Category: Labor Economics

Before Covid-19, Poverty and Unemployment Were Lowest in 50 Years

(p. B8) WASHINGTON — A record-low share of Americans were living in poverty, incomes were climbing, and health insurance coverage was little changed in 2019, a government report released on Tuesday showed — though the circumstances of many have deteriorated as pandemic lockdowns and industry disruptions have thrown millions out of work.

The share of Americans living in poverty fell to 10.5 percent in 2019, the Census Bureau reported, down 1.3 percentage points from 2018. That rate is the lowest since estimates were first published in 1959.

Household incomes increased to their highest level on record dating to 1967, at $68,700 in inflation-adjusted terms. That change came as individual workers saw their earnings climb and as the total number of people working increased.

. . .

Unemployment was hovering at around 3.5 percent before the crisis took hold, the lowest in 50 years, and wages were steadily rising.

For the full story, see:

Jeanna Smialek, Sarah Kliff and Alan Rappeport. “Census Shows Record-Low Poverty in U.S. Before Virus Struck.” The New York Times (Wednesday, September 16, 2020): B8.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 15, 2020, and has the title “U.S. Poverty Hit a Record Low Before the Pandemic Recession.”)

At Netflix “Adequate Performance Gets a Generous Severance Package”

Note that Netflix practices what Clayton Christensen called “emergent” strategic planning. Experimental responding to opportunities; no five year plans.

(p. B5) As a founder and co-chief executive of Netflix Inc., Reed Hastings has reshaped both the way people watch television and how the entertainment industry operates.

. . .

In his new book “No Rules Rules: Netflix and the Culture of Reinvention,” Mr. Hastings likens being employed at the streaming giant to being part of a sports team: Getting cut is disappointing but carries no shame. “Unlike many companies, we practice: Adequate performance gets a generous severance package,” reads one of Netflix’s mottos.

. . .

WSJ: In the book you say, “It’s impossible to know where a business like ours will be in five years.” What kind of prognosticating do you do?

Mr. Hastings: We keep trying experiments. The business model will be pretty similar in five years. Can we figure out animation? Can we catch Disney in family animation?

WSJ: You’ve said you want Netflix to be able to pounce on unanticipated opportunities. What’s an example of one you didn’t see coming?

Mr. Hastings: Nonfiction programming is a pretty good one. We started as superpremium TV, and the expansion into nonfiction has been a huge success. The whole sharing of content around the world has been a huge success. Prior to that, people thought Americans won’t watch content that’s produced outside the U.S.

For the full interview, see:

Joe Flint, interviewer. “BOSS TALK; Netflix’s Hastings Isn’t Fan of Remote Work.” The Wall Street Journal (Tuesday, September 8, 2020): B5.

(Note: ellipses added. “WSJ” and “MR. HASTINGS” were bolded in original.)

(Note: the online version of the interview has the date Sep. 7, 2020, and has the title “BOSS TALK; Netflix’s Reed Hastings Deems Remote Work ‘a Pure Negative’.”)

Hastings, Reed, and Erin Meyer. No Rules Rules: Netflix and the Culture of Reinvention. New York: Penguin Press, 2020.

“The Credentialist Prejudice” of the “College-Educated Elites”

Sandel in the passages quoted below is on to an important problem: that success depends too much on credentials. But in later passages than those quoted below, he misinterprets the deeper cause of the problem. He thinks the problem is that we value a person’s “merit.” I think valuing merit is fine, but we too much identify merit with credentials. Merit depends on character and skills. Credentials, at best, are one noisy signal of merit.

(p. 5) It is important to remember that most Americans — nearly two-thirds — do not have a four-year college degree. By telling workers that their inadequate education is the reason for their troubles, meritocrats moralize success and failure and unwittingly promote credentialism — an insidious prejudice against those who do not have college degrees.

The credentialist prejudice is a symptom of meritocratic hubris. By 2016, many working people chafed at the sense that looked down on them with condescension. This complaint was not without warrant. Survey research bears out what many working-class voters intuit: At a time when racism and sexism are out of favor (discredited though not eliminated), credentialism is the last acceptable prejudice.

In the United States and Europe, disdain for the less educated is more pronounced, or at least more readily acknowledged, than prejudice against other disfavored groups. In a series of surveys conducted in the United States, Britain, the Netherlands and Belgium, a team of social psychologists led by Toon Kuppens found that college-educated respondents had more bias against less-educated people than they did against other disfavored groups. The researchers surveyed attitudes toward a range of people who are typically victims of discrimination. In Europe, this list included Muslims and people who are poor, obese, blind and less educated; in the United States, the list also included African-Americans and the working class. Of all these groups, the poorly educated were disliked most of all.

Beyond revealing the disparaging views that college-educated elites have of less-educated people, the study also found that elites are unembarrassed by this prejudice. They may denounce racism and sexism, but they are unapologetic about their negative attitudes toward the less educated.

For the full commentary, see:

Michael J. Sandel. “The Consequences Of the Diploma Divide.” The New York Times, SundayReview Section (Sunday, September 6, 2020): 5.

(Note: the online version of the commentary has the date Sept. 2, 2020, and has the title “Disdain for the Less Educated Is the Last Acceptable Prejudice.”)

Sandel’s commentary is related to his book:

Sandel, Michael J. The Tyranny of Merit: What’s Become of the Common Good? New York: Farrar, Straus and Giroux, 2020.

The paper co-authored by Kuppens and mentioned above is:

Kuppens, Toon, Russell Spears, Antony S. R. Manstead, Bram Spruyt, and Matthew J. Easterbrook. “Educationism and the Irony of Meritocracy: Negative Attitudes of Higher Educated People Towards the Less Educated.” Journal of Experimental Social Psychology 76 (May 2018): 429-47.

More Work-Life Balance for Some Workers Means Less Work-Life Balance for Other Workers

(p. 3) I work for a successful, fast-growing technology company. There are times when some corporate “crisis” requires that a number of us lean in more in terms of office hours. My married, straight co-workers with children can easily bow out — while as a gay, single and child-free person, I get left with extra work because I am seen as not having responsibilities at home. I’m not unsympathetic to the difficulties my co-workers have in balancing work and life, but why does it have to be balanced on my back?

— Anonymous

. . .

You have every right to push back when you are imposed upon like this. Either everyone is responsible for extra work, or no one is. Your co-workers do not get to categorically decide that you have the time to handle the company’s crises because your life is arranged differently than theirs.

For the full story, see:

Roxane Gay. “A Great Work-Life Balance, Thanks to Me.” The New York Times, SundayBusiness Section (Sunday, August 23, 2020): 3.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 21, 2020, and has the title “My Colleagues Have Great Work-Life Balance (Thanks to Childless Me).”)

Deliberate Practice Is Key to Peak Performance

(p. D7) Anders Ericsson, a cognitive psychologist who demystified how expertise is acquired, suggesting that anyone can become a grand chess master, a concert violinist or an Olympic athlete with the proper training and the will, died on June 17 at his home in Tallahassee, Fla.

. . .

Professor Ericsson discovered that what separated the violinists’ skill levels was not natural-born talent but the hours of practice they had logged since childhood. The future teachers registered around 4,000 hours, the very good violinists 8,000 and the elite performers more than 10,000. The same study was conducted with pianists, with similar results.

Published in 1993 in Psychological Review, the paper later formed the basis for the so-called 10,000-hour rule described in Malcolm Gladwell’s best-selling “Outliers” (2008), which holds that it takes roughly 10,000 hours of practice to achieve mastery in a skill or field.

. . .

“Many people think what Anders discovered is that quantity of practice makes you a champion,” said Angela Duckworth, a professor of psychology at the University of Pennsylvania and the author of “Grit” (2016), a book about passion and perseverance. “That’s disastrously incomplete. It’s quantity and quality. One of his insights that I hope will have a lasting legacy is people need to work hard, but also smart.”

Professor Ericsson focused on what he called “deliberate practice,” which entails immediate feedback, clear goals and focus on technique. According to his research, the lack of deliberate practice explained why so many people reach only basic proficiency at something, whether it be a sport, pastime or profession, without ever attaining elite status. A Sunday golfer may whack balls around the course for years, but without incorporating such methods that player will never become the next Tiger Woods.

. . .

He had his critics. One of them, Zachary Hambrick, a professor of psychology at Michigan State University, co-wrote a paper in 2014 that concluded that deliberate practice was not the sole reason for peak performance in chess players and musicians. Innate characteristics like talent and intelligence, Mr. Hambrick argued, play a far more significant role than Professor Ericsson allowed for.

“There’s a side of me that resonates with his hopeful message,” said Scott Barry Kaufman, a humanistic psychologist who studies creativity and hosts “The Psychology Podcast.” “However, there’s another side of me that has seen the research, in a wide range of aspects in the field, that suggests that we can have some pretty severe limits on what we can achieve in life.”

Nevertheless, Mr. Kaufman added, “I don’t think any of this invalidates his contributions. He showed that humans have the capacity to go beyond, from one generation to the next, what had been thought of the limits of human potential.”

For the full obituary see:

Steven Kurutz. “Anders Ericsson, 72, Psychologist Who Became ‘Expert on Experts,’ Dies.” The New York Times (Monday, July 6, 2020): D7.

(Note: ellipses added, italics in original.)

(Note: the online version of the obituary was updated July 4, 2018, and has the title “Anders Ericsson, Psychologist and ‘Expert on Experts,’ Dies at 72.”)

Anders Ericsson explained his views on peak performance in his co-authored book:

Ericsson, Anders, and Robert Pool. Peak: Secrets from the New Science of Expertise. New York: Houghton Mifflin Harcourt, 2016.

Uber and Lyft Drivers Earn Over $23 an Hour in Seattle

(p. B3) A study by researchers at Cornell University found that the typical driver in Seattle made over $23 per hour after expenses during one week last fall. Previous studies for other areas had put net earnings well below $20 per hour. Another new study put the figure at less than half that.

. . .

While other researchers have assumed that drivers are working any time their app is turned on — even if they’re not on their way to pick up a customer or don’t have a passenger in the car — the Cornell study counts such time as work only if it directly precedes a ride. If a driver turns on the ride-share app but is not dispatched on a ride before shutting it off, the authors do not count the time as work.

According to the Cornell authors, this assumption adds about $2.50 per hour to the typical driver’s earnings.

. . .

The Cornell authors also assume that many of the costs of owning a vehicle, such as the value a car loses as it ages or financing costs, should not be considered work expenses because car owners would typically pay these costs even if they didn’t drive for Uber or Lyft.

The only costs the authors factor into their preferred calculation are so-called marginal costs — like gas and maintenance costs that accrue because of the extra miles a worker drives while on the job. This assumption results in costs that are up to about $5.50 an hour lower for full-time drivers, and a net wage that is several dollars per hour higher, than under a more conventional calculation.

For the full story, see:

Noam Scheiber. “Critics Doubt Study on Uber and Lyft Pay.” The New York Times (Monday, July 13, 2020): B3.

(Note: ellipses added.)

(Note: the online version of the story was updated July 14 [sic], 2020, and has the title “When Scholars Collaborate With Tech Companies, How Reliable Are the Findings?”)

The Cornell study mentioned above is:

Hyman, Louis, Erica L. Groshen, Adam Seth Litwin, Martin T. Wells, Kwelina P. Thompson, and K. Chernyshov. “Platform Driving in Seattle.” Research Studies and Reports, ILR School Cornell University, Institute for Workplace Studies. Ithaca, NY, July 6, 2020.

Covid-19 May Shift Restaurants Toward Fewer Workers and More Take-Out, Even in Long Run

(p. B4) Andrew Snow was supposed to be ramping up by now. Mr. Snow, who owns the Golden Squirrel, a restaurant and bar in Oakland’s Rockridge neighborhood, cut his staff of 28 people to two after the pandemic hit.

. . .

Now business is slowing again, as California is averaging about 8,000 new cases a day, about triple the level a month ago. Mr. Snow’s plans to bring back workers over the holiday weekend didn’t come to pass, and he has put further hiring on hold.

“People are scared,” he said in an interview. “The math for having more people doesn’t work out anymore.”

. . .

The longer the pandemic’s disruption, the more likely it is that some jobs will never come back. For instance, a number of restaurants had already switched to counter service, even for fairly high-end meals, to avoid the need for servers who have a hard time affording housing in big cities. Now virtually every restaurant in California is operating around counter service or delivery, and some may not change back.

Mr. Snow, for example, envisions a restaurant where people order at the bar, eat far from other patrons, then leave with a bag of groceries. The Golden Squirrel would have fewer employees, compensating for a less-full restaurant with expanded takeout orders.

“Some of the changes will make us a better business in the future,” Mr. Snow said. “The challenge is getting to that future.”

For the full story, see:

Conor Dougherty. “After Riding a Boom, California Braces for Hard Times.” The New York Times (Monday, July 13, 2020): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story was updated July 14, 2020, and has the title “California, After Riding a Boom, Braces for Hard Times.”)

Covid-19 May Make New York City “Cheaper, Messier, More Diverse”

(p. B1) Cities are remarkably resilient. They have risen from the ashes after being carpet-bombed and hit with nuclear weapons. “If you think about pandemics in the past,” noted the Princeton economist Esteban Rossi-Hansberg, “they didn’t destroy cities.”

. . .

So even as the Covid-19 death toll rises in the nation’s most dense urban cores, economists still mostly expect them to bounce back, once there is a vaccine, a treatment or a successful strategy to contain the virus’s spread. “I end up being optimistic,” said the Harvard economist Edward Glaeser. “Because the downside of a nonurban world is so terrible that we are going to spend whatever it takes to prevent that.”

. . .

(p. B5) Mr. Glaeser and colleagues from Harvard and the University of Illinois studied surveys tracking companies that allowed their employees to work from home at least part of the time since March. Over one-half of large businesses and over one-third of small ones didn’t detect any productivity loss. More than one in four reported a productivity increase.

Moreover, the researchers found that about four in 10 companies expect that 40 percent of their employees who switched to remote work during the pandemic will keep doing so after the crisis, at least in part. That’s 16 percent of the work force. Most of these workers are among the more highly educated and well paid.

. . .

“Everybody agrees on what are the key forces,” said Gilles Duranton, an economist at the Wharton School of the University of Pennsylvania. “The question is which will play out, and where are the tipping points?” One of the big remaining questions is whether remote work will prove sustainable. The productivity increases captured in the surveys examined by Mr. Glaeser’s team might prove fleeting.

. . .

Consider life in a reconfigured New York City. Rents are lower, after the departure of many of its bankers and lawyers. There are fewer fancy restaurants, but probably still many cheaper ones. People with lower incomes, including the young, can again afford to live in town. City services may be reduced, but if a fifth or more of workers aren’t going to the office on any given day it will be easier to get around.

Mr. Duranton argues that the cities that will be devastated by Covid-19 are the ones that have been falling for a long time: the Rochesters and the Binghamtons, which lost their sustenance once the manufacturing industries that supported them through much of the 20th century folded or moved away.

But for a city like New York, he said, Covid-19 offers an opportunity for redemption. “New York was running into a dead end, turning into a paradise for the rich,” he said. “Culturally dead.” Moving back to a cheaper, messier, more diverse equilibrium may carry a silver lining.

For the full story, see:

Eduardo Porter. “If Workers Opt Out, Star Cities May Dim.” The New York Times (Tuesday, July 21, 2020): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version,s and has the title “Coronavirus Threatens the Luster of Superstar Cities.”)

The study co-authored by Glaeser and mentioned above is:

Bartik, Alexander W., Zoe Cullen, Edward L. Glaeser, Michael Luca, and Christopher Stanton. “What Jobs Are Being Done at Home During the Covid-19 Crisis? Evidence from Firm-Level Surveys.” Harvard Business School Division of Research Working Paper #20-138, (July 2020).

Increase in Remote Work May Increase Quality and Diversity of Hires, Increasing Firm Innovation

(p. B1) A few years ago, Mr. Laermer let the employees of RLM Public Relations work from home on Fridays. This small step toward telecommuting proved a disaster, he said. He often couldn’t find people when he needed them. Projects languished.

“Every weekend became a three-day holiday,” he said. “I found that people work so much better when they’re all in the same physical space.”

IBM came to a similar decision. In 2009, 40 percent of its 386,000 employees in 173 countries worked remotely. But in 2017, with revenue slumping, management called thousands of them back to the office.

. . .

As long ago as 1985, the mainstream media was using phrases like “the growing telecommuting movement.” Peter Drucker, the management guru, declared in 1989 that “commuting to office work is obsolete.”

. . .

(p. B4) Apart from IBM, companies that publicly pulled back on telecommuting over the past decade include Aetna, Best Buy, Bank of America, Yahoo, AT&T and Reddit. Remote employees often felt marginalized, which made them less loyal. Creativity, innovation and serendipity seemed to suffer.

Marissa Mayer, the chief executive of Yahoo, created a furor when she forced employees back into offices in 2013. “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings,” a company memo explained.

. . .

At the beginning of the year, the unemployment rate was low and workers had some leverage. All that has been lost, at least for the next year or two. Widespread remote work could consolidate that shift.

“When people are in turmoil, you take advantage of them,” said John Sullivan, a professor of management at San Francisco State University.

“The data over the last three months is so powerful,” he said. “People are shocked. No one found a drop in productivity. Most found an increase. People have been going to work for a thousand years, but it’s going to stop and it’s going to change everyone’s life.”

Innovation, Dr. Sullivan added, might even catch up eventually.

“When you hire remotely, you can get the best talent around and not just the best talent that wants to live in California or New York,” he said. “You get true diversity. And it turns out that affects innovation.”

For the full story, see:

David Streitfeld. “Working From Home Has a Checkered Past.” The New York Times (Tuesday, June 30, 2020): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story has the date June 29, 2020, and has the title “The Long, Unhappy History of Working From Home.”)

Musk Pivots Tesla to Be Less Automated and to Do More In-House

(p. B2) Mr. Musk became deeply interested in improving and automating the car-building process after painful struggles to increase production of the company’s first SUV, the Model X, in 2016.

In a rare public acknowledgment of error, Mr. Musk conceded in 2018 that he went overboard with his automation attempts for the Model 3. That mistake snarled the company’s efforts to ramp up production in 2017 and 2018—a dark period that shook investor confidence in his ability to execute on his vision for Tesla to evolve from a niche luxury brand into a mainstream electric-car company.

. . .

The factory expansion is a further acknowledgment by Tesla that some of its founding assumptions were off. The original business plan for the company, founded in 2003, was to create a car company resembling more of a personal technology company, rather than a traditional auto maker, by outsourcing vehicle assembly much like how gadgets were made.

But that effort was eventually abandoned as Mr. Musk began to realize the importance of controlling more of a company filled with complex logistics and manufacturing nuances.

He has since brought in-house more of his supply chain than is normal for a car maker, including seat manufacturing, and developed greater expertise in battery cell manufacturing.

For the full story, see:

Tim Higgins. “Tesla Races To Boost Vehicle Production.” The Wall Street Journal (Friday, July 24, 2020): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date July 23, 2020, and has the title “Tesla Prepares for Hiring Boom as Elon Musk Targets Manufacturing Expansion.”)

Blacks Most Hurt by Creeping Credentialism

(p. A15) Nonessential degree requirements aren’t race-neutral. They embed into the labor market the legacy of black exclusion from the U.S. education system—namely, the antiliteracy laws that made it illegal for blacks to learn to read, the separate and unequal schools that kept them from catching up, and the limited progress since then on policies designed to remedy racial discrimination.

This spring, we and six other colleagues wrote a National Bureau of Economic Research working paper that questioned the fundamental assumption undergirding the proliferation of degree requirements: that workers without four-year degrees who earn low wages are low-skilled.

For the 71 million U.S. workers who have a high-school diploma but not a four-year degree, we used the skill profile of their current jobs as a proxy for their employability for higher-wage work. Their job experience suggests they are skilled through alternative routes, so we call them by the acronym STARs. They make up 60% of the active U.S. workforce.

Our research found that 16 million STARs have the skills for high-wage work, defined as earning more than twice the national median. Yet 11 million of them are currently employed in low-wage or middle-wage work. This suggests an extraordinary market failure: U.S. companies are systematically overlooking talent.

. . .

Our research suggests there are changes companies can make to address this problem:

• Hire for skills and work experience, not degrees. Rather than using the degree requirement as a default, employers should examine the skills that their jobs require and then use skill requirements for job postings, screenings and assessments. IBM adopted this type of skills-based approach with its New Collar initiative, launched in 2017.

. . .

Black workers face extraordinary barriers to economic mobility. By valuing skills over degrees, companies can improve the way the labor market functions for black STARs—a necessary step to ensure that the economy works for all.

For the full commentary, see:

Peter Q. Blair and Shad Ahmed. “The Disparate Racial Impact of Requiring a College Degree.” The Wall Street Journal (Monday, June 29, 2020): A15.

(Note: ellipses added; bullet point and italics in original.)

(Note: the online version of the commentary has the date June 28, 2020, and has the title “A Coronavirus Vaccine: Faster, Please.”)

The NBER working paper mentioned above is:

Blair, Peter Q., Tomas G. Castagnino, Erica L. Groshen, Papia Debroy, Byron Auguste, Shad Ahmed, Fernando Garcia Diaz, and Cristian Bonavida. “Searching for Stars: Work Experience as a Job Market Signal for Workers without Bachelor’s Degrees.” In NBER Working Papers: National Bureau of Economic Research, Inc., March 2020.