Are ZMP workers uneducated or unmotivated?
This is a touchy subject, so let’s begin with an analogy to clarify things. Years ago I read that drunk drivers were involved in 1/2 of all traffic fatalities. I’d guess the ratio was also high for accidents that put people in wheelchairs. Now let’s think about the class of people in America today who are paralyzed due to traffic accidents. Do you think that group of people are disproportionately drunks? That inference seems kind of logical, doesn’t it? And yet I think almost everyone (including me) would view that claim as being deeply offensive and unfair. Adding insult to injury. Literally. After all, lots of victims (probably most) are not drunks, and just imagine how they’d feel about hearing that generalization. The term ‘disproportionately’ might mean only 20%.
Now think about the class of Americans who have personal characteristics that might fairly be labeled “lazy and incompetent.” Are you unable to think of that class of people? Then stop reading this post; it’s not for you. My claim is that calling the long term unemployment “disproportionately lazy and incompetent” is offensive in roughly the same way that calling accident victims “disproportionately drunk.” It may be technically true, but it’s misleading and offensive. I’ll circle back to this point later, but first a study discussed in a recent Tyler Cowen post:
There is new Brookings research by Alan B. Krueger, Judd Cramer, and David Cho:
“The short-term unemployment rate is a much stronger predictor of inflation and real wage growth than the overall unemployment rate in the U.S. Even in good times, the long-term unemployed are on the margins of the labor market, with diminished job prospects and high labor force withdrawal rates, and as a result they exert little pressure on wage growth or inflation.”
Consistent with my earlier views, this work is suggesting that many of the long-term unemployed are/have become an economically segmented group. This is noteworthy too, as it implies the problem is not merely initial discrimination:
“…even after finding another job, reemployment does not fully reset the clock for the long-term unemployed, who are frequently jobless again soon after they gain reemployment: only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.”
I would consider that evidence for a notion of zero marginal product workers.
Let’s abstract from the current depressed labor market, and examine the people who have a hard time keeping jobs in good times. Many economists point to a lack of human capital, deficiencies in our educational system, etc. That’s obviously correlated, but doesn’t get to the root of the issue. Indeed when I read those explanations it just makes me think that most economists are far removed from the real world. Perhaps they don’t even know lots of long term unemployed people.
America has an enormous appetite for unskilled workers. So much so that we draw in millions of unskilled migrants from middle-income countries to nail shingles to our roofs, pick fruits and vegetables by hand, and clean toilets in hotels. Businesses can’t find enough Americans to do this work at anything close to current wage rates, although obviously there is SOME wage rate that would get even me up on the roof (I’ve done roofing when I was young.)
So what is the problem with the long term unemployed? I recall Tyler Cowen once mentioned that some low-skilled workers have a bad attitude, and that this reduces their productivity. That is certainly true in some cases. When we compare the migrant workers to the American workers who are part of the long term unemployed during booms, it’s easy to imagine a motivation difference.
So far it sounds like I’m engaged in the typical conservative “bashing the victim.” But I’d like to offer a different way of thinking about the issue. I’d encourage you to see low motivation as a characteristic of the system, not the person. Here are a few examples.
1. In the Middle Ages the poor were highly motivated and worked hard. The rich were unmotivated, and tended to be lazy aristocrats.
2. During the 1950s America’s rich had very little motivation to produce vast fortunes, and based on income tax receipts at the 90% MTR, they did produce very few vast fortunes. Unlike today, poor women were more motivated to work than rich women.
3. In my profession, tenured professors are less motivated to produce research than nontenured faculty, and we’ve all seen examples of how that differential motivation affects productivity.
The reason I particularly like the last example is that it takes some of the overheated emotion out of the issue. No one would claim that tenured professors have intrinsically different personal characteristics from nontenured professors. They are the same people, just at different stages of their lives. Similarly there is no fundamental difference between low-skilled American born labor and low-skilled Mexican born labor that snuck into the US. But they face very different incentives, very different consequences from not working hard, and thus look like they have very different personal characteristics.
Now this conclusion must be qualified to some extent, due to the sorting problem. Mexican migrants to America are probably some of the most ambitious of the unskilled labor in Mexico, and the long term unemployed are probably disproportionately among the less ambitious low-skilled workers in America. That’s a logical inference.
But don’t forget the earlier example, there is more to life than logical inferences. Would you feel comfortable telling an accident victim in a wheelchair that “his type of person” is disproportionately composed of drunks? If not, be careful in making generalizations about the unemployed.
A welfare state in a country with lots of low skilled workers will produce low motivation people. This will create resentment and prejudice among middle-income workers, especially if they are disproportionately from a different ethnic group. I wish people didn’t think this way, but they do.
PS. Nothing in this post has any bearing on sticky wages, and/or the fluctuations in unemployment associated with the business cycle. (I hope it’s obvious that those fluctuations are not caused by sudden bursts of laziness.)
PPS. I pay unskilled workers about $40/hour to do simple jobs like painting. Even during the recession. But that’s partly Boston; in Texas I would pay less.
PPPS. Sometimes I fail to get my point across, try as I might. Here’s the short version of the post: It’s wise to avoid thinking of the poor and unemployed as being intrinsically different from the rest of us. Or if you must think of them as being different, do so in roughly the way you’d think of serious accident victims as being different from the rest of us.
Update: Several commenters mentioned that they know people working in the underground economy. I’ve also met people like that, which makes me think there are quite a few people in that situation. I believe that in aggregate there must be a lot of people who are officially not in the workforce, but who are actually working. Not a large number in percentage terms, but large in absolute terms. Perhaps several million. Another reason to believe the poor are not as “lazy” as many people suggest.