A Reversal Of Structural Unemployment?

See Supermarkets start bagging self-serve checkouts: More supermarkets bagging do-it-yourself checkout lanes in name of customer service by Stephanie Reitz of the Associated Press. Excerpt:

"Big Y Foods, which has 61 locations in Connecticut and Massachusetts, recently became one of the latest to announce it was phasing out the self-serve lanes. Some other regional chains and major players, including some Albertsons locations, have also reduced their unstaffed lanes and added more clerks to traditional lanes.

Market studies cited by the Arlington, Va.-based Food Marketing Institute found only 16 percent of supermarket transactions in 2010 were done at self-checkout lanes in stores that provided the option. That's down from a high of 22 percent three years ago.

Overall, people reported being much more satisfied with their supermarket experience when they used traditional cashier-staffed lanes.

Supermarket chains started introducing self-serve lanes about 10 years ago, touting them as an easy way for shoppers to scan their own items' bar codes, pay, bag their bounty and head out on their way. Retailers also anticipated a labor savings, potentially reducing the number of cashier shifts as they encouraged shoppers to do it themselves.

The reality, though, was mixed. Some shoppers loved them and were quick converts, while other reactions ranged from disinterest to outright hatred -- much of it shared on blogs or in Facebook groups.

An internal study by Big Y found delays in its self-service lines caused by customer confusion over coupons, payments and other problems; intentional and accidental theft, including misidentifying produce and baked goods as less-expensive varieties; and other problems that helped guide its decision to bag the self-serve lanes."

Here is what I say about in class (which we covered this week):

"Structural unemployment: unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs.

One example of this is when you are replaced by a machine. We don’t have as many bank tellers any more because people use ATMs. Another example is when there is a fall in demand for your product, so you get laid off, like with typewrites since people now use computers. A third example is geographical, when the jobs are not in your region of the country."

Why is college so hard?

Here is the link:

Why is college so hard?

College degrees that can attract employers

Click here to read the article. Here are the top 5 they listed:

Degree #1 - Bachelor's in Business Administration

Degree #2 - Bachelor's in Computer & Information Sciences

Degree #3 - Master's in Business Administration (MBA)

Degree #4 - Bachelor's in Health Care Administration

Degree #5 - Bachelor's in Marketing/Communications

Of course, by the time you graduate, things may have changed. Maybe too many people will go into these majors, lowering the potential salary.

Will There Be A Pumpkin Shortage This Year?

See The Great Pumpkin Shortage: Stormy Summer Limits Supply In Northeast By MEGAN GIBSON of Time.com. Here is an excerpt:

"As much as we hate to admit we need pumpkins - NewsFeed answers to no vegetable - this time of year we really do. Unfortunately for those of you in the Northeast, pumpkins might not be so readily available for your Halloweening needs.

Thanks to Tropical Storm Irene and an especially stormy summer, there are severe reported shortages in pumpkin crops across the region as bad weather conditions have led to higher numbers of rotten vegetables. Which means that pumpkin seekers could be paying double for their Jack-o'-lantern canvases in some places and, in others, they could be out of luck entirely.

What's a Halloween lover to do? Now just because you didn't see this shortage coming, doesn't mean there's no hope for you. Now that you know, however, your first course of action should be to move quickly. David Dumaresq of Farmer Dave's told CBS that you should "[b]uy your pumpkins soon for the best availability because there's not going to be too many around this year.""

Of course, if everyone tries to "move quickly," that could make the price rise sooner. This relates to one of the shift factors of demand, expectation of future price. If buyers expect higher prices in the near future, demand today increases which will cause the price to rise.

Then sellers will reduce supply in anticipation of the higher price, further speeding up the price increase. My guess is that sellers try to project consumer behavior on this and will raise the price based on this.

But if the price actually doubles, then that would eliminate the shortage. We have the supply line moving to the left, raising the price and lowering the quantity bought and sold. Yes, fewer people will get pumpkins this time of year, but there is no shortage.

Josh Hamilton’s grand slam causes a flooring and countertop shortage

Click here to read the story. Or just read it here:

"ARLINGTON, Texas (AP)—A Dallas carpet company has had trouble with its website much of the day, thanks to Texas Rangers slugger Josh Hamilton(notes).

The Rangers beat Cleveland on Wednesday night, helped by Hamilton’s grand slam. It just so happened that CC Carpet was offering free flooring and countertops to customers in September if the Rangers outfielder hit a grand slam.

Hamilton did his part and the company has to pay up. Not long after the hit, the company’s website crashed and it’s been spotty Thursday.

CC Carpet president Steve Fitzgerald says the promotion will cost his company about $500,000 but it’s covered by insurance."

Could Those Hours Online Be Making Kids Nicer?

What would Adam Smith say, especially the one from Wednesday's post? Click here to read the Wall Street Journal article about this. Maybe Facebook and Twitter have positive externalities. Excerpts:

"Time spent online may be helping people learn to be more empathetic and make more friends in real life.

A growing body of research indicates the widespread use of texting, emailing or posting on social-media sites has social benefits."

"...digital communication can lead to more or better friendships online and off, greater honesty, faster intimacy in relationships and an increased sense of belonging, in addition to practical social benefits like an expanded circle for networking."

"...technology appears to enhance real-world relationships..."

"People use digital communication primarily to interact with people they are closest to offline, not with strangers. The communication tightens the bonds between them..."

"... technology-driven communication may be particularly helpful for people who are shy or anxious in social settings."

"Anxious students reported greater shyness and discomfort than non-anxious students in face-to-face groups. In the chat room, however, they said they felt significantly less shy, more comfortable and better accepted by their peers."

"Socially anxious participants were more likely to make decisions and lead the group when they were in the chat room than when face-to-face with others."

"Frequent communication online could serve as practice for in-person social interactions..."

"...empathy could indeed be recognized and communicated through written, online communication."

"Digital communication also appears to bolster individuals' sense of community and group identity..."

"Students reporting low self esteem who actively used Facebook were more likely to say they felt a part of the Michigan State community than low self-esteem individuals who didn't use Facebook as intensely..."

Adam Smith vs. Bart Simpson

In March of 2010, I attended a lecture by Paul Zak, a neuro-economist from Claremont Graduate University, at the Mind Science Foundation. This week in my micro class I talked about utility and how consumers behave. neuroeconomics is all about looking inside our brains to see what makes us tick.

Zak has studied how our behaviors are affected by the presence in our brains of a chemical called oxytocin, which can affect how generous we are. The more oxytocin you have have, the more generous and empathic (or sympathetic) you are. So he calls oxytocin "the moral molecule." It helps us identify with others and understand their feelings and situatons. Oxytocin can also increase when people trust you or are generous to you.

What does this have to do with Adam Smith? He wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through. This is directly related to oxytocin. In September 2009 I had a post on this called Science Proves That Adam Smith Was Right Over 200 Years Ago (sort of). That will provide you with more details.

Where does Bart Simpson come in? Professor Zak showed a video clip from the "The Simpsons" that illustrated sympathy, a concept that Adam Smith wrote about in the above mentioned book. To watch a lecture by professor Zak (very similar to the one he did here in San Antonio), go to The Moral Molecule. The Bart Simpson clip starts at the 7:40 mark. Bart's mom tells him to look at his sister and try to feel what she feels. Exactly the kind of thing Adam Smith talked about.

Oxytocin also facilitates trust. Economies need trust because not everything can be put into a law, a contract or be monitored. Your boss can't watch you every second to make sure you don't slack off on the job. We trust banks and our pension funds not to take the money and blow it all in Vegas. We trust our government officials not to accept bribes. Yes, we have rules and regulations against these things. But if we had to have a rule for everything and if everyone was being watched constantly, it would be too costly to our economy. Trust helps quite a bit.

Here are two articles about professor Zak's lecture from the San Antonio Express-News:

Emerging field offers insight into human virtues

Humans release ‘niceness' chemical

More information about neuroeconomics can be found at:

Neuroeconomics Explained, Part One

Neuroeconomics Explained, Part Two

Some Reasons Why Firms Are Not Hiring

See What's Wrong With America's Job Engine?: Wary Companies Rely on Temps, Part-Timers, Hire Overseas by DAVID WESSEL, WSJ 7-27-11. Excerpts:

"That's largely because the economy is growing much too slowly to absorb the available work force, and industries that usually hire early in a recovery—construction and small businesses—were crippled by the credit bust.

Then there's the confidence factor. If employers were sure they could sell more, they would hire more. If they were less uncertain about everything from the durability of the recovery to the details of regulation, they would be more inclined to step up their hiring."

"Something else is going on, too, a phenomenon that predates the recession and has persisted through it: Changes in the way the job market works and how employers view labor.

Executives call it "structural cost reduction" or "flexibility." Northwestern University economist Robert Gordon calls it the rise of "the disposable worker," shorthand for a push by businesses to cut labor costs wherever they can, to an almost unprecedented degree.

Looking back at the percentage of Americans with jobs in the 1990s (rising) and the 2000s (falling), Princeton University economist Alan Krueger estimates that 70% of today's job shortage is simply cyclical, the result of a disappointing recovery from a deep recession. But he attributes 30% to changes in the job market that began a decade or more ago."

"In the most recent recession and the previous two—in 1990-91 and 2001—employers were quicker to lay off workers and cut their hours than in previous downturns. Many also were slower to rehire."

"Between the end of 2007 (when American employment peaked) and the end of 2009 (when it touched bottom), the U.S. economy's output of goods and services fell by 4.5%, but the number of workers fell by a much sharper 8.3%."

"At the worst of the 1980-82 recession, 1 in 5 of the unemployed were "temporary layoffs." In the recent recession, the proportion of temporary layoffs never exceeded 1 in 10. In part that's because fewer Americans work in factories, where production can be stopped and restarted; if a restaurant doesn't have enough customers, it goes out of business.

"When layoffs are temporary, subsequent recalls can take place quickly," say economists Erica Groshen and Simon Potter of the Federal Reserve Bank of New York. When layoffs are permanent, job recovery is slower, they say. If the employer wants to hire, there's the time-consuming chore of sifting through applications.

Corporate employers, their eyes firmly fixed on stock prices and the bottom line, prize flexibility over stability more than ever. The recession showed them they could do more with fewer workers than many of them previously realized."

"58% of employers expect to have more part-time, temporary or contract workers over the next five years and 21.5% more "outsourced or offshored" workers.

"Technology," McKinsey says, "makes it possible for companies to manage labor as a variable input. Using new resource-scheduling systems, they can staff workers only when needed—for a full day or a few hours."

Temporary-help agencies are playing an ever-larger role"

"Workers, in short, now can be hired "just in time.""

"Because they can hire temps almost instantly, there's little need to hire in anticipation of a pickup in business."

"When they do hire, big U.S.-based multinational companies are more able and more willing to hire overseas, both because wages are often cheaper there and because that's where the customers are."

"some employers insist they can't find workers with the skills they need at wages they can afford."

"difficulty in hiring workers "with specialized technical skills, particularly in the health-care and technology sectors."

But workers without college degrees find well-paying jobs scarce."

Links To Differing Opions On President Obama's New Economic Policy Proposals

First, here is a link from the White House about the proposal:

Fact Sheet: The American Jobs Act.

Here is a quick summary from Megan McArdle (who writes for The Atlantic Monthly):

Tax cuts: $250 billion

•Payroll tax rebate on first $5 million in payroll, which the president says will reach 98% of American companies, plus complete rebate for new hires or raises
•Extending payroll tax cut
•Extending 100% expensing of business investment
•(A bunch of regulatory streamlining that is likely to have little effect and is bizarrely classed as a tax cut)
•Tax credits for hiring unemployed veterans, particularly those with service-connected disabilities
•$4,000 per worker for hiring workers who have been unemployed for more than six months

Infrastructure: about $100 billion

•$50 billion for new infrastructure projects
•$10 billion for an infrastructure bank
•$15 billion to rehab vacant and foreclosed homes/businesses
•Some undisclosed sum for getting high speed wireless to "98% of American"
•$25 million to rehab schools

Direct assistance: About $100 billion (?)

•Continuing the extension of unemployment benefits
•Various retraining/wage support ideas that are supposed to help the structurally displaced to transition into new careers.
•$35 billion for preserving/hiring teachers, cops and firefighters
•Federal assistance in refinancing to current mortgage rates

Now links to the various opinions:

Obama's Job Plan: Mostly More of the Same (by McArdle)

Obama’s Jobs Bill: A Reasonable Plan (by Justin Wolfers, economics professor at the University of Pennsylvania)

Obama’s Costly, Unaffordable, Harmful New Stimulus: The “American Jobs Act” (by Hans Bader of the Competitive Enterprise Institute)

A missed opportunity (by Scott Sumner, economics professor at Bentley University)

Obama’s Job Speech Full of Bad Ideas (by Chris Edwards of the Cato Institute)

Obama’s Jobs Speech: Bolder Than Expected (by Mark Thoma, economics professor at the University of Oregon)

Jobs plan may create 1 million jobs - economists (from CNN)

Republicans make nice, but wary of Stimulus 2 (from CNN)

Your Co-Workers Might Be Killing You

Interesting article by Jonah Lehrer, from The Wall Street Journal, 8-20-11. Click here to read it. Here are some excerpts:

"...jobs don't just take a physical toll—they also exact a mental price. When people experience chronic levels of stress—and this is precisely what happens when our workplace is unpleasant or demanding—their risk of suffering from a long list of ailments, such as Alzheimer's, heart disease, depression and even the common cold, is dramatically increased."

"..."psychosocial" factors, such as work-related stress, are the single most important variable in determining the length of a life."

"...the factor most closely linked to health was the support of co-workers: Less-kind colleagues were associated with a higher risk of dying."

"...middle-age workers with little or no "peer social support" in the workplace were 2.4 times more likely to die during the study."

"...worst kind of workplace stress occurs when people have little say over their day. These employees can't choose their own projects or even decide which tasks to focus on first. Instead, they must always follow the orders of someone else."

"...a lack of control at the office was deadly—but only for men. While male workers consistently fared better when they had some autonomy, female workers actually fared worse. Their risk of mortality was increased when they were put in positions with more control."

Do looks matter?

See Ugly? You May Have a Case by DANIEL S. HAMERMESH, professor of economics at the University of Texas, Austin. From the 8-28-11 New York Times. Excerpts:

"...being attractive also helps you earn more money, find a higher-earning spouse (and one who looks better, too!) and get better deals on mortgages."

"...one study showed that an American worker who was among the bottom one-seventh in looks, as assessed by randomly chosen observers, earned 10 to 15 percent less per year than a similar worker whose looks were assessed in the top one-third — a lifetime difference, in a typical case, of about $230,000."

"Most of us, regardless of our professed attitudes, prefer as customers to buy from better-looking salespeople, as jurors to listen to better-looking attorneys, as voters to be led by better-looking politicians, as students to learn from better-looking professors. This is not a matter of evil employers’ refusing to hire the ugly: in our roles as workers, customers and potential lovers we are all responsible for these effects."

"You might argue that people can’t be classified by their looks — that beauty is in the eye of the beholder. That aphorism is correct in one sense: if asked who is the most beautiful person in a group of beautiful people, you and I might well have different answers. But when it comes to differentiating classes of attractiveness, we all view beauty similarly: someone whom you consider good-looking will be viewed similarly by most others; someone you consider ugly will be viewed as ugly by most others. In one study, more than half of a group of people were assessed identically by each of two observers using a five-point scale; and very few assessments differed by more than one point."

Small Changes In Growth Rates Add Up Over Time

In my macro courses we read a chapter in the book "The Economics of Macroissues." The chapter discussed how nations with common law systems, where property rights are better protected than in nations with civil law systems, have higher growth rates. I pointed out to my classes that even a small difference in growth rates ends up causing a very big difference in per capita incomes due to the annual compounding effect.

In early 2010, Paul Krugman mentioned that the per capita GDP since 1980 has grown 1.95% in the US and 1.83% in the EU. But we should also remember that small differences in growth rates compound over time. If per capita income was 20,000 in both the US and EU 29 years ago, the per capita income (or GDP) now would be 35,015 in the US and 33,839 in the EU, a difference of $1,176. Maybe not a big difference. But after 100 years the US income level would be 12% higher. After 200 years it would be 26% higher.

The table below shows how much per capita income would be at various rates after 100 and 200 years. Assume we start with a per capita income of $1,000. If we grow 2.0% per year, after 100 years it will be $7,245. At 2.1% per year, it would be $7,791 or about $700 more. That is how much that little .1% matters. The difference over 200 years is about $11,000. After 100 years at 2.5% per year, per capita income would be $11,814. That is $4,000 more than the 2.0% rate. Small differences in growth rates add up to big differences over time.

Per Capita Income After 100 and 200 Years At Various Annual Growth Rates (Starting With $1,000)