Thursday, October 22, 2009

Hoisted From Comments

From Tim Bartik, Senior Economist, Upjohn Institute
Several points:

1. We need to distinguish between dealing with the current unemployment crisis and dealing with our long-term labor market problems. Some policy solutions may do both, but many may be more appropriate only as short-term solutions, or only as long-term solutions.

2. The current unemployment crisis is severe enough that we need to explore a variety of solutions. Work-sharing should be considered. Public service jobs should be considered. Some sort of employer tax credit for new job creation should be considered. Counter-cyclical revenue sharing should be considered. The issue for all of these is: what job creation impact are they likely to have, and at what cost.

3. Dean Baker recently has an interesting policy brief at CEPR that presents some numbers on work-sharing as a solution to the short-term unemployment crisis. My colleague Sue Houseman at the Upjohn Institute has an article with Katherine Abraham in our July newsletter that looks at short-time compensation via the UI system as a way of encouraging work sharing.

4. As for work-sharing and our long-term economic problems, I am less convinced than the Sandwichman seems to be that work-sharing is "the answer" to our long-term economic problems. I think this claim requires a high standard of proof, as most deeply rooted economic and social problems do not permit one "answer". I do think there is merit in trying to move towards shorter annual work hours as in much of Western Europe, not so much because it solves our long-term economic problems, but because it would increase the quality of life.

Tim Bartik
Senior Economist, Upjohn Institute

7 comments:

run75441 said...

Sandwichman:

Sort of feel like Rodney Dangerfield?

"What's a guy gotta do to get a little respect around here?"

Ever try walking on water as the evidence of a higher standard of proof? Would giving it a try cause any greater damage than letting W$ speculate with derivative or Nixon's Price and Wage Control.

I don't know Sandwichman, these guys who have never worked in a plant 50-60 hours a week seem to have all the answers for what will benefit us. Love that quality of life!

Sandwichman said...

run,

I love what Trucker said in the comments:

"If economics is not about improving the quality of life then what good is it?"

run75441 said...

Sandwichman:

Trucker has it right as do most people who exist below the median income level and have seen their incomes remain stagnant or slowly erode since the seventies. As you know, Dr. Elizabeth Warren does a great presentation on this topic which I push people towards just to understand the basics of the issues: "The Coming Collapse of The Middle Class."

Without job creation and getting people back to work, we are rapidly heading towards a new plateau of higher costs within this country as more and more people sit idle or are doing less than what they did before. I guess I am preaching to the choir on this issue and I am certain you fully understand where the last 8 years has taken us. Yet the economic sages miss the mark mostly. There is no theory or mathematics or stats to this issue, it is all about the creation of meaningful jobs.

I was struck by the words spoken by Senator Schumer of NY in support of the passage of Gramm's Financial Services Modernization Act in 1999/2000.

'''If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,' said Senator Charles E. Schumer, Democrat of New York. 'There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive.'''

Between SCOTUS knocking down Usury laws and the passage of Gramm's Financial Services Modernization Act in 1999/2000, we know where the priority lies. Certainly there is a higher rate of return in the Financial Industry from asset appreciation and 19% interest rates. Trucker also made this comment which goes right to the heart of this issue:

"And as to bubbles, they are caused by ridiculously low levels of taxation on gains from asset price appreciation."

In 1999/2000, the majority of Congress and economists were worried about financial interests slipping overseas. God forbid we might have to get a loan from the Chinese in person, which we are doing today with the sale of Treasuries. There was no hesitation on anyone's part to save W$ and the Financial Industry from the overseas scourge of begging for a loan and global competition. I guess we saved them then from having to compete globally. During this time, we have seen millions of jobs from the manufacturing and service sectors, not involved in asset appreciation, and creating something of value slip overseas in the names of global competition and comparative advantage as driven by the dastardly labor cost (benefits and laws) of operating in the US. I guess it is ok for Labor to compete globally.

In2008/2009, the Fed rapidly put together $trillions in funds to salvage a W$ that gambled once too many times while the Treasury made available the ability to become holding banks and $700 billion in TARP “Don’t ask and Don’t tell” loans. Even with the constituency up in arms, Congress reinforced by many economists did not “hesitate” to pass a stellar life line to W$, the big five banks, and many other institutes. I wonder what will be paid back by AIG?

And yet we hesitate to discuss how to create jobs and get the Unemployed back to work while we risked $trillions on W$ and the Financial Industry with little discussion. Off to the “Showdown in Chicago” with my pitch fork.

Sorry for the rant . . .

Jack said...

There would be less need for concerns regarding unemployment if there was as much concern about the US losing its position as the number one manufacturing center. Why is there so much concern for the financial center, and so little for the manufacturing centers? Do banks employ more people than do manufacturing plants? I don't think so. Do banks have more political clout than localities with a need for employment? What a dumb question!!

People like Nixon, Kissinger and Peter Peterson made it possible for the manufacturing of US goods to shift to the Far East, China in particular. That satisfied corporations, the financial sector that brokered the wholesale shift of manufacturing and our beloved political class. It screwed everyone else. We got what those we chose to represent us wanted for those that financed their political lives.

Sandwichman,
The hours of work are now being taken over by the rest of the world
and leaving us with fewer hours to work. What does that do to the concept of shorter hours leading to more employment?

Jack said...

There would be less need for concerns regarding unemployment if there was as much concern about the US losing its position as the number one manufacturing center. Why is there so much concern for the financial center, and so little for the manufacturing centers? Do banks employ more people than do manufacturing plants? I don't think so. Do banks have more political clout than localities with a need for employment? What a dumb question!!

People like Nixon, Kissinger and Peter Peterson made it possible for the manufacturing of US goods to shift to the Far East, China in particular. That satisfied corporations, the financial sector that brokered the wholesale shift of manufacturing and our beloved political class. It screwed everyone else. We got what those we chose to represent us wanted for those that financed their political lives.

Sandwichman,
The hours of work are now being taken over by the rest of the world
and leaving us with fewer hours to work. What does that do to the concept of shorter hours leading to more employment?

Sandwichman said...

"The hours of work are now being taken over by the rest of the world
and leaving us with fewer hours to work. What does that do to the concept of shorter hours leading to more employment?"

Good question, Jack. If I said there was an easy answer, it would be a "misrepresentation" but if I tried to explain the details your eyes would glaze over. ;-) All I can say is that longer hours of work do not give a competitive advantage. Strictly in terms of labor costs, "more productive" trumps "low wage, long hours". But then these things are NOT determined strictly in terms of labor costs, either. It's political, and sometimes Capital will cut off their workers' noses to spite their social democratic faces, so to speak.

Look at it this way, despite what economists tell us, people can make value judgments about what is acceptable and what is not. The U.S. government can say to China, "we're not going to trade with you unless you guarantee decent working conditions and wages for your workers." Or they can say to the big trans-national corporations, "we're not going to insure your overseas investments and subsidize the fossil fuel costs of your international shipping..."

Bottom line? "Free trade", my ass. It's all totally political now, as Dean Baker points out, but it's political with an anti-labor bias.

run75441 said...

Sandwichman:

As a consultant who walks into factories and listens to management rant over labor, this is music to my ears. LABOR, DIRECT LABOR COST, is not the issue regardless of what the Senator from Toyota , Corker, says.

Longer working hours are only essential if they give you something of value that can be sold immediately and even then one must wonder why the company does not expand the labor input. Longer working hours to build inventory and not to demand is exactly what automotive did for the last 30 years when they switched . . . morons.

Productivity improvements in throughput is the god we should worship with the gains being passed down the line in increased wages, more workers employed, and lesser hours worked. Insteaqd the gains are channeled to a few at the expense of the 99%. Drucker just rolled over in his grave with a smile on his face.

You don't know how many times I have argued this at Angry Bear and Slate