Roundup Of Key Research Papers At Jackson Hole
With all eyes and ears firmly focused Janet Yellen's opening oratory this morning (due at 10ET), the contents of the rest of the conference appear to have been forgotten (and yet in the past have been among the most crucial to comprehend central banks' actions after the fact - forward guidance and QE for 2). As Bloomberg BusinessWeek reports, robots don’t steal jobs, the U.S. labor market is less flexible than it was, and workers haven’t suffered unprecedented periods out of work (and rehiring odds are the same as always), are among the conclusions of key papers being presented at the symposium, along with (unsurprisingly) findings that policymakers would benefit from a better understanding of labor market dynamics. The following is a brief review of their contents...
Robots and computers don’t steal as many jobs as some believe, and automation actually benefits many workers, Massachusetts Institute of Technology Professor David Autor said in his paper.
A key reason humans aren’t obsolete yet is that simple tasks such as visually identifying a chair, which any child can do, aren’t so easy for engineers to teach to computers, Autor said.
“Journalists and expert commentators overstate the extent of machine substitution for human labor and ignore the strong complementarities that increase productivity, raise earnings, and augment demand for skilled labor,” he wrote. “Challenges to substituting machines for workers in tasks requiring flexibility, judgment, and common sense remain immense.”
The U.S. labor market became less fluid in recent decades partly because of an aging workforce, a shift to older businesses, and the spread of occupational licensing and certification, economists Steven J. Davis and John Haltiwanger wrote in their paper.
The economists define labor market fluidity as “flows of jobs and workers across employers.” The paper found the U.S. “underwent a large, broad-based decline in the pace of labor market flows in recent decades.”
“An aging workforce is a factor behind the slowdown of worker reallocation,” the paper said.
Other factors they found included the “information revolution in hiring practices”; minimum wage laws; and “job lock” associated with employer-related health insurance.
US workers in the aftermath of the 2007-2009 recession haven’t experienced unprecedentedly long bouts of non-employment, according to a paper by economists Jae Song and Till von Wachter.
Their findings “suggest that the potential for hysteresis in the aftermath of the Great Recession is moderate,” the paper said.
Hysteresis posits that people out of work for too long have a harder time finding work, leading to a persistent decline in the employment-to-population rate.
In contrast to long-term unemployment, the extent of long-term non-employment “was comparable to that in previous recessions,” the paper says, finding that non-employment spells lasting more than two years “exhibited moderate cyclical movements” also similar across downturns.
Policy makers would benefit from a better understanding of labor markets, economist Giuseppe Bertola argued in a paper that weighed the impact of rules making those markets rigid or flexible.
Rules that protect workers from job losses and provide more generous unemployment benefits can soften and smooth shocks to the economy, said Bertola.
More rigid policies have a greater appeal to policy makers “after a crisis that casts doubt on the efficacy of financial markets and shows that monetary and other macro policies cannot always prevent deep recessions”
Rules that make it easier for companies to fire workers can speed up how an economy adjusts after a crisis and are particularly useful when “sector reallocation” is needed “but it would be wishful to suppose that it can quickly and painlessly restore equilibrium”
Pros and cons of market rigidities depend on circumstances, and labor policies should adapt to specific conditions
“Policy makers should be ready to react appropriately to cyclical and structural developments in labor as well as monetary, financial and goods markets”
“Labor market rigidities may yet become fashionable in the aftermath of a crisis where they were useful”
So, there you have it - in full Obi Wan Kenobi 'this is not the reality you are looking for' style - the smartest people in the room want you to believe that robotification does not mean minimum wage hikes are impossible (just don't tell McDonalds) and that workers really haven't suffered that much (compared to ther recessions) - despite this being the worst recovery ever.
Finally, for those looking for today's full agenda, here it is:
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