Playing with the big boys

Everyone knows that big firms pay more: that’s why people want to work there. There are a few explanations as to why this might be the case. Maybe big firms make greater rents by exercising market power. maybe they can attract more skilled workers. Maybe there are economies of scale which make them more efficient and increase the productivity of their workers.

A recent study by John Gibson and Steve Stillman has a look at whether it’s attributable to higher skills:

We use the International Adult Literacy Survey, which gives richer skill measures than those typically available in labor market surveys, to measure the BFP in nine countries with and without controls for worker skill. The results show that the BFP is not as universal as is often suggested, but in countries where it exists controlling for skills does little to reduce the size of the BFP.

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NZIER: Suggestions for unemployment policy

Interesting piece from NZIER on unemployment policies.

It is a fairly broad sweep over the issues – and so does not go into many of the technical or policy related issues of some concepts. However, it provides a clear way of viewing a number of the potential policies.

However, I was surprised to see no mention of the “paradox of thrift” or how unemployment was fundamentally a “surplus” and thereby represented a “market failure”. If we are going to discuss a set of explicit unemployment policies we need these factors to justify it.

Woe is not primarily me

Ed Glaeser makes an important point about the current recession over at Economix:

it is important to recognize that in this recession, just as in every other recorded downturn, unemployment is overwhelmingly concentrated among those who started with less.

The overall unemployment rate for the more educated is only 4.3 percent. Individuals with a high school degree, but no college, have a 10 percent unemployment rate (not seasonally adjusted). The unemployment rate for high school dropouts is 15.5 percent. Moreover, the unemployment rate gap between the most- and least-skilled is widening, not narrowing.

It’s easy for professionals to complain about the problems facing the finance system and the lack of work for finance professionals. Let’s not forget that they are actually very well off compared to the average person in this recession, as in others. Governments may be bailing out financial firms but, if we want to help the most people, we should think about how best to aid the less fortunate among us who are suffering far more.

What’s wrong with being awesome?

Megan McArdle says that old people laid off in the recession find it hard to get work because

…older workers have more skills. In general, more skills is a good thing. But in an increasingly specialized society, those skills are increasingly specific,. The more skills you have, the fewer jobs there are that match them.

I don’t really get this. If you’re more experienced then you have more skills and more specialised skills. But you were once junior so you have mastery of all the skills that junior people have in addition to your specialised skills. I can accept that you might struggle to get a job utilising all your skills but, since you’ve been there and done that, you can probably do a junior job way better than a junior person.
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The cost of sickness

The Dom Post reports that, while the cost of sick days to employers is $700 per year per employee, the loss from employees turning up and being semi-productive when sick is $900! They then recommend that employers press workers to stay at home until they’re better.

There are two problems I have with that: their assumptions and their method of dealing with opportunity cost. Read more

Internet at work is a blessing (for your boss)

It’s always seemed to me a bit over the top to block social internet sites at offices. I’ve wondered if people spend more time looking up free proxy servers that aren’t blocked than they would have if they’d been allowed to check their Gmail. Now a study says that most people do surf at work and it actually makes most of them more productive: the opportunity to take a break and relax for a minute helps them to concentrate harder the rest of the time.

Clearly the productivity gain to surfing at work is concave, so the question is really, “at what point do the marginal gains become negative?” According to this study it’s only when you surf more than 20% of the working day that your productivity starts to decline! Read more