Labour day: Jobs as a cost?

Today is Labour Day in New Zealand – and given I’ve written about “co-ordination” so recently I can’t do one of those posts where I talk about public holidays as a co-ordination device.  Instead I intend to discuss the costs and benefits of “jobs” – or the costs of benefits of supplying your labour 😉

Read more

NZ isn’t the US: Employment rates

So often we hear that, even though the unemployment rate is falling in the US, employment is low.  It is the low level of employment, and the lack of integration in the community that entails, that is causing so much anger over there.  The lack of opportunity illustrated through the low employment rate is one of the key pieces of information pulled out to suggest something must be done.

Often people in New Zealand talk as if whatever is happening in the US is happening here, therefore something must be done.  However, lets be a bit more careful – especially as in the case of the employment rate that is untrue.


remprSource:  Stats NZ.  Quandl.

Yes, the story is more complicated (Working for families increased the number of second earners in the labour market, a factor that will in of itself have pushed up the participation and employment rates).  But if anything that suggests we need to be a lot more careful applying “lessons” from the US situation to New Zealand.  We are not the United States – a point we’ve noted when looking at median income comparisons in the past 😉



Billing by the hour

There’s an interesting article on the NYT about an accountant who has stopped billing by the hour:

A few years ago, he said, he realized that the billable hour was undercutting his value—it was his profession’s commodity, suggesting to clients that he and his colleagues were interchangeable containers of finite, measurable units that could be traded for money. Perhaps the biggest problem, though, was that billing by the hour incentivized long, boring projects rather than those that required specialized, valuable insight that couldn’t (and shouldn’t) be measured in time. Paradoxically, the billable hour encouraged Blumer and his colleagues to spend more time than necessary on routine work rather than on the more nuanced jobs.

I look at this from two perspectives: billing within the firm and billing to clients. Read more

No shirking from home, please!

Working from home massively increases productivity:

Over 10% of US employees now regularly work from home (WFH), but there is widespread skepticism over its impact and worries about “shirking from home”. We report the results of a WFH experiment at CTrip, a 16,000 employee NASDAQ-listed Chinese multinational. Call center employees who volunteered to WFH were randomly assigned to work from home or in the office for 9 months. Working from home led to a 13% performance increase, of which about 8.6% is from working more minutes per shift (fewer breaks and sick-days) and 4% from more calls per minute (attributed to a quieter working environment). Home workers also reported improved work satisfaction and their job attrition rate fell by 50%. After the experiment, the firm rolled the program out to all employees, letting them choose home or office working. Interestingly, only half of the treatment group decided to work at home, with the other half reallocating in favor of office working. After employees were allowed to choose where to work, the performance impact of WFH almost doubled, highlighting the benefits of choice when adopting modern management practices like home working.

Costs of unemployment

Simon Wren-Lewis:

…the long term unemployed typically do not think that at least they have more leisure time, so they are not so badly off. Instead they feel rejected, inadequate, despairing, and it scars them for life. Now that may not be in the microfounded models, but that does not make these feelings disappear, and certainly does not mean they should be ignored. It is for this reason that I have always had mixed feelings about representative agent models that measure the costs of recessions and inflation in terms of the agent’s utility.

Models should inform our interpretation of the evidence, but they are rarely complete descriptions of all relevant information.

Should student loans be bigger?

I share Holly Walker’s concern about the plight of post-graduate students. She is disturbed by a new survey showing that

[post-graduate students] committed to finishing their study highlight[ed] concerns about being able to provide basic needs for themselves without access to the [recently cut student] allowance, such as food and shelter.

As Matt has discussed previously, it is hugely unfair that students do not enjoy the same safety net as the rest of society when they struggle to find employment during their studies. If they are making a genuine effort to find part-time work during their studies, they should have access to a benefit or allowance, just as anyone else does.

The more important question is whether they should be supported through their studies even if they choose not to engage in part-time work. In that case I don’t see a convincing rationale for providing free support to students. They are voluntarily investing in their human capital in anticipation of better opportunities for themselves in future. As we have discussed previously

[t]hree years after completing their degree, a bachelor’s graduate will earn 51% more than someone with only secondary qualifications. Someone with a master’s degree will earn 74% more and a doctoral graduate 120% more.

It makes sense that a person would invest in education to take advantage of those wage increases, along with all the other benefits of a tertiary education. However, it is hard to justify forcing the rest of the population to pay for their personal investment that they benefit from so greatly. Nursing school scholarships may be a good alternative for those wishing to save a bit.

Nonetheless, some people find it hard to raise the money to attend university, despite the likelihood of higher future earnings. That is why we have a student loan scheme. If students are finding it difficult to pay their way during post-graduate study then it probably means that they are unable to borrow enough during their studies. That is because student borrowing is extremely expensive for the government, so the government limits its liability and costs by capping the level of borrowing. A simple solution would be to re-introduce interest on student loans, since the interest comprises the majority of the government’s cost of lending. That would allow the government to lend out more money to students at a lower cost.

Through that change we could allow students to live more comfortably during their studies, and ensure that the transfers to those, relatively wealthy, individuals do not become inequitably large.