Arnold Kling  

Labor Market Issues

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Today's New York Times has two opinion pieces on the labor market. Pessimist Steve Roach does not believe that the productivity growth that we are seeing is real or lasting.

we are woefully underestimating the time actually spent on the job. It follows, therefore, that we are equally guilty of overestimating white-collar productivity. Productivity is not about working longer. It's about getting more value from each unit of work time. The official productivity numbers are, in effect, mistaking work time for leisure time.

This is not a sustainable outcome — for the American worker or the American economy. To the extent productivity miracles are driven more by perspiration than by inspiration, there are limits to gains in efficiency based on sheer physical effort.

Of course, if Roach is correct, then further increases in demand ought to result in more hiring, because current workers are stretched to the limit.

Meanwhile, Austan Goolsbee believes that the labor market is weaker than it looks.

From 1999 to 2003, applications for disability payments rose more than 50 percent and the number of people enrolled has grown by one million. Therefore, if you correctly accounted for all of these people, the peak unemployment rate in this recession would have probably pushed 8 percent.

Goolsbee argues that since the late 1980's, it has been easy for people to transition out of work and into disability rather than unemployment.

For Discussion. Goolsbee implies that with an increase in demand, many who have taken disability would be back in the labor force. Is this plausible?

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CATEGORIES: Macroeconomics

COMMENTS (6 to date)
T L writes:

I don't know what criteria social security uses to evaluate disability, but it probably limits mobility in and out of the system. The lack of mobility would discourage re-entry of the disabled into the labor market even in an atmosphere of increased demand.

triticale writes:

I worked a brief tech contract last year together with a man who is recieving state disability benefits from workers comp. He is no longer able to work as a machinist due to arm tendon failure. An upturn in tech work will enable him to shift back into employment, doing work which his disability will not effect.

Note that this is an unusual case, but there is more brain and less muscle work now in general.

Lawrance George Lux writes:

Both Roach and Goolsbee are fundamentally right in their analysis. Government accounting procedures are horrifically dated, and Government eases transition to Disability to ease Unemployment estimates. Goolsbee make a fundamental error in judging Disabled individuals have ease in re-entering the labor force. Employers want younger, cheaper Labor, and justify their rejection upon work experience being dated and obsolete in the new Economy. Less than five percent of the Disabled Persons can re-enter the Occupation from which they left for Disability. The drop of Payscale is over fifty percent. lgl

Steve writes:

Fear is why we've been working our fingers to the bone. Fear of outsourcing, etc. I, personally, worry about it at least 5-10 hours a week.

Rid the country of that fear and you'll see rising incomes and rising productivity.

Eric Krieg writes:

>>Rid the country of that fear and you'll see rising incomes and rising productivity.

Rising incomes, I agree. Rising productivity, I disagree.

I have to tell you people, I have a BAD ATTITUDE about work (which you could probably tell by my posting rate during working hours!).

My company has been screwing people for going on 4 years now. Management is just awful.

All this has done is give me a mercenary attitude. Right now I'm doing enough to get by, but when times change and the employment market improves, there will be a reckoning.

I will NOT be working any harder, that's for sure. I can't see how my productivity would be higher if I worked (even) less than I do now.

Steve writes:

I am in the 1% minority that loves his employer. If I wasn't so worried about the Indians/Chinese/Brazilians/Russians/etc and tilting at windmills on this blog 5-10 hrs/week, I'd be the absolute hardest worker on the planet.

I'll say it again: remove the fear, and productivity will rise. Economists would call it "inexplicable" because workers who are afraid are supposed to be harder workers. Economists, again, are out of touch with reality.

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