Finding a job

Susannah Breslin at Forbes ruminates on finding a job when unemployed.

The advice about getting out the door and not just sitting at home sending out resumes sounds like good advice to me. And the role of chance cannot be denied, even in highly organized markets like that for new Ph.D.'s in economics.

IZA Prize

Congratulations to George Borjas and Barry Chiswick, the winners of this year's IZA prize in labor economics!

Stripper career paths

An interview with a stripper from Susannah Breslin at Forbes. Note the important social work component in the job description.

State of the labor market

Heidi Shierholz at the Employment Policy Institute, a Michigan Ph.D. from (just) before my arrival here, provides a useful summary the dismal recent statistics.

Note that the policy recommendations in the last paragraph do not follow in any obvious way from the discussion that precedes them.

Cedar Rapids is more realistic than I thought

On randy insurance salesmen or, more precisely, re-insurance men, in Germany.

Somewhere in here is a paper on when workers prefer compensation in kind to compensation in cash.

Hat tip: anonymous UM gradual student

Compelling evidence on college dropout

I happened to read this paper over the past few days:

Learning about academic ability and the college drop-out decision

Todd Stinebrickner

The University of Western Ontario

Ralph Stinebrickner

Berea College

Abstract: We use unique data to examine how college students from low income families form expectations about grade performance/academic ability and to examine the role that learning about these factors plays in the college drop-out decision. With respect to beliefs, at college entrance students are considerably overoptimistic. Subsequent updates depend on both initial beliefs and new information arriving in the form of grades, with individual heterogeneity in the weights assigned to initial beliefs and grades depending on individual-specific views about the underlying reasons for grade performance that are suggested to be of importance by a Bayesian model. While students with the worst grade performance update dramatically, they tend to remain overoptimistic because they understate the importance of permanent factors in determining their performance. With respect to drop-out, we find that learning about grade performance/ability plays a very prominent role; our predictions suggest that drop-out would be reduced by 41% if no learning occurred about these factors. Finally, the paper contributes directly to a recent literature examining gender differences in educational attainment and gender differences in other behavior. We find that the substantial gender difference in drop-out in our sample is predicted almost entirely by academic differences (1st year grades and beliefs about future grades), and we find direct evidence of gender differences in effort and gender differences in the non-pecuniary cost of effort. As to why poorly performing males decided to enter college, we find that, at entrance, males are substantially more overoptimistic than females.

The paper relies on the unique data from the Berea Panel Survey that the two Stinebrickner's designed and continue to field. This work, and a string of other papers using the same data, really illustrate the value of thoughtful data collection that is well-informed by the recent literature on measurement - particularly expectations measurement in this case, by the relevant theoretical literature, and by specific questions of academic and policy interest.

The results of the study suggest that many students enter college with remarkably misguided ideas about their own ability and about the workload required to succeed in college. It seems to me that high schools ought to be able to provide this information relatively cheaply and that doing so would be of great social benefit. While some learning at college is both inevitable and optimal, four year colleges in particular are very expensive for society to provide and having large numbers of students attend for only one or two years in order to learn that they are poorly suited for college-level work is a serious waste of resources.

Full disclosure: Todd is a friend and former colleague.

On compensating differences and amateurs

A fine post from Will Wilkinson at the Economist's Democracy in America blog about the partial replacement of professional newspaper photography by high-end "amateurs" nicely illustrate a general point, which is that salaries will usually be low in fields in which there are lots of people who enjoy the job enough that they are willing to do it for little in the way of monetary payment.

I suspect, for example, that in the absence of unions, elementary school teachers would make less than middle school teachers precisely because it is more fun to teach little kids than tweens. A similar point applies to daycare workers. There are lots of pretty good amateurs without degrees in child development willing to do this job for low pay, because they like hanging out with children a lot more than standing at a retail counter or an assembly line, and so the wages stay low unless propped up by laws that limit entry via degree requirements.

This also explains why humanities professors make less than faculty in other fields, and why so many people are willing to spends years getting doctorates in the humanities even when the chances of ending up in a tenure track position are low. There are lots of people who think it would be great fun to spend all their time thinking about, and teaching about, and researching about, literature and art. Some people think that about economics and physics, too, but the person at the occupational margin who sets the compensating difference is less enthused, or at least has better outside options that give some of the same satisfaction.

Still more broadly, it is always worth remembering when people talk about inequality in wages or incomes that any proper moral theory should be concerned with inequality in utility, rather than wages, and that in some cases more wage equality can mean less equality of utility. This will necessarily be the case if wages for jobs that are more fun are made equal to those in jobs that are less fun.

McJobs

McDonald's tries to improve the imagine of McJobs.

Ron Ehrenberg on elite colleges

The Ithaca Times summarizes Ron's views on higher education research and policy. Ron is a very distinguished labor economist who has written and edited an astounding number of books, and is co-author on one of the leading undergraduate labor economics texts.

I think the room in the picture in the article is the same one I gave my seminar in last week.

Economics of unions

Gilles Saint-Paul writes the post I've been meaning to write over at the Economist debate site.

Note the power of straight, dispassionate analysis to cut through the misleading moral fog.

I've only met Gilles once. We ended up somewhere in Germany, I don't recall where now, on the same day, and had a joint seminar dinner. My recollection is that he is quite entertaining, so if you get the chance to share a beer (or maybe wine) or a meal, take it.

IZA Prize to Fran Blau

Though the award itself was announced a couple of months ago, last night was the dinner at which Fran Blau officially received her well-deserved IZA Prize in Labor Economics.

I have to say that Fran gave what was probably the most sincere, moving acceptance speech that I have ever heard.

Congrats to Fran!

Is grade inflation bad?

The NYT has a piece on grade inflation that rather misses the point. It really does not matter what the labels are, whether they are five different kinds of A, A through F, or X, Y and Z. What matters is how well the information get conveyed. While there is a fair amount of work showing mean grades increase over time, what I am not aware of is much if any work showing that the information content of the grades has decreased over time. If everyone is playing along at home, so to speak, so that employers realize that when Bush and Gore got their C's at Yale those represented something very different than a C would today, then so what?

More broadly, the use of information such as grades, test scores, major and so on by workers and employers in the labor market has always seemed to me relatively under-studied in economics. John Bishop at Cornell has some good stuff, but there is not much else.

Mankiw on UI

A thoughtful post from Mankiw on Unemployment Insurance (UI).

He leaves out a couple of bits that are relevant to the current discussion. The first is that one additional benefit of UI centers on increasing the quality of job matches. Severely credit constrained workers without much in the way of assets will make bad job matches very quickly in the absence of UI and that has some costs for the economy in terms of forgone output and later job switching.

The second is that my understanding of the optimal UI literature is that it does have one fairly robust finding, which is that UI benefits should decline with spell length. This finding pops out fairly quickly from a model in which individuals have heterogeneous tastes for leisure. Among those with long spells, individuals with a strong taste for leisure are over-represented because the dynamic selection process weeds out those who do not like leisure earlier in the spell. As the optimal UI payment is decreasing in taste for leisure, so also is it decreasing in spell length.

The third is that there are dynamic issues here. We are setting up expectations for the next recession. This increases the impact of current extensions on future budgets.

I think I would be inclined to do the following in terms of an extension:

(1) Don't call the checks UI. Call them "Temporary Aid to the Long Term Unemployed". This makes it clear that they are welfare and not social insurance via the parallel to Temporary Aid to Needy Families. It also, hopefully, reduces expectations regarding future, milder, recessions.

(2) Following the optimal UI literature, reduce the replacement rate so that payments decline a bit. One could even think about dropping the replacement rate business altogether (along the theme that this is not a social insurance program and not really UI) and tying the payments to demographics instead. The cost of that is a whole bunch of bureaucracy that it would be hard to do quickly (and for which UI offices are likely ill-suited), so I guess I prefer just reducing the replacement rate a bit for practical reasons. Similar practical concerns arise with otherwise reasonable ideas like making people with family incomes above some level ineligible for the extended benefits.

(3) Attach some time-consuming job search requirements along the lines of those imposed in some states under the Worker Profiling and Reemployment Services System (WPRS). What I have in mind are the sorts of things Kentucky was doing when the data were generated for the Black, Smith, Berger and Noel (2003) American Economic Review paper. These sorts of required services are a two-fer. Based on the results in BSBN, they chase some people off UI who should not really be there. For the people who should be there, they may help them get a job by providing them with job search skills or simply by giving them a needed pep talk or kick in the pants. In this context, it may be useful to include some of the sorts of counseling services sometimes offered to high-wage union workers displaced from contracting industries and designed to help them adjust their wage expectations down to something closer to the value of their marginal product.

Like Greg, I think the petition is telling us about the normative views of those who sign it as well as their positive views, but there is some of both, as the statement of views at the start of the petition makes clear. I should note in full disclosure that the list of petition signers includes several friends of mine.

IZA Prize in Labor Economics

Congratulations to Francine Blau on winning the 2010 IZA Prize in Labor Economics!!!

What's in your first stage?

More nails in the coffin of the quarter of birth instrument from Kasey Buckles and Dan Hungerman at Notre Dame.

They also provide an interesting explanation for why it fails: high education mothers plan their births around the seasons.

On choosing a name for your journal

From the home page of the Journal of Human Resources:

The Journal of Human Resources is a quarterly journal that publishes academic papers using the best available empirical methods, principally in the field of economics.

It is not a management journal.

Age discrimination in silicon valley

This piece on age discrimination in the tech industry makes much of a graph showing that earnings in the industry decline with age.

I have two problems with this. First, though the article does not say so, the graph is almost certainly not the age-earnings profile for any one cohort, but rather is based on the "synthetic cohort" assumption. Under this assumption, which holds that older people at a point in time can proxy for what young people at that time will experience when they are old, allows the construction of age-earnings profiles using a single cross-section of data.

The synethetic cohort assumption seems really dubious in the context of the tech industry. Suppose the cross-section data come from 2005. The youngest individuals in the oldest group, who are 51, were then born in 1954 and went to college in the mid-70s, just before the arrival of PCs. Are they really a good proxy for what will happen to the earnings of people who are 20 in 2005 when they are in their 50s? More broadly, we know that in the population as a whole, actual cohort age earnings profiles generally look quite different than those implied by synthetic cohorts constructed from any individual cross-section.

A second, probably less important issue, is that in the oldest age group in the graph, many of the most successful workers will have retired, and so not get counted in the mean earnings figures. This sort of selective retirement would push the graph toward having a downward slope at higher ages even in the absence of any discrimination.

Ugh.

Via instatpundit

Alcohol and interviews

I found the results of this paper, which suggests that managers interviewing job candidates over dinner implicitly penalize those who order wine, a bit surprising, and am inclined to think that the story is really something else.

In particular, it would be interesting to see this replicated in the UK, where the culture of drinking at lunch [sic] still has a tiny bit of life left. And it would be interesting to replicate it in parts of the US with lots of Baptists and not much wine, e.g. Alabama, and with lots of wine and not so many Baptists, e.g. Northern California.

It would also be interesting to see whether the choice of wine or beer matters as a function of the interviewers own preferences and as a function of the job characteristics. Also, what if the problem is that the interviewee orders the house Merlot, which signals a lack of taste or knowledge, rather than the wine per se?

Having said all this, I actually notice at work lunches when people order regular coke instead of diet coke and infer something about their weight loss intentions.

Bonus points to Reuters for actually linking to the paper. Points off for writing about a paper not yet subject to peer review.

Hat tip: Charlie Brown

Working at Disney

I was expecting this to be better than it turned out to be, but it is I think still worth posting these (pretty tame) "confessions" of a Disney cast member.

Saving labor costs in Germany

The new kid on the business block in Germany is self-service bakeries. Unlike traditional bakeries, where a staff person assembles the desired baked goods for each customer, here the customer simply picks out the desired baked goods and then takes them to a cashier. The result, lower prices, 30 to 40 percent lower according to the one company, due to a smaller staff. Of course, there the cost is that some customers may misbehave and handle the food not with the tongs provided but with their hands. The main chains operate with a franchise model; here are the (English language) websites for two of them: back factory and backWERK (which roughly translates as "bakery factory" as well).

Should I note that labor costs are pretty high in Germany?

Hat tip: Michael Lechner