, music store clerk, rollforming mill accountant/salesman/operations manager, cost accountant, IS manager. Of those 15, I count 7 that would rarely be held by a native English speaker. Our businesses refuse to pay what a native would demand to do the job for. And that’s not totally business’s fault - the less skillful and experienced among us have a highly inflated view of their worth. I wonder how our teenagers and young adults are getting work experience. Cut illegal immigration, and you’d cut the skilled labor premium significantly.

A separate observation I’d make is that there are significant labor shortages that are structurally impossible to fill. In my industry, there is a great demand for master machinists (those with ~15 years experience). We are in permanent hiring mode for those positions -we’ll hire anyone who qualifies whether we are busy or not. But there is a great oversupply of machinists at lower levels, so few wind up with enough experience to meet the shortage. A similar shortage now affects oil&gas engineers. My 71 year old father could work, at his own terms, as long as he wanted to at his current employer. He “retired” 4 years ago, but they’re constantly begging for him to help them out on this or that. There is a shortage because for a 15 year period there was no hiring done in the industry.

As to the IS market, well for the most part it epitomizes a low entry cost labor market. With a few thousand dollar PC and 6 months of effort, many could become competent programmers. During the 90's, a college degree was never a requirement, and I always lived with the certainty that the average programmer would be hired away from me after 2 or 3 years. The really good ones got promotions within that time frame, so I could usually keep them. Now, it’s a buyer’s market. Anyone who hasn’t made a big investment in time simply doesn’t stand a chance. Why should I hire Joe 6 years of experience, when I can hire 20 years and higher quality at the same price? Our last opening was for 4 technical programmers. There were literally 100's, sometimes 1,000's of qualified programmers for each slot (some of which were highly esoteric- 1553 bus and real-time). 2 of the slots were for straight up C codeslingers. The guys I got were great, but then again, so were all of those who made it to the final cut of 8. All of these guys would have cost 2 or 3 hundred an hour in 1999, and I got them for 35. Two I turned away were literally rocket scientists.

Jobs I've held since the age of 14: dishwasher, pizza maker, cashier, grocery store bag boy and stocker, construction laborer, gas station attendant, micro-business owner (lawn mowing, snow shoveling), janitor, freelance legal researcher, taxi owner and driver, law clerk, attorney, CLE administrator, editor (print and electronic), managing editor, new product developer, trainer, marketer, manager, consultant, publisher ... and the occupations I gave some thought to and took some preliminary steps towards include financial planner, college professor, and carpenter.

With three children, I'm coming to believe that the only thing college is good for is (increasingly bad) signaling that the holder of a degree is somewhat literate (not numerate, however), and can probably communicate in spoken, although not necessarily written, form.

When we hire people, we always ask candidates what kind of customer service jobs they have held. It is amazing to me how many candidates think that a couple of years during their teens or twenties of learning to deal with people by being a waiter/waitress, hostess, cashier, retail store clerk, laborer, telemarketer, etc., are not relevant to their abilities. Because we see that the folks who have held unskilled labor type entry level jobs dealing with people are often more tolerant, better listeners, not so arrogant, more easily trainable, and become better colleagues.

I think of necessity on a scale from producing food to doing doggie perms, with writing computer software closer to the doggie perm end of the scale.

Hm. Without software, our GDP would probably be at least several trillion less than it is. We wouldn't produce nearly as much food, either.

Obviously a lot of software isn't especially necessary, but neither is a lot of agriculture. Most of the food we grow is grown for taste, not for necessity. A farmer who grows strawberries or raises cattle is, in a sense, in the entertainment industry -- we don't need beef and strawberries, they're just a lot of fun to eat.

Wow, another Little House on the Prairie fan! I'm a big fans of the books, not the television show. As an adult, I found the books have many, many examples of how life just is- and how we should deal with it. They are an awesome slice of life story that is based in reality, not in what we think should have been.

Dan, I used to raise cattle. What in the hell are you talking about?

Dan, I used to raise cattle. What in the hell are you talking about?

I was just disputing the idea that most food production is "necessary" labor. Most of it isn't, with cattle raising being an example of food-as-luxury, not food-as-necessity.

This is not quite a new phenomenon--remember the "jobless recovery" in the early Clinton years?

No, because it's a partisan fantasy.

Go to http://www.bls.gov/ces/home.htm, click on the first dinosaur in the right portlet, and set the start and end dates appropriately. The 200k+/month job growth was continuous, up to one-month glitches, from December 1992 through November 2000, inclusive.

Actually, the job market has taken off recently.

Nothing mysterious about what happened. The first problem was, few employers were trying to create jobs for a while.

In the beginning of the recession, it was because they couldn't predict future needs for employees, and in the middle, it was because they couldn't predict future demand for their products.

The second problem was a bit more complicated. The government was doing nothing effective in jobs creation. From the J.O.B.S. act on down, they allocated money, but failed to provide the leadership to turn that money into employment figures.

According to the testimony of a senior labor department official, there is tons of unused funds to make it happen.

What happened? I believe what is missing is someone with leadership and imagination in the department, to take those funds and get America competitive again. Problem is, its all mired in political infighting and graft a third world country would be embarassed by.

What do they need to do?

As Ms Galt said, fix structural unemployment issues. It is not that difficult.

To me, structural unemployment is unemployment due to a change in the struture of the industry.

For example, consider your qoute.

"...other countries can do some things better than we can..."

In other words, the structure of the industry (and hence the jobs) has shifted to another geographical area, another nation.

WHy? There has been considerable work on competitive strategy of nations. In my opinion (and a considerable amount of literature), the only real difference is a nucleus, a core competancy group in a specific geographic area.

Happens even within states. Utah, for example, has an impressive thriving cluster of technology companies, due in no large part to a few individuals whose influence has caused many other companies to crystalize.

Nebraska, which has a similar people, with similar skillsets, doesn't. As near as I can tell, the only thing missing is a nucleus to crystalize around.

Chicago, where I live, has a slightly different problem. There is more than enough individuals, both to crystallize around, and to form a tech community, but there is no large active tech community (user groups, etc) for them to meet.

All thats needed is to supply the missing ingredient. Since that does not involve supplying funds, nobody in our government knows how to do it.

And since the roaring 90's retired most of our entrepreneurs, our private sector, which traditionally supplied that leadership, has few human resources to devote to this sort of task.

As the next generation of entrepreneurs emerges (as is happening right now) that situation will be corrected.

THAT is why America had a (somewhat) jobless recovery, and why the job market is starting to heat up again.

randyjg2(at) yahoo.com

Wow, those Republicans sure are crafty! To think that they spent all that time and energy making their allies in the (95% Democratic) coin the phrase "jobless recovery" and mindlessly running stories about people having trouble finding work, just because they knew that eventually Bush would be president, and would need the "partisan fantasy" of structural unemployment to cover his ass!

Unemployment grew surprisingly slowly for several years at the start of the Clinton presidency; if you look at previous recessions, you see a much more rapid rebound. That was why the papers wrote so extensively about the "jobless recovery". Clearly, the rebound is even less strong now, which fits with an explanation that structural unemployment is growing as a result of two things:

1) The growing returns to skill and the lower demand for unskilled labour

2) Overinvestment in certain sectors of the economy as a result of the stock market bubble and earnings shenanigans

I think of necessity on a scale from producing food to doing doggie perms, with writing computer software closer to the doggie perm end of the scale.

I think that indicates a basic misunderstanding of how pervasive computer code is. Any idea how much computer code there is in modern farm equipment for example? Or your car? Or almost every appliance in your house?

Pick almost any product you like, and you'll find software being a significant part of the product itself or of the manufacturing process or the research, design, sales, marketing, and distribution processes. Or all of the above.

Everyone should be proficient in at least 2 skills. One skill that you`re good at and one skill that you enjoy doing. Being good at, and enjoying doing something are not always the same thing.

If you lose a job that requires the one skill, you have the other one to fall back on.

Specialized skills are fine, but the problem is that, due to technology, advancements in the field, workforce outsourcing or any number of other reasons, you can find yourself looking for a job in one and only one field.
When that happens you have to compete with the other specialists who also lost their jobs, and if you haven't kept up with the latest up-to-date advancements you`re out of luck.

In my case I chose fields of work where the basic conceptual principle(s) are the same in each.
I know everything there is to know about a G.E.-J-79-10 jet engine even though I haven`t worked on one since '79.
If I HAD to get a job as a jet engine mechenic today, it would be a simple matter to re-educate myself to the newer engines because the basic principle of all jet engines are the same.

Right now I do maintenance, specifically, emergency service maintenance, at a Navy base ( Civil Service) I`m the only one doing that kind of work and I`m GOOD at it.
The reason I`m good at it is because, although the position itself only requires 2 journeyman level skills, I have several ( JOATMOAF = Jack Of All Trades Master Of A Few :) gained from years of doing and learning things I`m good at and interested in.

It`s not glamorous, high powered or (very) high-paying (I do OK though) but has incentives that the other jobs don`t.

Basically, I`m critical to the orginization. Not the position itself, but me as an employee.
If a RIF were ordered I would be one of the last to go, even after most management, because I have proven skills in most blue collar and some white collar fields.

To be competitive in the workforce you have to be flexible. NO job is secure. The Unions have been cutting their own throat through greed and corruption, the government (DoD) must compete with contractors in CA-76 bids, and the tech and factory jobs are going overseas because it`s cheaper.
A well rounded resume of various proven skills will always insure a paycheck no matter what the economy does.

Unemployment grew surprisingly slowly for several years at the start of the Clinton presidency; if you look at previous recessions, you see a much more rapid rebound.

So you've already asserted. The BLS data I cited doesn't support you.

Nonfarm employment 12, 24, 36, 48 months after recession trough:

September 2001: -1.508M, -1.944M, -0.053M, +2.196M.
July 1992: +2.020M, +5.499M, +8.549M, 11.007M.
November 1982: +2.608M, +6.717M, +9.316M, +11.200M.
March 1975: +1.898M, +4.068M, +8.029M, +12.135M.
February 1961: +1.208M, +2.433M, +3.804M, +5.900M

I've omitted the 1970 and 1980 recessions, because they both relapsed within less than 3 years. Fun bar-bet fact: Carter's recovery was better than Reagan's, in absolute job numbers, even though the US population was lower. And Carter's, Reagan's, Clinton's recoveries were all about 8 million jobs ahead of Dubya's, two, three, or four years in.

That was why the papers wrote so extensively about the "jobless recovery".

As we've just seen, the alleged "jobless recovery" of Clinton's early years didn't happen. Do you have even one citation to show that it was written about, extensively or not, before 1995? (I am aware it's been written about extensively since 2002, but that's the "partisan fantasy" I alluded to. Contemporary cites only, please.)

There was actually an anomaly about the 1991 recession: it sat very close to its trough, in both GDP growth and employment, from March 1991 through July 1992; some sources actually identify the former as the trough. This doesn't help your case a bit, first because it was all on Bush I's watch and second because 1991-92 was a jobless recoveryless recovery. But if you move the 1992 recovery back a year, you can argue that one recession since the 1980s got stuck in neutral for a year, and another went full speed ahead without jobs for three years. It's a point of similarity, though a very tortured one.

The jobless recovery of the early 2000s was partly a result of a huge amount of technology transfer to the rest of the world, particularly Asia, during the latter half of the nineties. This technology transfer was sped up due to the huge differential in wage rates between the US and Asian countries that was made larger because of dollar surging higher despite a huge trade imbalance. All during this time US multinationals were getting squeezed at home and abroad, with shrink returns from overseas sales due to currency effects, while foreign competitors were getting entrenched and laying solid technological foundations to ensure future competitiveness. If the Clinton administration had done a better job with currency management during the late 90s the US would be much better off today.

Dan,

Re; "Without software, our GDP would probably be at least several trillion less than it is."

Which is precisely my point - that in our highly specialized, highly complex economy, much of our wealth is generated by things that are closer to the non-necessary end of the scale. And in a downturn, the things at the non-necessary end of the scale are the first to go.

On the other hand, such an economy is also capable of creating new complex specialized jobs. We are resilient, adaptable - as demonstrated by the many posters who have held such a wide variety of jobs.

lacklustre? labour? I thought you were home from London...

Jane rarely replies in comments threads, so you can forget about ever getting an answer to this oft-asked question about why she hates America. She'll probably never explain why she included Toronto in a list of European cities either, which means I can never send that otherwise-good article to friends without them figuring Jane is a moron who can't be trusted on anything. Although her systematic America-hating spelling might help her in some quarters.

She works for the Economist, folks. Writing like a Brit is in the job description. If you don't like the spelling find another blog to read.

The Economist is the publisher of this blog, then?

Which is precisely my point - that in our highly specialized, highly complex economy, much of our wealth is generated by things that are closer to the non-necessary end of the scale

I don't understand how you can say that software is "closer to the non-necessary end of the scale" when much of our wealth would not be possible without it. Without software pretty much everything in our lives, necessary and otherwise, would be more expensive and of lower quality. Many of the technologies we have would not be possible at all. We would live shorter, poorer lives without software.

No, Megan is, and clearly she chooses to write the same way off the job as she does on the job, instead of switching back and forth between two spelling systems for your benefit. She could switch to Pig Latin tomorrow if she cared to, without your permission.

Dan,

Re; "I don't understand how you can say that software is "closer to the non-necessary end of the scale" when much of our wealth would not be possible without it."

I grew up in a time before personal computers. I've actually worked with carbon paper and filing cabinets. I've actually done research in a library - with books and periodicals. I'm not saying computers aren't great - I work in IT. Hell, I'm totally in favor of doggie perms too. But your dog can live with a plain old bath, and you can live without the internet. And in hard times, when budgets get stretched, that monthly ISP bill is going to be one of the first things to go.

It is true that much of our wealth is dependant on computers - and many other non-necessary occupations. But it is also true that these non-necessary occupations are dependant on our wealth.

She could switch to Pig Latin tomorrow if she cared to, without your permission.

I'm sorry, are you her paid spokeswoman? The readers of this blog have consistently been seeking a response from Jane, not from her little fan-club president or whatever you are.

I'm sorry, are you her paid spokeswoman? The readers of this blog have consistently been seeking a response from Jane, not from her little fan-club president or whatever you are.

No, but I am. She pays four pounds and a shilling per month for my services, by which leave I can reveal that she drinks Guiness in the mornings and Jamieson's in the evenings, kills American puppies for fun on alternate Wednesdays, and is a card-carrying communist pretending to be a libertarian as part of a Cambridge-sponsored psychology experiment.

Also, the fact that she doesn't force herself to alternate between UK and Colonial spellings of popular words when switching between her blog and her day job is, exactly as you assert, clear evidence of her loathing for America. Excellent observation, old bean.

Will that suffice, or do your prejudices additional reinforcement? If more details are required, leave your name and a daytime phone number, and I shall call you again when HRH Jane Galt has a free moment for spitting on a yank.

I grew up in a time before personal computers. [...] And in hard times, when budgets get stretched, that monthly ISP bill is going to be one of the first things to go.

Heh. Well, that's a quaint example, but it's a bit like saying "food is no more useful than doggie perms. In hard times, my family stops buying potato chips and strawberries".

Software does quite a lot more than give you the ability to sound off on the Internet from the privacy of your home. Simply put, without software you'd die sooner and the life you lived would be worse.

It is true that much of our wealth is dependant on computers - and many other non-necessary occupations

Do you realize that that claim equates to "money is unnecessary", right?

One thing you didn't address that I don't see anyone really speaking about is what these changes mean to our system of unemployment benefits. If in fact when a job is lost now the odds favor someone having to have extensive retraining or further education in the same field they've already studied what does that say about us having a system that is geared solely towards people needing to pound the pavement and look for a job or submit the right resume or something else that shouldn't take as much time as retraining? What does it say about the politicians who vote against benefit extensions in light of those facts?

Everyone should be proficient in at least 2 skills. One skill that you`re good at and one skill that you enjoy doing. Being good at, and enjoying doing something are not always the same thing.

"A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects." - Robert Heinlein

test

Dan,

Re; "Do you realize that that claim equates to "money is unnecessary", right?"

I'm talking about a "range" of necessary, and money does indeed fall in the range.

I'm talking about a "range" of necessary, and money does indeed fall in the range

Nothing is more necessary than money. You can't even own land to grow food on if you haven't got money.

Dan,

This is so far from my original thought that it hardly matters - but wtf, its better than working on my inbox.

I once traveled from Seattle to Dallas in 5 days without a dime in my pocket. I don't recommend it, and I won't go into the details of how I did it, but it is possible to live without money even in this modern world.

Money is a tool - a highly useful tool, and definitely towards the food, water, and shelter end of the necessary range. It enables peaceful means of human interaction. But peaceful means are not the only means, and I'd burn a stack of bills to stay warm if I had to.

prosolution penis enlargement

Comments are Closed.