Arnold Kling  

Specialized Labor

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For over two centuries, economists have spoken of "labor" as if it were homogeneous. Back in the real world, people were learning trades, becoming trained as professionals, starting businesses, and otherwise undertaking to differentiate themselves.

Macroeconomics, as we know it, ignores this. Casey Mulligan points out that it was low-wage workers who took it on the chin this recession. My guess is that the folks who designed the "stimulus" package ignored this. If the stimulus helped people in government and financial services, then my guess is that is not where the help was really needed.

What Alexander Field's A Great Leap Forward shows is that even in the Great Depression, firms introduced labor-saving improvements in production processes. What we may be seeing today is the acceleration of a number of trends that are troublesome from the standpoint of the unemployed. People without college degrees face increased competition from foreign workers due to globalization. They are frozen out of government, health care, and education by protectionist measures that require educational credentials. And people in the higher-income brackets are imposing their preferences for health insurance on people who have a hard time earning enough to pay for it. (See Tyler Cowen for some similar observations on health care and inequality.)


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CATEGORIES: Labor Market



COMMENTS (2 to date)
Lars P writes:

So the stimulus was the left's version of "trickle down economics"?

Vy Nguyen writes:

I agree with your comment on the fact that low-wage workers were the most likely to survive group of individuals. However, the answer to explain the recession’s fall in employment is indeed the insufficiency of aggregate demand in the economy to provide jobs for everyone who wanted to work.

Starting from the fall in stock investments on technology around August 2001, the shock reduced household wealth that directly affected the consumer spending. In addition, the terrorist attacks on New York and Washington on September 11, 2011 significantly shifted the aggregate demand curve to the left. The accident did not only affect domestic investment in USA; but it also created uncertainty to all international investors. Because the demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages were sticky. Plus, the equilibrium wages were still too high that continued to increase cyclical unemployment in the society.

Despite the fact that the recession tremendously hit our financial lives (especially to those who lost their jobs), the temporary decline only crashed into certain industries around the world. On the other hand, there were cases when jobs were created in reference to Andrew Porter’s Gordon Brown to create 100,000 jobs under 'anti-recession' plans. By focusing in maintenance, or any “green” public works like school and hospital repairs, we would be able to create an attempt in lessen the seriousness of the rate of unemployment.

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