Bryan Caplan  

Final Points on ZMP

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A Pithy Sentence... More on ZMP...
Tyler makes some thoughtful points on ZMP.  Replies:

1. There has been plenty of evidence for "labor hoarding"; oddly, once the ZMP workers start actually being fired, the concept suddenly becomes controversial.  The simple insight is that firms don't hoard so much labor any more.

Clever, but at least at Princeton, no one claimed that "hoarded labor" had zero productivity.  The idea is merely that firms pay workers more than their current productivity during downturns to avoid the costs of hiring replacements when conditions improve.  If productivity declines 10%, wages don't fall, and employers don't get rid of you, that's labor hoarding, but hardly ZMP.  The fact that today's employers are more likely to get rid of you during recessions isn't a symptom of ZMP either.

2. The ZMP worker concept can overlap with the sticky wage concept.  If a person is a prima donna who will sabotage production unless paid 120k a year and given the best office, that person has a sticky wage.  That same person also can be ZMP.  Very often the concept is about bad morale, not literal and universal incompetence; the ZMPers are often quite effective at sabotage!

Excellent point.  But as I told Eli, this eliminates the policy difference between Keynesianism and ZMP.  If ZMP is caused by sticky wages, inflation effectively raises productivity.  In any case, note that sabotage need not drive net productivity down to zero to cause unemployment.  As long as net productivity falls faster than the fall in the nominal wage, employers won't want to cut wages.

3. No one thinks a worker is ZMP in all possible world-states.

True.  As Greg Clark says in A Farewell to Alms, the Industrial Revolution did disemploy a lot of horses.  I just don't see any evidence that relatively low-skilled humans are the horses of the Information Age.

4. The high and rising premium for good managers is another lens for viewing the phenomenon.  More workers could usefully be employed if we had more skilled supervisors, and thus the shadow value for a skilled supervisor is especially high.

Yes.

5. Virtually everyone believes in the concept, although opinions differ as to how many workers it covers.  How about the people who are classified as having given up the search for work altogether?  There's quite a few of them.  Put aside the blame question and the moralizing, can't at least a few of these people -- who aren't even looking to work -- be considered ZMP?

Of course.  I just don't think that the fraction of the healthy adult population with ZMP has risen much since the last time unemployment was 5%.


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COMMENTS (4 to date)
jseliger writes:

"More workers could usefully be employed if we had more skilled supervisors, and thus the shadow value for a skilled supervisor is especially high."

I wonder if this also means that teachers, professors, and mentors should spend more time trying to instruct students in how to be autonomous and how to find productive or useful activities even in the face of supervisors who might lack the skills to deploy them effectively.

James A Donald writes:

The cost of employing someone is high and has risen, risen substantially over the last few years. That has to cause a substantial increase in the number of people with zero marginal productivity.

For example, if you hire someone, he, and all his stuff has to traced by accounting, and accounting has to comply with a pile of rules that no one understands any longer, so that the only way that anyone can possibly comply is to hire accountants sufficiently well connected that whatever they do will be deemed to constitute compliance.

And if you hire a female, you have to make all sorts of special accommodations for her, or else it is a hostile work environment, and if you hire a male, you are probably discriminating against females, and if your hire has some unusual sexual preference, he will probably sense hidden disapproval of that sexual preference which will likely constitute discrimination.

These are large, and rapidly escalating, non wage costs of hiring.

Steve Roth writes:

"As Greg Clark says in A Farewell to Alms, the Industrial Revolution did disemploy a lot of horses. I just don't see any evidence that relatively low-skilled humans are the horses of the Information Age."

Thanks for visiting.

No evidence at all? Couldn't America be the Victorian England of the information age? People continued using horses elsewhere in the world for quite a long time.

Steve Roth writes:

To add: evidence could include the *steadily* increasing:

1. Duration of jobless recoveries

and

2. Duration of unemployment

Since the mid 70s.

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