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Friday, January 9, 2015

Jared Bernstein on Wage Stagnation

     In the previous piece I looked at wage stagnation. I suggested-as many liberals believe-that the problem could be helped considerably by two things the President is working on-raising the minimum wage and having more overtime pay. 

    http://diaryofarepublicanhater.blogspot.com/2015/01/a-recurring-theme-252000-new-jobs-but.html

    Here is Jared Bernstein former chief economic adviser to Vice President Biden:

   "The inadequate quantity and quality of American jobs is one of the most fundamental economic challenges we face. It’s not the only challenge: Poverty, inequality, and stagnant mobility loom large, as well. But in a nation like ours, where wages and salaries are key to the living standards of working-age households, all these challenges flow from the labor market problem."

     "OK, but this is a supposed to be an article about technology. What’s the linkage between technology and this fundamental problem? As a D.C.-based economist who’s been working on the issue of jobs and earnings for almost 25 years, trust me when I tell you that most policy makers believe the following:
     “Yes, there’s a problem of job quantity and quality, but it’s largely a skills problem. Because of recent technological advances, most notably computerization, an increasing share of the workforce lacks the skills to meet the demands of today’s workplaces."
     "What’s more, the pace at which technology is replacing the inadequately skilled is accelerating—think robotics and artificial intelligence. These dynamics explain growing wage stagnation, wage inequality, and the structural unemployment of those without college degrees.”
      http://prospect.org/article/it%E2%80%99s-not-skills-gap-that%E2%80%99s-holding-wages-down-its-weak-economy-among-other-things
      Yes there are a lot of people who believe technological displacement is a big part of the problem. 
      http://www.economist.com/blogs/freeexchange/2011/11/technological-unemployment
      I myself-though as Sumner likes to say, not an economist, though I do know a decent amount about it for a layperson-believe that TD is a big part of the problem. I'm not sure though how many Neoclassical economists believe this. Stiglitz was highly criticized by his NC fraternity a few years ago when he 'went Luddite.'
      http://diaryofarepublicanhater.blogspot.com/2011/12/scott-sumners-straw-man-attack-on-joe.html
      http://diaryofarepublicanhater.blogspot.com/2011/12/scott-sumner-faces-off-with-joe.html
      http://diaryofarepublicanhater.blogspot.com/2011/12/stiglitz-guilty-of-macroeconomic-heresy.html
      It seems to me that the dominant Neoclassical economic school presumes that technology displacement can't happen at least over the entire economy-though it can in particular industries. Again, I know that NCers think the idea that it can happen across the entire economy is not just wrong but absurdly so but I can't figure out why. I mean while TD happens in a few industries, how do you know that other industries will immediately increase jobs demanded to pick up the slack? I ask this sincerely-not as a rhetorical question. If anyone knows the answer I'd like to hear from them.  
     More from Bernstein:
     "Technology and employers’ skill demands have played a critical role in our job market forever, but they turn out to be of limited use in explaining the depressed incomes of today, or of the past decade.
     "Consider: The demand for college-educated workers has actually slowed quite sharply since 2000 and their real wages have been flat. If that fails to surprise you, you may well be someone who’s recently graduated and looked for work. If that does surprise you, you may well be a high-level economic policy maker."
      "I think we have to differentiate here. To me the fact that the demand for college educated workers has slowed quite sharply is not at all surprising as: I am a college educated worker. I got my degree in 2000 and saw how overnight back in 2001 how overnight the demand for college educated workers went down and never went back up."
    My argument is not about workers don't have the skills for high paying jobs but that the high paying jobs are few and far between. So it';s not a surprise at all. This fact certainly can account for increased wage stagnation-if there are fewer higher paying jobs demanded, wage growth will slow. As to wage inequality, it doesn't mean that the gap between white and blue collar workers lessens just that the market for white vs. blue collar jobs shrinks.
    My point is less that workers lack the skills for high paying jobs-though with so many among the long term unemployed this is certainly a major effect for this group of workers at least-but rather there are much fewer high paying jobs.
   My point here then is not that we need more and more education-which is maybe the kind of mainstream economist Bernstein has in mind-indeed, my own experience and that of many others is that that these days lots of college and graduate school may help very little. I'm close to getting my masters now but I don't feel in any great rush to get it: after all, it's not going to make much difference. 
    Any employer in a high paying finance job will be more interested in how long it is since I did a job in the field than that I have a masters. The jobs I have gotten in recent years were not ones that required any college-a high school kid can come in and be a telemarketer and many do actually. 
    I think I'm probably looking at a slightly different question that Bernstein but I do think this can be confused. To tell the truth today it's hard to tell kids they need lots of college and Krugman notably among others has suggested that the era where there were big gains to be had from lots of education may be over. 
     http://economistsview.typepad.com/economistsview/2011/03/paul-krugman-degrees-and-dollars.html
    Now the main thing you get thanks to a highfalutin education-unless you;re at a truly elite level-is lots and lots of college debt. Thankfully the President is aware of this and has done what he can with no help from Congress, of course, to lighten the burden on those of us with huge student loans and no job in the field from which to pay for the loan.      
    Here's more on in that meme:

    "While I'm on the subject of higher education, I'll point to three other bits and pieces that have caught my attention. Paul Krugman has pointed out that, contrary to popular wisdom, expounded relentlessly by the OECD among other august bodies, technological progress may reduce the demand for high-end jobs, not just low-end jobs. Computer software is now employed to perform tasks that used to require armies of lawyers, engineers or highly educated workers."

      http://www.economist.com/blogs/schumpeter/2011/04/higher_education

      However, I got to question Bernstein here:

      "But a number of important new studies show that it’s not technology-driven skill deficits that are depressing wage and job growth. It’s the weak economy, not yet recovered from the Great Recession, it’s persistently high unemployment robbing workers at almost every skill level of the bargaining power they need to claim their fair share of the growth, it’s terrible fiscal policy, it’s large and persistent trade deficits, it’s imbalanced sectoral growth as finance booms while manufacturing lags."

      At this point you have to question the weak economy thesis: aren't we finally seeing a little sustained and rising growth? We even have seen consumer confidence spiking up? I just feel like the problem of wage stagnation predates the recession and weak recovery as bad as it's been. 

     As to unemployment, we now have it under 6%. I know you can question U6 but still. I think the trouble is that we can create jobs but only low paying jobs-with a large part of those part time.  Surely technology displacement can account for much of this? 

    My point is not to disagree with Bernstein as I don't know how much I'm disagreeing rather than simply looking at things a slightly different way. I agree with him here about the idea that with enough education and the right skills by workers the good paying jobs will magically reappear. 

    "The policy implications that flow from these findings are profound. Improving workers’ skills is obviously insufficient. Supply doesn’t create demand. In fact, there’s evidence that as demand for college-educated workers has tailed off, they’ve been moving down the occupation scale, displacing workers with lower education levels."

      "If we want to improve the quantity of jobs, we’ll have to do more to promote labor demand. We’ll need to worry less about robots and more about austere fiscal policy, imbalanced trade, weak capital investment, and bubbles and busts. If we want the jobs we create to be of higher quality, we’ll have to do more to lift workers’ bargaining power, by enforcing labor standards, raising minimum wages, and leveling the playing field for collective bargaining. Supply-side solutions targeting workers’ skills may well help the targeted individuals, but they won’t help raise the number and quality of jobs."
       We should improve policy in all these areas he enumerates. However, I still wonder about TD.
      Overall, Bernstein is a smart guy and if anything I'm really not disagreeing but attempting clarity on some points. 
      

    

    
    

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