Labor Economics – Page 85 – artdiamondblog.com

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.

Samuel Johnson Saw Benefits of Free Markets

(p. A19) In “A Journey to the Western Islands of Scotland,” an account of his travels with James Boswell through the Hebrides in 1773, Johnson vividly described the desolation of a feudal land, untouched by commercial exuberance. He was struck by the utter hopelessness in a country where money was largely unknown, and the lack of basic material improvements–the windows, he noticed, did not operate on hinges, but had to be held up by hand, making the houses unbearably stuffy.

He was even more struck by the contrast between places where markets thrived and those where they didn’t. In Old Aberdeen, where “commerce was yet unstudied,” Johnson found nothing but decay, whereas New Aberdeen, which “has all the bustle of prosperous trade,” was beautiful, opulent, and promised to be “very lasting.”
Johnson also understood that what Smith would later call the division of labor was instrumental for human happiness and progress. “The Adventurer 67,” which he wrote in 1753 at the height of a commercial boom (and 23 years before Smith published “The Wealth of Nations”), delights in the sheer number of occupations available in a commercial capital like London.

For the full commentary, see:
ELIZA GRAY. “Samuel Johnson and the Virtue of Capitalism; The great 18th century writer on commerce and human happiness.” The Wall Street Journal (Fri., Sept. 11, 2009): A19.

Happy Entrepreneur: “Even When Things Get Tough, I’m Still in Control”

“‘Roger the Plumber’ owns his own business and is excited to go to work every day.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D1) By economic yardsticks, Roger the Plumber should be feeling pretty low. Roger Peugeot, owner of the 14-employee Overland Park, Kan., plumbing company that bears his name, is part of a sector hit hard by shrunken credit and slumping sales. He has been forced to reduce staff and is battling new competition from other plumbers fleeing the construction industry.

So why is Mr. Peugeot so happy? He genuinely likes fixing plumbing messes, for one thing, and despite the worst recession he has seen, “I’m still excited to get up and go to work every day,” he says. He relishes running into people at the local hardware store whom he has helped in the past. And in hard times, he says, his fate is in his own hands, rather than those of a manager. “Even when things get tough, I’m still in control,” he says.
In the broadest, most-comprehensive survey yet of how occupation affects happiness, business owners outrank 10 other occupational groups in overall well-being, based on the landmark survey of 100,826 working adults set for release today. Defined as self-employed store or factory owners, plumbers and so on, business owners surpassed 10 other occupational groups on a composite measure of six criteria of contentment, including emotional and physical health, job satisfaction, healthy behavior, access to basic needs and self-reports of overall life quality.
This puts Roger the Plumber well ahead of movers and shakers typically regarded as the top of the heap in society–professionals such as doctors or lawyers, who ranked second, and executives and managers in corporations or government, who came in third–according to the Gallup-Healthways Well-Being Index, a collaboration between Gallup and Healthways, a Franklin, Tenn., health-management concern. This is despite business owners ranking below those more-prestigious occupations in physical health and access to basic needs, such as health care.
. . .
“Despite the recession, it still pays to be your own boss,” says Frank Newport, editor in chief of the Gallup Poll. The survey, adds John Howard, director of the National Institute for Occupational Safety and Health, “reaffirms my view that the more control you have over your work, the happier you are.”

For the full story, see:
SUE SHELLENBARGER. “Plumbing for Joy? Be Your Own Boss.” The Wall Street Journal (Weds., SEPTEMBER 15, 2009): D1-D2.
(Note: ellipsis added.)

Doctors Seek to Regulate Retail Health Clinic Competitors

“A nurse practitioner with a patient at a retail clinic in Wilmington, Del.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen, in a chapter of Seeing What’s Next, and at greater length in The Innovator’s Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.
An obstacle to the realization of Christensen’s vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:

(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors’ groups and hospitals.

Walgreen Co.’s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.
. . .
As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.
. . .
(p. B2) But such moves are raising the ire of physicians’ groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.
. . .
The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

For the full story, see:
AMY MERRICK. “Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors.” The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.
(Note: ellipses added.)

A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. “How CEOs Can Help Fix Health Care.” The Wall Street Journal (Tues., July 28, 2009).

For the full account, see:
Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator’s Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.

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

Empathetic Judges Are Unjust to Bastiat’s “Unseen”

(p. A15) . . . , a compassionate judge would tend to base his or her decisions on sympathy for the unfortunate; an empathetic judge on how the people directly affected by the decision would think and feel. What could be wrong with that?

Frederic Bastiat answered that question in his famous 1850 essay, “What is Seen and What is Not Seen.” There the economist and member of the French parliament pointed out that law “produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.” Bastiat further noted that “[t]here is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”
This observation is just as true for judges as it is for economists. As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about — that is, for those who are “seen.”
One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.

For the full commentary, see:
JOHN HASNAS. “The ‘Unseen’ Deserve Empathy, Too.” The Wall Street Journal (Fri., MAY 29, 2009): A15.
(Note: ellipsis added.)

“How Do We Get on the Special Interests, Special Treatment Bandwagon?”

Uncreative destruction. “Jose Luis Garcia pours sodium silicate into a junkyard car engine to render it inoperable at a lot in Sun Valley, Calif., on Tuesday. The process destroys the car’s engine in a matter of minutes.” Source of photo and part of caption: online version of the WSJ article quoted and cited below.

(p. A4) WASHINGTON — Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.
Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said.
The clunkers program, formally known as the Car Allowance Rebate System, offers subsidies of as much as $4,500 to consumers who trade in older vehicles and buy new, more fuel-efficient models. The program was initially given $1 billion. That money was spent in one week.
The Senate reached a deal to extend the clunkers program Wednesday night, agreeing to vote on a measure Thursday that would add $2 billion to the program, the Associated Press reported.
The House approve a $2 billion extension last week.
For Mr. Wiygul and other mechanics, until now the recession has brought them more customers as people fixed cars rather than go into debt for new ones. He has hired five people and is expanding one of the shops.
Auto dealers who offer the rebates on new cars in exchange for clunkers must agree to “kill” the old models by disabling the engines and shipping the dead vehicle to a junkyard.
The loss of such potential work — as many as 250,000 vehicles will be destroyed in the program’s first round — prompted Mr. Wiygul to question the federal program’s focus on dealers and big business at the expense of the little guy.
“How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

For the full commentary, see:
GARY FIELDS. “Clunkers Plan Deflates Mechanics.” The Wall Street Journal (Thurs., AUGUST 6, 2009): A4.