Tag Archives: jobs

Academic Job Looks Promising

The recent article, “Tech Leaps, Job Losses and Rising Inequality” on the New York Times by Eduardo Porter talks about how growing technology is contributing to widening of income inequality in the U.S. As implementing cheaper technologies to industries, low skilled workers are replaced by these new machines. The article points out how certain medical conditions are tried to be diagnosed by technology. One example given is how researchers at Microsoft Research are developing a system that can predict with accuracy a probability of a pregnant woman’s suffering postpartum depression by looking at her tweets on Twitter. Science has made almost impossible things possible in the last century. If technology gets developed at the same rate as it has been for last decades, we could see today’s impossible ideas to come in our hands.

So, if technology is going to grow as it has been and if new technologies are going to replace workers whose job can be done by the new machines, what human beings are left to do?

The answer is simply that those jobs which are hard for robots to perform will be the jobs that humans will be competing for. The main function of these jobs include interpersonal communication, in which today’s technology hasn’t been developed to the extent to compete with humans. The jobs that require this characteristics include teachers and professors, variety of advising jobs, and motivational speakers!  Because, as of today, the technology hasn’t reached to the point where we can substitute another human with a machine to communicate our feelings. Even though we are experiencing growth of online schools and free Massive Online Open Courses (MOOC) offered by such as edX, Coursera and Khan Academy, human to human communication which these online education technologies lack is why teachers and professors will not have to worry about their jobs as for now. Even though we can get same amount and quality of education by taking online classes or MOOC, these courses can’t offer a type of relationship we can have with our professors in college. Professors not only teach the content of the course, but they motivate students to achieve more (Remember, most of us are going to make at least $2 million in our life time according to Professor Kimball). In other words, robots haven’t been programmed to motivate us emotionally.

Another reason that demand for academic jobs will be greater in the future is that as technology replaces jobs that require low skills or skills that can be programmed in a machine, people will be looking for to get skills that machines cannot possess. Most of these skills require higher education as how advising job requires to deep knowledge about the topic from the adviser. Therefore, demand for higher education will surge in the awakening of greater technology. Presumably so, then teachers and professors will be demanded in higher numbers.

Academic job will be demanded in greater number in the future because of its inherent function of interpersonal communication and demand for higher education.

Unemployment According to FRED

 

What can we see with this graph representing the changes in the unemployment rate in the past 60 years (approximately)? We can clearly see that the unemployment rate in this graph on FRED goes through periods of crests and troughs. It seems to hover around the natural rate, 5%. The exception is in the late 70’s and the 80’s. The lower troughs of the graph are above the natural rate. This tells us that unemployment during that time was very high. In approximately 1981, the unemployment rate was over 10%. That is a very bad unemployment rate, and it indicates economic troubles. From the mid 90’s to the first decade of the new millennium, we can see that the unemployment rate hovered around 5% again.

We can see that in recent years, the unemployment rate has been very high. Part of this can be attributed to the recession of 2008. The positive is that the unemployment rate has been declining since 2010. This is a sign that the economy has been creating more and more jobs this decade. Right now, we can only hope that this trend continues. Personally, I hope that it does because I will be graduating in a bout a year, and I would like to have a job ready. In a few of my previous posts about unemployment, there has been an increasing trend in the creation of jobs this year. Each month has seen more jobs created than the previous. As I mentioned in these other posts, one of the reasons for this is the weather changing. With the winter winding down, more jobs are created. Last month, the United States added a little less than 200,000 jobs. If more than 200,000 jobs are added this month, then that would be another step in the right direction.

Going back to Mankiel’s book, A Random Walk Down Wall Street, we cannot base our decisions on previous trends. As we can see on the graph, the unemployment rate does not follow a perfectly linear trend. Stocks do not follow perfectly linear trends either. Right now, one would expect that the unemployment rate would continue to decrease because it has been this decade, according to the graph. However, something unexpected and unpredictable could happen, such as a natural disaster, that could leave a lot of people jobless. If this were to happen, then the unemployment rate would skyrocket.

Mankiel also mentions that there is more than meets the eye with investments. Once again, we could treat the unemployment rate like a stock in terms of unpredictability. I mentioned in a previous post that one reason why the unemployment rate is decreasing is that the size of the labor force is also shrinking. We need to keep background details, such as this, in mind when analyzing and making predictions and assumptions.

The minimum wage can have major effects (revised)

Minimum-Wage-kitty-520x292

Last time I wrote about how in reality, the minimum wage in America is so low that it can’t even get the average person working full time earning it out of poverty.  It is low enough that some think it may be acting as a barrier to social mobility, a defining trait of the United States.  By considering what has happened in the past after wage increases, it will be clear that the only negative effects of increasing the minimum wage is on measurements of poverty.

While It seems obvious that increasing the minimum wage would decrease poverty (the wages increased, not the poverty level), there are those that argue it will have a negligible affect, since many poverty stricken people don’t work for the minimum wage.  Even though the increase can’t end poverty, as we will see, it can have an effect on it, and can therefore be an effective tool for addressing it.  Economic theory also predicts that with an increase in the price of labor the demand for labor would decrease, resulting in lost jobs.  This notion is not consistent with past results of minimum wage increases.

First, Consider Washington, the state with the highest minimum wage in the country at $9.32/hr., with future increases tied to the consumer price index.  Surely such an extreme example should support the assertion that increasing the minimum wage results in lost jobs.  In the 16 years since the law went into effect, Washington has been above the national average with respect to job growth.

Perhaps Washington was a fluke.  An even more extreme example can be found in San Francisco, which has gone to an inflation adjusting $10.74/hr., the highest minimum in the country at any level.  In addition it has laws requiring paid sick leave and health care spending.  What it doesn’t have is the predicted job loss. This can be seen in the following graph, which tracks the effect on the San Francisco restaurant industry, which employs the largest amount of minimum wage employees.

2023116010_t670As can be seen, it tracks the surrounding counties quite well, showing no large deviation, except perhaps a small increase of hiring after the addition of paid sick leave. Since San Francisco’s minimum wage laws don’t bind the surrounding counties, it is clear that the increased minimum wage, along with other benefits, have not resulted in job losses.  If two of the most extreme cases of minimum wage increases have not resulted in less jobs, there is little support to think that lesser hourly rates would result in any significant losses.

There are less surprising results for the economy, government spending, and businesses.  In this letter from the Chicago FED the effects of a $1.75 hike in the minimum wage are analyzed.  It finds that such an increase could lead to an increase in aggregate household spending, even after accounting for spending that was lost to increased costs.  Additional research also estimates that an increase in the minimum wage could result in a decrease in government spending for the SNP program (food stamps).   A growing collection of research shows that businesses that pay a higher wages receive less theft, higher productivity, and increased worker retention.

Having seen that increasing the minimum wage won’t harm society, we consider the economic outcomes of the workers themselves.  Research by Dube provides insight into how such increases have affected workers in the past.  Tracking the effects of the minimum wage on the distribution of family income from 1990 to 2012, he finds that the coefficient on the elasticity of the poverty rate is a statistically significant -.24.  Also statistically significant (at the 1% level) is the -.32 and -.96 coefficients on the poverty gap and gap squared terms, measures of how poor the poorest families are.  This provides evidence that “…minimum wage increases do not reduce poverty by merely pushing some families above the poverty line, but rather by increasing incomes substantially and further below the poverty line.”  More concisely, increasing the minimum wage decreases the portion of the population in poverty, as well as the depth of poverty.

Increasing the minimum wage is one of the most effective tools the federal government has to fight poverty.  The minimum wage should be increased to at least the same $10.10 an hour earned by federal contractors.  Past experience has shown that this will not result in the job loss that is threatened by businesses.  It is time for the United States to take the steps needed to guarantee that a full time worker makes a wage they can live on.

 

February: A Month in Review

It has been reported by multiple newspapers that the United States added 175,000 jobs in the month of February 2014. This happened despite the brutal winter. Along with this, the unemployment rate grew from 6.6% to 6.7%. At first glance, this would cause pessimism in the current employment situation. The reason why the unemployment rate rose is because more people joined the workforce. February saw more employment than the previous two months. The Wall Street Journal, New York Times and Washington Post all delve into this topic. These figures are grounds for optimism as spring arrives.

It is important to be cautiously optimistic about the recent employment figures. Yes, more jobs were created in the month of February than in the months of January and December. This was also with harsh winter conditions from the polar vortex. If the weather played a large role in unemployment, then we could expect an even better month in March. The other side is that the unemployment rate rose. It is true that this was caused by an increase in the workforce. If more jobs are created at a faster rate than the labor force grows, then the unemployment rate will decrease. If not, the unemployment rate could continue to climb.

As a student of economics, I would say that trends are of the most important interest right now. If the weather was indeed a cause of decreased employment, then spring coming will help increase the creation of jobs. If each month in the warmer part of the year, spring and summer, sees more jobs added than the previous month, then the American labor market will be raised out of its current slump. Another trend of great interest is the population of the labor force. Whether it continues to grow is not the main focus. What is more important is the rate at which it grows compared to rate of jobs added to the economy. It is obvious that if jobs are added at a higher rate than people entering the labor force, then unemployment will decrease. If the number of people entering the work force increases at a faster rate, then the current employment slump will continue. This explains why the unemployment rate rose in February. More people joined the work force than there were jobs added.

Hopefully, this is the beginning of the end for both the polar vortex and the employment slump. This nation has been enduring both for a long time. Obviously the length of the polar vortex is insignificant compared to the length of the unemployment crisis. However, the end of the polar vortex could help the end of the United States’ employment woes. It could be the beginning of the country getting out of the great recession.

(Revised) The Stimulus Bill 5 Years Later

After a speedy five years, the U.S. can finally look back at the $787 billion stimulus law that was passed 246 to 183, with just 7 Democrats voting against it. Whether you think the law has made a significant impact on the U.S. or not, our country is still in a hole of debt. Many experts thought that the law would help turn our debt around and decrease the unemployment rate. But after a speedy five years, we are still in tremendous debt and many believe our unemployment rate has decreased because Americans have stopped looking for jobs. Where exactly did the entire $787 billion go? Nevertheless, our government had a plan, which was to bring back our economy, and overall I believe it truly has…to an extent.

“The goal at the heart of this plan is to create jobs. Not just any jobs, but jobs doing the work America needs done: repairing our infrastructure, modernizing our schools and hospitals, and promoting the clean, alternative energy sources that will help us finally declare independence from foreign oil,” President  Obama stated back in 2009.

The White House said on Monday that the law “saved or created an average of 1.6 million jobs a year for four years” and it raised the country’s GDP by between 2% and 3% from 2009 through mid-2011. “The spending ‘initiated’ 15,000 transportation projects and helped with the construction or improvement of nearly 6,000 miles of railway lines,” the Wall Street Journal mentions. Not only have we seen the stimulus money help in these types of areas, but at this point in time we have seen a have a long term positive effect on our economy. Our nation has seen a stabilization of mortgage debts, which is the biggest piece of household borrowing. We have also seen more Americans borrowing in general, whether it has been for education or cars. I believe many Americans are feeling more confident again especially with the rising stock prices.

That being said, there have also been some major improvements in the stock market as well. We have seen record highs through quantitative easing as investors have seemed to ignore earnings thanks to the Fed pumping the stimulus money into the market. But that is also something to look out for with our economy another year from now; if earnings don’t catch up, we are going to have a serious correction in the market.

The unemployment rate has been one of the major topics when looking back on the stimulus bill. The unemployment rate has dropped below 7% from a peak of 10% in October 2009, but that is also because so many people have stopped looking for work. Although the stimulus bill has provided many construction jobs to build infrastructure, many Americans have still been asking “where are the jobs?”

Where exactly are the new jobs? Besides construction, what are the other main jobs that have been created or saved? As far as I’m concerned, I don’t believe businesses have truly been hiring a surplus of Americans in recent years. Another problem that I believe was not taken into account was research, especially in the field of technology. The president stated back in 2009 that the money was also going towards promoting clean, alternative energy sources. However, “Republicans criticized a loan guarantee funded by the stimulus that went to Solyndra LLC, a solar-panel manufacturer that filed for bankruptcy in 2011. Unfortunately, now we see where other portions of the $787 billion went.

House Speaker John Boehner described the situation in a statement on Monday saying “a new normal of slow growth has set in.”

Maybe we have seen a new normal of slow growth set in, which has been the main cause to our ‘somewhat’ positive turnaround. But in retrospect, America went through a serious recession back in 2008. Something had to be done to help the country get back on its feet. Although the large stimulus law may not have solved all the country’s problems, the economy has indeed begun to move forward again.

The Stimulus Bill 5 Years Later

After a speedy five years, the U.S. can finally look back at the $787 billion stimulus bill that was passed 246 to 183, with just 7 Democrats voting against it. Whether you think the bill has made a significant impact on our country or not, our country is still in a deep hole of debt with some serious losses that experts thought the bill would help turn around. However, we have seen a positive effect on our economy overall. Was the bill the true determinate that helped decrease the unemployment rate? Nevertheless, our government had a plan, and that was to bring back our economy, which I believe it truly has, to an extent.

“The goal at the heart of this plan is to create jobs. Not just any jobs, but jobs doing the work America needs done: repairing our infrastructure, modernizing our schools and hospitals, and promoting the clean, alternative energy sources that will help us finally declare independence from foreign oil,” President  Obama stated back in 2009.

The White House said on Monday that the law “saved or created an average of 1.6 million jobs a year for four years” and it raised the country’s GDP by between 2% and 3% from 2009 through mid-2011. “The spending ‘initiated’ 15,000 transportation projects and helped with the construction or improvement of nearly 6,000 miles of railway lines,” the Wall Street Journal mentions.

There have also been some major improvements in the stock market as well. We have seen record highs thanks to quantitative easing. Investors have ignored earnings because the Fed has been pumping the stimulus money into the market. But that is also something to look out for as we wait another year; if earnings don’t catch up, we are going to have a serious correction in the market.

The unemployment rate has been one of the major topics when looking back on the stimulus bill. The unemployment rate has dropped below 7% from a peak of 10% in October 2009, but that is also because so many people have stopped looking for work. Many Americans have still been asking “where are the jobs?” House Speaker John Boehner mentioned in a statement on Monday that “a new normal of slow growth has set in.”

Maybe we have seen as new normal of slow growth set in, which has been the main cause to our somewhat positive turnaround. But in retrospect, America went through a serious recession back in 2008. Something had to be done to help the country get back on its feet. Although the large stimulus bill may not have solved all the country’s problems, the economy has gotten back up on its feet.

Wages, Benefits and Unemployment.

When the recession hit in 2008, the job market was hit very hard. Job security became a prime concern for many people. According to an article in the Wall Street Journal, the Federal Reserve Bank of Atlanta’s research said that extended jobless benefits raises unemployment by half of a percent. This makes a lot of sense because more benefits means that people will relax more about seeking employment. This causes them to be more patient as well. Finding a job that provides better benefits than the government becomes a little less common. These people under unemployment benefits would not want to accept a job with worse benefits. I understand that the point of these government benefits is to prevent these people from hitting rock-bottom and losing everything. However, it is very easy to abuse them, and this can cause people to look for jobs less actively than if they had no benefits coming in.

In other news, President Obama is looking to raise the minimum wage to $10.10. According to the New York Times, many people travel across state lines to work for a better wage than their home states. By raising the minimum wage to $10.10, this would be less likely to happen. While raising the minimum wage can help some people, it hurts employment. We all know that the minimum wage is a price floor in the labor market, so a higher minimum wage would mean higher unemployment. Another New York Times article discusses how their have been fewer hirings lately. If the minimum wage rises to $10.10, then this will simply be worse. Minimum wages create more unemployment.

These three stories can easily be tied together. They all help explain why there has been so much unemployment in the United States. Extended benefits causing people to stay unemployed longer than normal is a large contributor. Raising the minimum wage would help worsen the employment situation. When you combine these two factors you make these more passive job-seeking people more expensive to hire. When this is the case, they are less likely to find a job. Employers look for the best workers at the lowest prices. To them, it is all about turning profits. Expensive employees hurt their profits, so they would not be ideal to hire. Due to inflation costs of living have increased, which is what could possibly call for a higher minimum wage. However, the answer is not necessarily to raise the wage, but to reduce benefits. I know that finding a job can take some time, but reducing benefits lights a fire under these people trying to find new jobs, thus employment would rise.

Are we entering the age of the robot?

Technology has been improving drastically for many years now. Have we actually now reached the time when robots will take over many jobs from Americans and people around the world? It seems that we may be heading in that direction fairly soon. With the latest jobs report came an interesting puzzle of weak hiring, but solid growth. Obviously growth is a good thing. The question is, how are we having this period of solid growth without respectable hiring to go along with it? The answer may lie within the advancement of and investment in robotics.

DemeTech Corp., a Miami maker of surgical sutures and blades, is posting higher revenue but trimming payrolls. The firm is investing in technology that automates many functions, Chief Executive Luis Arguello said.

In the next two years, the firm will make as many of its products with machines “as robotics will allow,” Mr. Arguello said. After cutting 20 jobs over the past year, the company now has about 75 workers.

This is just one case of a firm moving towards robotics and better technology and away from some of the manual labor that they previously used to construct their products. And one would have to believe that if a company is able to manufacture the same product while employing and paying less people, they really don’t have any reason not to do this. Of course you need to invest in the technology and robotics, which costs money, but this can save money in the long run and in many cases the product can be produced more efficiently and effectively. Looking at the big picture, the fact that many firms have been able to enhance production at a higher rate than employment may certainly be supporting the growth of GDP regardless of a lower level of employment.

Some folks, like Lynn Stuart Parramore, do not believe that there will be a so-called ‘jobocalypse’ caused by the advancement of technology.

“If job decreases were really caused by waves of automation, the unemployment rate should have ticked up during the 1990s, when you probably started the decade with a typewriter and finished it with a laptop,” Parramore writes in her online article “Don’t buy the hype of a robot-driven ‘jobocalypse.’”

However, I don’t really buy into her argument. With some things, the past can tell you a lot about the future, but I am not so sure that applies in this scenario. According to Derek Thompson of The Atlantic, almost half of the jobs in this country could be replaced by robots within the next ten or twenty years. And while most of these are routine jobs, this is a frightening thought for many people because even if this revolution helps out the economy as a whole, the benefits will not be shared by everyone. In fact, it appears that half of the country will be sh*t out of luck if this hypothesis indeed comes to fruition. Furthermore, Bill Gates suggests that a rise of the minimum wage would also increase the likelihood that more low-end jobs would be replaced by robots as well. 

All of this taken into consideration, it seems that we are already headed into the direction of an increased robot takeover of at least some of the jobs in America. The current condition of our economy leads me to believe that more and more business owners and decision makers would like to pay as few people as possible while still being able to make their product and conduct growth. And certainly other policies that come into play over the next few months or years can have a large impact on this scenario as well. Taking this into account, I believe this should most definitely be considered an important piece to the debate over the minimum wage. While a small increase in the minimum wage would not cause some immediate disaster in terms of a robot ‘jobocalypse’, a big push could have some unintended repercussions.

A Big Step For Minimum Wage

I have always personally been amazed with our level of minimum wage in this country. For years it has always struck me that someone could be working for an hour and just receives $7.25, the current federal minimum wage level. That is about $15,000 a year, below the poverty line. I truly believe this has always been extremely low. What bothers me more is that you hear people working somewhere for maybe a year and receiving a 40 cent increase in pay. According to estimates from the liberal Economic Policy Institute, there are 28 million workers that would be affected.

During Yesterday’s State of the Union address, Obama announced that it would raise the minimum wage for workers on new federal contracts to $10.10 an hour. Now keep in mind, this is not just any person working at a McDonalds that will receive this increase, “These jobs include food service workers in federal buildings, people doing laundry at military bases and people cleaning floors at post offices,” said Amy Traub, a senior policy analyst at Demos. She goes on to say, ‘Like the rest of the economy, federal jobs are increasingly low-wage jobs.” With this increase, there is an estimated 200,000 workers that would benefit from the pay increase.

There is a loud uproar across the nation for the minimum wage to be changed as well. 71% of American voters support raising the minimum wage. Fast food workers have been mentioning wages to reach up to a staggering $15 per hour. Amy Glasmeir, a MIT professor who studies wages, “points out that there is a gap between a minimum wage and a living wage—the cost of paying the most basic, necessary bills based on where a person lives.” She also found that a living wage can range between $12 to $25 an hour. Many critics believe that higher minimum wages will hurt jobs. Employers would have to hire fewer people and also reduce their hours. Companies would also have to compensate in ways that could hurt consumers by raising prices. “Some studies show a negative effect on jobs. But others show a positive effect or no effect at all.” CNN reports.

With constant head-to-head debate between Democrats and Republicans, Congress does not look like it will make a leap to increase the minimum wage of the country anytime soon. With Obama’s executive order to raise the minimum wage for government contract workers in place, I do believe this is a possibility to come into effect this year. Why not start somewhere? And do it with Federal Contracts? Would it really affect the country as a whole in a negative way? If Congress can get its act together, this would be a big step for minimum wage in the United States

How New Immigration Policy Can Save America’s Economy

According to the WSJ, 2014 will be a great year for the American job market.  Total jobs is projected to pass it’s pre-recession peak, while adding almost 200,000 jobs per month. (WSJ: Signs Point to Healthier Job Market in 2014).  Nevertheless, even the aforementioned, optimistic WSJ article concedes that there is still considerable room for improvement, particularly given the distribution of new jobs.  In January of 2014, the Bureau of Labor Statistics released projections for job growth until 2022.  Unfortunately, with respect to salary levels, the jobs projected to experience the most growth pay very low wages.  Specifically, of the top five jobs projected to grow, 3 of them barely exceed the federal poverty level for a three-person family (annual income of $19,090), and 1 of them is below this poverty threshold (see graph below for details from MetroTrends Blog).  This data seems to suggest that job recovery in the United States is extremely one sided; low-wage employment is making a recovery while high-wage employment is not.  In this way, while the unemployment rate is falling, the Untied States definitely still has an employment problem

Job Growth

Interestingly, according to an article in Forbes titled “The Cities Creating the Most High-Paid Jobs, And Why They’re Good for Low-Wage Workers Too,” points out that if we focus on growing high-wage jobs, the low-wage job growth will follow (Forbes: The Cities Creating the Most High Paid Jobs…). This article points out that high-wage jobs, typically those requiring a large degree of specialization and existing in export-oriented industries (like technology, which siphons money into silicon valley from outside the region), have a very large “multiplier effect.”  Because they draw in so much money, high-wage jobs created a demand for services that pay low wages, like grocery services, food prep, and health aids.  Thus it seems logical that policymakers should focus on increasing high-wage employment, as the multiplier effect will help local economies maximize growth.

But how do we increase the amount of high-wage jobs?  One potential solution is to refocus immigration policy.  Specifically, the United States immigration department, by issuing more H1-B visas, can increase the level of high-wage employment (note: an H1-B visa is a visa granted to non-immigrants who temporarily come to the United States to work in specialized occupations like biotechnology, medicine, business, or engineering).  Indeed, data supports that issuing H1-B visas has an extremely positive impact on domestic employment.  In 2008, Bill Gates stated that “Microsoft has found that for every H-1B hire we make, we add on average four additional employees to support them in various capacities” (Immigration Policy Center).

It is logical to suspect that issuing fewer H-1B visas would force American corporations to rely on domestic labor for the “specialty labor” that foreigners provide.  But this does not seem to be the case.  A survey by the National Foundation for American Policy found that 65% of firms respond to low limits on H-1B visas by moving operations oversees where these firms can freely access the specialty labor they need (Immigration Policy Center).  Furthermore, H-1B visas allow non-immigrants to “temporarily” work in the United States.  In this way, they allow firms to create high-wage employment opportunities domestically by hiring foreign experts to get the ball rolling.

Certainly, adjusting immigration policy is just one way to increase the amount of high-skilled labor in the United States, and I would certainly enjoy hearing additional ideas.  The key takeaway, however, is that increasing the amount of high-skilled labor is a far more effective way of fueling economic recovery than growing low-wage employment.  By fueling high-wage job growth and taking advantage of the multiplier effect, US policymakers can accelerate this country’s economic recovery.