Archive for the ‘Labor’ Category

Military Recruitment

January 30, 2007

Thanks to my buddy Lauren for this link (you can see her in the video clip) http://abcnews.go.com/Video/playerIndex?id=2829157

Eventually they get to the point that the marines desire to have more recruits than currently they are getting.  ABC talks about them having to lower their standards.  Not once was it mentioned that they could increase the wages they offer, or give a bigger bonus in order to attract more people.  That would be silly.

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Stewart on Economists on the Minimum Wage

January 23, 2007

In the current issue of Econ Journal Watch, our own Stewart Dompe and Dan Klein have an excellent article titled Reasons for Supporting the Minimum Wage: Asking Signatories of the “Raise the Minimum Wage” Statement. (pdf)

Labor in the Letters

January 19, 2007

I wish to comment upon a January 13, 2007 letter to the editor in The Washington Post.  It reads as follows:

“Three Jan 8. letters commented on the economic views of George F. Will’s Jan 4 column, “The Right Minimum Wage.”  None cited his comments that reveals his lack of respect for workers. He said, “labor is a commodity.”

Labor is done by human beings.  Regarding labor as a commodity was supposed to have ended with the Emancipation Proclamation.”

 This letter is evidence of media bias, although given its quality and substance I am unsure of the direction of the bias.

 George Will is not showing a lack of respect.  Labor is a commodity because in this instance it is a homogenous service that varies little with the person providing the service.  Specifically ones humanity, all our likes, dislikes, thoughts and dreams, has little effect upon ones ability to flip burgers or make change.  Labor is a commodity because at the entry level, where the minimum wage will most likely apply, for any individual there are a potential six billion replacements.

The consequence of the minimum wage is that as unskilled, commodity, labor becomes more expensive, people will substitute into machinery and skilled labor.  The legislation will have destroyed the jobs of the very people it was supposed to help.

 

Differences in unemployment between states

January 17, 2007

Sometimes it is good to take a look at your country at a more divided level than at the most aggregated level. Let’s take a look at unemployment rates of various states (thanks to the BLS for the data). Hawaii, Utah, and our very own Virginia have the lowest unemployment rates (Oct 2006) at 2.1, 2.5, and 2.9% respectively. The highest unemployment rates are residing in South Carolina, Mississippi, and Michigan at 6.6, 6.7, and 6.9% respectively. That’s more than a 4% gap between them.

Does this tell us a little something about labor mobility and transaction costs? It is understandable that the unemployment in Hawaii would be low as we’d imagine that more jobs are created over time and due to the high costs of relocating to Hawaii they may tend to be filled by the locally unemployed instead of the nationally unemployed. Seems like a possible explanation. But why Utah? 2.5% nestled between Colorado (28) at 4.4% and Nevada (22) at 4.2%. West Virginia (41) is sitting at 5.1% unemployed while VA is sitting at 2.9%

Now can we explain this by costly relocation expenses? Probably not, Alaska is 48th with 6.4% unemployed, not too easy to move there, but then again, the increase in number of jobs is probably less prevalent in Alaska than Hawaii. Alaska also has its governmental problems of paying people to live there. In terms of unemployment fighting, maybe not the best solution. Perhaps people are more willing to relocate due relative reduction in transportation costs due to the promise of future subsidized living in Alaska. I haven’t heard much about this program in a while, so I’m not positive about the details or whether or not it still exists. Just throwing around some ideas.

Georgia (34) (while not a peach in its own right, excuse the pun) is below South Carolina by nearly 2%, While Alabama (6) is sitting at a pretty 3.2% unemployment rate, a good 3.5% below Mississippi’s astounding 6.7% unemployment rate. While I don’t have all the answers I attribute the unemployment rate differences between adjacent states to a few things here are 5 of the many factors (not relayed in order of importance.)

  1. Transaction (relocation) costs.
  2. Asymmetric information—Unemployed in Birmingham don’t know they can go to Birmingham for a job.
  3. Family—A kind of transaction cost, or at least expected transaction costs. A family oriented unemployed person in Birmingham knows that moving to Jackson while affordable means having to drive 3 or 4 hours whenever he/she wants to see their parents. This additional costs may outweigh the benefits of finding a job faster in a market more favorable for job-seekers.
  4. Government regulations and legislation—Policies and Laws like the Alaska pay to live here may have direct or indirect impacts on the unemployment rate. The size of welfare and unemployment checks could make a big difference. I’ve personally heard stories of people who were collecting unemployment checks from states with higher payouts (based on costs-of-living) while living and looking for work in states that are cheaper. Thus the unemployed have relocated but are still on the pay-rolls of the state that pays more, in order to take advantage of higher checks. This skews the distribution of rates across the country.
  5. Make-up of the unemployed—Who are the people that are unemployed? DC’s 3% higher unemployment than Virginia may be explained by the make up of those unemployed. All the displaced government workers between political regimes, who are looking for new jobs but want to stay in the political realm may not be willing to relocate.
  6. Illegal Immigration—A topic that surely contributes to the unemployment rate, but merits its whole own discussion.

Comments or other explanations?