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Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Papers, Please #1: Various Papers on Employment, Wages and Productivity, published by Zvi on May 22, 2023 on LessWrong.
For a while, I’ve been keeping a bookmark folder called ‘Papers, Please’ of all the papers I’d like to check out in the future. For those I do get to look at, I’ve compiled my observations, with the intent of making this another kind of roundup. I noticed a bunch of them were focused on questions of employment, wages and productivity, so it made sense to pull those out into a post, and stay on the lookout for similar groupings in the future as the section expands.
If there is a central theme here, it is the outsized role of norms, expectations and comparisons in determining outcomes, as well as underlying differences, and how such considerations seem to be neglected in many of the papers.
What interventions are implied, if any, although that is very much not the question I’m looking to ask here? Highly unfashionable ones.
US labor market can be thought of as two and a half mostly distinct labor markets.
Aggregate U.S. labor market dynamics are well approximated by a dual labor market supplemented with a third, predominantly, home-production segment. We uncover this structure by estimating a Hidden Markov Model, a machine-learning method. The different market segments are identified through (in-)equality constraints on labor market transition probabilities. This method yields time series of stocks and flows for the three segments for 1980-2021.
Workers in the primary sector, who make up around 55 percent of the population, are almost always employed and rarely experience unemployment.
The secondary sector, which constitutes 14 percent of the population, absorbs most of the short-run fluctuations, both at seasonal and business cycle frequencies. Workers in this segment experience six times higher turnover rates than those in the primary tier and are ten times more likely to be unemployed than their primary counterparts.
The tertiary segment consists of workers who infrequently participate in the labor market but nevertheless experience unemployment when they try to enter the labor force. Our individual-level analysis shows that observable demographic characteristics only explain a small part of the cross-individual variation in segment membership. The combination of the aggregate and individual-level evidence we provide points to dualism in the U.S. labor market being an equilibrium division of labor, under labor market imperfections, that minimizes adjustment costs in response to predictable seasonal as well as unpredictable business cycle fluctuations.
This seems right to me. If you can check off a standard set of boxes that make you capable of ‘normal work’ and you are willing to accept what the market has on offer, you will be highly employable. When you lose one job, you will be able to find another. It would take quite a lot of AI automation or economic decline to change this.
Whereas if you can’t check enough of the boxes, and you have some incompatibility with the jobs on offer and can’t find a niche that fixes this that you will accept, you will struggle. And it makes sense that there’s mostly a sharp line between these two groups, with a third group that doesn’t always want to work and is mostly in category two when they try.
Note that a large majority of workers can check off the necessary boxes. This rules out anything too onerous, or the possession of an especially valuable skill, as a barrier to joining the first group.
Is Pay Transparency Good? In some ways yes, in some ways no. Here’s the abstract.
Countries around the world are enacting pay transparency policies to combat pay discrimination. 71% of OECD countries have done so since 2000.
Most are enacting transparency horizontally, revealing pay between co-workers of similar seniority...
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