Category: Labor Economics

Musk Says Productivity Rises When Firms Fire Employees Who “Slam the Brakes”

(p. B3) Elon Musk said more companies should consider running lean like Twitter.

. . .

“There’s a potential for significant cuts, I think, out of companies without affecting their productivity,” Musk said, adding that staffing cuts could increase productivity by speeding up operations. “At any given company, there are people who help move things forward and people who sort of try to slam the brakes on.”

For the full story, see:

Chip Cutter. “Musk Urges Others to Cut Jobs as Twitter Did.” The Wall Street Journal (Thursday, May 25, 2023): B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 24, 2023, and has the title “Musk Urges More Companies to Shrink Like Twitter.”)

The Role Disney “Fans Play in Creating the Disney Magic”

(p. 10) On Nov. 20, [2022],I was relieved to hear the news that Disney’s chief executive, Bob Chapek, had been fired and replaced with the former chief executive Robert Iger. The news was also met with near-unanimous celebration among my community of super fans.

While his ouster shocked investors and Hollywood, many in our community had been actively campaigning for Mr. Chapek’s firing for the past two years. A Change.org petition to fire Mr. Chapek that started in 2020 garnered over 117,000 signatures. (It now reads “Victory.”) Online forums teemed with complaints about Mr. Chapek’s management style and strategy.

. . .

We also pushed to have Mr. Chapek fired because he didn’t believe in Disney magic. Disney is so much more than just another big business. Understanding that is crucial to its success.

When Walt Disney opened Disneyland, he referred to his theme park customers as “guests,” an understanding that is explicitly reinforced in Disney employee training to this day, and by which Disney’s theme park community refers to itself.

. . .

What Mr. Chapek doesn’t understand is the role we fans play in creating the Disney magic. It is our Instagram accounts, our blogs and our websites that those out-of-towners refer to in order to prepare for that revenue-generating Disneyland trip. I get paid to do it, but many others do this work just because they love it. Mr. Chapek disregarded us.

Worse was the way Mr. Chapek treated “cast members,” as Disney’s park employees are known. The people who greet you at the park entrance, serve you food and get you safely on and off the rides have an enormous influence on the quality of your visit. I’ve talked to many cast members, from young people to older adults, about why they’re willing to wear polyester costumes in Florida’s summer heat for relatively low wages. To a person, they say something like, “I want to make people happy, and Disney is the best place to do that.”

So it was disheartening when, in September 2020, Mr. Chapek announced that the company was laying off 28,000 workers, most of them cast members. While many other businesses were laying off workers during that time, Mr. Chapek was also committing Disney to spending billions to ramp up content production for its Disney+ streaming service. As we saw it, Mr. Chapek viewed the incomes and health care of thousands of people — the people who make the magic — as less important than another season of “The Mandalorian.” Many cast members decided not to return to Disney’s parks when they reopened.

For the full commentary, see:

Len Testa. “Bob Chapek Didn’t Believe in Disney Magic.” The New York Times, SundayOpinion Section (Sunday, December 4, 2022): 10.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the commentary has the date Nov. 29, 2022, and has the same title as the print version. Where there is a slight difference in wording between versions, the passages quoted above follow the online version.)

Nursing Slots Filled Via Gig Apps Give More Control to Nurses and More Uncertainty to Hospitals

(p. A3) Hospitals are joining the gig economy.

Some of the nation’s largest hospital systems including Providence and Advocate Health are using apps similar to ride-hailing technology to attract scarce nurses. An app from ShiftKey lets workers bid for shifts. Another, CareRev, helps hospitals adjust pay to match supply, lowering rates for popular shifts and raising them to entice nurses to work overnight or holidays.

The embrace of gig work puts hospitals in more direct competition with the temporary-staffing agencies that siphoned away nurses during the pandemic. The apps help extend hospitals’ labor pool beyond their employees to other local nurses who value the highly flexible schedules of gig work.

. . .

Gig apps give nurses even more control than other common temporary-employment options that lock in workers for multiweek contracts, at least. It opens shifts to a broader labor pool, too, but also a more fluid one, hospital executives said.

That means less certainty for employers.

For the full story, see:

Melanie Evans. “Gig Work Helps Hospitals Fill Nursing Shifts.” The Wall Street Journal (Wednesday, April 19, 2023): A3.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 18, 2023, and has the title “Nurse Shortage Pushes Hospitals Into the Gig Economy.”)

European Farmers Want Climate Protected by More Innovation, Not by Less Agriculture

(p. 4) To meet climate goals, some European countries are asking farmers to reduce livestock, relocate or shut down — and an angry backlash has begun reshaping the political landscape before national elections in the fall.

. . .

Those like Helma Breunissen, who runs a dairy farm in the Netherlands with her husband, say that too much of the burden is falling on them, threatening both their livelihoods and their way of life.

For almost 20 years, Ms. Breunissen has provided the Dutch with a staple product, cow’s milk, and she felt that her work was valued by society, she said. The dairy sector in the Netherlands, which also produces cheeses like Gouda and Edam, is celebrated as a cornerstone of national pride.

But the sector also produces almost half the Netherlands’ emissions of nitrogen, a surplus of which is bad for biodiversity. Ms. Breunissen and thousands of other farmers bridle that they are now labeled peak emitters.

“I was confused, sad and angry,” said Ms. Breunissen, who manages a farm of 100 cows in the middle of the country. “We are doing our best. We try to follow the rules. And suddenly, it’s like you are a criminal.”

. . .

In the Netherlands, the government has asked thousands of farmers to scale back, move or close. The authorities set aside about 24 billion euros, about $26 billion, to help farmers put in place more sustainable solutions — or to buy them out.

. . .

For Ms. Breunissen, who is 48 and works as a veterinarian in addition to her duties on the farm, none of the government-proposed options seem feasible. She is too young to quit and too old to uproot her life, she said, and the authorities have not provided enough support and information on how to change what she now does.

“There are so many questions,” she said. “The trust in the government is completely gone.”

. . .

A host of new groups are vying to displace traditional parties. They include the Farmer Citizen Movement, known by its Dutch acronym BBB, which was established four years ago.

. . .

Caroline van der Plas, the party’s co-founder, used to be a journalist in The Hague covering the meat industry, and she has never worked in farming. But she grew up in a small city in a rural area, and she said in an interview that she wanted to be “the voice of the people in rural regions who are not seen or heard” by policymakers.

She and her party have talked down the need for drastic steps to cut emissions, saying the reductions can be achieved through technological innovation. Policies should be based on “common sense,” she said, while offering no concrete solutions.

“It’s not like science says this or that,” Ms. van der Plas said, referring to how theories can change. “Science is always asking questions.”

For the full story, see:

Monika Pronczuk and Claire Moses. “New Climate Standards Have Farmers in Europe Bristling.” The New York Times, First Section (Sunday, Aug. 27, 2023): 4.

(Note: ellipses added.)

(Note: the online version of the story was updated Aug. 28, 2023, and has the title “Labeled Climate Culprits, European Farmers Rebel Over New Standards.”)

Musk’s $48 Billion Pay Deal Showed that the Entrepreneur Is Not Obsolete

(p. B3) WILMINGTON, Del.—The scale of concern among Tesla Inc. board members about how to keep Elon Musk‘s attention trained on the electric-vehicle maker loomed large during a weeklong trial over the chief executive’s pay package.

A desire to motivate Mr. Musk to focus on Tesla triggered a monthslong pay negotiation that culminated in the shareholders’ approval of a 2018 CEO equity grant valued at roughly $48 billion at recent stock prices.

That deal—and the process under which it was put together—have been the subject of the trial in Delaware’s business-law court, where testimony has underscored that current and former Tesla board members have long viewed Mr. Musk as irreplaceable.

For the full story, see:

Rebecca Elliott and Meghan Bobrowsky. “Pay Trial Shines Light on Tesla’s View of Musk as Irreplaceable.” The Wall Street Journal (Monday, November 21, 2022): B3.

(Note: the online version of the story was updated November 19, 2022, and has the title “Tesla Board View That Elon Musk Is Irreplaceable Emerged in Pay Trial.”)

Shrinking Black-White Wage Gap Mainly Due to “Tight Labor Market”

A tight labor market is a key feature of what I call a “robustly redundant labor market” in my Openness to Creative Destruction book.

(p. A13) In the early 2000s, the wage gap between Black and white workers in the U.S. was as large as it had been in 1950.

. . .

The wage gap, though still enormous, has shrunk.

. . .

There appear to be three main causes of the recent trend, and the most significant is the country’s tight labor market. The unemployment rate has been falling for most of the past decade and has recently been near its lowest levels since the 1960s.

Tight labor markets help almost all workers, and they tend to help disadvantaged workers the most. As Gould put it, “When employers can’t be quite as choosy — when employers have to look beyond their network — that can provide more opportunities for historically marginalized groups.”

This dynamic helps close the Black-white wage gap because Black workers are overrepresented among low-wage workers. The Hispanic-white wage gap has also declined recently.

For the full commentary, see:

David Leonhardt. “The Morning; Why There’s Progress, Finally, on Closing the Black-White Pay Gap.” The New York Times (Monday, June 19, 2023): A13.

(Note: ellipses added.)

(Note: the online version of the commentary also has the date June 15, 2023, and has the title “The Morning; The Racial Wage Gap Is Shrinking.” The online version of the passages quoted above includes an illustrative parenthetical sentence that I do not include above.)

Progressives Now Argue that F.D.R.’s Liberal New Deal “Rested on a Jim Crow Foundation”

(p. C1) In October 1935, President Franklin D. Roosevelt had his administration send letters to thousands of clergy across the country, asking if the New Deal was helping their communities.

Even from admirers, the news wasn’t always good. Local administrators did not “carry out your will and purpose,” J.H. Ellis, a Black pastor in Hot Springs, Ark., wrote, “especially as it relates to the Negro group.” J.W. Hairston, an African American minister in Asheville, N.C., lamented that in the South “there are two states and two cities, one white — one black.”

The Northern Black press, meanwhile, was more blunt. The New Deal, more than one newspaper proclaimed, was also a “Raw Deal.”

Eight decades later, that charge still hangs in the air. Conservatives have long assailed the New Deal, which radically expanded the government’s involvement in the economy, as the epitome of big-government overreach. But in recent years, progressives have increasingly argued that this pillar of 20th-century liberalism rested on a Jim Crow foundation, and laid the groundwork for the yawning Black wealth gap that persists today.

Now, the Franklin D. Roosevelt Presidential Library and Museum in Hyde Park, N.Y., is entering the fray. “Black Americans, Civil Rights and the Roosevelts, 1932-1962,” on view through December 2024, takes a frank, deeply researched view of what it calls Franklin and Eleanor Roosevelt’s “mixed” record on race, from their personal attitudes to the policies they championed.

. . .

(p. C3) . . . , the title of the opening wall text makes the central question plain: “A New Deal for All Americans?”

While a mainstay of scholarship for decades, that question has recently reached a broader public, thanks to books like Ira Katznelson’s “When Affirmative Action Was White” and Richard Rothstein’s “The Color of Law: A Forgotten History of How Our Government Segregated America.”

On a recent afternoon, a docent directed visitors toward what she called “the most amazing thing” — a 1937 Home Owners Loan Corporation map of the nearby city of Poughkeepsie, labeling predominantly Black areas as “hazardous” for lenders.

In 1935, the newly created Federal Housing Administration issued a manual for lenders, endorsing redlining (so named for the pink shading of “hazardous” areas) and warning that Black families should not be approved for mortgages in white areas. “Incompatible racial groups,” it noted, “should not be permitted to live in the same communities.”

Housing policy is widely seen by historians as one of the New Deal’s most consequential failures, one which over time dramatically deepened residential segregation. But while the exhibition deals bluntly with the issue, it also avoids any simplified counternarrative of the New Deal writ large as inherently, and intentionally, racist at its core.

. . .

The exhibition deals directly with what the library calls the “greatest stain” on Roosevelt’s racial record: his refusal to publicly support federal anti-lynching legislation, out of fear it would alienate the Southern Democrats who dominated Congress and imperil the New Deal.

For the full story, see:

Jennifer Schuessler. “F.D.R.’s Library Takes a Hard Look at Race.” The New York Times (Thursday, August 3, 2023): C1 & C3.

(Note: ellipses added.)

(Note: the online version of the story has the date Aug. 1, 2023, and has the title “At the Roosevelt Library, an Unflinching Look at Race.”)

“FDR’s Policies Laid the Foundations for Generations of Hardship” for Black Americans

(p. A13) Just past the midway point of “Black Americans, Civil Rights, and the Roosevelts”—a powerful and powerfully disturbing exhibition at the Franklin D. Roosevelt Presidential Library and Museum—you can pick up a headset and listen to parts of a secretly recorded White House meeting on Sept. 27, 1940 (a transcript is also provided).

. . .

. . ., FDR nonchalantly settles into condescension and caricature. He emphasizes his appreciation of black servicemen, recalling “my colored messenger in the Navy Department”: “I gave him to Louis Howe, who was terribly fond of him.” And he promises to support opportunities for Negroes. In the Navy, he suggests, they could play in bands: “There’s no reason why we shouldn’t have a colored band on some of these ships, because they’re darn good at it.”

It is a shock to come upon these words. They even raise a question of just how much the administration’s sluggishness in dealing with racial issues was due to the power of Southern Democrats.

. . .

. . . the exhibition argues . . . that FDR’s policies laid the foundations for generations of hardship. The Social Security Act of 1935, for example, is criticized for not including “farm and domestic workers, who were disproportionately Black. This kept nearly two-thirds of Black workers out of the program”—in part, the text suggests, because of Southern Democrats’ racist influence. The exhibition also argues that the “redlining” of neighborhoods by Roosevelt’s Home Owners’ Loan Corporation, which mapped out areas with the highest probability of mortgage defaults, harmed the very neighborhoods where most blacks lived, with an effect lasting generations.

Racism, of course, should not be dismissed as a factor, but these are complicated issues, and much literature challenges any sweeping assertions. Did racism play an important role in excluding farm workers and domestics from Social Security, as the exhibition ends up suggesting? A 2010 Social Security Administration paper argues otherwise, noting that 74% of all excluded workers in those categories were white. Moreover, the act also excluded the self-employed, crews of ships, and employees of nonprofit religious and educational institutions. A 1997 paper in Political Science Quarterly argued that such initial exclusions were likely due to difficulties in how taxes and payrolls were handled, adding too many challenges to the administration of a new social program. Studies of redlining have also led to questions about its racial origins and effects. Redlined areas housed large proportions of a city’s black residents, but about three-quarters of the inhabitants were white. And as a 2021 paper from the National Bureau of Economic Research suggests, the maps were reflections of economic conditions, not racial demarcations, and “had little effect” on the distribution of federal mortgage activity.

For the full exhibition review, see:

Edward Rothstein. “Black Americans and the New Deal.” The Wall Street Journal (Thursday, Aug. 24, 2023): A13.

(Note: ellipses added.)

(Note: the online version of the exhibition review has the date August 23, 2023, and has the title “Black Americans, Civil Rights, and the Roosevelts’ Review: A New Look at the New Deal Era.”)

The 2021 National Bureau of Economic Research (NBER) paper mentioned above was published online in 2022 (in advance of print publication):

Fishback, Price, Jonathan Rose, Ken Snowden, and Thomas Storrs. “New Evidence on Redlining by Federal Housing Programs in the 1930s.” Journal of Urban Economics (online on May 11, 2022).

Improved AI Models Do Worse at Identifying Prime Numbers

(p. A2) . . . new research released this week reveals a fundamental challenge of developing artificial intelligence: ChatGPT has become worse at performing certain basic math operations.

The researchers at Stanford University and the University of California, Berkeley said the deterioration is an example of a phenomenon known to AI developers as drift, where attempts to improve one part of the enormously complex AI models make other parts of the models perform worse.

“Changing it in one direction can worsen it in other directions,” said James Zou, a Stanford professor who is affiliated with the school’s AI lab and is one of the authors of the new research. “It makes it very challenging to consistently improve.”

. . .

The goal of the team of researchers, consisting of Lingjiao Chen, a computer-science Ph.D. student at Stanford, along with Zou and Berkeley’s Matei Zaharia, is to systematically and repeatedly see how the models perform over time at a range of tasks.

Thus far, they have tested two versions of ChatGPT: version 3.5, available free online to anyone, and version 4.0, available via a premium subscription.

The results aren’t entirely promising. They gave the chatbot a basic task: identify whether a particular number is a prime number. This is the sort of math problem that is complicated for people but simple for computers.

Is 17,077 prime? Is 17,947 prime? Unless you are a savant you can’t work this out in your head, but it is easy for computers to evaluate. A computer can just brute force the problem—try dividing by two, three, five, etc., and see if anything works.

To track performance, the researchers fed ChatGPT 1,000 different numbers. In March, the premium GPT-4, correctly identified whether 84% of the numbers were prime or not. (Pretty mediocre performance for a computer, frankly.) By June its success rate had dropped to 51%.

. . .

The phenomenon of unpredictable drift is known to researchers who study machine learning and AI, Zou said. “We had the suspicion it could happen here, but we were very surprised at how fast the drift is happening.”

For the full commentary, see:

Josh Zumbrun. “THE NUMBERS; AI Surprise: It’s Unlearning Basic Math.” The Wall Street Journal (Saturday, Aug. 5, 2023): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date August 4, 2023, and has the title “THE NUMBERS; Why ChatGPT Is Getting Dumber at Basic Math.”)

The Elite Are Politically Progressive as a Way to Reduce Their Guilt for Rejecting the Uneducated

David Brooks, the author of The New York Times column quoted below, views himself as an anti-Trump member of America’s elite educated class.

(p. A18) Donald Trump seems to get indicted on a weekly basis. Yet he is utterly dominating his Republican rivals in the polls, and he is tied with Joe Biden in the general election surveys. Trump’s poll numbers are stronger against Biden now than at any time in 2020.

What’s going on here? Why is this guy still politically viable, after all he’s done?

. . .

This story begins in the 1960s, when high school grads had to go off to fight in Vietnam but the children of the educated class got college deferments. It continues in the 1970s, when the authorities imposed busing on working-class areas in Boston but not on the upscale communities like Wellesley where they themselves lived.

The ideal that we’re all in this together was replaced with the reality that the educated class lives in a world up here and everybody else is forced into a world down there. Members of our class are always publicly speaking out for the marginalized, but somehow we always end up building systems that serve ourselves.

The most important of those systems is the modern meritocracy. We built an entire social order that sorts and excludes people on the basis of the quality that we possess most: academic achievement. Highly educated parents go to elite schools, marry each other, work at high-paying professional jobs and pour enormous resources into our children, who get into the same elite schools, marry each other and pass their exclusive class privileges down from generation to generation.

Daniel Markovits summarized years of research in his book “The Meritocracy Trap”: “Today, middle-class children lose out to the rich children at school, and middle-class adults lose out to elite graduates at work. Meritocracy blocks the middle class from opportunity. Then it blames those who lose a competition for income and status that, even when everyone plays by the rules, only the rich can win.”

. . .

Members of our class also segregate ourselves into a few booming metro areas: San Francisco, D.C., Austin and so on. In 2020, Biden won only 500 or so counties, but together they are responsible for 71 percent of the American economy. Trump won over 2,500 counties, responsible for only 29 percent. Once we find our cliques, we don’t get out much. In the book “Social Class in the 21st Century,” the sociologist Mike Savage and his co-researchers found that the members of the highly educated class tend to be the most insular, measured by how often we have contact with those who have jobs unlike our own.

. . .

Elite institutions have become so politically progressive in part because the people in them want to feel good about themselves as they take part in systems that exclude and reject.

For the full commentary, see:

David Brooks. “What if We’re the Bad Guys Here?” The New York Times (Friday, August 4, 2023): A18.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Aug. 2, 2023, and has the same title as the print version.)

The books cited by Brooks in the passages quoted above are:

Markovits, Daniel. The Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite. New York: Penguin Press, 2019.

Savage, Mike. Social Class in the 21st Century. London: Pelican Books, 2015.

Chinese Communists Suspend Release of Record High Youth Unemployment Rate

(p. B1) The Chinese government, facing an expected seventh consecutive monthly increase in youth unemployment, said Tuesday [Aug. 15, 2023] that it had instead suspended release of the information.

The unemployment rate among 16- to 24-year-olds in urban areas hit 21.3 percent, a record, in June and has risen every month this year. It was widely forecast by economists to have climbed further last month.

The decision to scrub a widely watched report could exacerbate the concerns expressed by investors and executives who say ever-tightening government control of information is making it harder to do business in China.

Fu Linghui, a spokesman of the National Bureau of Statistics, said at a news briefing that the government would stop making public employment information “for youth and other age groups.” He said the surveys that government researchers use to collect the data “need to be further improved and optimized.”

China’s youth unemployment rate has doubled in the last four years, a period of economic volatility induced by the “zero Covid” measures imposed by Beijing that left companies wary of hiring, interrupted education for many students, and made it hard to get the internships that had often led to job offers.

The announcement drew more than 140 million views on the Chinese social media site Weibo within a few hours. Many people (p. B3) commenting online, some turning to sarcasm, said they believed the government suspended the report to try to hide negative information. Others said they believed the public had the right to be informed.

. . .

Young people in China are facing a big gap between labor demand and supply. According to official data, 11.6 million students were expected to graduate college or university this year — the most ever and nearly one million more than last year. Future classes are expected to be even larger, while economic growth had started to slow even before the pandemic.

. . .

Even becoming an entry-level civil servant working for the government is harder these days. Last year, a record 2.6 million people applied to take the national civil service exam to compete for only 37,100 entry-level positions.

Xi Jinping, the country’s top leader, has called for young people to go to remote areas to find work — to “eat bitterness,” a Chinese expression that refers to enduring hardship.

For the full story, see:

Claire Fu. “China Scraps Jobs Report On the Young.” The New York Times (Wednsday, August 16 2023): B1 & B3.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the review has the date Aug. 15, 2023, and has the title “China Suspends Report on Youth Unemployment, Which Was at a Record High.”)