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May 13th, 2019

↳ Jobs

Reality Slays Art

PREMATURE PROGRESS

New patterns in deindustrialization

As economies across Europe and in the United States have become more knowledge-based, urban-centered, and tech-driven, people in manufacturing reliant regions have seen declining life expectancies, stagnating real incomes, and minimal job growth.

In recent years, social scientists have been grappling with the interconnected political, economic, and social effects of deindustrialization. But this literature is almost entirely confined to Europe and the U.S. In a new paper, DAVID KUNST broadens the scope of this research using a novel dataset on manufacturing employment by occupation in developing countries. He studies the labor market effects of 'premature deindustrialization,' finding a general decline in the hiring capacity of manufacturing sectors and a genuine risk from automation in emerging markets. The study comes to four conclusions:

"First, it is mostly unskilled jobs that have disappeared, and also the wage premium of workers with little formal education in manufacturing relative to other industries has declined. Second, the disappearing jobs have been among the most formal both relative to other industries, and to the manufacturing average. Third, premature deindustrialization has been driven by occupations which are intensive in tasks that are vulnerable to an increasing adoption of ICT. Fourth, the phenomenon pertains most clearly to middle income countries, as low income countries have been spared from premature job losses.

250 years after the beginning of the Industrial Revolution, it appears that manufacturing is losing its ability to employ unskilled workers more productively than other industries. Developing countries, abundant in unskilled labor, lose their comparative advantage in producing an increasing range of manufactured goods. Hence, future growth in developing countries may have to rely more on improvements in 'fundamentals' such as education and governance, and policy makers need to focus on a broader range of sectoral policies than in the past."

Link to the full paper.

  • The notion of 'premature deindustrialization' was developed by Dani Rodrik in 2015. In that paper, Rodrik argued that "countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers" and suggested that "early deindustrialization could well remove the main channel through which rapid growth has taken place in the past." Link.
  • In a 2017 report, Carol Graham, Sergio Pinto, and John Juneau II map the "geography of desperation" in the United States: "In general, minorities scored worse on all of the variables in states where there are proportionately fewer minorities, such as Washington State and Kansas. These include Maine, Wisconsin, North Dakota, and Florida. Poor whites, meanwhile, tended to score lower across the board in the Appalachian states, and then poorly in many of the Midwestern and Western heartland states." Link. Two more reports from Brookings offer suggestions for place-based policies in the U.S. to counter these effects. Link, link.
  • David Clingingsmith and Jeffrey G. Williamson study the causes behind Indian deindustrialization from 1750-1860. Unlike literature which attributes the decline to growing competition in textile production from Britain, the authors find that the dissolution of Mughal hegemony and deteriorating climate conditions better account for the shift. Link.
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April 20th, 2019

Gesture Dance

EXPLICIT SPHERE

Wage boards, climate targets, and employment security

Just as universal basic income has its corollaries in more moderate policies like Earned Income Tax Credits (EITC) and Child Tax Credit (CTC) reform, a federal jobs guarantee (estimated by some measures to total nearly $543 billion in the first year) has organizational corollaries in collective bargaining institutions. Among them, wage boards have received renewed attention both by researchers and politicians in the United States. Distinct from trade unions, wage boards serve to centralize bargaining at the firm level through proportionate representation by employers, employees, and policymakers. Within the German context, they have been found to increase productivity and reduce social inequality. Unlike other policies aimed at mitigating income and wealth disparities, wage boards are virtually costless to implement.

Existing literature on codetermination has focused on its economic impacts. In a recent article, ROBERT SCHOLZ and SIGURT VITOLS broaden the inquiry to the sphere of corporate social responsibility (CSR). Using an original measure for the strength of codetermination institutions, they test whether wage boards influence the likelihood of firms to adopt socially conscious practices:

"Codetermination strength is strongly and positively related to all three of the substantive types of CSR we examine, the adoption of targets for emissions reduction, the publication of a CSR report and commitment to employment security. This suggests that worker representatives are selective with regard to the policies they support: they appear less likely to support symbolic than substantive forms of CSR.

We also shed light on the debate in comparative CSR literature regarding the adoption of CSR policies in coordinated market economies like Germany. All five policies examined are of the ‘explicit’ variety, adopted voluntarily by companies. They are often supposed to be most prevalent in liberal market economies like the USA and the UK where the need for business legitimacy is greatest… Our results suggest that worker representatives are also an important factor in explaining the spread of some types of explicit CSR policies to coordinated market economies."

Link to the paper.

  • The development of codetermination in Germany and Sweden has been the subject of numerous academic debates. Peter Swenson’s widely cited account concludes that codetermination was the product of a persistent “cross-class alliance.” By contrast, Walter Korpi’s “power-resource” interpretation argues that these institutions reflect a “distributive conflict and partisan politics based in social class.” Link to an article which lays out the first analysis, and link to one which presents the second.
  • A more recent paper by legal scholar Ewan McGaughey argues that codetermination in Germany was the result not of legal compulsion, but of the strength and unity of the German labor movement.[Link](http://eprints.lse.ac.uk/61593/1/The codetermination bargains the history of german corporate and labour law.pdf).
  • Support for wage boards is growing among the American public, according to David Madland.Link to his analysis of the most recent public poll, his policy proposal, and coverage of the proposal on Vice.
  • To understand the degradation of collective bargaining models across European economies, see Lucio Baccaro and Chris Howell’s most recent book, Trajectories of Neoliberal Transformation. See especially chapters 6 and 8, which discuss the pressures faced by bargaining institutions in Germany and Sweden. Link.
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April 13th, 2019

Assemblies

FISSURED CHURN

Reexamining claims about automation and labor displacement

Current UBI discussions emerged out of concerns over the role of human beings in a machine-dominated labor market. In 2013, a paper by Oxford University professors Carl Benedikt Frey and Michael Osborne claimed that 47% of US jobs were at risk of long term automation. The statistic circulated widely, prompting fears of widespread unemployment. The debate over these predictions is complex: those who deny any threat from automation often point to near-full employment, and risk overlooking the proliferation of low-paying and precarious jobs; while those who forecast mass unemployment risk assuming that technological development necessarily leads to labor displacement.

In a 2018 paper, legal scholar BRISHEN ROGERS argues that fears of a robot takeover misapprehend the real dynamics in the labor market:

"In a period of technological upswing, with companies rapidly installing robotics and other automation devices, we would also see significant increases in labor productivity. In fact, productivity growth has recently been the slowest as at any time since World War II. What’s more, productivity change in the manufacturing sector—where automation is easiest—has been especially tepid lately, at 0.7 percent over the last decade. On a related note, levels of 'occupational churn,' or the net creation of jobs in growing occupations and loss of jobs in declining occupations, are also at historic lows.

Even more striking, if firms expected artificial intelligence to be a major source of productivity in the near future, they would surely be investing in information technology and intellectual property. But they aren’t. Computers and software constituted 13.5 percent of the value of companies’ investments from 2000-2007, as the internet was coming into wide use. Over the last decade, that rate declined to 4.8 percent. These differences strongly suggest that there is nothing inevitable about precarious work or economic inequality. Hotel work, food services, janitorial work, and retail work have become precarious over the past twenty years because companies in those sectors forcibly de-unionized and/or 'fissured' away their workers to subcontractors or franchisors, thereby denying them effective access to many legal rights."

Link to the paper.

  • An MIT Technology Review from 2018 surveyed the predictions of every paper published on job losses due to automation. The results: "There is really only one meaningful conclusion: we have no idea how many jobs will actually be lost to the march of technological progress." Link.
  • "...even those occupations which are contracting due to technological change will continue to provide plenty of job openings over the next two decades. The challenge lies in improving the quality of these jobs going forward." Paul Osterman anticipates Rogers' arguments in a column from 2017. Link.
  • Another recent paper by Brishen Rogers (to which we previously linked) continues the thread: "Based on a detailed review of the capacities of existing technologies, automation is not a major threat to workers today, and it will not likely be a major threat anytime soon." Link.
  • Daron Acemoglu and Pascual Restrepo published two papers on automation and employment: the first uses industry level data to observe changes in the task content of production. The second argues that automation has been primarily concerned with reducing the need for labor, with insufficient attention being paid to socially productive investment. Link to the first, link to the second.
  • Frank Levy on the relationship between automation-induced job losses and the rebirth of populist politics. Link.
  • From EconFIP, a research brief on automation, AI, and the labor share. Link.
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