Précis
Uncertainty and labor turnover
Cyclical well-being
Innovative workplaces and their workers
Uncertainty and labor turnover
It should be widely known that the change in employment reported every month is the net of two much larger flows into (hires) and out of (separations) employers’ payrolls. The Cleveland Federal Reserve Bank included in their April 2003 Economic Trends bulletin an analysis of the new data from the BLS Job Openings and Labor Turnover Survey (JOLTS) that illustrated that fact. They point out that the over-the-year comparisons of hiring rates between the months of 2002 and 2001 were generally downward: "… in every month of 2002 except December, the hiring rate was lower than or equal to the rate for the same month a year earlier." According to the table in the report, the overall hiring rate in private industry fell from 3.9 percent of employment to 3.5 percent.
The separation rate also fell, however, moving from 4.0 percent in 2001 to 3.5 percent in 2002. The decline, according to the Cleveland Fed’s report, was mostly the result of a lower quit rate while the layoff rate declined barely 0.1 percentage point. "The pattern of weaker hiring and fewer separations, which is repeated across the full range of private industry," the report concludes, "may be another example of how uncertainty is slowing the recovery."
Although some economists might argue the long-term effect of business cycles on consumers’ is rather small (especially if well-being is measured as consumption), most economists agree with the general public that preventing recessions is important, even to the point of being willing to absorb some costs of counter-cyclical policies. Justin Wolfers has examined the direct effect of the business cycle variables of unemployment and inflation on self-reported data on subjective well-being.
In his recent NBER working paper (no. 9619), "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-being," Wolfers regresses unemployment and inflation on measures of satisfaction for 16 European nations derived from the European Union-sponsored Eurobarometer survey. The results confirm that both inflation and unemployment lower reported levels of satisfaction. The impact of unemployment seems to be much greater. Likewise, volatility in unemployment and inflation have negative impacts on satisfaction, with current levels of variability having perhaps the same impact as raising the level of the unemployment rate by about a quarter of a percentage point.
The use of subjective data is rare among economists, but perhaps less so than in the past. As Richard A. Easterlin remarks in his Journal of Economic Literature review of Bruno S. Frey and Alois Stutzer’s recent book, Happiness and Economics: How the Economy and Institutions Affect Well-Being, "Economists are trained to turn a cold shoulder to what people say about their well-being." However, such information can be quite useful, even to economists, as evidenced by the recent writings of Wolfers, Frey, and Stutzer, Easterlin himself, on growth and happiness, and Sharon DeVaney and Sandy Chen, on job satisfaction in the Bureau’s Compensation and Working Conditions On-line.
Innovative workplaces and their workers
One response to intense economic competition has been to adopt innovative practices in the workplace with a view toward increasing the performance of the workforce. Such "high-performance workplace" innovations might include, either singly or, more effectively, in combination, such practices as job rotation, self-managed teams, extensive worker training, widespread diffusion of computer technologies, or employee participation in problem-solving groups. While some research has suggested that such practices can increase the productivity of establishments, Sandra E. Black, Lisa M. Lynch, and Anya Krivelyova investigate the impact of these practices on the workers.
They make three sets of findings in their recent National Bureau of Economic Research working paper (no. 9569), "How Workers Fare When Employers Innovate." First, at least some workers, often supervisory workers, receive some compensation for being involved in workplaces with specific combinations of high performance work practices. This effect was most often seen in the interaction of unionization and practices such as self-managed teams or labor-management problem-solving groups.
Second, many high performance practices tend to raise wage inequality, once other characteristics have been controlled for. Say the authors, "Both the count measures and the index of workplace practices suggest that these high performance workplace practices actually increase within-establishment inequality."
Third, Black, Lynch, and Krivelyova found mixed evidence on the impact of high performance practices on employment. Firms that had adopted profit sharing and self-managed teams tended to be more likely to have had a large layoff between 1993 and 1996. Firms with problem-solving meetings in a unionized context or with a large share of employees engaged in job rotation were less likely to have had a major jobs cutback.
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