Archive for the ‘Employment’ Category

Mission-Oriented Finance (Video)

Michael Stephens | September 10, 2014

The following clips are from the Mission-Oriented Finance for Innovation conference held in London, organized by Mariana Mazzucato as part of a research project with L. Randall Wray on “Financing Innovation.”

L. Randall Wray, “Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis” (slides)

 

Pavlina Tcherneva, “Full Employment, Value Creation and the Public Purpose” (slides)

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Greece: The Impact of Austerity on Migration

Gennaro Zezza | July 11, 2014

Greece. Population
The chart above documents another striking feature of the impact of the recession on Greece.

The Hellenic Statistical Authority (ElStat) has recently released the new quarterly data on employment and the labor force, which includes a measure of the population aged 15 or more (Table 1). While the series published in the previous release exhibited a stable upward trend (reported in green in the chart), the new estimates show that population peaked at 9.437 million at the end of 2008, and then started declining, reaching 9.296 million in the first quarter of this year, i.e. it went back to its 2004 level. (The reasons for the change in the series are due to ElStat incorporating the latest census data: details are available in the ElStat web site).

As ElStat does not publish an up-to-date measure of net migration, we assume this could be measured by the distance between the pre-crisis population trend and the actual values. We therefore computed a simple linear trend on the 2001-2008 data, which shows that population would have now been at 9.686 million, had the previous trend continued. The difference between this value and the population reported for the first quarter of 2014 is thus approximately 390,000 people (4 percent).
Greece. Population by age group
ElStat makes available the detail by age groups (Table 2), reported in our second chart, which shows that younger Greeks are declining steadily in number – a trend which is common to many developed countries who chose to reduce the average number of kids per family – while the number of older people is steadily increasing – again a trend common to many countries, linked to longer life expectancy. Summing up the 15-29 groups to the 45+ groups, we find that the decline in the younger population accelerated after 2007, compensating the increase in the number of Greeks aged 45 and over, so that the inverted U-shape of the population in our first chart can largely be attributed to the decline in Greek residents aged 30-44, who are now 2.442 million against a peak of 2.544 million at the end of 2008.

We have no complete information to know if this decrease is due to Greeks in this age cohort migrating abroad, or to a smaller number of immigrants. However, the OECD migration database contains some (incomplete) statistics on immigrants by country (the figures largely under-estimate total migration, as some major European countries such as France and Italy do not report any figures to the OECD).

As the next chart shows, and how it should be expected looking at the respective unemployment rates, the main destination of Greek emigrants is Germany, and the number of migrants has almost doubled from 2010 to 2011 (the last available year).
Greece. Emigrants from Oecd database
The other portion of the fall in population is given by migrants to Greece, which have fallen from 65.3 thousands in 2005 to 33.3 thousands in 2010 and 23.2 thousands in 2011.

It is to be expected that migration of Greeks abroad, and the decline in immigrants to Greece, continued on the same paths after 2011, given the size of the unemployment rate in Greece (still at 26.8 percent in March 2014, seasonally adjusted). Using the economists’ jargon, this is another loss of human capital for the Greek economy which will make a recovery more difficult. And, in addition, balance of payments statistics published from the Bank of Greece do not show any improvements in payments made from abroad which could be related to migrants’ remittances: both the compensation of employees received by Greece from abroad, and current transfers to the private sector have actually declined since the beginning of the crisis.

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An Employment Safety Net for Youth

Michael Stephens | May 22, 2014

Pavlina Tcherneva participated in a conference on youth unemployment at Middlebury College and shared her ideas for a youth employment safety net (beginning at 38:45):

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Phillips Curve Still Alive for Compensation?

Greg Hannsgen | May 13, 2014

wage_phillips_curve

On reading a recent post by Ed Dolan at Economonitor with some evidence of the lack of a strong Phillips relationship for consumer-price inflation in US data, it occurred to me to try a measure of total compensation per hour with recent data. The wage relationship estimated over all available quarters, using averaged monthly observations for the civilian unemployment rate, is shown above, with a scatter plot and an estimated regression line. Like the relationship estimated by Dolan, the regression line above suffers from a rather loose fit (constant: 6.87; slope coefficient: -.29; R-squared = .02). A complete explanation of inflation is complicated and of course also involves other costs, including raw materials such as fuel. The latter costs are subject of course to “cost-push”-type inflation at times, as are wages. Exchange rates of course affect these costs.

A time series graph below displays both series over the entire sample period, 1948q1 to 2014q1. As some have observed, the exceedingly high unemployment rates of the post-financial-crisis era (blue line) have resulted in very weak or negative compensation growth rates (red line). The latter are not adjusted for inflation in the figures, since we are focusing on nominal data in this post.  The downward trend in nominal wage growth in the right side of the figure (red line) helps to explain recent declines in the so-called wage share, which measures the fraction of national income going to labor costs. (However, see this New York Times article for some evidence that falling unemployment is beginning to bring some inflation-adjusted wage growth to parts of the US.)

wage-Phillips time series

By the way, if inflation were to become a large problem (and it seems well-contained now), non-recessionary methods exist to try to alleviate it. Even where the Phillips-curve relationship is strong, the human costs of using it to combat inflation are usually very high, given the existence of alternative policies that could perhaps be given a try in the US.

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The Problem of Unemployment in Greece

Rania Antonopoulos | February 12, 2014

(The following is an extended version of a piece that originally appeared in Greek in Kathimerini.)

The responses to unemployment by the last three governments in Greece have been characterized by sloppy proposals and an insignificant amount of funds in relation to the size of the problem. Regardless of whether there were political considerations behind it (or not), the recent announcement of the Prime Minister highlights, unfortunately, a relentless continuation of a lack of understanding of reality.

The Prime Minister recently (on January 29) told us that unemployment is a “sneaky enemy” and proceeded to announce measures to tackle the problem. He also indicated that “we do not promise things we cannot do, and we say no to populism and fine words.” The goal of the proposed measures, we heard, is to create 440,000 “work opportunities,” of which 240,000 will target the unemployed 15-24 years of age with no prior work experience. The announced measures totaling 1.4 billion euros will be financed by funds from the National Strategic Reference Framework (NSRF), social funds from the EU, and are classified into three pillars.

Specifically, the first pillar sets a target to recruit 114,000 unemployed for the private sector; an initiative that essentially subsidizes wages and social security contributions for businesses that hire unemployed who are up to 29 years old and some who are unemployed between the ages of 30 and 60. The second pillar concerns 240,000 young persons. This program will provide work experience and training for all unemployed up to 24 years old who have no prior work experience. These unemployed will also go to private companies for some time, or participate in vocational training centers (VTC) to improve their skills in order to find their first job, or both. The third pillar concentrates on hiring 90,000 unemployed from households that have no employed person, who will work in community service projects in the public sector and local government.

Assuming that strict rules are in place, with dedicated control mechanisms that will guarantee non-replacement of existing positions in the private and public sector (really, is there a sufficient number of public sector inspectors for this task?), prima facie, it all sounds positive and leads to the conclusion that at last the Prime Minister himself has publicly accepted his responsibility toward the citizens that have been left without a job. But appearances can be deceiving.

Let’s start with the obvious. continue reading…

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Minsky on the War on Poverty

Michael Stephens | January 10, 2014

Roughly a year after President Johnson used the occasion of his first State of the Union address to declare war on poverty, Hyman Minsky presented a paper on the subject at a conference in Berkeley. Here’s what he wrote:

The war against poverty is a conservative rebuttal to an ancient challenge of the radicals, that capitalism necessarily generates “poverty in the midst of plenty.” This war intends to eliminate poverty by changing people, rather than the economy. Thus the emphasis, even in the Job Corps, is upon training or indoctrination to work rather than on the job and the task to be performed. However, this approach, standing by itself, cannot end poverty. All it can do is give the present poor a better chance at the jobs that exist: it can spread poverty more fairly. A necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not, by itself, eliminate a large part of the poverty that exists.

The war against poverty cannot be taken seriously as long as the Administration and the Congress tolerate a 5 percent unemployment rate and frame monetary and fiscal policy with a target of eventually achieving a 4 percent unemployment rate. Only if there are more jobs than available workers over a broad spectrum of occupations and locations can we hope to make a dent on poverty by way of income from employment. To achieve and sustain tight labor markets in the United States requires bolder, more imaginative, and more consistent use of expansionary monetary and fiscal policy to create jobs than we have witnessed to date. …

The single most important step toward ending poverty in America would be the achieving and sustaining of tight full employment. Tight full employment exists when over a broad cross-section of occupations, industries, and locations, employers, at going wages and salaries, would prefer to employ more workers than they in fact do. Tight full employment is vital for an anti-poverty campaign. It not only will eliminate that poverty which is solely due to unemployment, but, by setting off market processes which tend to raise low wages faster than high wages, it will in time greatly diminish the poverty due to low incomes from jobs.

Ending Poverty_cover

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The Social Enterprise Sector Model for a Job Guarantee in the U.S.

Pavlina Tcherneva |

Jesse Myerson created a firestorm over mainstream media with his Rolling Stone piece “Five Economic Reforms Millennials Should Be Fighting For.” I’d like to address the very first of these reforms, the Job Guarantee (JG), as Myerson references my proposal for running the program through the non-profit sector and discussed it in several interviews on Tuesday.

Last month, I did a podcast with him about this program. Let me focus on some questions that keep popping up about the proposal, e.g., Josh Barro’s Business Insider piece.

What is the problem?

It is fundamental. It’s not just a problem of today’s deeply ailing economy. It’s permanent. There are always people willing to work, whom profit-driven firms do not wish to hire.  Even when economies are growing rapidly, there are never enough job openings for all who want to work. That number is 24.4 million people today: 10.9 million officially unemployed and 13.5 million in hidden unemployment (bls.gov).

The mark of unemployment is itself an obstacle to getting a job. The average employer equates 9 months of unemployment to 4 years of lost work experience. (Eriksson and Rooth AER, 2014). And so unemployment breeds unemployability, feeding the decades-long uptrend in long-term unemployment, while the economic, political and social costs are mounting.

Whenever I write about unemployment, I always stress the long run. The point is to solve the problem in recessions and expansions. Virtually no economist or pundit outside MMT makes this point. I predict that, while it is fashionable to entertain various solutions for the unemployed today, as soon as the economy recovers sufficiently, they will be forgotten.

It’s time to change the conversation from creating jobs for the jobless now, to creating jobs for the jobless always. The Job Guarantee provides the solution. I have explained elsewhere why neither the private sector nor the flawed bastard Keynesian pump-priming policies can get us there (here and here).

So let’s move right to the design and implementation of a JG through the non-profit sector.* continue reading…

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Push for Job Guarantee Gains Momentum

L. Randall Wray | January 6, 2014

I just returned from the big annual meeting of economists (this time in Philly), at which we had a panel on the Job Guarantee. One of the papers on our panel was by William (Sandy) Darity and Darrick Hamilton, which demonstrated how imperative it is to implement the JG to reduce hiring discrimination in the labor market. Darrick (who presented the paper) pointed out that official unemployment rates for black Americans is chronically twice as high as that for whites; by conventional views of what constitutes Great Depression levels of unemployment, black Americans are in a Great Depression and are always suffering from at least recession levels of unemployment.

Darrick pointed out that even in good times, blacks with some college education have unemployment rates higher than white high school drop-outs, and even as high as whites who’ve been incarcerated. Sandy has supported the Job Guarantee since the earliest days—he was on the first panel we ever organized on the JG (back when we were calling it Public Service Employment). While the JG will not eliminate racial discrimination in the USA, it will go a long way in helping to provide a real opportunity.

The highest unemployment rates are among the young. As Sandy says, black teen high school dropouts have a 95 percent joblessness rate. You read that right. The JG would give them an alternative path to gainful employment.

Some years ago, Marc-André Pigeon and I did a study of joblessness. We found that during the Clinton boom years (when the overall unemployment rate finally reached the lows that were last achieved in the Johnson years), of the 12 million jobs created only 700,000 of them went to workers who had not attended college. We found that even with the relatively robust labor markets of the Clinton boom, “Well over half of noninstitutionalized high school dropouts remain out of the labor force, compared with only a quarter of those who attended college. If the current expansion raises the employment rate for high school dropouts by only about 3 percentage points over a period of 6 years, by simple extrapolation, the expansion would have to continue for another 78 years before the gap could be closed.” YEP. If we could maintain an economic boom for 78 more years, we could get the unemployment rate down across all the groups. That’s how boomy our economy needs to be to generate jobs for workers at the bottom of the queue.

(It won’t happen. We’d get very high inflation and asset bubbles before we boomed for even a decade. See our other article that looks in depth at those who are officially “out of the labor force” but who could be brought in if jobs were available. We estimated there were probably around 26 million potentially employable people left behind. In other work we looked at incarceration rates and compared the probabilities of employment rates and incarceration rates among prime age males across race and level of educational attainment. The results were horrific; I’ll report on that some time.)

Here are three recent, interesting, pieces on the JG proposal, two by Sandy Darity and one by Jesse Myerson at Rolling Stone: continue reading…

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When Robots Make Drones: The Brave New World of Secular Stagnation

L. Randall Wray | December 10, 2013

Amazon’s Jeff Bezos is all over the news with his statement that drones will sooner or later be delivering packages to your home. Predictably, this has generated two types of buzz: what about the inevitable mishaps, and what about the poor displaced UPS workers?

For me, the first is a wee bit scary. Of course, you now have the prospect of being run over by a UPS driver whose workload has already been increased so much that he doesn’t have the time to drive carefully. With the coming of drones we’ll have to constantly scan the sky for incoming errant flights and packages falling to earth. I suppose the drones are scarier than the trucks.

However, it is the second worry that is getting most of the attention: What are we going to do as robots increasingly replace human workers? That sort of apocalypse has been featured in science fiction from time immemorial. Not only do we have the worry of rising unemployment of humans, but also the growing intelligence of robots as they realize they don’t need no damn humans any more. Ahhhnold Is Baaaack! Open the Bomb Bay Doors, Hal!

An interesting piece in Salon addresses these latter issues. Indeed, the title tells it all: “Amazon, Applebee’s and Google’s job-crushing drones and robot armies: They’re coming for your job next.”

Andrew Leonard lays out the issues nicely:

Nobody knows how it will play out, but one thing seems certain: We won’t have to wait too long to find out whether a robot apocalypse is going to ravage society. The sense of increasing momentum toward a more robot-infested future is undeniable. No matter what the regulators say, I find it impossible to imagine that there won’t be more drones in our skies, more tablet menus replacing human beings, more jobs accomplished by automation. Whether this transition is driven because it delivers true convenience for consumers, or whether it simply makes economic sense for the masters of capital, the logic of this technological evolution is inexorable….

Panglossians believe that robots will perform the world’s drudgery, ushering in an era of affluence and leaving humans free to nurture their creative instincts. Whether our creative instincts will be able to generate the capital necessary to purchase the products of robot labor is as yet unknown. I’ve noted before that the big difference between the current technological revolution and the Industrial Revolution is that the initial technological advances of the 18th century created jobs for unskilled workers, while today’s robot armies are increasingly replacing the jobs of unskilled workers…

When the warehouse and the delivery and the waitress and taxi driver jobs are gone, where do those workers go? Will our education system be robust enough to keep them ahead of the rising technological curve?

The typical economist’s take on this, however, is that by filling the lower-skilled jobs with robots, we will be able to move human workers into the higher-skilled work. Of course, as robots get smarter (or as we continually reduce complex processes to a series of simple steps—which has been the basis of automation since the days of Adam Smith), humans will be funneled into ever-higher-order tasks. Not to worry, say the economists, because we’ll need more and more robots, too. Hence, the final refuge for human workers will be to make the robots that do everything else.

Economist Joan Robinson (who should have been the first woman to win the Nobel for Economics—but was disqualified for taking the winning side of the “Capital Controversy” debate; note all the losers of that debate did get a Nobel, presumably as a consolation prize for losing to Robinson!) saw all this coming long ago when she wondered “But what do we do when robots make the robots?”

Back in 1991, I wrote about all this in a journal article: continue reading…

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Work and Income as Economic Rights

Michael Stephens | September 10, 2013

In this video, Pavlina Tcherneva and Philip Harvey look at the job guarantee and basic income grant proposals in the context of a discussion of economic rights.

Tcherneva begins with the theory behind the job guarantee — a federally-funded (and in Tcherneva’s version, locally-administered) program that would offer a paid job to anyone willing and able to work — and then (16:10) turns to a real-world example that, while not quite a job guarantee, was in the family of direct job creation programs: Argentina’s Plan Jefes. (Tcherneva has a related working paper that analyzes the socially transformative potential of direct job creation, over and above its macroeconomic stabilization benefits, in the context of the alteration of Plan Jefes into a pure cash transfer program, Plan Familias.)

Philip Harvey (31:45) looks at the legal bases of the rights to work and income (beginning with US statutes) before moving on to a comparison of basic income guarantees with job guarantees:

This talk was delivered as part of Columbia’s “Modern Money” series; you can find links to background reading for this seminar here.

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