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Archive for July, 2012

This essay in the NYT lays out the poverty situation in America eloquently:

Low-wage jobs bedevil tens of millions of people. At the other end of the low-income spectrum we have a different problem. The safety net for single mothers and their children has developed a gaping hole over the past dozen years.

And he rightfully point to politics, not policy, as the solution:

A surefire politics of change would necessarily involve getting people in the middle — from the 30th to the 70th percentile — to see their own economic self-interest…

 

I have seen days of promise and days of darkness, and I’ve seen them more than once. All history is like that. The people have the power if they will use it, but they have to see that it is in their interest to do so.

Edelman speaks like a community organizer here- change is not about “empowering,” but organizing the power that already exists- which is easier said than done.

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Mother Jones has another dispatch from the excellent Economic Hardship Reporting Project, with this edition focused on temporary employment. It underscores, in visceral detail, how an increasingly prevalent mode of employment leaves workers economically insecure (and often unsafe).

To get one thing straight, the temporary sector isn’t exactly taking over the economy. There is a difference between “fast growing” and “huge,” and this sector is clearly the former:

In the early 1980s, employment in the “temporary help services” industry—which covers both temp workers and employees of the firms that supply them—stood in the several hundreds of thousands. Now it’s 2.5 million, a seven-fold increase in less than four decades. By 2020, the BLS foresees more than 440,000 new jobs in the sector.

However, the details of it are depressing:

Back at the Labor Ready office, I have to wait nearly 30 minutes to receive my check. The job paid $8 an hour—minimum wage. For five hours of labor, I get $37.34 after taxes. I am not paid, however, for the four hours on call, or the time spent in transit to and from the job site, or waiting to get paid. None of this meets the legal definition of wage theft, but it sure feels like it…

Labor Ready’s Oakland workforce is nearly entirely black, excepting the branch manager, who is white. Most of the workers I talk to are searching for stability but finding it elusive. They include homeowners in foreclosure, apartment-dwellers who are being evicted, and residents of motels negotiating for a few more days. And many express hope they can parlay a temp gig into something permanent…

The potential to convert a temp job into full-time employment is one of the benefits promoted by Labor Ready, but the company doesn’t actually know at what rate this happens…

Yet there’s little evidence to support the claim that temp agencies help impoverished workers…Providing low-skill workers with a temp job, they wrote, “is no more effective than providing no job placements at all.”

There is not really a big policy takeaway from this. There will always be a need for low-skilled workers, and it seems like increasingly these jobs will not even offer the protections of permanent employment. Certain things, like strengthening the safety net and increasing the minimum wage, will be a help. However, the growth of the temporary model may be seen as undermining any gains that organized labor or cooperative enterprises might seek- it would be hard to imagine either growing as fast as this sector. Clearly, our society will need to rethink how labor can have solid footing in a temp economy.

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Michael Sandel has a fascinating new book out called What Money Can’t Buy: The Moral Limits of MarketsSandel makes an old argument, that economics cannot be divorced from its roots in moral philosophy, but he makes it in a fresh light from the perspective of the 21st century. Two transformations, he writes, have made this argument more compelling and important than ever before: our world has changed towards a market orientation, and the boundaries of the economics discipline have expanded.

I do not intend to provide a summary, but want to point out one argument of the book that I found particularly fascinating and persuasive. Sandel describes the commercialization effect – which refers to when markets change the character of the good and the social practices they govern. That is, a good’s characteristics will change depending on how it is exchanged/provided, whether through market exchange or another form such as through gift, informal exchange, altruism, love, or feeling of responsibility or loyalty. Thus, the value of a commodity will depend on how it was provided. The exact same commodity may have one value if I buy it commercially and another if it is given as a gift by a friend.

Though it seems very obvious, the vast majority of economics ignores this commercialization effect. (Some behavioral experimenters such as Dan Ariely have found evidence of this effect, no surprise, and have commented on it.) This highlights how mainstream economics is an analysis of a very special case of economic activity, that done through market exchange, and this theory falls apart with respect to other forms of economic activity. A truly general theory of economic behavior of humans must recognize and deal with these aspects of human psychology and moral philosophy which give rise to the commercialization effect and throw a wrench into the standard microeconomic theory of choice and exchange.

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