Labor Economics – Page 80 – artdiamondblog.com

Fewer Entrepreneurial Startups Leads to Fewer New Jobs

Source of graph: online version of the WSJ article quoted and cited below.

(p. B1) Start-ups fuel job growth disproportionately since by definition they are starting and growing, adding employees, says the Kauffman Foundation, which researches and advocates for entrepreneurship.
Though there was start-up activity during and after the recession, driven partly by unemployed individuals putting out a shingle, Bureau of Labor Statistics data show the total number of “births” of new businesses declined sharply from previous years. What’s more, the number of people employed by new businesses that are less than a year old–a common definition of a start-up–also declined. That trend started a decade ago.
In a recent report on entrepreneurship, the BLS said the number of new businesses less than a year old that existed in the year ending March 2010 “was lower than any other year” since its research began in 1994. The downdraft started with the recession.
“More people who were self-employed failed and left self-employment than people who entered,” says Scott Shane, an economics professor at Case Western Reserve University who wrote a study on entrepreneurship and the recession for the Cleveland Fed. “The net effect is negative, not positive, largely because downturns hurt those in business and those thinking of entering business.”

For the full story, see:
JOHN BUSSEY. “THE BUSINESS; Shrinking in a Bad Economy: America’s Entrepreneur Class.” The Wall Street Journal (Fri., AUGUST 12, 2011): B1 & B2.
(Note: ellipsis added.)

The BLS report mentioned above can be found at: http://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm

The Scott Shane commentary mentioned above can be found at:
http://www.clevelandfed.org/research/commentary/2011/2011-04.cfm

Source of graph: online version of the WSJ article quoted and cited above.

Jobs Haiku

jobs and Jobs are gone
need more Jobs to get more jobs
innovate to grow

Arthur Diamond

In his Q4 survey of influential economics bloggers, Tim Kane of the Kauffman Foundation whimsically requested that we create a haiku that speaks to the state of the economy. I sent him my haiku, above, on Sunday, October 16, 2011.
(Do not worry—I have no plans to retire and devote myself to writing poetry.)

Another Nod to Planck’s “Cynical View of Science”

The Max Planck view expressed in the quote below, has been called “Planck’s Principle” and has been empirically tested in three papers cited at the end of the entry.

(p. 12) How’s this for a cynical view of science? “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

Scientific truth, according to this view, is established less by the noble use of reason than by the stubborn exertion of will. One hopes that the Nobel Prize-winning physicist Max Planck, the author of the quotation above, was writing in an unusually dark moment.
And yet a large body of psychological data supports Planck’s view: we humans quickly develop an irrational loyalty to our beliefs, and work hard to find evidence that supports those opinions and to discredit, discount or avoid information that does not.

For the full commentary, see:
CORDELIA FINE. “GRAY MATTER; Biased but Brilliant.” The New York Times, SundayReview Section (Sun., July 31, 2011): 12.
(Note: ellipses added.)
(Note: the online version of the article is dated July 30, 2011.)

Three of my papers that present evidence on Planck’s Principle, are:
“Age and the Acceptance of Cliometrics.” The Journal of Economic History 40, no. 4 (December 1980): 838-841.
“Planck’s Principle: Do Younger Scientists Accept New Scientific Ideas with Greater Alacrity than Older Scientists?” Science 202 (November 17, 1978): 717-723 (with David L. Hull and Peter D. Tessner).
“The Polywater Episode and the Appraisal of Theories.” In A. Donovan, L. Laudan and R. Laudan, eds., Scrutinizing Science: Empirical Studies of Scientific Change. Dordrecht, Holland: Kluwer Academic Publishers, 1988, 181-198.

“Unless the Federal Government Takes It All Away”

“Wayne Gravot, right, and Jeff Sparwasser at the new plant in North Charleston, S.C.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) NORTH CHARLESTON, S.C. — Boeing’s gigantic new $750 million airplane factory here is the pride of South Carolina, the biggest single investment ever made in a state that is far more associated with old-line textile mills than state-of-the-art manufacturing. In just a few weeks, 1,000 workers will begin assembling the first of what they hope will be hundreds of 787 Dreamliners.

That is, unless the federal government takes it all away.
In a case that has enraged South Carolinians and become a cause célèbre among Republican lawmakers and presidential hopefuls, the National Labor Relations Board has accused Boeing of illegally setting up shop in South Carolina because of past strikes by the unionized workers at its main manufacturing base in the Seattle area. The board is asking a judge to order Boeing to move the Dreamliner production — and the associated jobs — to Washington State.

For the full story, see:
STEVEN GREENHOUSE. “Boeing Labor Dispute Is Making New Factory a Political Football.” The New York Times (Fri., July 1, 2011): A10.
(Note: ellipsis added.)
(Note: the online version of the story is dated June 30, 2011.)

Occupational Licensing Reduces Job Creation

(p. A15) Only one in 20 workers needed the government’s permission to pursue their chosen occupation in the 1950s, notes University of Minnesota Prof. Morris Kleiner. Today that figure is nearly one in three.
. . .
The breadth of jobs is remarkable. Travel and tourist guides, funeral attendants, home-entertainment installers, florists, makeup artists, even interpreters for the deaf are all regulated by various states. Want to work as an alarm installer? In 35 states, you will need to earn the government’s permission. Are you skilled in handling animals? You will need more than that skill in the 20 states that require a license for animal training.
There’s usually more to these licenses than filling out some paperwork and paying a small fee. Most come with government-dictated educational requirements, examinations, minimum age and grade levels, and other hurdles.
. . .
Instead of looking to the federal government to create jobs, state legislatures could have a real and immediate effect on unemployment in their states by showing how less truly is more. They can remove the barriers to job creation that their predecessors erected and enjoy the job-generating drive of their states’ aspiring entrepreneurs.

For the full commentary, see:
CHIP MELLOR And DICK CARPENTER. “Want Jobs? Cut Local Regulations.” The Wall Street Journal (Thurs., July 28, 2011): A15.
(Note: ellipses added.)

Strong Economic Growth Benefits Workers

(p. A13) Workers do well only when the economy grows at a healthy and consistent pace. The biggest threat to long-term economic growth is government growth of the magnitude that characterized the past two years and that is forecast for our future.
Our current problems are not a result of acts of nature. They stem from policy choices that dramatically increased the size of the government. In the past two years, the federal budget has grown by a whopping 16%.
. . .
. . . , the price of the stimulus is what appears to be a permanent increase in the size of government that will continue to slow economic growth. Most economists believe that high debt and high taxes each contributes to slow economic growth, which hurts workers both in the short and long run.

For the full commentary, see:
EDWARD P. LAZEAR. “OPINION; How Big Government Hurts the Average Joe; Job growth is very closely linked to GDP growth. If the economy is not growing, then jobs aren’t being added.” The Wall Street Journal (Fri., August 5, 2011): A13.
(Note: ellipses added.)

Krugman Says Economic Policy of Past Two Years “Isn’t Working”

(p. A21) . . . we already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t.

For the full commentary, see:
PAUL KRUGMAN. “The Wrong Worries.” The New York Times (Fri., August 5, 2011): A19.
(Note: ellipsis added.)
(Note: the online version of the commentary is dated August 4, 2011.)

Consumption Is More Equal Than Income

Source of graph: online version of the NYT commentary quoted and cited below.

Income inequality is widely derided. But inequality in consumption is more meaningful than inequality in income. The wonderful graph above, and the commentary quoted below, show that consumption per person is much more equal than the usually-used income per household.
(Click on the graph to pop up a larger version that is easier to read.)

(p. 14) It’s true that the share of national income going to the richest 20 percent of households rose from 43.6 percent in 1975 to 49.6 percent in 2006, the most recent year for which the Bureau of Labor Statistics has complete data. Meanwhile, families in the lowest fifth saw their piece of the pie fall from 4.3 percent to 3.3 percent.

Income statistics, however, don’t tell the whole story of Americans’ living standards. Looking at a far more direct measure of American families’ economic status — household consumption — indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.

For the full commentary, see:
Cox, W. Michael, and Richard Alm. “You Are What You Spend.” The New York Times, Week in Review (Sun., February 10, 2008): 14.

Much of U.S. Job Gains Are in Texas

(p. 1A) While the nation’s job growth has limped along since the economic recovery began two years ago, the Lone Star State is enlarging payrolls in Texas-size fashion.

From June 2009 to June 2011 the state added 262,000 jobs, or half the USA’s 524,000 payroll gains, according to the Federal Reserve Bank of Dallas and the Bureau of Labor Statistics. Even by a more conservative estimate that omits states with net job losses, Texas’ advances make up 30% of the 1 million additions in the 34 states with net growth.

For the full story, see:
Paul Davidson. “Need a Job? Move to Texas.” USA Today (Tues., JULY 20, 2011): 1A.
(Note: the online version of the article has the title “Texas bucks national unemployment trend.”)

Private ADP Job Data May Better Capture Startup Job Growth than Government Data

“ADP” in the quote below, stands for Automatic Data Processing Inc. which is a large payroll processing firm that provides job growth data that are an alternative to the official Bureau of Labor Statistics numbers. Recent research by Haltiwanger and others, has indicated that startups may have an under-appreciated large role in job growth.

(p. C1) It has been dubbed “Another Dumb Payroll” report and a “random number generator.” But the ADP employment report doesn’t entirely deserve its bad rap.

. . .
ADP may better capture . . . new business formation than Labor Department estimates. BofA Merrill Lynch economist Michelle Meyer notes that new firms show up in ADP data after two months of existence; the government doesn’t have complete records until much later. Indeed, more than half the 187,000 new jobs ADP reported last month came from businesses with fewer than 50 employees.

For the full story, see:
KELLY EVANS. “AHEAD OF THE TAPE; Respect for ADP: Jobs Picture Is Brighter.” The Wall Street Journal (Tues., FEBRUARY 4, 2011): C1.
(Note: ellipses added.)
(Note: the online version of the story has the title “AHEAD OF THE TAPE; Respect for ADP: Jobs Picture Is Brighter Than Thought.”)

For some of the work showing the importance of startups in job creation, see:
Haltiwanger, John C., Ron S. Jarmin, and Javier Jarmin. “Who Creates Jobs? Small Vs. Large Vs. Young.” NBER Working Paper # 16300, August 2010.

Few Good Jobs for China’s College Graduates

(p. A13) BEIJING–Young people calling themselves the “ant tribe” and living in Beijing’s outskirts have prompted a national discussion about the tough job market for college graduates in China.
The term “ants”–referring to the graduates’ industriousness as well as their crowded, modest living conditions–was coined in a book by Lian Si, a professor at the University of International Business and Economics in Beijing, who in a 2007-09 survey of 600 Beijing-area college graduates found their average monthly income was the equivalent of $300.
The book touched a nerve in China, inspiring both admiration for the young people’s striving and indignation at their living conditions. Earlier this year, several members of the Chinese People’s Political Consultative Conference, an advisory body to the government, said they were moved to tears on a visit to the village of Tangjialing when they heard two young men who shared a 50-square-foot room sing a song they composed about their tough lives.
. . .
The “Song of the Ants” is a favorite. Its refrain: “Though we have nothing, we are tough in spirit; though we have nothing, we are still dreaming; though we have nothing, we still have power; though we have nothing, we are not afraid of being deserted.”

For the full story, see:
Sue Feng and Ian Johnson. “Job Squeeze in China Sends ‘Ants’ to Fringes; Millions of College Graduates Stack Up, Seek Cheap Living on Beijing Outskirts.” The Wall Street Journal (Tues., May 4, 2010): A13.
(Note: ellipsis added.)
(Note: the online version of the story is dated May 3, 2010 and has the title “China Job Squeeze Sends ‘Ants’ to Fringes; Millions of College Graduates Stack Up, Seek Cheap Living on Beijing Outskirts.”)