labor markets

Some interesting work by four economists at Berkeley contains the results of on experiment designed to figure out if relative pay affects job satisfaction.  The results are as you might expect, and it is good to see them documented:

Economists have long speculated that individuals care about both their absolute income and their income relative to others. We use a simple theoretical framework and a randomized manipulation of access to information on peers' wages to provide new evidence on the effects of relative pay on individual utility. A randomly chosen subset of employees of the University of California was informed about a new website listing the pay of all University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings indicate that utility depends directly on relative pay comparisons, and that this relationship is non-linear.

The latest from the BLS on the employment situation is more of the same.  There was essentially no net job growth -- a decline of 54,000 consisting of a fall in government employment as Census workers finished up that was not quite offset by a rise in private sector employment.  The official unemployment rate went from 9.5 to 9.6 percent and the broadest measure of labor underutilization (U-6) went from 16.5 to 16.7 percent.  There is nothing in here that merits joy.  Expect the spinmeisters to focus on the rise in private sector employment (up 763,000 since the low in December 2009) and the upward revisions (to smaller job losses) from the two prior months.

Hot off the virtual press is the Employment Report for March.  The key numbers are:

• Total nonfarm employment was up 162,000, with 48,000 accounted for by the hiring of temporary workers for Census 2010.
• Nonfarm employment growth in the prior two months was revised upward by a combined 62,000 jobs.
• Manufacturing employment was up 17,000, with 45,000 jobs added over the past three months.
• Temporary help services added 40,000 jobs over the month and over 300,000 jobs since September.
• Total unemployment stayed at 9.7 percent, with net job gains in the household survey offset by increases in the labor force.
• The composition of the unemployed shifted toward those unemployed for longer than 26 weeks.

I say that this report is good enough for now because this is what the labor market looks like when it starts to bottom out and slowly recover -- overall job growth turns small and positive, cyclically sensitive sectors like temporary help services grow more rapidly than most, and it is tough to make progress against the unemployment rate because the number of job seekers may go up in tandem with total employment.  I was at CEA in 2003-4 as the labor market went through the bottom of its last cycle, and I am having a little deja vu.

According to The Washington Post, this was the reaction of House leaders to President Obama's proposal to use tax credits to expand employment:

The administration also wants to put an additional $100 billion toward an immediate jobs bill. One of the most significant ideas would award tax credits worth as much as $5,000 per new hire to employers that expand their payrolls this year. By the administration's calculations, the tax credit would create 600,000 jobs at a cost to the government of about $33 billion.

That is my reaction as well.  If the Federal government could administer a problem this intricate, I doubt we would be in the shape we are in.  We are over two years into these discussions of stimulus and bailouts, and it is disappointing to continue to see these gimmicks being discussed.  What are we going to have next, "Cash for Coworkers?"  The basic lesson does not seem to have sunk in -- when you are relatively poor, you must be more careful with your money, not less.  You should be spending your money only on what you need and not spending it on what you don't.

At the Economix blog on Thursday, Catherine Rampell posted a must-read analysis of the composition of the unemployed population.  But I think her conclusion is too pessimistic.  She writes:

Whatever the underlying cause, the result is disconcerting: compared with previous recessions, many more of the employment gains in this recovery will have to come from new jobs.

That is much easier said than done.

Workers whose entire occupations — not just the previous payroll positions they held — are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire.

Even if the employment gains in this recovery will have to come from new jobs, it is not necessarily the workers whose entire occupations are disappearing that will have to fill the new jobs in emerging fields.