Why are apparently good workers unemployed for so long in recessions? One channel that Tyler has promoted is ZMP: Some workers are almost completely unproductive, so employers can them rather than have them eat up all the pizza on Pizza Fridays.
Why are apparently good workers unemployed for so long in recessions? One channel that Tyler has promoted is ZMP: Some workers are almost completely unproductive, so employers can them rather than have them eat up all the pizza on Pizza Fridays.
Apr 18 2013
Tonight I'll be speaking at the Monterey Institute of International Studies on the perverse economics of sanctions. The other speaker is Stephen Zunes. The overall event is on Iran. 7:30 PM at the Irvine Auditorium, Monterey Institute of International Studies (MIIS) 499 Pierce Street Monterey The program is free (z...
Apr 18 2013
Recent Twitter exchange between myself and Tyler:@tylercowen: [ZMP] is about morale effects in the workplace, not "finding something for them to do," the latter is trivially easy.@bryan_caplan: This reply deserves mischief-free elaboration.@tylercowen: Is there a difference?@bryan_caplan: Asking "Is there a difference?...
Apr 17 2013
Why are apparently good workers unemployed for so long in recessions? One channel that Tyler has promoted is ZMP: Some workers are almost completely unproductive, so employers can them rather than have them eat up all the pizza on Pizza Fridays. One might debate the pros and cons of the idea. And of course ...
READER COMMENTS
david
Apr 17 2013 at 7:08pm
Re-read Cowen’s post, the one that you linked it. He explains the difference between his ZMP theory, which is rather more specific than merely observing that some workers have zero MP (which is necessarily true in any model with both non-zero non-search unemployment and flexible wages):
The whole point of demand-constraint models is that Y is constrained and isn’t surging merrily along whilst leaving U high.
Nick Rowe
Apr 17 2013 at 7:22pm
If you said they were ZVMP theories (Zero Value Marginal Product or Zero Marginal Revenue Product theories) in one sense you would be correct, but in another sense you wouldn’t. Yes, they are ZVMP for the firm that hires them, given the constraint in AD, but not ZVMP in the bigger picture, if that constraint were lifted.
My old post: http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/08/zmp-workers-and-output-quotas.html
Marcus Nunes
Apr 17 2013 at 8:06pm
I tend to agree with Nick and have illustrated the question thus:
http://thefaintofheart.wordpress.com/2013/04/15/chilling/
Garett Jones
Apr 17 2013 at 10:58pm
Nick:
I say we focus on the sense in which I’m correct… 😉
kebko
Apr 18 2013 at 12:22am
“In general, which hypotheses predict lots more short-term unemployment among the less educated, but among the long-term unemployed, a disproportionately high degree of older, more educated people?”
I have to think that there are some demographic explanations here that mitigate the apparent problem. The problem of unemployment is different for a 55 year old that took an early retirement package and a 30 year old with 3 kids at home. There are a lot of baby boomers out there with an unclear employment status. I don’t think it’s hard to imagine a percent or 2 of the labor force in this situation who might pick up some part time or consulting work over the next decade to keep busy or to supplement their retirement savings. It certainly explains the fact, as described, and a very generous unemployment insurance policy would also help push people in these vague categories into the “long term unemployed” classification.
RPLong
Apr 18 2013 at 9:09am
IMO, we’re not talking about ZMP employees, we’re talking about ZMP positions of employment. Economists (and executives) spend a lot of time analyzing workforce productivity, but they never spend any time analyzing management efficacy.
What I mean is, if a company ends up with several unproductive people on-staff, how did that happen? Is it because there is plenty of work to go around, but the particular employees hired will not do the work? No, that’s not what we’re talking about in the macroeconomic sense, at least not so long as there is work to be done and a unemployment is > zero.
No, we’re talking about people who have jobs, but there isn’t sufficient work to justify the position.
Well, whose fault is that? The managers! Good management completely avoids this kind of situation.
So sure let’s talk about ZMP employees. Let’s also talk about NMP (Negative Marginal Productivity) managers.
Roger McKinney
Apr 18 2013 at 9:33am
Yes, they are ZMP theories!
Tyler Cowen could learn a lot from the Austrian business cycle. I realize Cowen thinks he understands Austrian econ, but comments like those on the ZMP prove he doesn’t.
Unemployment doesn’t happen only by employers laying off people.Businesses fail and all of the employees of failed businesses lose their jobs. Usually those businesses are in capital goods industries that expanded too much during the boom years. They are ZMP for businesses in other industries for which their skills are not useful. It takes time to train an auto worker or carpenter to be a nurse, even if they wanted to.
At the same time, the ABCT says that businesses will purchase labor saving equipment in the midst of recessions to boost the productivity of remaining workers. That starts the upswing in gdp, but not necessarily employment because employers will have existing workers work overtime before they hire an extra worker. The marginal costs of new workers don’t increase continuously, as the calculus suggests, but in huge stair steps because of the high costs of healthcare and payroll taxes.
The latest recession has played out according to the ABCT play book.
Floccina
Apr 18 2013 at 9:33am
I look around and see plenty of work that is on some value and could be done by very low skill workers but is not. My theory is that it is always the deltas (change in) that cause the problems. People are being laid of in some businesses faster than they can be used in other ways. We could use more errand runners, more landscape workers, more car cleaners etc. but it takes time for these business to lower there wages and prices and for people to notice the lower prices and there are many factors that slow the processes. So I do not get Tyler’s point.
One thing that I think we miss is that the cash non-taxpaying economy grows in a recession in part to route around some of the costs and speed bumps that slow the process of employing low skill people in new areas. If taxation where more efficient that would help.
Zachary
Apr 18 2013 at 10:14am
Garret, First Major Disagreement with you while I’ve read this blog: There is NOT a shortfall of real demand. There is a NOMINAL drop in demand. Nominal money needs increasing in order to decrease nominal prices. When the nominal Money growth slows, then prices stick and take time to adjust. This is a nominal demand story.
Real demand for goods, and for money, is determined by real variables. Unless you tell an RBC story, then there is no drop in real demand that is separable from the interaction between the nominal and the sticky prices. You are right that real demand ‘falls’. But that is only by definition of identity. Causal in a GENERAL sticky price story are nominal variables.
michael pettengill
Apr 18 2013 at 1:46pm
Isn’t the actual explanation that:
– under employment leads to low demand
– low demand leads to firm losses from fixed capital demands
– firm losses lead to decreased employment
– decreased employment leads to more reduced demand
– that leads to firm losses as capital demands loom larger and decreased employment
– repeat until depression creates war or revolution
– war leads to pillage and plunder that redistributes the wealth to promote increased demand, unless society choses a different path
Unless loan balances, capital rents, are equally flexible, capital becomes a larger and larger part of the economy while labor income falls forcing consumer demand to fall.
Friedman suggested that contracts be dictated by government to be variably priced according to a government determined price index. In a time of deflation, your bank balance would be reduced, but so would your loan balance due, and your rents would be reduced.
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