The problem with having narrow skills, like being able to structure CDOs, is that if you lose your job, your employment prospects are limited. Unless you have personal connections that are willing to give you a chance at something where your skills might be distantly relevant (say being the CFO of a small company), most employers, especially large companies, want to hire someone who is already doing precisely what the job calls for. I've seen enormously talented senior people (and I don't mean from Wall Street) unable to land jobs because employers write the job specifications so narrowly.The best current thinking on income inequality is that it represents a dramatic structural change in the distribution of returns to skill--that many labor markets have turned into tournaments. This has boosted the return to rare human capital, relative to more general skills.
Recall that in the dot-com bust, those who lost jobs in Silicon Valley faced similarly bleak situations, and stories abounded of principals of failed companies seeking work at the likes of Home Depot.
It is hard to be sympathetic with people who made so much money in the fat years. Nevertheless, naivetee, optimism, peer pressure and (of course) big bucks lead young people to chose these high paying careers and not consider how risky they are. Even though Wall Street's cyclicality is well known, many assume the cuts will happen to someone else, and if something bad were to happen, they could always find a job on the buy side. They are learning otherwise.
One interesting thought is that the two current banes of left-leaning economists, income-inequality and "jobless growth", may be linked.
This hyperspecialization may be contributing to what I think is the best current explanation of the tendency for recent recessions to be followed by jobless growth: a shift from cyclical unemployment to structural unemployment. According to this theory, in recessions before the 1990s, recessions used to be simply a matter of contracting aggregate demand, and companies reacted accordingly--laying workers off during the downturn, then hiring them back as demand picked up. But during the 1980s and 1990s, recessions took on a much more industry-specific character. Changes in technology and trade meant that entire industries or job descriptions contracted, often permanently. The workers they laid off, with their specialized skills, took much longer to be reabsorbed by the labor market.
What Yves Smith is describing fits that model. Both employee and employer are trying to maximize the returns to skill by looking for very specific matches; failing that match, they drop out of the pool entirely until they can find some other form of work.
At least we can take comfort in the notion that income inequality is probably falling . . .
At least we can take comfort in the notion that income inequality is probably falling . . .
Really? Do you have data to back that up? Where is Jimmy Cayne these days?
I've long felt that this country badly needs a reinvigorated marketplace for jobs that pay a good wage but don't require a college education, a perfectly common thing as recently as 40 or 30 years ago. I think that people who want to go to college should have the opportunity, financially, in one way or the other. But I'm not one of these people that thinks college for everyone will solve our economic problems, and I think it runs the risk of simply eliminating college diplomas as a sorting factor. I also think that the collapse of the uneducated/high wage job infrastructure in this country is responsible for a lot of the social ills and family formation problems that routinely are blamed on the 60s cultural revolution, though I admit that's more supposition than anything else.
I'll agree with this. And I think that IT is a decent example of this. Many of my co-workers make more than 70k/year without college degrees. Often this requires "certifications" (Microsoft, Cisco, etc), but the cost in both time and money to obtain an MCSE or CCNA is well below that of a BS.
Still IT is only one slice of the pie, it'd be nice to see more jobs like that. Although I guess it kind of runs counter to Megan's point - as we're now requesting more specific skills instead of general education.
"I've seen enormously talented senior people (and I don't mean from Wall Street) unable to land jobs because employers write the job specifications so narrowly."
I have always thought the obsession with a narrow range of skills and experience is one of the dumber business practices businesses engage. It is not just at this level it is at all levels. Look through the want ads and you will see ads for admin assistants with "5 years experience". I would rather have someone who was smart and motivated and easy to work with that I have to train on a few things then someone who has serious flaws but knows the job.
I think this is the reason why incompetant people are able to jump from one important job to the next; companies look at their resume and see "oh this guy has 5 years experience at this job" and never bother to worry about if they are actually any good.
IT is a bad example, I think, as the people who can get by without bachelor's degrees are generally very talented, from my experience. That talent is readily apparent upon their work - others need credentials either for training purposes or for supporting evidence of skills. That isn't really like union shop line worker.
There are still a ton of non-replaceable jobs that don't require a BS - electrician, plumber, carpenter, machinist, HVAC, mechanic, waste management, cops, firemen - but those are hard to break into on your own and can be very hit or miss.
After that, I think it would be difficult to raise a family on one income without a BS, which is a shame, but I don't long for more coal mining and tunnel digging jobs. A lot of the premium they were paid was for risk, and while that let them support a family, it was often at the expense of their health / life.
"A lot of the premium they were paid was for risk, and while that let them support a family, it was often at the expense of their health / life."
That is very true. My father in law is an retired electrician and his health is about shot from 30 years of going into crawl spaces running wire. My older brother is a cattle rancher and has had several serious on the job accidents. Being in a cubical sucks and is boring as hell but you don't have horses throwing you off or 3000 lb bulls trying to kill you very often.
Just to echo Skull, in my area, electricians, HVAC people, and Stucco people are in high demand. Actually I shouldn't say people in the previous sentence, I should say persons. As in there is only 1 reliable guy that several contractors turn to to get the job done for new construction. Get trained, certified, then apprentice or work as a lower paid assistant for a year or 1 with an HVAC guy, electrician, etc and then go off on your own is a pretty easy way to make a good living. You won't get rich, but you'll be able to buy whatever you need and most of the things you want.
I agree that there is often a large problem with narrowly written job requirements. I once lost a chance to interview for a job because I did not have experience with the text editor the company used! If a company hires smart people then having them learn the skills usually takes only a few months while looking for a person with the exact right match can take as long or longer and often requires paying more. I think the problem is brain dead human resource departments that find it easier to reject people who don't exactly match specific requirements than to look at a larger pool of people who might turn out to be good.
As for the out of work Wall Streeters, I think there are probably a lot of companies that would be interested them, but they may have to move out of New York and they would get a much lower salary.
Unemployment stays around 5.5% even though every one thinks the economy is in the tank. More people are working from home and when they choose this option many are paid not by the hour but by the job - becoming self-employed. These people are not counted as eithe having jobs or being on a payroll. They disappear and don't return.
Others, like teenagers, are simply priced out of the market because the minimum wage has sky rocketed. Who will pay that kind of money to someone with no experience or skills. So these people never enter the job market or are gone so long they are forgotten.
Jobless recovery occurs because 1) people who were payroll are now self employed and 2) people who never had a job are priced out of the market by the minimum wage law.
My experience in the tech industry is that narrow job requirements are used out of cluelessness and laziness on the part of management.
Clueless because they can't evaluate skills of programmers directly. A lot of managers don't know what makes a good programmer in the first place, and can't ask technical questions. So they write these ridiculously specific requirements thinking that means they are taking no risks.
Laziness because they don't want to interview a lot of applicants with varied backgrounds. So just find someone who has done this exact same job before and hire him. Assume he knows what he's talking about. No one can blame you for anything, since you wrote this very specific job requirements list.
The relentless shift in income and more importantly asset distribution has been caused by the ability of the financial sphere to game the system to their advantage. Starting with tax policy. For 30 years we have given tax advantage to so called investment but that 'investment' was mostly speculation. Americas investment in basic infrastructure and profit making plants and equipment is a disaster, after 30 plus years of 'investment' incentives.
Huge portions of the financial sphere and its attendent genius and 'skill' was and is based upon false assumptions, primarily about risk.
Now go read Adam Smith and find one single remark about the inflation of asset prices being thought of as profit. It's speculation, not investment.
To the extent most major corporations were profitable over the last ten years is the degree to which they were involved in financial gamesmanship. Nobody makes big money, really big money, the kind CEO's make, by making anything. It's all about, or was, inflating the prices of assets. financial assets.
Now the government is going to move in to save the system. This system that degrades work and rewards speculation. Profits privatized, losses socialized. Interest rates will be kept low, or the attempt will be to keep them low. Wage earners will be punnished, as they have for a generation, of course. Savings are for losers. What meager savings people have will again be forced into 'investment', or so goes the dream, the dream to keep the current system intact. Hoping against hope another bubble can be blown. All those wage earners whose IRA has been flat for 10 years and whose house is going to drop 40% in value will pay the cost of the several trillion dollars Uncle Sam is going to take on from the GSE's and who know what other places.
All in the name of free markets.
I've long felt that this country badly needs a reinvigorated marketplace for jobs that pay a good wage but don't require a college education
Do you support stopping the flow of illegal aliens across the Mexican border? I think that's about all it would take.
Any trade, and I count IT as the latest trade on the scene, is the best hope for someone who is pretty sharp but not a college graduate, or HS graduate for that matter. I know a guy without a HS diploma or GED who's a Nerd on the Go, or whatever, and does well for himself.
The reason relatively low wage jobs have turned crap, like service, retail, and clerical jobs, is because of the sexual revolution. Smart women aren't becoming waitresses, secretaries and shop girls anymore. They are going to college and getting better jobs. So the people left to do those lower wage jobs which can't be automated aren't as good, because they aren't as smart as the smart women who did them before.
SG: You're so right. Close that border tighter than a duck's behind. Then we can get decent gawd-fearing white people (& enough "darkies" to keep the rest of them quiet) back at the GM plant in Van Nuys & the Ford plant in Southgate, not to mention the Firestone tire plant down on the Five. (Forget what city that is.) Oh, wait – GM & Ford shut down & the Firestone plant is a bargain outlet mall.
But that's OK. Now we can blame the UAW instead of the "Meskins." Long as the greed-crazed bosses or the people who hire the illegals don't get any blame. They're just trying to make a profit.
Is there something good about reduced income inequality?
Since a smallportion of americans pay any significant federal income tax, these lost jobs certainly are no help to the budgets of NY or the US
and yes, sadly, many of these people are nowstrucurally unemployed
We're the victims of our own success in replacing much mindless, repetitive physical labor with automation. At our current level of technology, what tends to add value is figuring out better things to make, or better ways to make them, not simply following instructions and making 'something'. Financial jobs pay well in part because finding better ways to allocate resources can have a significant payoff (although I agree that there's also a risk premium component both to mining jobs and to Wall Street jobs).
As a teacher at the undergraduate and master's level, I've always found that it's much harder to get students to think than it is to get them to do mindless 'grunt work'. But simply doing whatever one is told to do doesn't add that much value today - we have machines for that.
Do you support stopping the flow of illegal aliens across the Mexican border? I think that's about all it would take.
I wonder about this sometimes. On the one hand, I doubt flooding a labor pool can be good for the wages of those in it. On the other hand, jobs aren't fixed quantities. In 1776, most people were farmers. Today, only a small percentage are farmers, with the more food produced more efficiently. But the non-farmers aren't all unemployed just because 'technology took their jobs.'
I'm not sure how many mexicans working on housing are required to effectively nix an American job, but I doubt it's 1:1. Theoretically, cheap labor could create jobs. But I'm not prepared to provide evidence of that.
Re: These people are not counted as either having jobs or being on a payroll.
Not true. The household survey will count these people as employed provided, when asked, they answer that they are working.
Re: Others, like teenagers, are simply priced out of the market because the minimum wage has sky rocketed. Who will pay that kind of money to someone with no experience or skills. So these people never enter the job market or are gone so long they are forgotten.
Um, no one stays a teenager forever. And whether employers like it or not certain jobs have to be done and they will have to hire people for them. There are of course many jobs which require only minimal skills (and of course they pay very poorly—the minimum wage isn’t a lot to pay you know) so for your average teenager there are jobs to be had. And indeed, the minimum wage is now worth less (in constant dollars) than it was worth a generation ago, when jobless recoveries did not happen, so I don’t think your theory holds much water.
Re: A lot of managers don't know what makes a good programmer in the first place, and can't ask technical questions. So they write these ridiculously specific requirements thinking that means they are taking no risks.
During a recession there are so many job seekers that they can get away with larding up the job requirements. In other times they may list a lot of desired skills, but have to settle for far, far less.
Re: Do you support stopping the flow of illegal aliens across the Mexican border? I think that's about all it would take.
Um, no. You’d also have to get many women back home and out of the workforce. That’s when wages began to collapse for men: when women entered the job market in huge numbers. There are far, far more women in the country than there are illegal (or even legal) aliens you know.
Re: Since a smallportion of americans pay any significant federal income tax, these lost jobs certainly are no help to the budgets of NY or the US
Don’t be dense. There are many other taxes that are paid by pretty much everyone, starting with the regressive payroll tax.
"I've long felt that this country badly needs a reinvigorated marketplace for jobs that pay a good wage but don't require a college education
I'll agree with this."
I wonder what exactly would qualify one for good wages in the absense of skills? Using skilled laborers is not going to be a good answer for this question. Acquiring mastery level in crafts takes more time than going through college, and apprentices don't rake in big bucks, either. My suggestion to people dreaming of good jobs without having any skills - start playing lottery until you go broke, go work for Mickie D, see the light and go to college or prefessional training to get a decent job. I'm not being rude, am I?
Jobless recovery occurs because 1) people who were payroll are now self employed and 2) people who never had a job are priced out of the market by the minimum wage law.
Cite? You obviously don't know how the Dept. of Labor keeps track of unemployment. There are three different classifications. I have a question for you. If unemployment is so low(as you seem to believe), how come real wages aren't going up? How are people priced out by the minimum wage law? Do you know of anyone that was laid off because of the recent hike? No? I thought so.
Larry:
*I did not have experience with the text editor the company used*
Emacs is not just a text editor, it's a way of life. Your lack of understanding this fact showed you would be a poor cultural fit, and *that* is why you didn't get the job.
Re: I wonder what exactly would qualify one for good wages in the absense of skills?
In the complete and permanent absence of skills, nothing would. However there once were a fair number of jobs that allowed one to learn skills on the job and advance from modest wages to decent wages. Most factory jobs were of this sort, which is why there's a nostalgia for them-- not because that sort of work was good in and of itself. Most of today's low skill jobs offer no real chance for moving up, and that may be the problem. Paying a 19 year old minimum wage is not usually a problem-- but if that 19 year old can't climb the ladder so that he is still making minimum wage at 30 that is a big problem.
Ryan:
I know what you're saying, but my experience says differently.
I grew up in a part of the country that has yet to experience a large influx of illegal workers. Many of my relatives still there are making a decent (lower middle class) living in the semi-skilled trades (construction, landscaping). These jobs are entirely done by illegal aliens where I currently live.
The thing is those jobs aren't mobile and yet they have to be done. If you reduce the competition for those jobs, the wages would seem to have to go up.
And JonF, there's almost never a woman in those jobs. I don't believe women make up a significant portion of that labor pool. Not that that really matters because the issue was how to raise wages for low-skilled workers, not simply men.
And to be clear, I'm not blaming the illegal immigrant or the employer. Everybody individually is behaving rationally. I'm blaming the government.
Hell, I wouldn't even care if this was a considered policy, but letting this happen by neglecting to enforce the existing laws is (well ought to be...) a problem. And for the record, I think we should greatly increase our legal immigrant quotas, although I think we should be taking more high-skilled people (doctors, engineers, scientists) and less low-skilled people. Highly skilled people can handle the competition, the less skilled/educated can't.
>Both employee and employer are trying to maximize
>the returns to skill by looking for very specific
>matches; failing that match, they drop out of the
>pool entirely until they can find some other form
>of work.
If this were true then unemployment in a downturn would be concentrated amongst the educated. In contrast, I'm pretty sure that labor markets show evidence of dual-queuing, where management hires the "best" workers it can until there are no more available and then it substitutes less desirable workers. I have no problem believing that computer experts specializing in Apache were underemployed in 2001 but I'm very skeptical that they were unemployed.
Masters of the Universe - from Big Swinging Dicks to Wee Shrivelled Pricks. Alas, alack.
Two different aspects of Megan's post.
First, how does it come about that employers specify their want ads so narrowly? It excludes quick learners who have never been doing the work that the vacancy covers. A good deal of the time in a rapidly changing economy, the actual work to be done will turn out to be quite a bit different from the work done by the last guy in the job. How do Chinese employers - who face a much faster rate of change in the economy - go about it? (Confession of bias: it is over 5 decades since I took on a job I was formally qualified for.)
Second, Is finance becoming more like acting and art? A few who enter the career suceed/get lucky, the rest limp along on pretty low earnings all their life? And some of the lucky find luck turns part way through life? And you never are really sure if you will be employed next month?
Re: And JonF, there's almost never a woman in those jobs. I don't believe women make up a significant portion of that labor pool.
Labor pools are not isolated from one another; they flow into and out of one another pretty easily. If you add a large number of new workers to the labor force in any area that change in supply will ultimately tricle through to all parts of the workplace economy.
"At least we can take comfort in the notion that income inequality is probably falling . . ."
In the short term, maybe. However, I think this trend of some people trading job security (or at least shorter spells of unemployment) for higher income will continue.
People who gripe about income inequality are focusing on the wrong number. The real measure of economic equality is lifetime wealth. This leads to all sorts of misguided policy views. For example, many argue that teachers are underpaid because of their lower incomes. However, when the steadiness of employment and guaranteed pension benefits are considered, the lifetime wealth of teachers is actually pretty good. (This is also evidenced by the number of people who seek teaching jobs.)
This hyperspecialization may be contributing to what I think is the best current explanation of the tendency for recent recessions to be followed by jobless growth
This can't be comforting to someone who has become expert in writing a shitty little blog about shopping for iPods.
"That’s when wages began to collapse for men: when women entered the job market in huge numbers."
This may be true, but it doesn't necessarily imply a causal relationship between the two. Why were large numbers of women able to enter the formal job market? Perhaps because technology had replaced enough labor around the house that it became possible to manage a household without a person at home full time. Both trends might have occurred at roughly the same time because of automation and technological change.
Megan, people who've served in the military face a similar problem. I wrote about it a few years ago for Across the Board.
Why were large numbers of women able to enter the formal job market?
Because they were allowed to enter the formal job market. Before, women could not get some of the jobs they hold now. An example is that hospitals were able to pay nurses substandard wages for their intelligence/education level because there weren't many other options for women.
Once they were allowed to enter the job market, things started to be priced around a two income family. Most families now require the second income to stay above water.
JordanT -
I agree that there were barriers before that were lowered, in part because of ardent feminists that had to put up with a lot to pave the way for women like me that came later and reaped the benefits. And it's even easier today than when I was finishing college in the 1980s.
But in part my point is that women were always working. The shift is that at some point they became more likely to have formal jobs outside the home, but their other 'job' - keeping the house going - was still there. They went from one job to two, in part because one of the jobs became less demanding, making the change feasible.
There were many technological shifts that greatly reduced the amount of time and effort it takes to keep a household running. I heard my mother and my 88 year old aunt talking recently about washing clothes and bedding by hand as children (they had a wringer and three tubs - one for washing, one for rinsing, and one for bluing; the wringer could swivel around to go over more than one tub). Then you hung everything outside and hoped it didn't rain. The day after laundry day was ironing day, when you heated the iron in the fire and then ironed all the sheets, etc.
And they talked about how they had to keep emptying the tray under the ice box, or it would overflow as the ice melted (but at least there was a job for the ice man delivering ice every morning, for the milk man to deliver milk, etc.).
I'm a single working mother, and it's hard to keep the house going when I can only devote a small portion of my time to it. But it's now possible to do so and still maintain a fairly high level of comfort. I have my little Roomba robots to vacuum, a washer and dryer to make laundry easy, and a microwave to cook frozen food in minutes.
Families don't absolutely have to have two incomes to get by - they need it in order to buy all the extra stuff that's available now but just didn't exist 50 years ago. The trade-off is different than it was, but overall I'd say life is much easier. It's easier in part because machines now do much of the grunt work that was once done by relatively unskilled labor, leaving fewer unskilled jobs to go around.
SG - Certainly, flooding the low income market will reduce low income jobs, or reduce what those jobs earn. My question is along the lines of whether it will create higher income jobs in their place in much the way that automation has.
Outside of arguments like "who is a citizen?" "Who votes?" "Who pays taxes?" is there a solid economic argument against immigrant or foreign labor which would not also apply to technology? I suppose the technology, once developed, might be improved upon, while cheap labor tends to have pretty much built in limits. And foreign labor means dollors flowing overseas (which isn't a totally bad thing. They have to come back eventually and US inflation essentially taxes the world.) Otherwise, they seem very similar.
You've only got one car for a family of six, right? One small TV? No computer, video games, or the like? You only buy fresh produce when it's in season and cheap? You buy essentially no frozen or otherwise already-prepared meals? No microwave? McDonald's is a special night out for the family, not something routine? Your house, for the six of you, is about 1,000 square feet?
Oh. You know, maybe the reason you can't get by on a single income isn't that it's more expensive to live nowadays than it was in 1958. Maybe it's because you unthinkingly spend thousands of dollars a year for things that were considered expensive luxuries by the middle class in 1958.
A major reason employers write hyper-specific job requirements rather than to give IQ tests to applicants is to avoid discrimination lawsuits. Written tests have been under a cloud of suspicion since the Supreme Court's 1972 Griggs decision. In contrast, writing extremely detailed descriptions of credentials and experience required reduces your chances of the EEOC or DOJ dropping a big discrimination lawsuit on your head. The rule is that if you employee minorities at a rate of at least 80% of their representation in the relevant workforce, then you are reasonably safe your hiring lawsuits. So, you define the relevant work force so narrowly that very few non-Asian minorities(NAMs) make the cut, so then a small number of quota hires means you're safe from the EEOC.
"A major reason employers write hyper-specific job requirements rather than to give IQ tests to applicants is to avoid discrimination lawsuits. Written tests have been under a cloud of suspicion since the Supreme Court's 1972 Griggs decision. In contrast, writing extremely detailed descriptions of credentials and experience required reduces your chances of the EEOC or DOJ dropping a big discrimination lawsuit on your head."
Doesn't Griggs limits employers ability to require high school diplomas? However, for reasons that I don't know, the Court has refrained from extending those limits to employers college degree requirements.
Ryan W:
Sure, if you ignore the fact that they are, you know, people, then illegal aliens have a strong similarity to technology. They provide a cheaper way to get the same work done as before and that makes some current workers uneconomical.
That said, I don't see where illegal immigrants create an opportunity for higher paying jobs. I don't think the workers they displace are generally capable of proving greater value; if they were capable they'd probably be doing so even in the absence of illegal labor. I'm not saying it's not possible - just that I don't see it.
I don't doubt that cheaper labor is better for the economy (neglecting the cost of the safety net). I'm not against illegal immigrants per se. It's the "wink, wink, nudge, nudge" game that both parties play with the issue that offends me. Based on the laws currently on the books, We The People have said we don't want uncontrolled immigration across our southern border. Both parties (Reps for cheap labor reasons, Dems for reasons I'm not sure I understand) look the other way instead of enforcing the law. Lower skilled workers take suffer for that. I think that fact is worth pointing out.
Re: A major reason employers write hyper-specific job requirements rather than to give IQ tests to applicants is to avoid discrimination lawsuits.
I would like to suggest that looking at someone's past job experience is a lot more gernmane to assessing their skills and potential than any test could be. The thing being tested by an IQ test (if anything useful at all is) may well not be something useful for a particular job anyway. I'm sure we've all known people who were highly inetlligent but who had no common sense, nasty personalities, an utter lack of ethics etc.-- and thereby would be the last person we'd want to work with.
From what I've read via a cursory Google search, not all tests are considered discriminatory. Academic oriented tests are discriminatory, but job related tests are fine.
You can't ask when Columbus discovered America, but you can ask how many of each denomination of bill and coin you must give a customer to make change for a given transaction.
I can't help but wonder if this doesn't provide some support for the idea that productivity is more regulated by the job than by the individual or the individual's skill level.
Dave Schuler -
And where does the job come from? You're right, many people's productivity comes largely from the efforts of someone else to create the job and organize everything. No matter how capable people are, if the system is messed up and doesn't give them the correct opportunities, their output will tend to be low.
That's why there are so many poor countries - not because the people aren't capable, but because the system is dysfunctional and outdated. That's also an explanation for income inequality, i.e. why a few jobs at the top get paid such a large amount in today's specialized economy - because the most value is created by the person that does the best at figuring out what everyone else should do.
Have you ever considered the reverb effect of lay offs on worker loyalty, which makes companies then less likely to invest in labor which leads to stupid. Isn't the market efficient over the long term. No.
Income inequality is bad? OK but before we experiment on reducing it nationwide I propose we experiment on one or two occupations. Professional sports and acting come to mind.
Income inequality is bad? OK but before we experiment on reducing it nationwide I propose we experiment on one or two occupations. Professional sports and acting come to mind.