Category: Labor Economics

Current Labor Market Seems Robustly Redundant

In Openness to Creative Destruction, I argue for the possibility and desirability of a “robustly redundant labor market” in which workers can usually quickly find an equally good or better job when they lose their current job.

(p. A6) . . . one characteristic of today’s economy is that job cuts at small startups and large companies have yet to dent the overall labor market. Labor demand is still historically strong, offering only faint signs of cooling. There are nearly two job openings for every unemployed person seeking work. That means many workers who are losing their jobs are quickly landing jobs. Some are even weighing multiple offers and accepting positions that pay more and better align with their skills.

. . .

Employers had 10.7 million unfilled jobs in June [2022], down from a record of 11.9 million in March, but still well above the 7 million job openings in February 2020 ahead of the pandemic, when the labor market was also booming.

Job-openings rates across industries are much higher than before the pandemic hit, suggesting companies still need workers even in sectors where company layoffs have been pronounced, such as technology, real estate, finance and insurance.

Longer periods of unemployment can allow job seekers more time to search for roles that match their skill sets, some economists say. But with job opportunities so abundant, many unemployed workers are finding jobs that suit them within a matter of weeks or even days.

For the full story see:

Sarah Chaney Cambon. “Laid-Off Employees Quickly Find New Jobs.” The Wall Street Journal (Thursday, Aug. 25, 2022): A1 & A6.

(Note: ellipses and bracketed year added.)

(Note: the online version of the story has the date August 24, 2022, and has the title “The Surprise in a Faltering Economy: Laid-Off Workers Are Quickly Finding Jobs.”)

My book mentioned above is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Wittgenstein Center’s Scenario Has Global Population Peak in 2050 at 8.7 Billion

(p. A2) Since the 1960s, when the global number of people first hit three billion, it has taken a bit over a decade to cross each new billion-person milestone, and so it might seem natural to assume that nine billion humans and then 10 billion are, inexorably, just around the corner. That is exactly what the latest population projections from the U.N. and the U.S. Census Bureau have calculated.

. . .

The U.N.’s projections are the best known. But an alternate set of projections has been gaining attention in recent years, spearheaded by the demographer Wolfgang Lutz, under the auspices of the Wittgenstein Centre for Demography and Global Human Capital at the University of Vienna, of which Mr. Lutz is founding director.

. . .

“There’s two big questions,” Mr. Lutz explains, that determine whether his forecasts or the U.N.’s end up closer to the mark. “First, how rapidly fertility will decline in Africa…. The other question is China, and countries with very low fertility, if they will recover and how fast they will recover.”

. . .

The Wittgenstein forecasts, by contrast, look not only at historical patterns, but attempt to ask why birthrates rise and fall. A big factor, not formally included in the U.N.’s models, is education levels. Put simply: As people, especially women, have greater opportunities to pursue education, they have smaller families.

. . .

The U.N. projects Africa’s population will grow from 1.3 billion today to 3.9 billion by century’s end.

Once education is accounted for, Wittgenstein’s baseline scenario projects Africa’s population will rise to 2.9 billion during that time period. In another scenario from Wittgenstein, which it calls the “rapid development” scenario, the population of Africa will only reach 1.7 billion by century’s end.

Wittgenstein’s phrase “rapid development” is revealing: This isn’t a forecast of doom and decline, but rather one in which health and education simply improve, a world with better human well-being, lower mortality, and medium levels of immigration.

. . .

Wittgenstein’s rapid-development scenario has the global population topping out at 8.7 billion in 2050.

For the full commentary see:

Josh Zumbrun. “THE NUMBERS; As Population Nears 8 Billion, Some See Peak.” The Wall Street Journal (Tuesday, Aug. 13, 2022): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date August 12, 2022, and has the title “THE NUMBERS; Global Population Is About to Hit 8 Billion—and Some Argue It Is Near Its Peak.”)

“Overzealous Environmentalism” Hurts Poor Poaching “Misunderstood Outcasts”

(p. 17) In the journalist Lyndsie Bourgon’s telling, . . ., the poachers are not quite villains. Instead, they are responding — if not justifiably then at least predictably — to a lack of economic opportunities and the perception that the rules governing forests are arbitrary and heavy-handed.

Bourgon puts herself in the poacher’s shoes, and the result is a refreshing and compassionate warning about the perils of well-intentioned but overzealous environmentalism.

. . .

. . . she regards the history of the American conservation movement with something approaching scorn. It was hatched, she writes, to serve the whims of wealthy urban vacationers who wanted access to lands unspoiled by their longtime inhabitants. National parks were conceived as vehicles to resist “any attempt to turn to utilitarian purposes the resources represented by the forest,” as one booster put it.

At times, the motives were even less pure. Bourgon describes how ultrarich environmentalists in the early 1900s saw conservation — and in particular the protection of California’s redwoods — “as part of a mission to enshrine a white, masculine dominance over the wilderness.” Some conservationists, she notes, were “eugenicists who saw parallels between environmental destruction and the decline of Nordic supremacy.”

. . .

This is the backdrop for Bourgon’s depiction of “tree thieves” as misunderstood outcasts. “I have begun to see the act of timber poaching as not simply a dramatic environmental crime, but something deeper — an act to reclaim one’s place in a rapidly changing world,” she writes, tracing that desire back to 16th-century England, where poachers in royal forests were celebrated as folk heroes.

Bourgon immersed herself with a small handful of these men in the Northwest, and a picture emerges of a fractious band of down-on-their-luck crooks. A number abuse drugs. The poachers acknowledge that what they’re doing is illegal, but they frame it as principled, akin to stealing a loaf of bread to feed their families.

. . .

On the one hand, unemployed loggers and others who are suffering economically because of stringent enforcement of conservation laws are facing poverty. On the other hand, the damage that poachers are inflicting on forests appears to be, in the grand scheme of things, modest.

For the full review, see:

David Enrich. “No Clear-Cut Villains.” The New York Times Book Review (Sunday, July 24, 2022): 17.

(Note: ellipses added.)

(Note: the online version of the review has the date June [sic] 21, 2022, and has the title “When It Comes to Timber Theft, There Are No Clear-Cut Villains.” Where the online version has “misunderstood poacher’s” [sic], the print version quoted above has “misunderstood outcasts.”)

The book under review is:

Bourgon, Lyndsie. Tree Thieves: Crime and Survival in North America’s Woods. New York: Little, Brown Spark, 2022.

A.I. Cannot Learn What 4-Year-Old Learns From Trial-And-Error Experiments

(p. C3) A few weeks ago a Google engineer got a lot of attention for a dramatic claim: He said that the company’s LaMDA system, an example of what’s known in artificial intelligence as a large language model, had become a sentient, intelligent being.

Large language models like LaMDA or San Francisco-based Open AI’s rival GPT-3 are remarkably good at generating coherent, convincing writing and conversations—convincing enough to fool the engineer. But they use a relatively simple technique to do it: The models see the first part of a text that someone has written and then try to predict which words are likely to come next. If a powerful computer does this billions of times with billions of texts generated by millions of people, the system can eventually produce a grammatical and plausible continuation to a new prompt or a question.

. . .

In what’s known as the classic “Turing test,” Alan Turing in 1950 suggested that if you couldn’t tell the difference in a typed conversation between a person and a computer, the computer might qualify as intelligent. Large language models are getting close. But Turing also proposed a more stringent test: For true intelligence, a computer should not only be able to talk about the world like a human adult—it should be able to learn about the world like a human child.

In my lab we created a new online environment to implement this second Turing test—an equal playing field for children and AI systems. We showed 4-year-olds on-screen machines that would light up when you put some combinations of virtual blocks on them but not others; different machines worked in different ways. The children had to figure out how the machines worked and say what to do to make them light up. The 4-year-olds experimented, and after a few trials they got the right answer. Then we gave state-of-the-art AI systems, including GPT-3 and other large language models, the same problem. The language models got a script that described each event the children saw and then we asked them to answer the same questions we asked the kids.

We thought the AI systems might be able to extract the right answer to this simple problem from all those billions of earlier words. But nobody in those giant text databases had seen our virtual colored-block machines before. In fact, GPT-3 bombed. Some other recent experiments had similar results. GPT-3, for all its articulate speech, can’t seem to solve cause-and-effect problems.

If you want to solve a new problem, googling it or going to the library may be a first step. But ultimately you have to experiment, the way the children did. GPT-3 can tell you what the most likely outcome of a story will be. But innovation, even for 4-year-olds, depends on the surprising and unexpected—on discovering unlikely outcomes, not predictable ones.

For the full commentary see:

Alison Gopnik. “What AI Still Doesn’t Know How To Do.” The Wall Street Journal (Saturday, July 16, 2022): C3.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 15, 2022, and has the same title as the print version.)

A.I. Remains Useful Mainly for “Uncinematic Back-Office Logistics”

(p. B4) After years of companies emphasizing the potential of artificial intelligence, researchers say it is now time to reset expectations.

With recent leaps in the technology, companies have developed more systems that can produce seemingly humanlike conversation, poetry and images. Yet AI ethicists and researchers warn that some businesses are exaggerating the capabilities—hype that they say is brewing widespread misunderstanding and distorting policy makers’ views of the power and fallibility of such technology.

“We’re out of balance,” says Oren Etzioni, chief executive of the Allen Institute for Artificial Intelligence, a Seattle-based research nonprofit.

. . .

The belief that AI is becoming—or could ever become—conscious remains on the fringes in the broader scientific community, researchers say.

In reality, artificial intelligence encompasses a range of techniques that largely remain useful for a range of uncinematic back-office logistics like processing data from users to better target them with ads, content and product recommendations.

. . .

The gap between perception and reality isn’t new. Mr. Etzioni and others pointed to the marketing around Watson, the AI system from International Business Machines Corp. that became widely known after besting humans on the quiz show “Jeopardy.” After a decade and billions of dollars in investment, the company said last year it was exploring the sale of Watson Health, a unit whose marquee product was supposed to help doctors diagnose and cure cancer.

. . .

Elizabeth Kumar, a computer-science doctoral student at Brown University who studies AI policy, says the perception gap has crept into policy documents. Recent local, federal and international regulations and regulatory proposals have sought to address the potential of AI systems to discriminate, manipulate or otherwise cause harm in ways that assume a system is highly competent. They have largely left out the possibility of harm from such AI systems’ simply not working, which is more likely, she says.

For the full story see:

Karen Hao and Miles Kruppa. “AI Hype Doesn’t Match Reality.” The Wall Street Journal (Thursday, June 30, 2022): B4.

(Note: ellipses added.)

(Note: the online version of the story was updated July 5, 2022, and has the title “Tech Giants Pour Billions Into AI, but Hype Doesn’t Always Match Reality.”)

Brynjolfsson Made “Long Bet” with Gordon that A.I. Will Increase Productivity

(p. B1) For years, it has been an article of faith in corporate America that cloud computing and artificial intelligence will fuel a surge in wealth-generating productivity. That belief has inspired a flood of venture funding and company spending. And the payoff, proponents insist, will not be confined to a small group of tech giants but will spread across the economy.

It hasn’t happened yet.

Productivity, which is defined as the value of goods and services produced per hour of work, fell sharply in the first quarter this year, the government reported this month. The quarterly numbers are often volatile, but the report seemed to dash earlier hopes that a productivity revival was finally underway, helped by accelerated investment in digital technologies during the pandemic.

The growth in productivity since the pandemic hit now stands at about 1 percent annually, in line with the meager rate since 2010 — and far below the last stretch of robust improvement, from 1996 to 2004, when productivity grew more than 3 percent a year.

. . .

(p. B6) The current productivity puzzle is the subject of spirited debate among economists. Robert J. Gordon, an economist at Northwestern University, is the leading skeptic. Today’s artificial intelligence, he says, is mainly a technology of pattern recognition, poring through vast troves of words, images and numbers. Its feats, according to Mr. Gordon, are “impressive but not transformational” in the way that electricity and the internal combustion engine were.

Erik Brynjolfsson, director of Stanford University’s Digital Economy Lab, is the leader of the optimists’ camp. He confesses to being somewhat disappointed that the productivity pickup is not yet evident, but is convinced it is only a matter of time.

“Real change is happening — a tidal wave of transformation is underway,” Mr. Brynjolfsson said. “We’re seeing more and more facts on the ground.”

It will probably be years before there is a definitive answer to the productivity debate. Mr. Brynjolfsson and Mr. Gordon made a “long bet” last year, with the winner determined at the end of 2029.

For the full story see:

Steve Lohr. “Why Isn’t A.I. Increasing Productivity?” The New York Times (Wednesday, May 25, 2022): B1 & B6.

(Note: ellipsis added.)

(Note: the online version of the story was updated May 27, 2022, and has the title “Why Isn’t New Technology Making Us More Productive?”)

Union Blocks Automation That Would Make Ports More Resilient and Efficient

(p. B6) The companies that transport and handle the cargo say the automation is one solution to the congestion at ports, particularly the Los Angeles and Long Beach sites at the heart of America’s supply chain woes. The spare use of robotics at U.S. ports leaves them uncompetitive with big gateways in China and Europe that are packed with automation, they say.

Jeremy Nixon, chief executive of Singapore-based container line Ocean Network Express, told the TPM22 Conference produced by The Journal of Commerce in Long Beach earlier this year that European and Asian ports can clear backlogs quickly because they have automated cargo-handling equipment that operates around the clock. “Here, we just don’t have that resilience,” he said.

. . .

A port performance index created by the World Bank and S&P Global Market Intelligence ranked the Los Angeles and Long Beach port complex dead last in efficiency among the world’s ports last year, trailing Luanda, Angola, and the Port of Ngqura, South Africa. The world’s most efficient ports were in the Middle East and Asia.

For the full story, see:

Paul Berger. “Port Union Talks Center on Automation.” The Wall Street Journal (Friday, June 10, 2022): B6.

(Note: ellipsis added.)

(Note: the online version of the story has the date June 9, 2022, and has the title “A Deep Divide on Automation Hangs Over West Coast Port Labor Talks.”)

Wealthiest Resident of Illinois Moving His Business to Florida for Lower Taxes and Less Crime

(p. B1) Billionaire Ken Griffin is relocating his hedge-fund firm Citadel from Chicago to Miami, the third major employer to announce the move of a corporate headquarters from Illinois in the past two months.

In a letter to employees Thursday [June 23, 2022], Mr. Griffin said he had personally moved to Florida—a state that doesn’t collect personal income tax—and that his market-making business, Citadel Securities, would also transfer. He wrote that he views Florida as a better corporate environment and though he didn’t specifically cite crime as a factor, company officials said it was a consideration.

Mr. Griffin has been the wealthiest resident of Illinois, so his departure will hurt state tax collections on both the individual and corporate side. It could also be a blow to Chicago’s philanthropic scene. Mr. Griffin has given more than $600 million in gifts to educational, cultural, medical and civic organizations in the area, spokesman Zia Ahmed said.

For the full story see:

John McCormick and Juliet Chung. “Citadel Plans to Relocate to Florida.” The Wall Street Journal (Friday, June 24, 2022): B1-B2.

(Note: bracketed date added.)

(Note: the online version of the story was updated June 30 [sic], 2022, and has the title “Ken Griffin Moving Citadel From Chicago to Miami Following Crime Complaints.”)

New York City Hurt as Wealthy Residents Move to Miami

(p. A1) When roughly 300,000 New York City residents left during the early part of the pandemic, officials described the exodus as a once-in-a-century shock to the city’s population.

Now, new data from the Internal Revenue Service shows that the residents who moved to other states by the time they filed their 2019 taxes collectively reported $21 billion in total income, substantially more than those who departed in any prior year on record. The IRS said the data captured filings received in 2020 and as late as July 2021.

Many new or returning residents have since moved in. But the total income of those who had initially left was double the average amount of those who had departed over the previous decade, a potential loss that could have long-term effects on a city that relies heavily on its wealthiest residents to support schools, law enforcement and other public services.

The sheer number of people who left in such a short period raises uncertainty about New York City’s competitiveness and economic stability. The top 1 percent of earners, who make more than $804,000 a year, contributed 41 percent of the city’s personal income taxes in 2019.

About one-third of the people who left moved from Manhattan, and had an average income of $214,300. No other large American county had a similar exodus of wealth.

Early in the pandemic, Sam Williamson, 51, a white-collar defense lawyer living on the Upper West Side of Manhattan, first relocated to Utah, then to Long Island. After a return to the city, he and (p. A19) his family permanently moved to Miami last year when his law firm opened an office there.

“I love New York City, but it’s been a challenging time,” Mr. Williamson said. “I didn’t feel like the city handled the pandemic very well.”

. . .

Gergana Ivanova, 28, a clothing designer and social media influencer, said her decision to move to Miami was less about taxes. The pandemic made the downsides of living in New York City more noticeable, she said, including the lack of space in her tiny Queens apartment and the trash piling up on the sidewalks. She felt less safe walking around when the streets were emptier.

“It didn’t feel happy and positive like it used to,” she said.

. . .

The exodus to Florida was especially robust, and not just for the retiree crowd. In 2020, New York City had a net loss of nearly 21,000 residents to Florida, IRS data showed, almost double the average annual net loss from before the pandemic.

. . .

Zak Jacoby was the general manager of a bar on the Lower East Side when the pandemic hit. Throughout 2020, his employment status fluctuated with the city’s changing indoor dining rules, a stressful period that put him on and off unemployment benefits.

Mr. Jacoby, 37, flew to Miami in January 2021 to see a friend — and decided to stay permanently after getting a job offer at a local restaurant group. If there was another virus surge, he said, the state would be less likely to shut down businesses, giving him more job security.

“My mind-set was, Florida’s more lenient on Covid, and there’s going to be less regulation,” he said.

For the full story see:

Nicole Hong and Matthew Haag. “Exodus of New York’s Wealthy Leaves Lasting Costs in Wake.” The New York Times (Tuesday, June 28, 2022): A1 & A19.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “The Flight of New York City’s Wealthy Was a Once-in-a-Century Shock.” The online version of the story says that the print version has the title “An Exodus of New York’s Wealthy Has Left Lasting Costs,” but my National print version has the somewhat different title “Exodus of New York’s Wealthy Leaves Lasting Costs in Wake.”)

Truckers Hurt If Union Dock Workers Strike to Add to Their Six Figure Pay, and to Block Efficient Technology

(p. B1) LOS ANGELES — David Alvarado barreled south along the highway, staring through the windshield of his semi truck toward the towering cranes along the coastline.

He had made the same 30-minute trek to the Port of Los Angeles twice that day; if things went well, he would make it twice more. Averaging four pickups and deliveries a day, Mr. Alvarado has learned, is what it takes to give his wife and three children a comfortable life.

“This has been my life — it’s helped me support a family,” said Mr. Alvarado, who for 17 years has hauled cargo between warehouses across Southern California and the twin ports of Los Angeles and Long Beach, a global hub that handles 40 percent of the nation’s seaborne imports.

He weathered the blow to his paycheck early in the pandemic when he was idling for six hours a day, waiting for cargo to be loaded off ships and onto his truck. Now the ports are bustling again, but there is a new source of anxiety: the imminent expiration of the union contract for dockworkers (p. B5) along the West Coast.

If negotiations fail to head off a slowdown, a strike or a lockout, he said, “it will crush me financially.”

The outcome will be crucial not only for the union dockworkers and port operators, but also for the ecosystem of workers surrounding the ports like Mr. Alvarado, and for a global supply chain reeling from coronavirus lockdowns and Russia’s invasion of Ukraine. Inflation’s surge to the highest rate in more than four decades is due, in part, to supply chain complications.

The contract between the International Longshore and Warehouse Union, which represents 22,000 workers at 29 ports from San Diego to Seattle, and the Pacific Maritime Association, representing the shipping terminals, is set to expire on Friday. The union members primarily operate machinery like cranes and forklifts that move cargo containers on and off ships.

. . .

The negotiations have centered largely on whether to increase wages for the unionized workers, whose average salaries are in the low six figures, and expanding automation, such as using robots to move cargo containers, to speed up production, a priority for shipping companies.

“Automation allows greater densification at existing port terminals, enabling greater cargo throughput and continued cargo growth over time,” Jim McKenna, the chief executive of the Pacific Maritime Association, said in a recent video statement on the negotiations.

. . .

As he drove past the ports, Mr. Alvarado turned his truck into a warehouse parking lot, where the multicolored containers lined the asphalt like a row of neatly arranged Lego blocks.

It was his third load of the day, and for this round, he didn’t have to wait on the longshoremen to load the carrier onto his truck. Instead, he backed his semi up to a chassis, and the blue container snapped into place.

He pulled up Google Maps on his iPhone and looked at the distance to the drop-off in Fontana, Calif.: 67 miles, an hour and half.

It might, Mr. Alvarado said, end up being a four-load day after all.

For the full story see:

Kurtis Lee. “As Dockworkers Near Contract’s End, The U.S. Has a Stake.” The New York Times (Thursday, June 30, 2022): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “As Dockworkers Near Contract’s End, Many Others Have a Stake.”)

“More a Great Reshuffling Than a Great Resignation”

In the passages quoted below, Nobel laureate, and often-strident leftist Paul Krugman, modifies his views on the state of the U.S. labor market in an interesting and plausible way. I believe another part of the story, as Newt Gingrich has suggested, is that some workers may be following the advice of Ayn Rand’s Atlas Shrugged, by in effect going on strike. So the Great Resignation may not entirely be a “myth.” More remains to be learned.

(p. 3) Have large numbers of Americans dropped out of the labor force — that is, they are neither working nor actively seeking work? To answer this question, you need to look at age-adjusted data; falling labor force participation because a growing number of Americans are over 65 isn’t meaningful in this context. So economists often look at the labor force participation of Americans in their prime working years: 25 to 54. And guess what? This participation rate has surged recently. It’s still slightly below its level on the eve of the pandemic, but it’s back to 2019 levels, which hardly looks like a Great Resignation.

What about early retirement? If a lot of that was happening, we’d expect to see reduced labor force participation among older workers, 55 to 64. But they’ve come rapidly back into the labor force.

A few months ago, it still seemed reasonable to talk about a Great Resignation. At this point, however, there’s basically nothing there. It’s true that an unusually high number of workers have been quitting their jobs, but they have been leaving for other, presumably better jobs, rather than leaving the work force. As the labor economist Arindrajit Dube says, it’s more a Great Reshuffling than a Great Resignation.

. . .

How can labor markets be so tight when payroll employment is still well below the prepandemic trend?

. . .

First, as the economist Dean Baker has been pointing out, the most commonly cited measures of employment don’t count the self-employed, and self-employment is up by a lot, around 600,000 more workers than the average in 2019. Some of this self-employment may be fictitious — gig workers who are employees in all but name but work for companies that classify them as independent contractors to avoid regulation. But it also does seem as if part of the Great Reshuffling has involved Americans concluding that they could improve their lives by starting their own businesses.

Second, a point that receives far less attention than it should is the decline of immigration since Donald Trump came to office, which turned into a plunge with the coming of the pandemic.

For the full commentary, see:

Paul Krugman. “The Myth of the Great Resignation.” The New York Times, SundayReview Section (Sunday, April 10, 2022): 3.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 5, 2022, and has the title “What Ever Happened to the Great Resignation?”)

Ayn Rand’s magnum opus, mentioned above, is:

Rand, Ayn. Atlas Shrugged. New York: Random House, 1957.