Labor Economics – Page 84 – artdiamondblog.com

An “Entrepreneur’s Visa” to Let the Future Sergey Brin In

(p. A19) . . . , there is one way to create a lot more jobs without spending federal money. Let’s import them. More precisely, let’s import the people who create them: entrepreneurs.

A bipartisan bill that would begin to do just that was introduced on Feb. 24 by Sens. John Kerry (D., Mass.) and Richard Lugar (R., Ind.). Their “Startup Visa Act” would create a new, two-year visa for immigrant entrepreneurs whose firms attract at least $250,000 in financing from American angel investors or venture capital firms.
. . .
Here’s a way to improve on the Kerry-Lugar plan. Create a true “job creator’s visa,” one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.
. . .
Google was founded by Sergey Brin, a Russian immigrant, and American Larry Page by borrowing funds from their own credit cards. Why on earth would we want to create an entrepreneurs’ visa that couldn’t let in the future Sergey Brin?

For the full commentary, see:
ROBERT E. LITAN. “Visas for the Next Sergey Brin; To create more jobs, let’s import more employers.” The Wall Street Journal (Mon., MARCH 8, 2010): A19.
(Note: ellipses added.)
(Note: the online version of the article is dated MARCH 7, 2010.)

Largest Decline in Private Sector Union Members in 25 Years

(p. A3) Organized labor lost 10% of its members in the private sector last year, the largest decline in more than 25 years. The drop is on par with the fall in total employment but threatens to significantly limit labor’s ability to influence elections and legislation.

On Friday, the Labor Department reported private-sector unions lost 834,000 members, bringing membership down to 7.2% of the private-sector work force, from 7.6% the year before. The broader drop in U.S. employment and a small gain by public-sector unions helped keep the total share of union membership flat at 12.3% in 2009. In the early 1980s, unions represented 20% of workers.

For the full story, see:
KRIS MAHER. “Union Membership Declines by 10%.” The Wall Street Journal (Sat., January 23, 2010): A3.
(Note: the online version of the article has the slightly different title “Union Membership Drops 10%.”)

Entrepreneurial Judgment Can Be Right Even When It Is Hard to Articulate

Entrepreneurs may develop a good sense of people, even though they cannot articulate their judgment. Yet their firms, and our economy, might be more efficient and productive if they were allowed to follow their judgments, rather than follow Human Resource Department credentialism and paper trails.
The entrepreneurs might make mistakes, but in an open economy they would pay a price for their mistakes in profits foregone, and hence would have an incentive to correct the mistakes. And there would be plenty of alternative jobs for anyone mistakenly fired.

(p. 91) I’ve been wrong in my judgments about men, I suppose, but not very often. Bob Frost, one of our key executives on the West Coast, will remember the time he and I were checking out stores, and I got a very unfavorable impression of one of his young managers. As we drove away from the store I said to Bob, “I think you’d better fire that man.”
“Oh, Ray, come on!” he exclaimed. “Give the kid a break. He’s young, he has a good attitude, and I think he will come along.”

“You could be right, Bob,” I said, “but I don’t think so. He has no potential.”
Later in the day, as we were driving back to Los Angeles, that conversation was still bugging me. Finally I turned to Bob and yelled, “Listen goddammit I want you to fire that man!”
One thing that makes Bob Frost a good executive is that he has the courage of his convictions. He also sticks up for his people. He’s a retired Navy man, and he knows how to keep his head under fire. He simply pursed his lips and nodded solemnly and said, “If you are ordering me to do it, Ray, I will. But I would like to give him another six months and see how he works out.”
I agreed, reluctantly. What happened after that was the kind of (p. 92) personnel hocus-pocus that government is famous for but should never be permitted in business, least of all in McDonald’s. The man hung on. He was on the verge of being fired several times in the following years, but he was transferred or got a new supervisor each time. He was a decent guy, so each new boss would struggle to reform him. Many years later he was fired. The assessment of the executive who finally swung the ax was that “this man has no potential.”
Bob Frost now admits he was wrong. I had the guy pegged accurately from the outset. But that’s not the point. Our expenditure of time and effort on that fellow was wasted and, worst of all, he spent several years of his life in what turned out to be a blind alley. It would have been far better for his career if he’d been severed early and forced to find work more suited to his talents. It was an unfortunate episode for both parties, but it serves to show that an astute judgment can seem arbitrary to everyone but the man who makes it.

Source:
Kroc, Ray. Grinding It Out: The Making of McDonald’s. Chicago: Henry Regnary Company, 1977.

Another Boeing BHAG Takes Flight

“Members of the public watched the first test flight of the Boeing 787 on Tuesday in Everett, Wash.” Source of caption and photo: online version of the NYT article quoted and cited below.

In their stimulating business best-seller Built to Last Collins and Porrus have a chapter in which they argue that one way to attract and retain the best employees is to give them a difficult but important project to work on. They call such projects “BHAGs,” which stands for Big Hairy Audacious Goals. Among their main examples (e.g., p. 104) of BHAGs were Boeing’s development of the 707 and 747.
Boeing’s latest BHAG is the 787 Dreamliner.

(p. A25) EVERETT, Wash. — The new Boeing 787 Dreamliner lifted into the gray skies here for the first time on Tuesday morning, more than two years behind schedule and burdened with restoring Boeing’s pre-eminence in global commercial aviation.

“Engines, engines, engines, engines!” shouted April Seixeiro, 37, when the glossy twin-engine plane began warming up across from where spectators had informally gathered at Paine Field. Ms. Seixeiro was among scores of local residents and self-described “aviation geeks” who came to watch the first flight.
Moments after the plane took off at 10:27 a.m., Mrs. Seixeiro was wiping tears from her eyes. A friend, Katie Bailey, 34, cried, too.
“That was so beautiful,” Ms. Bailey said.

For the full story, see:
WILLIAM YARDLEY. “As 787 Takes Flight, Seattle Wonders About Boeing’s Future.” The New York Times (Weds., December 16, 2009): A25.
(Note: the online version of the article has the title “A Takeoff, and Hope, for Boeing Dreamliner” and is dated December 15, 2009.)

The reference for the Collins and Porras book is:
Collins, James C., and Jerry I. Porras. Built to Last: Successful Habits of Visionary Companies. New York: HarperBusiness, 1994.

Like Cesar Chavez, Union Intimidates Its Own Members

“Amelia Frank-Vitale, a former union organizer, said the practice of pink sheeting sent her into therapy.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) After six years working in the laundry of a Miami hotel, Julia Rivera was thrilled when her union tapped her to become a full-time union organizer.

But her excitement soon turned to outrage.
Ms. Rivera said her supervisors at Unite Here, the hotel and restaurant workers’ union, repeatedly pressed her to reveal highly personal information, getting her to divulge that her father had sexually abused her.
Later, she said, her supervisors ordered her to recount her tale of abuse again and again to workers they were trying to unionize at Tampa International Airport, convinced that Ms. Rivera’s story would move them, making them more likely to join the union.
“I was scared not to do what they said,” said Ms. Rivera, adding that she resented being pressured to disclose intimate information and then speak about it in public. “To me, it was sick. It was horrible.”
Ms. Rivera and other current and former Unite Here organizers are speaking out against what they say is a longstanding practice in which Unite Here officials pressured subordinates to disclose sensitive personal information — for example, that their mother was an alcoholic or that they were fighting with their spouse.
More than a dozen organizers said in interviews that they had often been pressured to detail such personal anguish — sometimes under the threat of dismissal from their union positions — and that their supervisors later used the information to press them to comply with their orders.
“It’s extremely cultlike and extremely manipulative,” said Amelia Frank-Vitale, a Yale graduate and former hotel union organizer who said these practices drove her to see a therapist.
Several organizers grew incensed when they discovered that details of their history had been put into the union’s database so that supervisors could use that information to manipulate them.
“This information is extremely personal,” said Matthew Edwards, an organizer who had disclosed that he was from a broken home and was overweight when young. “It is catalogued and shared throughout the whole organizing department.”
. . .
(p. B5) Several organizers likened pink sheeting to a practice that Cesar Chavez, former president of the United Farm Workers, used when he embraced a mind-control practice developed by Synanon, a drug rehabilitation center founded in Santa Monica, Calif. Union staff members were systematically subjected to intense, prolonged verbal abuse in an effort to break them down and assure loyalty.
. . .
Ms. Frank-Vitale, now a graduate student at American University, says she is still haunted by memories of pink sheeting.
“One night my supervisor pushed me and pushed me, and I started talking about being an overweight woman in America, what that was like in high school, that it was very difficult for me,” she said. “I felt kind of violated.”

For the full story, see:
STEVEN GREENHOUSE. “Some Organizers Protest Their Union’s Tactics.” The New York Times (Thurs., November 19, 2009): B1 & B5.
(Note: the online version of the article is dated November 18, 2009.)
(Note: ellipses added.)

Microsoft Hired Good People and Gave Them the Space and Privacy to Think

Not Microsoft. “Mark Clemente, a Steinreich Communications vice president, in the firm’s smaller Hackensack, N.J., office.” Source of caption and photo: online version of the WSJ article quoted and cited below.

The article quoted below documents the trend in business toward small, and more open offices. I believe that this trend is largely a mistake.
Another trend in business (see Levy and Murnane 2004) is for more jobs to involve thinking and creativity. Thinking and creativity are harder in an environment of noise and frequent and unpredictable interruptions.
David Thielen’s book on the secrets of Microsoft’s success that said that Microsoft emphasized hiring really good people, and then respected them enough to give them an office with a door, so they could have the space and privacy to think and create (e.g., pp. 17-35 & 147-150).
Microsoft had the right idea.

(p. B7) The office cubicle is shrinking, along with workers’ sense of privacy.

Many employers are trimming the space allotted for each worker. The trend has accelerated during the recession as employers seek to cut costs and boost productivity.
. . .

Tighter quarters and open floor plans also can present challenges. David Lewis, president of OperationsInc LLC, a Stamford, Conn., provider of human-resources services to more than 300 U.S. companies, says open floor plans and low cubicle walls can create discord and lead to increased turnover.
“Now everybody knows everybody else’s business,” he says. “It actually starts to create a level of tension in an office that never existed before. People can’t focus on work because they’re on top of each other.”

For the full story, see:
SARAH E. NEEDLEMAN. “THEORY & PRACTICE; Office Personal Space Is Crowded Out; Workstations Become Smaller to Save Costs, Taking a Toll on Employee Privacy.” The Wall Street Journal (Mon., DECEMBER 7, 2009): B7.
(Note: ellipsis added.)

The Levy and Murnane book mentioned above, is:
Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.
The Thielen book is:
Thielen, David. The 12 Simple Secrets of Microsoft Management: How to Think and Act Like a Microsoft Manager and Take Your Company to the Top. New York: McGraw-Hill, 1999.

Intel’s Computer-on-a-Chip “Was Achieved Largely by Immigrants from Hungary, Italy, Israel, and Japan”

(p. 111) By launching the computer-on-a-chip, Intel gave America an enduring advantage in this key product in information technology–an edge no less significant because it was achieved largely by immigrants from Hungary, Italy, Israel, and Japan. Intel’s three innovations of 1971–plus the silicon gate process that made them the smallest, fastest, and best-selling devices in the industry–nearly twenty years later remain in newer versions the most powerful force in electronics.

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

Doctorow’s “Makers” Novel Paints Unrealistically Bleak View of Life with Creative Destruction

Source of book image: http://www.globalnerdy.com/wordpress/wp-content/uploads/2009/11/makers.jpg

Awhile back I mentioned a science fiction book that made use of the process of creative destruction. Here’s a discussion of another one—called Makers, it apparently adopts the unlikely premise that a world of creative destruction would have a 20% unemployment rate. (I say “unlikely” because the evidence is that in a world of creative destruction, as many new jobs are created as old ones are destroyed.)

(p. A19) Consider the world of “Makers,” the latest by best-selling writer Cory Doctorow. This novel is set in a not-too distant future, when the creative destruction of technological change has created an economy so efficient, with profit margins so thin, that traditional companies can hardly stay in business.

The inventor-heroes of “Makers” take technology to its conclusion: They figure out a way to use three-dimensional printers to produce copies of machines and most anything else at close to no cost. This sparks “New Work,” with geeky investment bankers scouring the country to fund promising artisans who use the technology to build things cheaply. The heroes also run a series of entertainment rides across the country in abandoned Wal-Marts, until Disney unleashes its lawyers on them.
Mr. Doctorow, a Canadian living in London, has a keen eye for the pressures on contemporary business. In the novel, an M.B.A. brought in to work with the inventors explains, “The system makes it hard to sell anything above the marginal cost of goods, unless you have a really innovative idea, which can’t stay innovative for long, so you need continuous invention and reinvention, too.”
. . .
In the world of “Makers,” and perhaps in our own world, “we’re approaching a kind of pure and perfect state now, with competition and invention getting easier and easier–it’s producing a kind of superabundance.”
Mr. Doctorow paints a bleak picture of the process of getting there, even if many of us take a more benign view of increasingly efficient capitalism. “Makers” features widespread unemployment, with 20% of workers relocating to look for jobs. Even with scientific advances–obesity is solved, for example–life is brutal. There are squatter neighborhoods alongside abandoned strip malls.

For the full story, see:

L. GORDON CROVITZ. “Technology Is Stranger Than Fiction; Best-selling writer Cory Doctorow on change and its discontents.” The Wall Street Journal (Mon., NOVEMBER 23, 2009): A19.
(Note: ellipsis added.)

Young Firms Create Two-Thirds of New Jobs

(p. A25) While a slight improvement over last month’s numbers, today’s employment update from the Bureau of Labor Statistics presents a dismal picture for American workers. As policy makers search for the best remedies to strengthen our economic performance, they can’t afford to overlook new firms and young firms.

Unfortunately, in troubled economic times the language of recovery is too often tilted toward large, established companies or to “small businesses,” a broad term that traditionally applies to businesses with fewer than 500 employees. The conventional wisdom is that such businesses account for half of the labor force and are therefore the engine of future job creation.
That’s not quite the case. The more precise factor is not the size of businesses, but rather their age. According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years.
. . .
Entrepreneurs have a proven track record of job creation, especially in the early years of their firms. Eliminating or lowering the economic and regulatory hurdles that stand in the way of their success will pave the way for sustained expansion after the government’s current stimulus measures come to their inevitable end.

For the full commentary, see:
CARL SCHRAMM, ROBERT LITAN AND DANE STANGLER. “New Business, Not Small Business, Is What Creates Jobs; Nearly all net job creation since 1980 occurred in firms less than five years old.” The Wall Street Journal (Fri., NOVEMBER 6, 2009): A25.
(Note: ellipsis added.)

Stimulus Recipients “Have Strong Incentives to Inflate Their Reported Numbers”

(p. A19) After reporting GDP, the government released new numbers claiming that the stimulus programs have “created or saved” over a million jobs. These data were collected from responses by government agencies that received federal funds under the American Recovery and Reinvestment Act of 2009. Agencies were required to report “an estimate of the number of jobs created and the number of jobs retained by the project or activity.” This report is required of all recipients (generally private contractors) of agency funds.

Unfortunately, these data are not reliable indicators of job creation nor of the even vaguer notion of job retention. There are two major problems. The first and most obvious is reporting bias. Recipients have strong incentives to inflate their reported numbers. In a race for federal dollars, contractors may assume that the programs that show the most job creation may be favored by the government when it allocates additional stimulus funds.
No dishonesty on the part of recipients is implied or required. But when a hire conceivably can be classified as resulting from the stimulus money, recipients have every incentive to classify the hire as such. Classification as stimulus-induced is even more likely if a respondent must only say that, except for the money, an employee would have been fired. In this case, no hiring need occur at all.
. . .
Net labor market figures do exist. Administrations have always been held to the time-tested and well-understood monthly job numbers put out by the Bureau of Labor Statistics, which reports the unemployment rate and the net job gain or loss for the economy as a whole. It is important to use reliable, accurate and well-understood numbers to determine the true causes of recovery. The unemployment rate, now at 9.8%, has continued to rise, and job losses have remained at high levels throughout the stimulus period. Few will be comforted by the good-news-only claim that the stimulus “created or saved” over one million jobs.

For the full commentary, see:
EDWARD P. LAZEAR. “Stimulus and the Jobless Recovery; Jobs ‘created or saved’ is meaningless. What matters is net job gain or loss, and that means the unemployment rate.” The Wall Street Journal (Mon., NOVEMBER 2, 2009): A19.
(Note: ellipsis added.)
(Note: the online version of the article was dated Nov. 1st.)

Calderón’s Decision Is Bigger than Reagan’s Firing of Air Traffic Controllers

“The Mexican Union of Electricians protests the government’s decision to liquidate the state-owned electricity company in Mexico City.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A19) Eight days ago, just after midnight on a Sunday morning, Mexican President Felipe Calderón instructed federal police to take over the operations of the state-owned electricity monopoly, Luz y Fuerza del Centro (LyFC), which serves Mexico City and parts of surrounding states. The company’s assets will stay in the hands of the government but will now be run by the Federal Electricity Commission (CFE), a national state-owned utility and the major supplier of LyFC’s energy.

The net effect of the move is to dethrone 42,000 members of the Mexican Union of Electricians, which had won benefits over the decades to make Big Three auto workers in Detroit blush. When the liquidation is complete, it is expected that the company will employ about 8,000. To appreciate the magnitude of Mr. Calderón’s decision, think of Ronald Reagan’s firing of the air traffic controllers–only bigger. As one internationally renowned Mexican economist remarked on Sunday, it is “the most important act of government in 20 years.”

For the full commentary, see:
MARY ANASTASIA O’GRADY. “Mexico’s Calderón Takes on Big Labor; Its state-owned electricity company was bleeding the national treasury dry.” The Wall Street Journal (Mon., October 19, 2009): A19.