Précis
Skills are starting blocks for
competitiveness
The working rich
Style of corporate governance
affects workers
Health insurance affects the labor
market
Skills are starting blocks for competitiveness
Information technology, global competition, welfare reforms, and the coming requirement to replace a huge cohort of skilled wage earners have combined to create what the Council on Competitiveness, a non-partisan organization of business, labor, and academic leaders, calls "compelling pressures to upgrade the U.S. skills base." The Council’s report, Winning the Skills Race, describes why work force skills are today’s greatest competitive challenge, examines the potential impact of skill shortage on a variety of stakeholders, and documents a number of successful, collaborative solutions to the shared problem.
Perhaps the most startling gap in their analysis is that between the perceived basic literacy of entry-level workers and the efforts being made to remediate it. The data the Council examined suggested that roughly 80 percent of 21- to 25-year-olds entering the labor market did not possess sufficient skills to read safety rules and write simple reports. Nevertheless, data they obtained from the 1993 Survey of Employer-Provided Training show that only 2 percent of employers offer basic skills training and data they obtained from a 1991 supplement to the Current Population Survey found that only 6 percent of workers obtained basic skills training from any source.
At the end of the 19th century, it was low-wage workers who put in the longest workdays. Workers in the lowest hourly wage decile worked about 2 hours longer per day than workers in the top decile, according to Dora L. Costa’s paper, "The Unequal Work Day: A Long-Term View," published in the May 1998 Papers and Proceedings issue of American Economic Review. In 1973, lower paid workers still tended to work longer days, but the decrease in hours as one worked up the wage distribution was less pronounced. In contrast, Costa’s analysis of the May 1991 supplement to the Current Population Survey revealed that workers in the top wage decile worked the longest day, albeit only 40 minutes longer than those at the bottom of the wage distribution.
The pattern of hours worked has an impact on income distribution. According to Costa’s figures, about a quarter of the increase in earnings inequality between 1973 and 1993, as measured by the 90/10 ratio, could be attributed to changes in hours worked. "In the past," she concludes, "an inegalitarian distribution of work tended to equalize income, whereas today it magnifies earnings disparities."
Style of corporate governance affects workers
Two working papers from the Jerome Levy Economics Institute of Bard College touch on national styles of corporate governance and their impact on the labor force, according to the Institute’s May 1998 Report. In "The Political Economy of Corporate Governance in Germany," Mary O’Sullivan of the Center for Industrial Competitiveness at the University of Massachusetts at Lowell and INSEAD, claims that Germany’s current high unemployment is not, as many suggest, the result of the high cost of German labor and their expensive pensions and welfare schemes. Rather, it is that "German corporations have failed to invest in the organizational learning that leads to innovation. It is innovation that allows corporations to improve the quality of products while reducing production costs, thereby becoming more competitive." She believes that this failure has occurred because German corporate governance has shifted toward providing returns to stakeholders—shareholders, managers, financiers, and workers—rather than building the corporation.
In comparison, William Lazonick, also of the Center for Industrial Competitiveness and INSEAD, finds that despite their current recession, Japanese firms are fundamentally sound and have stayed committed to a policy of promoting lifetime employment, rather than a policy of extracting financial returns. Lazonick’s paper, "The Japanese Financial Crisis, Corporate Governance, and Sustainable Prosperity," argues that the Japanese system of cross-shareholding—much of the stock of Japanese corporations is owned by other corporations—has allowed executives to govern without interference from outside stockholders. As a result, he concludes, firms in Japan can allocate resources with a view to strengthening the company as a whole and boosting the productivity of the work force.
Health insurance affects the labor market
Almost 9 of 10 Americans with private health insurance obtain it through employer-provided plans. As a result, health care analysts have always been aware of the impact of labor market events such as unemployment on coverage. But what about the impact of health insurance coverage on labor market decisions? Tom Buchmueller, an assistant professor at the University of California—Irvine, and Rob Valletta, a senior economist at the Federal Reserve Bank of San Francisco, examine three such effects in a recent FRBSF Economic Letter.
Job lock is the reduced voluntary job mobility arising from the risk of losing health insurance. Their analysis suggests that this effect could be substantial, and more pronounced among women. The decision to retire is also affected by health insurance considerations. The ability to purchase post-retirement insurance at a rate comparable to that under the employer’s plan may lead to earlier retirement, particularly among men. The availability of insurance also seems to increase the labor supply of married women whose husbands do not have coverage.
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