Category: Equitablog

Valuing alternative work arrangements

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Authors:

Alexandre Mas, Professor of Economics and Public Affairs, Princeton University
Amanda Pallais, Paul Sack Associate Professor of Political Economy and Social Studies, Harvard University

Abstract:

We use a field experiment to study how workers value alternative work arrangements. During the application process to staff a national call center, we randomly offered applicants choices between traditional M-F 9 am – 5 pm office positions and alternatives. These alternatives include flexible scheduling, working from home, and positions that give the employer discretion over scheduling. We randomly varied the wage difference between the traditional option and the alternative, allowing us to estimate the entire distribution of willingness to pay (WTP) for these alternatives. We validate our results using a nationally-representative survey. The great majority of workers are not willing to pay for flexible scheduling relative to a traditional schedule: either the ability to choose the days and times of work or the number of hours they work. However, the average worker is willing to give up 20% of wages to avoid a schedule set by an employer on a week’s notice. This largely represents workers’ aversion to evening and weekend work, not scheduling unpredictability. Traditional M-F 9 am – 5 pm schedules are preferred by most jobseekers. Despite the fact that the average worker isn’t willing to pay for scheduling flexibility, a tail of workers with high WTP allows for sizable compensating differentials. Of the worker- friendly options we test, workers are willing to pay the most (8% of wages) for the option of working from home. Women, particularly those with young children, have higher WTP for work from home and to avoid employer scheduling discretion. They are slightly more likely to be in jobs with these amenities, but the differences are not large enough to explain any wage gaps.

hould-Read: Walt Mossberg: Lousy ads are ruining the online experience

Posted on by Brad DeLong

Should-Read: Walt Mossberg: Lousy ads are ruining the online experience: “I left the Journal in 2013 and co-founded Recode…

…About a week after our launch, I was seated at a dinner next to a major advertising executive. He complimented me on our new site’s quality and on that of a predecessor site we had created and run, AllThingsD.com. I asked him if that meant he’d be placing ads on our fledgling site. He said yes, he’d do that for a little while. And then, after the cookies he placed on Recode helped him to track our desirable audience around the web, his agency would begin removing the ads and placing them on cheaper sites our readers also happened to visit. In other words, our quality journalism was, to him, nothing more than a lead generator for target-rich readers, and would ultimately benefit sites that might care less about quality…

When recessions happen, who’s most at risk?

Posted on by Bridget Ansel
According to a new study, low-earning individuals, men, and workers in construction and manufacturing are more at risk during a recession.

 

Recessions are risky affairs. When the overall economy starts to shrink, the likelihood a person’s own income is about to drop rises. But by how much? In other words, how much are the earnings of individuals tied to the risk of the overall economy? And given that it’s unlikely that everyone is going to face the same risk in the event of an economic downturn, how does this risk vary across the population? A new study takes a look at such questions for the United States.

The paper, by economists Fatih Guvenen of the University of Minnesota, Sam Schulhofer-Wohl of the Federal Reserve Bank of Chicago, Jae Song of the Social Security Administration, and Motohiro Yogo of Princeton University, looks at this question in the United States from 1978 to 2013. The dataset is the Master Earnings File from the Social Security Administration, which qualifies as “big data” to say the least. The data cover all the earnings for workers whose employers reported to the Social Security Administration—essentially the entirety of legal earnings in the U.S. economy.

Using these data, the authors can see how much the income of individuals fluctuates with changes in gross domestic product. They calculate how correlated the changes in GDP are to changes in an individual income. The higher this correlation, or “beta,”is, the more a person’s income will respond to changes in GDP. The riskier someone’s income, the higher their beta is.

Looking at risk by income level, the economists find a U-shaped relationship. Risk is higher for individuals with low earnings and declines as individuals move up the earnings distribution. Then, at around the 80th percentile, risk starts to increase a bit and then really picks up at the 90th percentile. It’s worth noting here that the earnings measured by the Social Security data includes capital gains, which are more volatile than labor earnings and could explain some of the increased risk faced by those at the top of the income distribution.

This same U-shaped relationship also holds up when you break out the relationship by gender. But at every percentile in the income distribution, men have a higher beta and more income risk than women. At the same time, earnings risk is not evenly distributed among workers in different industries. Earnings for workers at the 50th percentile are more volatile in the construction and durable manufacturing sectors and less volatile in health and education. Given the gender make-up of those industries—the manufacturing sectors are typically comprised mostly of men, while health and education are staffed more by women—this might explain some of the difference in risk between the two genders.

The variation in these risks has implications for how we think about social insurance programs and other efforts to smooth risk. As the authors note, while policies that help fight recessions – fiscal and monetary policy – wouldn’t eliminate all the risks documented in the paper, it could help reduce many of the worst effects of the recession for quite a few U.S. workers.

Must- and Should-Reads: January 23, 2017

Posted on by Brad DeLong
  • Nicholas Bagley: Patching Obamacare at the State Level: “If Congress zeroes out the individual mandate—and my hunch is that it will—it’s game over for the exchanges…
  • Xavier Jaravel: The Unequal Gains from Product Innovations: Evidence from the US Retail Sector: “From 2004 to 2013 higher-income households systematically experienced a larger increase in product variety and a lower inflation rate for continuing products…
  • Larry Summers: Disillusioned in Davos: “I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company…
  • Charles Stross: Why Scifi Matters More When the Future Looks So Dangerous: “Near-future scifi is not a predictive medium: it doesn’t directly reflect reality so much as it presents us with a funhouse mirror view of the world around us…
  • Robert Allen (2004): Progress and Poverty in Early Modern Europe: “At the end of the middle ages, the urban, manufacturing core of Europe was on the Mediterranean with an important offshoot in Flanders…
  • Michael Klein, Edward Schumacher-Matos, and Miriam Wasserman: Econofact: About: “EconoFact is… to bring key facts and incisive analysis to the national debate on economic and social policies…

Interesting Reads:

Must-Read: Michael Klein, Edward Schumacher-Matos, and Miriam Wasserman: Econofact: About

Posted on by Brad DeLong

Must-Read: Talking Points!

Michael Klein, Edward Schumacher-Matos, and Miriam Wasserman: Econofact: About: “EconoFact is… to bring key facts and incisive analysis to the national debate on economic and social policies…

…It is written by leading academic economists from across the country who belong to the EconoFact Network, and published by the Edward R. Murrow Center for a Digital World at The Fletcher School at Tufts University…. Our mission at EconoFact is to provide data, analysis and historical experience in a dispassionate manner. The presentation is in short memo form and written in everyday language, free of jargon, and where appropriate, accompanied by visuals illustrating the main point. We are committed to presenting even complex economic analysis in a way that is accessible to all. Our guiding ethos is a belief that well meaning people emphasizing different values can arrive at different policy conclusions. However, if in the debate we as a society can’t agree on the relevant facts, then the nation itself loses a common base for constructive debate and policy will suffer…

Should-Read: Robert Allen: Progress and Poverty in Early Modern Europe

Posted on by Brad DeLong

Should-Read: Robert Allen (2004): Progress and Poverty in Early Modern Europe: “At the end of the middle ages, the urban, manufacturing core of Europe was on the Mediterranean with an important offshoot in Flanders…

…The Netherlands was thinly populated, and England was an agrarian periphery. By 1800, the situation was largely reversed. First, the Netherlands and, then, Britain emerged as commercial and manufacturing powerhouses with the largest urban economies in Europe. Italy and Spain slipped behind. Only present-day Belgium managed to remained near the leaders, perhaps because of proximity to the Netherlands. Explaining this reversal in fortunes has been a central problem of social science, and the literature includes many conflicting hypotheses. This paper attempts to give an integrated assessment of six….

The intercontinental trade boom was a key
development that propelled northwestern Europe forward…. Northwestern Europe’s ascent began in the century before the American and Asian trades become important…. Yhe commercial revolution began… [as] an intra-European reorganization in which northwestern Europeans out competed Mediterranean producers in woolen textiles…. Northwestern Europe’s success was based on a two step advance–the first within Europe, the second in America and Asia. This success, it might be noted, marked the first steps out of the Malthusian trap…

Has Protectionism Ever Worked?

Posted on by Brad DeLong

Q: Has protectionism ever worked? Are there examples of countries throughout history that have embraced protectionist policies, and did that yield positive results? And what do these examples, if there are any, tell us about the economic plans of Mr. Trump?

A: If I were you, I would go grab Robert Allen’s Global Economic History: A Very Short Introduction <http://amzn.to/2kgt8pj>, and immediately read chapters 8 and 9.

First, chapter 8: Briefly, tariffs–but on the manufacturing goods of the first and early second industrial revolution where learning-by-doing and developing effective communities of engineering practice–is a piece but only a piece of the standard nineteenth century industrialization package: subsidizing railways, schools, banks, and (the right kind of tariffs). They don’t work without the other three components. They do work for a while–for the mid- and late-nineteenth centuries and into the twentieth, with diminishing effectiveness–if the entire package is successfully implemented.

(Note that the British dominions–Canada, Australia, New Zealand–do fine without the tariffs. They become rich in the late nineteenth century. But in the 20th they do fall behind to some degree because they are not strong in the industries where twentieth century productivity growth is initially most rapid. And note that for countries that already have dominant positions in leading edge high tech communities of engineering practice, tariffs are simply a drag.)

Second, chapter 9: After the standard nineteenth-century package is played out, successful rapid development requires a “big push” and a successfully implemented big push: Japan, South Korea, Taiwan, and now China. (The Soviet Union is an interesting case–I am not sure Allen has gotten it right.) And a great many other countries have tried for “big pushes”, and failed. Tariffs on the goods in which your economy is going to have a comparative advantage in a generation are useful, but only those tariffs…

Trump’s plans–whatever they may be, and nobody knows what they are, not even, or perhaps especially, not him–have nothing to do with past successful episodes of the right kind of tariffs as part of a pro-growth or pro-opportunity industrial policy mix.

Sincerely yours,

Brad DeLong

Professor of Economics J. Bradford DeLong
U.C. Berkeley
delong@econ.berkeley.edu
925 708 0467
@delong

Should-Read: Charles Stross: Why Scifi Matters More When the Future Looks So Dangerous

Posted on by Brad DeLong

Should-Read: We are narrative-loving animals. It’s how we think. We are jumped-up East African Plains Apes, only 3000 generations removed from those who first developed language, trying to understand the world as monkeys with, as Winnie-the-Pooh would say, “very little brain”. We are lousy at remembering lists—that is why we need to write them down. We are not much good at retaining sets of information—unless we can, somehow, turn them into a journey or a memory palace. We are excellent, however, at remembering landscapes. And we are fabulous at stories: human characters with believable motivations; beginnings, middles, and endings; hubris and nemesis; cause and effect; villains and heroes. To place ideas and lessons in the context of a story is a mighty aid to our thinking:

Charles Stross: Why Scifi Matters More When the Future Looks So Dangerous: “Near-future scifi is not a predictive medium: it doesn’t directly reflect reality so much as it presents us with a funhouse mirror view of the world around us…

…But in a post-truth world, it may be that only by contemplating deliberate un-truths can we retain our sense of what it is plausible to believe in the collage the media surround us with. State surveillance with overt goals that differ from actual, unadmitted motivations? Check. Intelligence bureaucracies that have their own agendas, focussed on institutional stability rather than carrying out their official mission? Check. Other groups infiltrating government agencies and using them for their own purposes, like parasitic wasps laying their eggs inside a paralyzed caterpillar? Check. This is what near-future science fiction can do for us: it glues convenient handles—explanations we can grasp—on models of phenomena that mimic the patterns of the real world, and gives us the chance to infer the intentions of the hidden manipulators. And that’s why near-future SF remains relevant—and dangerous—in the “post-truth” era…

>Should-Read: Larry Summers: Disillusioned in Davos

Posted on by Brad DeLong

Should-Read: Larry Summers: Disillusioned in Davos: “I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company…

…rushing to praise the new administration; (ii) the unwillingness of business leaders who rightly take pride in their corporate efforts to promote women and minorities to say anything about presidentially sanctioned intolerance; (iii) the failure of the leaders of global companies to say a critical word about US efforts to encourage the breakup of European unity and more generally to step away from underwriting an open global system; (iv) the reluctance of business leaders who have a huge stake in the current global order to criticise provocative rhetoric with regard to China, Mexico or the Middle East; (v) the willingness of too many to praise Trump nominees who advocate blatant protection merely because they have a business background…. My objection is not to disagreements over economic policy. It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity. Burke was right. It is a lesson of human experience whether the issue is playground bullying, Enron or Europe in the 1930s that the worst outcomes occur when good people find reasons to accommodate themselves to what they know is wrong. That is what I think happened much too often in Davos this week…

Should-Read: Xavier Jaravel: The Unequal Gains from Product Innovations: Evidence from the US Retail Sector

Posted on by Brad DeLong

Should-Read: Xavier Jaravel: : The Unequal Gains from Product Innovations: Evidence from the US Retail Sector: “From 2004 to 2013 higher-income households systematically experienced a larger increase in product variety and a lower inflation rate for continuing products…

…Annual inflation was 0.65 percentage points lower for households earning above $100,000 a year, relative to households making less than $30,000 a year…. The relative demand for products consumed by high-income households increased because of growth and rising inequality; (B) in response, firms introduced more new products catering to such households; (C) as a result, continuing products in these market segments lowered their price due to increased competitive pressure…. Increasing relative demand leads to more new products and lower inflation for continuing products, implying that the long-term supply curve is downward-sloping…