Category: Labor Economics

Ban of Affirmative Action Does Not Reduce Overall Black Enrollment

(p. 435) Using institutional data on race-specific college enrollment and completion, I examine whether minority students were less likely to enroll in a four-year public college or receive a degree following a statewide affirmative action ban. As in previous studies, I find that black and Hispanic enrollment dropped at the top institutions; however, there is little evidence that overall black enrollment at public universities fell. Finally, despite evidence that fewer blacks and Hispanics graduated from college following a ban, the effects on graduation rates are very noisy.

For the full article, from which the above abstract is quoted, see:
Backes, Ben. “Do Affirmative Action Bans Lower Minority College Enrollment and Attainment?” Journal of Human Resources 47, no. 2 (Spring 2012): 435-55.

“Education Bubble”: “A Spurious Inflation of the Credentials Required for Many Jobs”

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Source of book image: http://2.bp.blogspot.com/-N1hV093ckVc/T8YmCXE2sQI/AAAAAAAAAYc/1B5hWDeXbzQ/s1600/basement.jpg

(p. 17) In June 2008, The Atlantic published an essay by an adjunct instructor of English, identified only as “Professor X,” whose job filled him with despair. Although the courses he taught were introductory, success was beyond many of his students, who, he wrote, were “in some cases barely literate.” X found giving F’s to be excruciating — “I am the man who has to lower the hammer,” he lamented — in part because he identified with his older students, who seemed to have lost their way in their careers much as X himself had.
. . .
. . . X’s function, in the ecology of the colleges where he teaches, is gatekeeper — most students who fail his classes will drop out — and he articulates the ethical challenge before him this way: “What grade does one give a college student who progresses from a 6th- to a 10th-grade level of achievement?” X gives F’s.
. . .
X and his wife got snookered in the housing bubble, and he wonders if the misery in his classroom might result from a similar education bubble. In 1940, there were 1.5 million college students in America; in 2006, there were 20.5 million. In X’s opinion, a glut of degrees has led to a spurious inflation of the credentials required for many jobs. Tuitions are rising, and two-thirds of college graduates now leave school with debt, owing on average about $24,000. A four-year degree is said to increase wages about $450,000 over the course of a lifetime, but X doubts the real value of degrees further down on the hierarchy of prestige. To him, the human cost is more conspicuous.
. . .
Professor X can be caustic about the euphemism and somewhat willed optimism that sometimes befog discussion of how to teach unprepared students. To relieve his and his students’ unhappiness, he proposes that employers stop demanding unnecessary degrees: a laudable suggestion, unlikely to be realized until the degree glut has dried up.

For the full review, see:
CALEB CRAIN. “Lost in the Meritocracy.” The New York Times Book Review (Sun., May 1, 2011): 17.
(Note: ellipses added.)
(Note: the online version of the review has the date April 29, 2011.)

The full reference for the book under review, is:
X, Professor. In the Basement of the Ivory Tower: Confessions of an Accidental Academic. New York: Viking, 2011.

Skilled Immigrants Increase U.S. Patents

(p. 31) We measure the extent to which skilled immigrants increase innovation in the United States. The 2003 National Survey of College Graduates shows that immigrants patent at double the native rate, due to their disproportionately holding science and engineering degrees. Using a 1940-2000 state panel, we show that a 1 percentage point increase in immigrant college graduates’ population share increases patents per capita by 9-18 percent. Our instrument for the change in the skilled immigrant share is based on the 1940 distribution across states of immigrants from various source regions and the subsequent national increase in skilled immigration from these regions.

For the full article, from which the above abstract is quoted, see:
Hunt, Jennifer, and Marjolaine Gauthier-Loiselle. “How Much Does Immigration Boost Innovation?” American Economic Journal: Macroeconomics 2, no. 2 (April 2010): 31-56.

A True Tall Tale: Mankiw Lays a Reductio Ad Absurdum on the Egalitarians

(p. 155) Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard utilitarian framework for tax policy analysis answers this question in the affirmative. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities. Alternatively, if policies such as a tax on height are rejected, then the standard utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.

For the full article, from which the above abstract is quoted, see:
Mankiw, N. Gregory, and Matthew Weinzierl. “The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution.” American Economic Journal: Economic Policy 2, no. 1 (Feb. 2010): 155-76.

Raising Minimum Wage Hurts Working Poor

(p. 592) Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.

For the full article, from which the above abstract is quoted, see:
Sabia, Joseph J., and Richard V. Burkhauser. “Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?” Southern Economic Journal 76, no. 3 (Jan. 2010): 592-623.

A Marshmallow Now or an Elegant French Pastry Four Years Later

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Source of book image: http://images.amazon.com/images/G/01/richmedia/images/cover.gif

(p. 19) Growing up in the erratic care of a feckless single mother, “Kewauna seemed able to ignore the day-to-day indignities of life in poverty on the South Side and instead stay focused on her vision of a more successful future.” Kewauna tells Tough, “I always wanted to be one of those business ladies walking downtown with my briefcase, everybody saying, ‘Hi, Miss Lerma!’ “

Here, as throughout the book, Tough nimbly combines his own reporting with the findings of scientists. He describes, for example, the famous “marshmallow experiment” of the psychologist Walter Mischel, whose studies, starting in the late 1960s, found that children who mustered the self-control to resist eating a marshmallow right away in return for two marshmallows later on did better in school and were more successful as adults.
“What was most remarkable to me about Kewauna was that she was able to marshal her prodigious noncognitive capacity — call it grit, conscientiousness, resilience or the ability to delay gratification — all for a distant prize that was, for her, almost entirely theoretical,” Tough observes of his young subject, who gets into college and works hard once she’s there. “She didn’t actually know any business ladies with briefcases downtown; she didn’t even know any college graduates except her teachers. It was as if Kewauna were taking part in an extended, high-stakes version of Walter Mischel’s marshmallow experiment, except in this case, the choice on offer was that she could have one marshmallow now or she could work really hard for four years, constantly scrimping and saving, staying up all night, struggling, sacrificing — and then get, not two marshmallows, but some kind of elegant French pastry she’d only vaguely heard of, like a napoleon. And Kewauna, miraculously, opted for the napoleon, even though she’d never tasted one before and didn’t know anyone who had. She just had faith that it was going to be delicious.”

For the full review, see:
ANNIE MURPHY PAUL. “School of Hard Knocks.” The New York Times Book Review (Sun., August 26, 2012): 19.
(Note: the online version of the article is dated August 23, 2012.)

The full reference for the book under review, is:
Tough, Paul. How Children Succeed: Grit, Curiosity, and the Hidden Power of Character. Boston, MA: Houghton Mifflin Harcourt, 2012.

Mitt Romney on Innovation and Creative Destruction

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Source of book image: http://mittromneycentral.com/uploads/No-Apology1.jpg

(p. 108) Innovation and Creative Destruction

The key to increasing national prosperity is to promote good ideas and create the conditions that can lead them to be fully exploited–in existing businesses as well as new ones. Government is generally not the source of new ideas, although innovations from NASA and the military have provided frequent exceptions. Nor is government where innovation is commercially developed. But government policies do, in fact, have a major impact on the implementation of innovative ideas. The degree to which a nation makes itself productive, and thus how prosperous its citizens become, is determined in large measure by whether government adopts policies that stimulate innovation or that stifle it.
The government policy that has the greatest effect on innovation is simply whether or not the government will allow it. It’s sad but true: Government can and often does purposefully prevent innovation and the resulting improvement in productivity. Recall my hypothetical example of a society in which half the farming jobs were lost due to innovation in the use of a plow? Some nations accept and encourage such “creative destruction,” recognizing that in the long run it leads to greater productivity and wealth for its citizens. But other nations succumb to the objections of those in danger of becoming unemployed and prevent innovation that may reduce short-term employment.
Two centuries ago, more than three-quarters of our workforce actually did labor on farms. Over the succeeding decades, innovations like irrigation, fertilizer, and tractors were welcomed, and eventually large farming corporations were allowed to prosper, despite protests from family farmers and the often heart-wrenching dislocations that accompanied consolidation of farmlands. The result was the disappearance of millions of agricultural jobs and the large-scale migration of Americans from rural regions to our cities. Once there, they provided the labor that powered America’s new industrial age. And at the same time, because farming innovation and productivity were allowed to flourish, America became the leader in agriculture education, research, and industry. Innovations from these sources have enabled us to produce sufficient food to feed not only our growing population but other parts of the world as well.

Source:
Romney, Mitt. No Apology: The Case for American Greatness. New York: St. Martin’s Press, 2010.
(Note: bold in original.)

Joe Biden’s Dad Told Him to “Get Up” in Face of Job Loss

Innovative entrepreneurs, through the process of creative destruction, provide us with wonderful new products and services. But sometimes the process also results in job loss. One response to the job loss is to shut down innovation. Another is to preach resilience. Joe Biden’s Dad said “get up.” (The clip is from a talk that Joe Biden gave to the National Press Club on August 1, 2007. The full talk is posted to the C-SPAN web site.)

A mainly similar presentation of the “get up” message is on p. xxii of Biden’s autobiography:
Biden, Joe. Promises to Keep: On Life and Politics. New York: Random House, 2007.

Technology Allows Start-Ups to Launch with Fewer Employees

HarelAndShilonOfBiteHunter2012-06-22.jpg “Start-up BiteHunter launched with three employees. Above, co-founders Gil Harel, left, and Ido Shilon.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Lower costs to entry means more start-ups and that means more innovation, ceteris paribus. All good. For the labor market, there will be fewer initial jobs per start-up. But there will be more start-ups, and more opportunity for erstwhile laborers to themselves become entrepreneurs. So maybe still all good.

(p. B5) New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.

The change, which began before the recession, may be permanent, according to some analysts.
. . .
Rather than purchasing the tools and manpower needed to run their companies, more small firms are renting, sharing or outsourcing resources, typically through online services, according to Steve King, a partner at Emergent Research, a research and consulting firm for small businesses.
. . .
Last year, Gil Harel launched BiteHunter, a search engine for restaurant discounts, with just three employees. Based in New York, the site used shared screens and other communications tools to work with developers in Russia, Uruguay and Israel.
“Just to build the infrastructure to get a business off the ground used to take a lot of money and people. But things that you couldn’t do in the past, you can now do on your own,” Mr. Harel says.

For the full story, see:
ANGUS LOTEN. “With New Technology, Start-Ups Go Lean; Web-Based Services Mean Fewer Workers Needed.” The Wall Street Journal (Thurs., September 15, 2011): B5.
(Note: ellipses added.)

Neglecting Valid Stereotypes Has Costs

(p. 169) The social norm against stereotyping, including the opposition to profiling, has been highly beneficial in creating a more civilized and more equal society. It is useful to remember, however, that neglecting valid stereotypes inevitably results in suboptimal judgments. Resistance to stereotyping is a laudable moral position, but the simplistic idea that the resistance is costless is wrong. The costs are worth paying to achieve a better society, but denying that the costs exist, while satisfying to the soul and politically correct, is not scientifically defensible.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

Web Expedites Labor Market for Small Projects

LangerAndBurksChore2012-06-22.jpg “Liz Langer helped John Burks retrieve his keys.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A1) A new crop of websites and smartphone applications are allowing people to farm out chores to a growing army of temporary personal assistants. These micro-employees are taking the division of labor to once-unthinkable extremes.
. . .
(p. A14) Some investors see dollar signs. Zaarly Inc., an online marketplace for micro-labor and goods based in San Francisco, recently raised $14.1 million from Google Inc. GOOG -2.18% investor and venture-capital firm Kleiner Perkins Caufield & Byers. Actor Ashton Kutcher and clothing designer Marc Ecko have also put in money. In October, Hewlett-Packard Chief Executive Meg Whitman joined the company’s board.
After launching six months ago, Zaarly is processing more than 1,000 transactions a week for jobs that cost around $50 a pop. Chief Executive and cofounder Bo Fishback, 33, says about half the requests involve tangible goods, and the rest involve some sort of service. One of his favorites: a person who hired someone to buy a Michael Jackson-themed dog costume for a puppy.
Sometimes the situation can be dire. John Burks, a 30-year-old actor who also runs an arts organization in Chicago, accidentally dropped his keys in a sewer during a rainstorm over the summer. To replace all the keys–including ones to his home, office and Mercedes–could cost well over $100.
After Googling “lost keys down sewer” to see what tactics others had used, Mr. Burks thought he could recover his keys with a fishing rod and a magnet, but had neither. His girlfriend at the time knew someone who worked at Zaarly, so he posted the job on its site. Liz Langer, a 27-year-old neuroscience graduate student and top Zaarly “fulfiller,” spotted the job and within an hour arrived with the needed tools. Fifteen minutes later, they fished the keys out of the sewer. (Price: $80.)
“It’s like stranger than fiction,” Mr. Burks says. “I thought there was a very small chance that anything like that can happen.”

For the full story, see:
EMILY GLAZER. “Serfing the Web: Sites Let People Farm Out Their Chores; Workers Choose Jobs, Negotiate Wages; Mr. Kutcher, Anonymously, Asks for Coffee.” The Wall Street Journal (Mon., November 28, 2011): A1 & A14.
(Note: ellipsis added.)