Arnold Kling  

Some Trends of Interest

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1. Menzie Chinn offers charts that demonstrate that unemployment is highest in 2010 among those who had the lowest income in 2008.

Does that mean that they have the stickiest wages? Just kidding.

I think the one thing we could do that would quickly improve the employment prospects of low-productivity workers would be to separate health insurance from employment. If a family of four costs $15,000 per year to insure, then every worker has to be worth $15,000 a year to the employer just for break-even, before the worker gets any take-home pay. That means that somebody who is worth less than $40,000 a year to a firm probably will not get hired. People who are worth $25,000 to $50,000 a year would be more likely to have jobs if taxpayers gave them health insurance vouchers and employers did not have to pick up health insurance cost.

2. At the other end of the education spectrum, Michael Mandel offers data to show that over the past year young college grads were more likely to find employment in government than in any other occupation. Shock me.

3. Finally, Robert J. Gordon joins the Jagadeesh Gokhale demographic pessimism club. This club foresees an increase in the share of the population at the lower end of the educational attainment spectrum, and as a result they foresee relatively low productivity growth.

I wonder how the Sergey Brin effect plays into this. That is, we may be seeing more workers at the low-education end, but we may be seeing more workers at the high-education end, because of assortive mating. What determines national average productivity? If it's the ideas of those at the high end, then maybe we ought not to worry. Of course, the much-dreaded inequality is likely to continue to emerge.


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COMMENTS (4 to date)
James writes:

Of course, a simpler explanation may come from the fact that the minimum wage increased from $6.55 to $7.25 over the same time period, which should displace only those lowest income workers (minimum wage workers) into unemployment.

razib writes:

That is, we may be seeing more workers at the low-education end, but we may be seeing more workers at the high-education end, because of assortive mating.

hm. last i looked at this quantitatively the effect was depressingly weak or non-existent. i'd like to be disabused of my pessimism. can someone please give me the data? re: innovation, i think the key for the 21st century has to be more efficient coordinated mobilization and allocation of human capital, not throwing a bunch of barely-high-school-graduates into a 4 year university hoping to work magic.

coordinated mobilization: get them to live together like in silicon valley.

allocation: get them to work on real innovation with positive externalities, not various forms of arbitrage and rent seeking which are rational only from an individual perspective.

Prior_Analytics writes:

"Of course, the much-dreaded inequality is likely to continue to emerge."

Many people get concerned with inequality because it has the possibility of shifting prices higher without anything else changing.

There are few mechanisms to differentiate the prices for goods where information levels are high. Airlines can charge different prices only as long as everyone doesn't have access to good information. As soon as information levels increase prices converge.

People who have higher incomes can afford higher prices. All things being equal, when richer people can afford higher prices, prices shift upward.

A good example is CableTV. There are only so many different packages that can be designed. The Cable Company is going to choose a price that maximizes 'revenue minus costs'. If costs stay equal, but some people are willing to pay higher prices, prices will shift upwards, pricing a few (at the margin) out of the market.

The same happens in many other areas. Do a search of 'reverse imports', and you'll find a bunch of stuff.

Companies that try to pick different prices for different markets, like Pharmaceuticals, often have PR issues. Again, as information increases, and as a single price converges globally, the price can shift up as inequality increases and price some out of the market....

-p_a

Hyena writes:

I doubt health insurance is a significant factor in this; so far as I can tell, employers don't generally have to subsidize health insurance, making it a non-issue from a cost standpoint (if the employer doesn't like the cost, she doesn't have to subsidize it).

What seems much more likely is that most people working at low-wage jobs were working jobs which were inherently less productive. Those jobs added little to overall utility regardless of who worked them, placing them at or below ZMP very quickly as the value of money rose.

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