May 29th, 2021

We're Coming

LABOR SHORTAGES

Though the US economy remains about 10 million jobs short of its pre-pandemic levels, employers and commentators have begun to express fears over a reduction in the labor supply, prompting debates over the possible causes of this shortage.

A new article by JOSH BIVENS and HEIDI SHIERHOLZ questions the grounds for these fears using data from the most recent jobs report.

From the piece:

"Policymakers currently face a choice of guarding against growth constraints driven by demand or driven by supply. The Biden administration has chosen to zealously guard against demand shortfalls, even at the risk of running into some supply constraints in the near term. If policymakers change this orientation and reel back macroeconomic stimulus and cut off UI benefits, they will be making the other choice—guarding zealously against supply-constrained growth and being willing to risk growth running into demand constraints. This would be a huge mistake for human welfare, even if it were true that some workers were choosing to pass on available jobs due to enhanced UI benefits. A worker who is jobless because they have voluntarily decided that they’d rather wait out the next month or two on enhanced UI benefits—rather than throwing their caregiving responsibilities into disarray by taking on work in the face of continued school closures or braving a job they feel might be unsafe for them—suffers far less than a worker desperate for work who just can’t find it because the economy is unnecessarily running at too cool a pace.

Many face-to-face service-sector jobs have become unambiguously worse places to work over the past year. This has in no way been fully restored to the pre-COVID normal, as the coronavirus remains far from fully suppressed. Well-functioning labor markets should account for this degraded quality of jobs by offering higher wages to induce workers back. If enhanced UI benefits and a demand-increasing dose of fiscal stimulus are allowing these higher wages to be quickly offered in the face of supply constraints, then it seems like they’re improving labor market efficiency in this regard. Policy boosts to labor supply that aim to expand opportunities and remove key barriers to work—like the investments in care work provided in the American Jobs Plan and the American Families Plan—are excellent examples of this kind of progressive labor supply policy."

Link to the post.

 Full Article

March 6th, 2021

Clown Underwater

PERSONNEL DEPARTMENTS

Deindustrialization is a key orienting point for research in political economy. But around the world, factory production remains significant, with employment in industry constituting between one-fifth and one-third of total employment in large economies.

While factory production persists, its form and function has changed dramatically. In his 2004 book, SANFORD JACOBY analyzes the bureaucratization of employment through the lens of factory organization, and particularly through the early-twentieth-century invention of the personnel department.

From the text:

"This book treats bureaucratic employment practices as the outcome of a prolonged struggle to overcome the insecurity and inequities produced by a market-oriented employment system. The struggle was played out both within management and between management and other groups. Within management, the conflict between the traditional and the bureaucratic approach to employment was epitomized by clashes between the production division and the new personnel departments that began to appear after 1910. The creation of a personnel department signaled that employment policy would now be treated as an end in itself rather than as a means to the production division’s ends. One of the personnel manager’s chief responsibilities was to stabilize labor relations, a task that required trading off short-term efficiency in the interests of achieving high employee morale over the long run.

But personnel management was more than a new slot in the corporate hierarchy. Unlike marketing or finance, it was deeply affected by developments external to the firm, such as changes in social attitudes and norms regarding industrial employment. Because it had its roots in various Progressive reform movements, personnel management was influenced by new middle-class beliefs in the necessity of market intervention, the beneficial effects of rational administration, and the power of the educated expert to mediate and mitigate social conflict. Many early personnel managers thought of themselves as neutral professionals, whose job was to reconcile opposing industrial interests and make employment practices more scientific and humane. Personnel management and the new bureaucratic approach to employment did not gradually take hold in an ever-growing number of firms. Instead they were adopted during two periods of crisis for the traditional system of employment—World War I and the Great Depression."

 Full Article

August 18th, 2020

Lamp Effect

DEFINING CLASS

Standard postwar theories of class composition in the global north emphasized occupational differences between employers, blue collar, and white collar workers. But deindustrialization, and the army of underpaid service workers it generated, has increasingly muddied these categories.

In a 2018 article, MORITZ KUHN, MORITZ SCHULARICK, and ULRIKE STEINS redraw these distinctions for the era of asset ownership. Using household-level archival data from the Survey of Consumer Finances, they argue that portfolio composition and asset prices, rather than income or occupation, are the defining features of class in the contemporary economic landscape.

From the paper:

"A channel that has attracted little scrutiny so far has played a central role in the evolution of wealth inequality in postwar America: asset price changes induce shifts in the wealth distribution because the composition and leverage of household portfolios differ systematically along the wealth distribution. While the portfolios of rich households are dominated by corporate and noncorporate equity, the portfolio of a typical middle-class household is highly concentrated in residential real estate and, at the same time, highly leveraged. These portfolio differences are persistent over time.

An important upshot is that the top and the middle of the distribution are affected differentially by changes in equity and house prices. Housing booms lead to substantial wealth gains for leveraged middle-class households and tend to decrease wealth inequality, all else equal. Stock market booms primarily boost the wealth of households at the top of the wealth distribution as their portfolios are dominated by listed and unlisted business equity. Portfolio heterogeneity thus gives rise to a race between the housing market and the stock market in shaping the wealth distribution. A second consequence of pronounced portfolio heterogeneity is that asset price movements can introduce a wedge within the evolution of the income and wealth distribution. For instance, rising asset prices can mitigate the effects that low income growth and declining savings rates have on wealth accumulation."

Link to the piece.

  • "Of course, income from work remains vitally important for many people as a way to access subsistence goods, but by itself it is less and less able to serve as the basis of what most people would consider a middle-class lifestyle." In the LARB, an excerpt from Lisa Adkins, Melinda Cooper, and Martijn Konings' forthcoming book, The Asset Economy. Link.
  • "I discuss three clusters of class analyses, each associated with a different strand of sociological theory. The first identifies classes with the material life conditions of individuals; the second focuses on the ways in which social positions afford some people control over economic resources; the third considers how economic positions accord some people power over the lives of others." Erik Olin Wright in 2009. Link.
  • "Wright’s class scheme is based on the premise of a free market system and private production organizations under advanced capitalism; however, the mode of production in transitional China is a complex hybrid." Xin Liu on "Class structure and income inequality in transitional China." Link. And Alejandro Portes and Kelly Hoffman analyze changing social structures across Latin America. Link. And a brand new Göran Therborn article on the "Dreams and Nightmares of the World's Middle Classes." Link.
 Full Article

March 2nd, 2019

Weak Local Lineament

REACH ARREARS

Charting the significance of credit and debt throughout society

Household debt has proliferated in the past decade. In the final quarter of 2018, it reached $13.54 trillion—an $869 billion increase since the previous peak in 2008 and a 21.4% increase since the post-crisis trough. While it is now widely recognized that the financialization of household consumption set the groundwork for the Recession (see for example this chapter by Manuel Aalbers), credit markets seem immune to structural reform.

On the one hand, access to credit enables purchases and investments crucial to long term financial mobility; on the other, it incorporates those who lack resources into a cycle of obligations to lenders. In her most recent publication in the Annual Review of Sociology, RACHEL E. DWYER questions how debt has shaped the American social landscape. She develops a two dimensional model of formal debt relationships which categorizes contracts according to the source of credit (state vs. market) and the nature of the obligation (prospective vs. retrospective). The model integrates the logic of debt and credit relationships with an analysis of distributional politics:

"The top row of prospective credit offers are more likely made to affluent or middle-class and disproportionately white populations, and the bottom row of retrospective financial obligations are more likely to fall on lower-income or poor and disproportionately racial/ethnic minority populations. The experience of debt and financial fragility is thus different across these social groups defined by class, race/ethnicity, and other social status, though also tied together by similar logics of financialization and individualized accountability for life conditions."

Dwyer's research shows how credit and debt relations vary geographically and temporally, encouraging a comparative analysis of debt relationships in countries with different political economies. Link to the article.

  • On the unique role that credit markets play in the American economy, see Monica Prasad on the credit-welfare state tradeoff, and Colin Crouch on privatized-mortgage Keynesianism. Link to the first; link to the second.
  • For a pre-crisis examination of credit and inequality, see Patrick Bolton and Howard Rosenthal's Credit Markets for the Poor. Link.
  • Vicki Been, Ingrid Ellen, and Josiah Madar explore the relationship between urban segregation and subprime mortgage lending. Link.

    New Researchers: VISIBILITY PREMIUM

Political effects of celebrity exposure

In a novel paper, HEYU XIONG—a Phd candidate at NORTHWESTERN and newly appointed professor at CASE WESTERN RESERVE UNIVERSITY—studied the political consequences of television celebrity. He used the career of Ronald Reagan as a case study and exploited quasi-experimental variation in television reception to estimate the effects of celebrity media exposure on political outcomes, finding that
support for Reagan based on non-political factors extended nearly two decades after his television career—an effect more pronounced in areas in which Reagan was not a known political entity. The findings suggest that elections hinge considerably more on non-political media exposure and personal characteristics than previously assumed.

From the abstract:

"My results contribute to our knowledge of the vote decision process. Understanding what candidate information is pertinent and how that information is processed is key to understanding the selection of elected officials and, subsequently, the policies those elected officials enact. The economic theory of electoral competition is traditionally situated in the framework of the policy oriented voter. Even without the assertion of rationality, voters are, at the very least, presumed to be voting in order to advance a policy position or to express a political preference. While this preoccupation is not misplaced, the results suggest that candidates' personal characteristics constitute a significant, if substandard, criterion for vote choice."

Link to the paper.

 Full Article

February 23rd, 2019

Grievous Plans

NO SHORTAGE

New evidence on the relationship between skills and labor supply

More than a decade after the financial crisis of 2008, median household incomes have stagnated at their pre-2008 levels, and global economic growth is expected to decline further from what is already a historic low. While the unemployment rate has rebounded, part time, service, and temporary work remain the principal drivers behind labor market growth. Weak recovery from the crisis has been widely attributed to the “skills gap”; commentators and policymakers alike hold that quality jobs are there, but Americans are simply not qualified to perform them.

At the American Economic Association’s most recent conference, ALICIA SASSER MODESTINO, DANIEL SHOAG, and JOSHUA BALLANCE provide evidence against this view. Using a proprietary database of more than 36 million online job postings, they show that employers increased skill requirements in states and occupations which experienced larger increases in the unemployment rate. Their findings suggest that it wasn’t a shortage of skills which weakened labor markets, but rather the ubiquity of qualified applicants which drove employers to raise hiring standards. By testing employer responses to an influx of veterans from Iraq and Afghanistan, the authors are able to confirm this mechanism:

"As a source of exogenous variation in the availability of skilled workers, we make use of a natural experiment resulting from the large increase in the post-9/11 veteran labor force following troop withdrawals from Iraq and Afghanistan... Panel A of Table 5 demonstrates that there is a strong, significant, and positive relationship between the sharp increase in the supply of returning veterans and the rise in employer skill requirements for both education and experience."

This is among the first pieces of empirical evidence which suggests that employer skill requirements are driven, in part, by labor supply. Link to the conference webpage, where a full version of the paper is available for download.

  • As early as 2011, Lawrence Mishel argued against analysts who asserted that the unemployment crisis was structural, proposing instead that the economy was experiencing a crisis of demand. Link.
  • In his most recent book, LSE anthropologist David Graeber examines the relationship between skill and value, questioning why jobs which produce the most social value tend to be categorized as unskilled, consequently earning lower wages. Link to Graeber's widely acclaimed essay from 2013 that first outlined his argument, and link to the Google preview of his new book.
  • In a report for the Roosevelt Institute, Marshall Steinbaum and Julie Margetta Morgan argue that the 'skills gap' narrative is inconsistent with student debt crisis: "Although the country’s populace is becoming more educated, each educational group is becoming less well paid." Link.
  • Paul Osterman wrote an accessible overview of the debate for The Atlantic in 2014: “The claim that a shortage of skilled workers has exacerbated inequality has gained traction but it is not supported by the data… For instance, while 38 percent of manufacturing firms require math beyond simple addition, subtraction, and multiplication, the type of math employees need to be able to handle are standard features of a good high school education and part of the curriculum for most community-college students…Nearly 65 percent of businesses report they have no vacancies whatsoever, and another 76.3 percent report they have no long-term vacancies…” Link.
 Full Article