Comments on: Insuring skills

By: Thomas

Thomas — Thu, 23 Oct 2003 06:37:05 +0000

Is it your contention that none of their work has any value? That Becker and Murphy are simply…partisans? Your complaint doesn’t seem to be that there argument is incoherent, but that it is incomplete. That’s a damning criticism, but not of an op-ed piece.

By: Matt Weiner

Matt Weiner — Tue, 21 Oct 2003 00:54:04 +0000

Well, I would alter that to “Never trust fellows of the Hoover Institution,” whose explicit institutional bias is rather shocking. In any case, you haven’t explained why their argument isn’t incoherent.

By: Thomas

Thomas — Mon, 20 Oct 2003 22:48:12 +0000

If there’s a rule I’ve learned, it’s never trust Nobel prize winning economists, and certainly never trust Clark Medal winners, especially when they’re pronouncing on the very topic for which they won such an award.

By: dsquared

dsquared — Mon, 20 Oct 2003 07:13:23 +0000

What’s wrong with specializing in fields of activity with generalist skill profiles, given that there are plenty, and plenty lucrative, such fields? Basically, it’s crap if you don’t want to be dependent on France and Germany for your precision engineering.

By: Matt Weiner

Matt Weiner — Sat, 18 Oct 2003 23:14:58 +0000

Nicholas: It seems to me that Becker et al. care. They argue that highly progressive tax structures discourage people from training for specialized skills, and that’s an argument against those structures. It may be that in fact we don’t want any more people to train for those specialized skills, but then the argument that “Tax cuts incentivize people to train for skills and so are bad” won’t wash. (It may be that Becker et al.’s response would turn on generalist vs. specific skills—in which case I would have to retire from the fray.) Incidentally, isn’t it highly questionable whether progressive tax structures really do discourage people from getting better-paid jobs? I’m not economically trained, but I’ve looked at Samuelson’s text, and I recall a passage in which he said that empirical studies had failed to find such effects. I was also rather flabbergasted by this, from Becker et al.: Countries that invest heavily in educating their citizens are also those that tend to experience high economic growth following such investments. Would those not also be countries that collect enough tax revenues to pay for schools?

By: Nicholas Weininger

Nicholas Weininger — Sat, 18 Oct 2003 21:40:30 +0000

Henry: your response to Brett begs the question: who cares? What’s wrong with specializing in fields of activity with generalist skill profiles, given that there are plenty, and plenty lucrative, such fields? Far better to do that, I say, than to do as the Soviets did and produce legions of ultra-specialized engineers with no employability outside their sub-sub-fields. Yes, I know, there are alternatives in between; I’m just pointing out that one can go too far the other way. And if weak welfare states may produce underinvestment in specialist industries, strong ones may just as likely produce overinvestment (not to mention all the other economic distortions they produce, but that’s a whole other argument…). The information problems involved in setting the right level of investment in such industries are, to put it mildly, knotty. Furthermore, can you give some examples of industries that require investment in specific skills and in which the US has fallen behind the likes of Sweden and Germany?

By: Henry

Henry — Sat, 18 Oct 2003 20:44:18 +0000

Too many comments to respond to here, so I’m just taking up a couple… baa – Becker et al.’s argument goes a lot further than arguing that tax reductions will, on average, reduce government expenditure. They’re claiming, without providing any sort of serious evidence, that reducing spending through starving the beast is indubitably a good thing. I’m not a macroeconomist, but Brad DeLong is surely right in saying that very few serious economists take as sanguine a view of this as Becker et al. My strong impression is that they take liberties with theory in order to support a particular partisan viewpoint. Further, I reckon that your implication that Nobelists don’t produce codswallop is manifestly contradicted by the facts. Especially when it comes to Gary Becker. He’s brilliant – but much of his work teeters on the border between genius and lunacy. And for the record, George Akerlof, who’s also a Nobelist, has described Bush’s policy in some rather unflattering terms; I don’t think that Robert Solow is too impressed either. Nicholas – the extent to which there are externalities is a matter of controversy in the literature. Becker claims that all the benefits can be captured by firms; others disagree. As you likely suspect, I side with the others on this. Brett – You’re very likely correct – there aren’t all that many specific skills in the field of employment that you’re in. And this is true, I would imagine, of most skilled jobs in the US. Which is precisely the point that Iversen etc are trying to make. Economies such as the US, with weak social welfare systems, tend to specialize in fields of economic activity with generalist skill profiles. As for your recommendation that the problem could be solved through some sort of indenture system – there are rather less draconian solutions available. For example, in Germany, skills training is carried out through industry-level training schemes, which help address the collective action problems inherent to training provision in a free economy.

By: Ophelia Benson

Ophelia Benson — Sat, 18 Oct 2003 18:09:12 +0000

“but the people actually running the show seem to have a positive jones for such a state of affairs.” Well exactly, this is my point. There is a blindingly obvious and very compelling reason for that, and it’s really remarkable how little it gets discussed, at least in journalism. You can find it mentioned in books, but not in the daily fare that makes up the medium we all swim in. So they get away with it. People who are afraid, and for damn good reason, will take crappier jobs for crappier pay than people who aren’t. The correct way to discuss this is to call it a ‘flexible’ labor market. Meaning one that can be fired and underpaid at will.

By: Davis X. Machina

Davis X. Machina — Sat, 18 Oct 2003 18:01:30 +0000

I do not want to live in a country which is so draconian that all of the workers live in constant fear that they will loose their job and die of starvation. Hey, I don’t either, but the people actually running the show seem to have a positive jones for such a state of affairs.

By: Davis X. Machina

Davis X. Machina — Sat, 18 Oct 2003 17:59:38 +0000

What happens when someone in Bangalore, or in Manila, or in Kiev, has the same ‘specific skill’ I’ve been developing, and is employable at a third or a tenth of my cost?

By: Nicholas Weininger

Nicholas Weininger — Sat, 18 Oct 2003 16:58:43 +0000

It strikes me that the argument here depends on the hypothesis that when people develop specific skills, it has really big positive externalities—economic effects not captured by the return to employers of having people around with said skills. I don’t see, however, why that should necessarily be the case. You’re certainly not going to learn about the externality effects of developing specific skills by asking people with those skills whether they favor the welfare state. Of course it’s in their interest to have more economic security than their narrowly-tailored jobs might otherwise provide them. But that says nothing about whether taxing other people to give them that security provides a net benefit. And if externality effects are small compared to direct short-term benefits to employers, then no welfare state is needed to provide skilled people with security. High demand for valuable specific skills will lead employers to pay high salaries to the skill-holders, and the skill-holders can then use those salaries to buy themselves security through savings. For example, if you can make lots of money—but only sporadically—for knowing an obscure and narrowly applicable programming language, then you go into a job using that skill knowing it’s probably not going to last, and you use the premium salary it provides you to build up investments and savings accounts. This then gives you the wherewithal to tide yourself over during a downturn or to retrain yourself if the whole industry you depend on goes away. Moreover, companies that have sporadic needs for workers with narrowly tailored skills can do this sort of calculation as well as individuals—they can choose to keep people “on the bench” during downturns, for the longer-term benefit of having them back when they really need them again.

By: Ophelia Benson

Ophelia Benson — Sat, 18 Oct 2003 16:44:37 +0000

“An employer does want their employees to be more skilled” But that’s not true, is it? Not necessarily, not all employees and not all employers. It depends on the kind of work that’s involved and the state of the labor market, for a couple of things, surely. For plenty of jobs no real skill is required, just a lot of damn hard work, which skilled people don’t want to and (with any luck and a good labor market, etc.) don’t have to do. A lot of employers do indeed want, precisely, unskilled workers, because no one else will do the job, especially not for shit pay.

By: Brett Bellmore

Brett Bellmore — Sat, 18 Oct 2003 16:27:15 +0000

I’d be hard put to identify any skills in the field I’m in that could actually be considered employer specific. Use of some company specific software package, maybe? Even that helps your employability, by demonstrating that you’re capable of learning. And hopefully if you lose your job, you won’t be such an ass as to refuse gainful employment just because it’s “beneath you”. The key point though, is this: An employer does want their employees to be more skilled, but has to be reluctant to pay them to aquire skills which might be taken elsewhere. One might attempt to indirectly solve this with welfare policy, but that’s a very indirect solution indeed. I’m dubious that it works at all; Welfare also lessens the perceived need to obtain skills which provide job security, after all. The military has a direct solution to this dilemma, which is proven to be very effective: Offer training in return for a commitment to use that training for a specified term in the military’s employ. “Indentured servitude”, if you will. I think industry should be permitted to offer this road out of poverty, too.

By: doctorem

doctorem — Sat, 18 Oct 2003 15:49:58 +0000

Look. The primary and glaring flaw of ANY argument that says “tax cuts are good” irrespective of anything else (which IS what Grover Norquist and his minions including 90% of the “modern” Republican party argue), is that it leads very simply to the logical conclusion that there should be no taxes whatsoever. Virtually everyone agrees that there is SOME optimum level of taxation greater than zero, one that is determined by a sober evaluation of our society’s resources and needs. People will disagree about what that level is, but NOBODY can know for sure whether current tax rates are above or below the optimum rates and, ay any given time, it is just as likely to be either. The sooner we recognize this tautology, the sooner we will reject the “no tax pledge” madness which says taxes are ALWAYS too high and upon which the “modern” Republican party bases its domestic economic agenda.

By: Barry

Barry — Sat, 18 Oct 2003 15:41:47 +0000

Brett, think of it this way: As a machinist, you could learn skils which are highly transferrable across industries (‘general’), or those which are only highly transferrable across companies within one industry(‘industry-specific). You could also learn skills which are valued by your present employer, but which wouldn’t be valued (and might be negatively-valued) by any other employer (‘company-specific’). In the absence of a safety net, it makes a lot more sense to prioritize general over industry-specific, and industry-specific over company-specific skills. The reason is that you don’t want to flip burgers in the event of losing your current job; you’d prefer to go to another company as a machinist.