By Simon Grey, on February 7th, 2012
The wages of federal workers are 2 percent higher than similar private-sector workers, on average.
The benefits of federal workers are 48 percent higher than similar private-sector workers, on average.
The total compensation (wages plus benefits) of federal workers is 16 percent higher than similar private-sector workers, on average.
I guess the relevant question is this: are federal services so efficiently provided and in such high demand that federal employees are truly deserving of a 16% wage premium? If not, federal employees are definitely overpaid.
An alternative question is this: would federal employees be paid as well for doing the same job in the private sector? If not, federal employees are overpaid.
By Eldon Mast, on January 31st, 2012
I happened across this article today and wish I could claim that I wrote it. Here is the opening…
Sen. Marco Rubio (R) of Florida delivered his party’s weekly address on Saturday morning, and made a provocative claim about President Obama.
“The bottom line is this president inherited a country with serious problems,” Rubio said. “He asked the Congress to give him the stimulus and Obamacare to fix it. The Democrats in Congress gave it to him. And not only did it not work, it made everything worse.”
What a crock!
So have a look at the full article here and see the Rubio claim debunked soundly.
Not only has the U.S. economy grown for the last 10 quarters, but the workforce has ADDED jobs for the last 22 months straight.
Can we do better? Sure. Did Obama policies make things worse?
I don’t think so!
By Christopher Briem, on January 25th, 2012
OK… listen up. Nabobs especially. Latest job counts are out and for December we again have a peak in terms of the highest December job count for the Pittsburgh region ever.
Only May and June of 2001 showed a higher job count than the 1,164,000 raw number just out. So the middle of construction season then when I think there were a few big constuction projects pushing up the data (and before USAirways employment imploded of course). Seasonally adjusted the first part of 2001 had some slightly higher numbers.
So we will call it the post-USAirways peak.
and yes.. just a side story to that number may be the warm weather permitting more construction than is typical to continue through the season.
By Simon Grey, on January 25th, 2012
Parlier earns about $13 an hour. She’d like to become one of the better-paid workers in the plant, but, in today’s factories, that requires an enormous leap in skills. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.”
A good attitude and hustle have taken Parlier as far as they can. It’s hard, given her situation, to acquire the skills she needs to realize the American dream.
But skills aren’t always necessary. A dumbed-down UI can serve as a substitute for knowledge, particularly if a firm can hire a technician to know the technical aspects of the technology in use so other workers don’t have to. In fact, the trend of technology has generally been to serve as a substitute for knowledge and ability. Why learn Trig if you can run a fairly simple program on a computer?
Anyhow, this story is evidence of my claim of a technology gap. If labor were allowed to compete freely in a deregulated economy, technological growth would be slower and technological innovations implemented less frequently. This in turn ensures that labor is not stagnant or regressive, and also gives less intelligent laborers a chance to remain on the market longer as technology remains relatively expensive. In order to make technology more appealing, then, technological innovators will find it useful to dumb down the UI to make the device more readily accessible by lower-intelligence labor.
The point in all this, then, is that the government has basically set policies in place that pulls demand for technology forward, leaving less-intelligent laborers in the lurch. And since less-intelligent laborers tend to also be poor, it can be said that the government hates poor people.
By Ajay Shah, on January 13th, 2012
Land ownership in pre-modern India
In India, 50 or 100 years ago, land was a defining feature of wealth. The stock of land generated a flow of income. The landless were low-paid agricultural labour. The landed gentry of rural India were the kings of their heap. They had power, prestige, position, prosperity.
In the eyes of many, the initial conditions of high inequality of land ownership were a key barrier that held India back. It was argued
that a one-time bout of bloodshed was essential, to expropriate the rich, and to transfer land ownership in a more equitable fashion. In India, this capacity for State-inflicted bloodshed was present in some places only. In much of India, the unequal distribution of land ownership found in 1947 was left intact.
Fast forwarding into the present, there has been a sea change in the fortunes of the owners of agricultural land.
Agriculture is less important
Particularly after we escaped from the Hindu rate of growth (3.5%) in 1979, the share of agriculture in GDP has dropped sharply. In
relative terms, the wealth created through firms in industry and services has dwarfed the wealth of the landed gentry. The richest man in India is born of one who started out with no land. Government interventions continued to stifle agriculture, but shifted to a
greater laissez faire approach in industry and services; this helped accelerate the decline of agriculture.
The plight of those who stayed back
Rural to urban migration has unleashed new forces on the role and status of the landed lords. Within rich families, high IQ children may be going off to the city to a greater extent, e.g. based on the filtration by competitive examinations where outcomes are correlated with IQ. To the extent that such a process has been afoot, it has given a selection bias where the low IQ children were the ones more likely to stay back in the `idiocy of rural life’ (as Marx characterised it).
That there was an easy option – to live off the land – was a `resource curse’ which afflicted the households who had land. In
contrast, for landless households, there was no conflict of interest in moving to cities (other than the recently introduced NREG, which tries to perpetuate poverty by hindering rural to urban migration).
The power and status of the landed lords was now twice undermined. Their quick-witted cousins who established themselves in
the cities were connected into capitalism and getting ahead. Families of the landless have tended to move to cities and connect into
capitalism and get ahead. The erstwhile lords have started looking nervously at both groups of escapees, wondering whether land ownership was such a nice initial condition.
In a fascinating recent article, Devesh Kapur, Chandra Bhan Prasad, Lant Pritchett and D. Shyam Babu gave us some insights into these changing social structures. In their survey data, in 2007, 98.3 per cent of Harijans were contracting-out the work of tilling their fields to their erstwhile lords, the upper-caste men who owned and operated tractors. The upper tail of the Indian income distribution has, in a few generations, been reduced to operators of agricultural equipment.
The importance of engaging with the market
A defining issue of modern times, for an individual, is a continued and deep engagement with the market. For insights into this idea, see this interview with Tom Sargent. The Ljungqvist/Sargent story matters even more in India, when compared with what has happened in the West. At 7 per cent GDP growth, every few years, far-reaching change comes about in technology and processes. Each individual builds knowledge and human networks by continually engaging with the market. If a person is cut off from engagement with capitalism for even a few years, this generates a lot of damage to the human capital. At that reduced human
capital, the person has to either accept an offer at a much reduced wage, or stay unemployed (which further undermines human capital).
In this setting, consider the plight of a land owner, who has been living off the land, and has never engaged with modern India. Particularly in the post-1979 period, when India has experienced relatively rapid growth, each year of being a country hick owning land meant being further away from the skills required to participate in the contemporary Indian economy.
We see the plight of adivasis in India, who have been away from the market economy, and are unable to plunge into it. We see the plight of the unemployed of Europe: the welfare state pays them dole to stay warm and well fed for many years of unemployment, but after this they are unable to come back into the labour market.
We see a similar problem with the landed gentry of India. They lack the skills to participate in the market economy. Income from the land, their resource curse, dulls their incentive to overcome the barriers. They are often too proud to accept low wage assignments
which are the starting point through which the unskilled connect to capitalism. These problems have come together to give a unique vicious cycle of dis-engagement with modern India that now afflicts the rural landed gentry.
Sale of land in the outskirts of cities
At the edges of all cities, urbanisation is proceeding through developers buying land from the local landed rich and transforming it
into the endless suburbs. In the short term, this has generated immense windfalls of wealth for the landed rich. But in some ways,
this is a bit of a disaster for many of them. Lacking in knowledge about the market economy, they are scammed by insurance salesmen and such like. Much of this newfound wealth tends to get dissipated in a few years.
Urbanisation and land development throws open vast opportunities for trade and industry. But the erstwhile landed rich tend to be
uniquely ill equipped at harnessing these opportunities. They tend to be too proud to work for someone else, and inadequately equipped to stake out on their own. They experience a brief blaze of glory when paid fabulous prices for their land, and then fade away into insignificance.
Some politicians have been moved to advocate special legal protections for the hapless rural rich who sell land to the modern
sector. It’s quite a turnabout within a few generations: from landed elite that oppress the others, to witless folk who need to be
protected by special laws that inhibit the sale of land.
The curse of land
A few decades ago, the left-of-centre view dominated the thinking in India. It was felt that inequality of land was a major bottleneck
that held India back. Many argued that the failure of Indian democracy to engage in a one-time bout of class warfare was a major mistake that was holding India back. It was argued that the Chinese path was the right one: to expropriate the landowners and then start a capitalist economy where everyone is equal.
With the benefit of hindsight, things look different. I think this story reiterates the dangers of social engineering. We are dealing
with enormously complex systems that we only dimly understand. As far as possible, it is wise on our part to use the force of the State as little as we can, and to always avoid treading on fundamental human rights such as property rights.
Acknowledgments
I am grateful to K. P. Krishnan , Suyash Rai and Mihir Thaker and for insightful conversations.
By Simon Grey, on January 12th, 2012
But, in the first study of its kind, the MAC – set up by the last Labour government, and independent of Whitehall – said large-scale immigration was having a significant impact on the job prospects of the ‘native’ population.
The report, which follows years of controversy over whether immigration leads to fewer jobs for British workers, showed that every increase of 100 foreign-born working-age migrants in the UK was linked to a reduction of 23 Britons in employment between 1995 and 2010.
Between 2005 and 2010 alone, the number of working-age migrants in employment rose by 700,000 and displaced 160,000 British-born workers, it said.
As can generally be expected, increasing the supply of something—in this case labor—without a similar increase in demand for that thing will generally lead to lower prices. When there is a price floor of sorts (minimum wage, workers’ rights, etc.), the better labor will win out at the margins, which is what appears to have happened here. Since those who decide to emigrate usually tend to be of a rather hardy stock, it should come as no surprise that they are often viewed as marginally better labor, and, as such, get hired more often. And it should also come as no surprise that the marginally superior laborers (immigrants) are offered jobs that would otherwise be offered to natives.
But more than that, it is philosophically consistent to support both free trade and free labor, as the arguments or them are rather similar. The problem, though, with both free trade and free labor is that domestic regulation of both tends to discourage domestic production/producers. As such, both free trade and free labor operate essentially as foreign subsidies. However, free labor is the more pernicious of the two seeing as how it not only undermines domestic production, but also domestic culture, what with the sudden influx of people from other cultures. Ad while people from another culture may enjoy the consequences of living in another culture, this is no guarantee that they will ever do anything but support and further their original culture.
The lesson to be learned from this is that free labor—or even limited regulation—is not particularly beneficial for the native population, economically. As such, it can reasonably be said that any politician who advocates an increase in immigration, tolerance for illegal aliens, or otherwise promotes the migration of foreign workers of any sort is one who is ignorant, hates his country, or is simply stupid.
By Simon Grey, on January 3rd, 2012
As demonstrated in this example of mechanization:
I’m in Chicago at my Mom’s place for Christmas, and over dinner last night we were talking about Race Against the Machine and the steady pace of automation (because what else do I talk about these days?). She and her husband Gene told me that the Walgreens in their neighborhood didn’t have any human cashiers any more.
I told them they must be mistaken. I’ve seen plenty of self-checkout stations, but they’ve always been accompanied by at least one human cashier to accommodate customers who for whatever reason — unfamiliarity, techno-fear, the desire to chat, whatever — don’t want to deal with a machine. I assumed the same would be true at this Walgreens. Mom and Gene were adamant that it was 100% self-checkout, so we got bundled up and walked over to get the straight dope.
They were right and I was wrong. There are six NCR self-checkout kiosks at the entrance / exit, and no cashiers at all there. There are human cashiers at the photo lab and the pharmacy and customers can take their purchases to these two locations if they want, but at the main checkout area you can’t get rung up by a person any more.
This goes back to something I wrote about a month ago. The tendency in the free market is for labor to become of an increasingly higher order. Note that this is not an immutable economic law so much as an ex post observation. There is no reason to believe that this trend will continue, save for the purpose of thought experiments.
At any rate, the historical trend demonstrates two things. First, as intellectual capital increases, humans have a tendency to mechanize labor. The cotton gin and mechanical harvester are early examples, and the robotic assembly line and aforementioned cashier are more recent examples. The problem with machines, though, is that for all of their advantages they still aren’t perfect. They generally need maintenance of some sort and occasionally fail. Fixing machines, for the time being, requires human involvement.
This problem is generally solved first by increasing pay for those skilled at maintaining and repairing machines and then eventually simplifying the operation and maintenance of said machines so as to tap into unskilled labor (which the machines initially replaced). Basically, then, machines are a net benefit in the long run because they enable humans to capitalize on a broad set of intellectual capital via higher order labor. As such, one need not be a Luddite for economic reasons, as the market generally does a good job of solving the problem of labor displacement.
By Christopher Briem, on December 27th, 2011
So in the spirit of the end of year retrospectives we will be having all week this came to mind. In October I pointed out that for the Pittsburgh region, it was the highest employment count for an October ever. Same for November. Following from that, I was thinking a bit about some analysis by the folks at the parent of the business times which showed Pittsburgh among a small set of regions that are at their decade high employment peaks.
That analysis might be misread a bit. It is not that Pittsburgh is among the top employment gainers over the decade. We are one of a few regions currently hitting their decade high peaks. Lots of regions have had more growth over the decade, but many have dropped a lot from those peaks in recent years. In lots of ways it is a reflection of the relative stability here, not a lot of job growth.
So I made a graphic of the employment change for the 50 largest MSAs (currently, by employment) over the last decade. So with November 2001 as a baseline, below is what those trends looks like; Pittsburgh is in red. It works out, and I calculated this explicitly that Pittsburgh is in a sense the single most stable employment time series among all 50 regions. Stable as defined by the difference in this time series between the peak and trough over the decade. The difference between the peak and trough for Pittsburgh works out to 6.67 across the decade, which works out to the lowest range for any of the 50 regions.
By Simon Grey, on December 22nd, 2011
So what are the best bets when buying student debt? Technical schools. Students pay the least for their education with the potential to make good money after graduation in only a couple of years.
By that arithmetic, technical colleges come out on top, Mr. [Daniel] Ades said. “We’re in a skills based economy and what we need is more computer programmers, more [nurses],” he said. “It’s less glamorous but it’s what we need.”
Meanwhile the nation’s law schools continue to over-supply the nation with lawyers. Law students are borrowing an average of $68,827 at state schools and $106,249 a private schools only to add to the glut of barristers.
In what must undoubtedly be a shock to humanities majors, people who are actually know how to do useful things are in position to make money after they graduate. Imagine that.
Of course nurses and programmers are going to be in a position to make good money, mostly because people want to not be sick, maim, or injured, and they also like to be able to use electronic gadgets. Hence the reason why students who graduate from technical schools with degrees in nursing and programming are in a better position to be employed than, say, an English major. As fascinating as Faulkner undoubtedly is, being able to expound upon his work at length is not something many consumers really want to pay for.
As such, it should no surprise that people who learn actual, useful skills in college are in a better to make money than those who majored in something that is considerably less practical.
By Eldon Mast, on December 16th, 2011
Fewer Americans filed for their first week of unemployment benefits last week. So few in fact, that the number of initial claims fell to its lowest level since May 2008.
About 366,000 people filed initial jobless claims in the week ended Dec. 10, the Labor Department said Thursday. That was a decrease of 19,000 from the prior week.
The report continues to signal that the unemployment rate will come down further in December. Even the most pessimistic of economists often look for the weekly tally to stay below 400,000 to signal that job growth is strong enough to lower the unemployment rate.
The drop in claims last week and the drop in the unemployment rate last month was the complete opposite of what a majority of economists had expected. (Remember the majority is always wrong?)
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