[p2p-research] Job Losses and Productivity

[Ryan]

Once again...the same thesis...appearing in a different place.

Sent to you by Ryan via Google Reader: Job Losses and Productivity via
The Bonddad Blog by bonddad on 5/17/10


On May 11 I wrote the following:

Personally, I think what has happened over the Great Recession is jobs
that would have disappeared by natural attrition over a period of say
5-10 years were accelerated out of existence by the recession. For
example, a manufacturer was thinking, "I'll continue to move in the
area of automation at a slow rate." But then the recession hit and he
said, "no time like the present to at least start getting rid of
people."

The next day, a NY Times article observed:

For the last two years, the weak economy has provided an opportunity
for employers to do what they would have done anyway: dismiss millions
of people — like file clerks, ticket agents and autoworkers — who were
displaced by technological advances and international trade.
The phasing out of these positions might have been accomplished through
less painful means like attrition, buyouts or more incremental layoffs.
But because of the recession, winter came early.



This is a central problem to the long-term unemployment the country is
facing. Consider this:






Ms. Norton is one of 1.7 million Americans who were employed in
clerical and administrative positions when the recession began, but
were no longer working in that occupation by the end of last year.
There have also been outsize job losses in other occupation categories
that seem unlikely to be revived during the economic recovery. The
number of printing machine operators, for example, was nearly halved
from the fourth quarter of 2007 to the fourth quarter of 2009. The
number of people employed as travel agents fell by 40 percent.

This “creative destruction” in the job market can benefit the economy.

Pruning relatively less-efficient employees like clerks and travel
agents, whose work can be done more cheaply by computers or workers
abroad, makes American businesses more efficient. Year over year,
productivity growth was at its highest level in over 50 years last
quarter, pushing corporate profits to record highs and helping the
economy grow.

But a huge group of people are being left out of the party.

Millions of workers who have already been unemployed for months, if not
years, will most likely remain that way even as the overall job market
continues to improve, economists say. The occupations they worked in,
and the skills they currently possess, are never coming back in style.
And the demand for new types of skills moves a lot more quickly than
workers — especially older and less mobile workers — are able to
retrain and gain those skills.

There is no easy policy solution for helping the people left behind.
The usual unemployment measures — like jobless benefits and food stamps
— can serve as temporary palliatives, but they cannot make workers’
skills relevant again.



I've covered one big reason for this problem: educational achievement.
The data indicates that higher educational levels leads to higher wages
and lower rates of unemployment.

But consider this chart, which is a 10-year chart of output per hour in
logarithmic scale:






Output per hour increased during the great recession, indicating that
productivity increased. Simply put, despite a massive drop in
employment, the amount of work done increased, telling business they
could indeed get by with less. That means the from a business owners
perspective, the massive cut in payrolls was a good thing, as it
lowered their fixed costs (by lowering payroll expenses which are
usually some of the largest a company faces) but didn't hurt overall
output.






















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