Marginal Revolution University
Published on 22 Nov 2016For most people in developed countries, retirement comes down to a choice: weighing the costs and benefits of continuing to work vs. leisure. An important factor influencing an individual’s decision is their government’s tax and retirement policies.
Most developed countries offer a government-run retirement system with benefits that kick-in at a certain age. That age varies from country to country, usually starting when a worker reaches their early sixties.
Of course, not everyone wants to retire simply because they can receive benefits. People that really love their work may choose not to retire. In some countries, though, that decision can be heavily penalized through lost retirement benefits.
Taxes on earnings plus penalties, like losing retirement benefits, gives us an implicit tax rate. Countries with higher implicit tax rates for older workers see a much lower labor force participation rate for people considered retirement age.
As you might imagine, these government policies on retirement can be extremely costly. Many European governments that penalize non-retirement have been working to reform these policies and reduce implicit tax rates for elderly workers.
In the Netherlands, which had one of the highest implicit tax rates in the 1990s, an older worker could have actually had to pay to work. Since the Netherlands reformed their policies surrounding retirement, they’ve seen an increase in the labor force participation rate for older workers.
In the next video, we’ll cover another big influence on female labor force participation: The Pill.
June 5, 2018
Taxing Work
May 26, 2018
QotD: Child labour
In response to something I’d written about labor unions, a critic started badgering me about child labor.
What a terrible feature of capitalism, he said.
No, it was a terrible feature of all of world history, I replied.
Thank goodness for people who passed laws against it, he said.
No, I said, thank goodness for capitalism, which created enough wealth that families didn’t have to send their kids to work anymore just to avoid starvation.
Then I was asked: do I really believe my kids would be better off in a factory (than in school, presumably)?
As if the choice we’re talking about is between factory work and school! The actual choice faced by these families is between factory work and starvation.
The British charity Oxfam found that in Bangladesh, where the government caved in to Western demands to suppress child labor, the children — you’ll never guess — didn’t wind up in school! How about that.
Where did they wind up? In prostitution, or dead.
Nice going, geniuses.
Yes, there were laws passed against child labor, but those came when child labor was already practically a thing of the past.
No law is going to keep families from avoiding starvation — and even the left-wing International Labor Organization admits that this is the real reason for child labor. Only capital accumulation makes it possible to end child labor humanely.
My opponent probably isn’t a bad guy. He’s just absorbed the conventional wisdom on pretty much everything.
It’s very easy to blame “capitalism” for child labor. Where is the average person going to hear any other explanation?
Tom Woods, “SJWs Really Mean Well, But Accidentally Starve Some Children”, The Tom Woods Show, 2016-09-13.
May 21, 2018
Work in high tech? You’ll instantly recognize this office
Alistair Dabbs on the utterly interchangeable (except for the bogs) modern high tech office suite:
As an itinerant freelancer, my work takes me to a variety of tech-savvy business premises. And while small companies each have their own style of office layout, every larger organisation from mid-size to corporate looks almost exactly the same as another.
Except for the toilets. You can learn a lot about a business by its bogs.
So as I turn up for an on-site booking and sit for a short while in a reception space that has been arranged identically to those depicted in every business furniture catalogue ever printed, later to stride through yet another open-plan office of the same old rows of grey desks and the same old blue carpet tiles, I am overwhelmed by the tedium of déjà vu.
So on arriving at the designated meeting room – always featuring a frosted glass wall, a boardroom-style table with a faux teak effect surface and luxury adjustable chairs that refuse to be adjusted unless you violently bounce up and down on them like an over-excited child on a Space Hopper – I drop my things in the corner furthest from the door and enquire about using the washroom facilities.
As I am given verbal directions for the nearest toilet, I make a cursory check under the table which has been designed for up to 20 persons and confirm, yes, there are just TWO power sockets, as per usual, and no extension cable of any description. A quick glance behind the massively undersized TV at the end of the room reveals another six wall sockets that are, as I confidently expected, all occupied by plugs already – one for the TV and the other five for various components of the impossibly complicated video conferencing system that no one knows how to use, least of all the IT department that had lobbied strongly against its purchase in the first place.
So far, so identical. Now let’s find out what this place is really like.
[…]
Unlike this particular unfortunate, I return from the grunting rooms this day refreshed and with a spring in my step. My face smarts invigoratingly with aftershave and creamy odours waft from my gesticulating soft palms – vanilla from the left, coconut from the right.
Back in the meeting room, I am soon brought back to Earth and my surroundings merge into the amorphous generic semblance of every other office building in the western world.
A large cupboard that does not match the rest of the furniture has been installed in the most awkward place to squeeze past; it is locked but almost certainly contains nothing but a layer of dust, a torn corner from a Post-It note and a single paperclip. The aircon has just two settings: Arctic or Sahara. Everyone is forced to use a Guest Wi-Fi login whose permissions have been devised by a recent graduate of a free Cyber Security MOOC to prevent access to personal emails, cloud drives and the internet in general. A ceiling light flickers every two minutes. Halfway into the meeting, the room begins to vibrate to the intense scream of a workman’s drill on the other side of a wall, and continues for the next six hours.
I could be anywhere.
May 20, 2018
Labor Force Participation
Marginal Revolution University
Published on 17 Nov 2016The formula for the labor force participation rate is simple: labor force (unemployed + employed) / adult population, excluding people in the military or prison for both.
The total labor force participation rate has grown significantly in the United States since the 1950s. But the total growth doesn’t paint a clear picture of how the U.S. workforce has changed, particularly the makeup.
There are several big factors at play influencing the demographics of labor force participation. For starters, women have entered the labor force in greater numbers since the 1950s. At the same time, technology has altered the types of work available. Manufacturing jobs, which tended to employ lower-skilled, less-educated male workers, gave way to more service jobs requiring more skills and education.
In more recent years, the labor force participation rate, though still much higher than it was half a century ago, has been declining.
There are a number of factors influencing the decline. Many more women are working, but fewer men are employed or actively looking for a job. The United States also has an aging population with many Baby Boomers retiring from the labor force.
In an upcoming video, we’ll take a look at one of the big reasons behind why women have been able to enter and stay in the labor force during peak childbearing years: The Pill.
May 13, 2018
Cyclical Unemployment
Marginal Revolution University
Published on 15 Nov 2016This wk: More from Macro — Cyclical unemployment, sticky wages, natural unemployment, and more.
Coming soon: Who works? Who doesn’t? Why? Get a big picture view on labor force participation.
Unemployment rates ebb and flow with business cycle phases. We all saw this when unemployment rates increased in the United States during the 2008 recession. What we observed was called cyclical unemployment, and it usually accompanies slow economic growth.
It can take many years for unemployment rates to return to pre-recession levels, even after real GDP per capita growth has bounced back. Why is that? For starters, supply and demand in labor markets have to deal with “sticky” wages. That is, wages that adjust more slowly, which in turn reduces an employer’s incentive to hire.
Why are wages sticky to begin with? Economists have many theories, but one that is fairly obvious is that employers are reluctant to lower wages out of fear that their employees may respond by working less or even causing disruptions in the workplace. Employers don’t want to risk a dip in morale. In short, wages take longer to adjust to changes in the labor market than goods may take to adjust to a change in price.
Other factors affecting wage adjustment could include minimum wages or union contracts, which put contractual limits on how low wages can go. Both of these factors affect the rate at which unemployed workers are rehired.
Another contributing factor to prolonged cyclical unemployment is that people are reluctant to take lower-wage, lower-skill jobs than they previously held. For example, an unemployed computer programmer may not want to accept a job as a barista, and will search for a long time to find a job that is more in line with their previous work.
As we’ve learned from this video, cyclical unemployment responds to booms and busts. But what causes these business cycle fluctuations? We’ll be covering that topic in future videos.
May 12, 2018
Toys Were Us – Now Let’s Build Something Better!
Foundation for Economic Education
Published on 10 May 2018Don’t get nostalgia goggles stuck on your face. The closing of retail stores will be a net win!
QotD: Women in I.T.
… any woman who wants to be in a STEM field should be able to get as far as talent, hard work, and desire to succeed will take her, without facing artificial barriers erected by prejudice or other factors. If there are women who dream of being in STEM but have felt themselves driven off that path, the system is failing them. And the system is failing itself, too; talent is not so common that we can afford to waste it.
Now I’m going to refocus on computing, because that’s what I know best and I think it exhibits the problems that keep women out of STEM fields in an extreme form. There’s a lot of political talk that the tiny and decreasing number of women in computing is a result of sexism and prejudice that has to be remedied with measures ranging from sensitivity training up through admission and hiring quotas. This talk is lazy, stupid, wrong, and prevents correct diagnosis of much more serious problems.
I don’t mean to deny that there is still prejudice against women lurking in dark corners of the field. But I’ve known dozens of women in computing who wouldn’t have been shy about telling me if they were running into it, and not one has ever reported it to me as a primary problem. The problems they did report were much worse. They centered on one thing: women, in general, are not willing to eat the kind of shit that men will swallow to work in this field.
Now let’s talk about death marches, mandatory uncompensated overtime, the beeper on the belt, and having no life. Men accept these conditions because they’re easily hooked into a monomaniacal, warrior-ethic way of thinking in which achievement of the mission is everything. Women, not so much. Much sooner than a man would, a woman will ask: “Why, exactly, am I putting up with this?”
Correspondingly, young women in computing-related majors show a tendency to tend to bail out that rises directly with their comprehension of what their working life is actually going to be like. Biology is directly implicated here. Women have short fertile periods, and even if they don’t consciously intend to have children their instincts tell them they don’t have the option young men do to piss away years hunting mammoths that aren’t there.
There are other issues, too, like female unwillingness to put up with working environments full of the shadow-autist types that gravitate to programming. But I think those are minor by comparison, too. If we really want to fix the problem of too few women in computing, we need to ask some much harder questions about how the field treats everyone in it.
Eric S. Raymond, “Women in computing: first, get the problem right”, Armed and Dangerous, 2010-07-15.
May 11, 2018
“65% of managers add zero or negative net value to the company” Jordan Peterson
TheArchangel911
Published on 21 Sep 2017to see the full lecture go to https://youtu.be/Q7GKmznaqsQ
In this lecture, he talks about the thorny problem of predicting performance: academic, industrial, creative and entrepreneurial); about the practical utility of such prediction, in the business and other environments; about the economic value of accurate prediction (in hiring, placement and promotion) — which is incredibly high.
Intelligence (psychometrically measured IQ) is the best predictor of performance in complex, ever changing environments. Conscientiousness is the (next) best predictor, particularly in the military, in school and in conservative businesses. Agreeable people make better caretakers; disagreeable people, better disciplinarians and negotiators (within reasonable bounds). Open people are artistic, creative and entrepreneurial. Extraverts are good socially. Introverts work well in isolation. People low in neuroticism have higher levels of tolerance for stress (but may be less sensitive to real signs of danger).
Match the career you pursue to your temperament, rather than trying to adjust the latter. Although some adjustment is possible, there are powerful biological determinants of the five personality dimensions and IQ (particularly in environments where differences are allowed to flourish).
May 9, 2018
QotD: The “you can’t get good help” period after WW1
Look, I, like you, heard about how terrible the aftermath of WWI was, and how broke people were right after, and how they were moving to cities and living in tenements. It wasn’t until I was reading a book about the between the war period in England that I realized they were telling me TWO stories which couldn’t both have happened. In the part about the common folk, they were telling me how much poorer they were than before the war. In the part about the great families, they were telling me how the huge rise of the middle class and the building of suburbs had hurt them, and how the newly rich common folk no longer wanted to be servants.
That was one of those “wait a minute.” Sure I was taught both things in school, but you know you write down the bullet point for the test, and that’s it. Now I was going “Who the heck wrote these narratives and why doesn’t anyone question them?”
The truth, btw, from going to primary sources is closer to the second. And the people who wrote the narrative were the unseated noblemen, who did not like all these nouveau riche but who wanted to justify their disgust by showing how it hurt the poor. (It did increase the underclass somewhat, not because of economic conditions, but because a lot of men don’t integrate well after war, and well, WWI was something special by way of trauma.)
There are tons of these when you start poking. For instance the idea that the industrial revolution was unremittingly bad for the poor/people. Looking at China and India and such places right now, all I can do is roll my eyes.
Yeah, sure, the conditions of the early industrial revolution were appalling. And yet people crowded to the cities to take these jobs. What the historians never ask themselves is “How much worse was what they were escaping from?” We know that in India and China and other recently industrialized countries.
Sure the countryside has relatively clean air and more open space, but there are still real famines, and the work was unremitting and brutal and yes, little children worked too (says the daughter of middle class in a rural community whose first “job” was weeding the onion patch at five. And I was a pampered moppet. Kids my age from farming families had what we’d call full time jobs. Factory jobs at least had a stopping time.)
The idea that the industrial revolution was awful comes from upper class historians who could see the little kids twisted by working in the mills but who never consorted closely enough with the rural poor to see the misery behind raising baah lambs and the pretty pretty flowers.
Yeah. So the past isn’t written in stone. And it’s not a conspiracy. Not precisely a conspiracy. Yeah, sure, the Marxists influenced a lot of modern history with their ideas, but that is not necessarily conspiring. They view the world a certain way and it influences how they view the past too.
Sarah Hoyt, “How Do You Know?”, According to Hoyt, 2016-08-24.
May 8, 2018
QotD: Pay inequality
It probably doesn’t come as news that airline companies pay pilots more than cabin crew — but according to the dogma of the gender wage gap, we’re supposed to find this fact troubling. The British government now requires companies to report their raw gender gap — that is, the difference in the median hourly wages earned by their male and female employees. Ignoring occupational differences, seniority, employment history, hours worked, or any of the countless other factors affecting salaries, these data are misleading at best. Nevertheless, when budget airline EasyJet reported a 51 percent pay gap between its male and female employees, the company knew that its reputation perched on the edge of a PR abyss.
And that’s the whole point of the exercise: simplify statistics to shock people at the seeming injustice done to women and shame companies into action; refuse to compare similar job functions; ignore the fact that, like every other airline, EasyJet’s pilots are disproportionately male, while their cabin crews skew female; forget that almost all carriers compete for the same 4 percent of the world’s female pilots; and whatever you do, don’t mention that the EasyJet CEO, who was in charge of this bigoted organization and also its highest-paid employee until retiring earlier this year, was a woman. The company should be branded with a scarlet “51 percent” until it … does what? Cuts pilots’ pay? Hikes the salaries of female cabin crew? Hires male attendants instead of female? Goes bankrupt?
Kay S. Hymowitz, “Equal Pay Myths: Activists for wage parity ignore stubborn truths”, City Journal, 2018-04-09.
May 5, 2018
QotD: Making decisions for other people’s “best interests”
Confession: ever since I began to study economics as an 18-year old, I’ve always had difficulty understanding the thought processes of people who fancy themselves fit to intervene into the affairs of other adults in ways that will improve the lives of other adults as judged by these other adults. I understand the desire to help others, and I also understand that individuals often err in the pursuit of their own best interests. What I don’t understand is Jones’s presumption that he, who is a stranger to Smith, can know enough to force Smith to modify his behavior in ways that will improve Smith’s long-term well-being. Honestly, such a presumption has struck me for all of my adult life as being so preposterous as to be inexplicable. I cannot begin to get my head around it.
I cannot get my head around Jones’s presumption that he knows enough to forcibly prohibit Smith from working for an hourly wage lower than one that Jones divines is best for Smith. I cannot understand Jones’s presumption that he ‘knows’ that Smith meant, but somehow failed, to bargain for family leave in her employment contract. I am utterly befuddled by Jones’s presumption to know that the pleasure that Smith gets from smoking cigarettes is worth less to Smith than is the cost that Smith pays to smoke cigarettes. I cannot fathom why Jones presumes that he knows better than does Smith how Smith should educate her children.
Yet this presumption is possessed by many, perhaps even most, people. Why?
Don Boudreaux, “A Pitch for Humility”, Café Hayek, 2016-08-05.
April 29, 2018
QotD: Impostor Syndrome
… the list of people who sometimes worry about being uncovered as an impostor is as impressive as it is long. Having to live with a nagging fear of being “found out” as not being as smart or talented or deserving or experienced or (fill-in-the-blank) as people think is a common phenomenon. So common, in fact, that the term “Impostor Syndrome” was coined to describe it back in the 1980’s. Indeed, researchers believe that up to 70% of people have suffered from it at some point. Myself included.
Apart from serial narcissists, super low achievers and outright crazies, no one is immune to the self-doubt that feeds Impostor Syndrome. But what matters most is not whether we occasionally (or regularly) fear failing, looking foolish or not being ‘whatever enough’; it’s whether we give those fears the power to keep us from taking the actions needed to achieve our goals and highest aspirations. Unfortunately, too often people do just that.
Impostor Syndrome is the domain of the high achiever. Those who set the bar low are rarely its victim. So if you are relating to what I’m sharing, then pat yourself on the back because it’s a sure sign that you aren’t ready to settled into the ranks of mediocrity. Rather, you’re likely to be a person who aims high and is committed to giving your very best to whatever endeavour you set your sights upon. A noble aim to be sure.
But giving your best is not the same as being the best. Likewise, there’s a distinct difference between trying to better yourself and being better than every one else. Overcoming the Imposter Syndrome requires self-acceptance: you don’t have to attain perfection or mastery to be worthy of the success you’ve achieved and any accolades you earn along the way. It’s not about lowering the bar, it’s about resetting it to a realistic level that doesn’t leave you forever striving and feeling inadequate. You don’t have to be Einstein to be a valuable asset to your organization and to those around you. Nor do you have to attain perfection to share something with the world that enriches people’s lives in some way.
Margie Warrell, “Afraid Of Being ‘Found Out?’ How To Overcome Impostor Syndrome”, Forbes, 2014-04-03.
April 23, 2018
April 10, 2018
Structural Unemployment
Marginal Revolution University
Published on 8 Nov 2016Unemployment comes in many forms. Sometimes, like we saw with short-term, frictional unemployment, it can actually indicate a healthy, growing economy. But what about persistent, long-term unemployment? That’s not so good.
When a large percentage of those who are considered unemployed have been without a job for a long period of time and this has been true for many years, it’s considered structural unemployment.
Structural unemployment can result from shocks to an economy that drastically alter the labor market. These shocks are not all bad – the rise of the Internet is one such example. Regardless, it can take a while for an economy to adjust to big changes.
These adjustments tend to happen faster in the United States than in Europe. This is most likely due to differences in labor regulations, and how those regulations affect a country’s ability to respond to shocks.
The United States’ employment law known as the “at-will doctrine” makes it so that an employee can quit, or an employer can fire, at any time for any reason. It’s legally much harder to terminate an employee in many European countries. This makes hiring riskier in Europe, resulting in a less dynamic labor market that isn’t able to quickly respond to shocks.
As you might guess, structural unemployment tends to count for a higher percentage of total unemployment in Europe than in the United States. This remains one of the most serious issues facing many European economies today.
March 31, 2018
QotD: Workshops and how to avoid them
Kingsley Amis, a man whom, for reasons neither interesting nor publishable, I did not much admire, once said that the word “workshop” summed up all that was wrong with the modern world. He was right, and his comment was both shrewd and prescient. Courses, conferences, away-days, workshops, team-building weekends – they’re all part of the same pathology, and they’ve spread like bacteria on agar gel.
With a regularity bordering on the boring, from many sources, I receive flyers offering me courses to improve myself. I am far from supposing that I cannot improve or be improved, but most of these courses seem more designed to relieve me of money than anything else. They come with pictures of the course leaders (or trainers), happy and smiling and, to my eyes at least, deeply crooked.
A learned journal to which I subscribe always arrives with invitations to courses and conferences. Some, naturally, are of interest: those given by people who are acknowledged experts in their field, and who will provide a convenient digest of the latest research in it. But a high proportion of them are about what one might call para-work: activity that has nothing, or something only very tangential, to do with the ostensible aims of one’s profession.
Theodore Dalrymple, “Workshops and why you must avoid them”, The Social Affairs Unit, 2009-11-18.
