How to make a living in the cult of meritocracy
Last week, as most of the US took a holiday to celebrate its founding, some corners of the internet decided to celebrate its modern cult of meritocracy instead.
Yes, there was yet another news cycle about America's bogus “ labour shortage”.
The US labour market has inarguably improved in recent months and years, of course. It is important to acknowledge that the 4-per-cent unemployment rate is the result of economic improvement, and that US growth seems to be humming along just fine, despite worries about changes in policy.
But the moniker “labour shortage” does a disservice to truth. One recent offender is CNBC, in a story about ADP's June payrolls data:
America’s labor shortage is approaching epidemic proportions, and it could be employers who end up paying...Truck drivers are in perilously low supply, Silicon Valley continues to struggle to fill vacancies, and employers across the grid are coping with a skills mismatch as the economy edges ever closer to full employment.
As former Alphavillain Cardiff Garcia observed in a helpful Twitter thread, some version of this piece has been written almost every year since the financial crisis, including in 2009, 2010 and 2011.
And even CNBC's claim of a shortage of labour (introduced by economist Mark Zandi) does not appear to have much evidence behind it. To wit:
The Bureau of Labor Statistics reported that April closed with 6.7 million job openings. May ended with just over 6 million people the BLS classifies as unemployed, continuing a trend this year that has seen openings eclipse the labor pool for the first time. At some point that gap will have to close. Economists expect that employers are going to have to start doing more to entice workers, likely through pay raises, training and other incentives.
That paragraph compares April data on job openings and labour turnover (JOLTS) with May data on US unemployment -- all to illustrate the ADP report for June. Cool. Problematic time comparisons aside, the JOLTS data is collected by the BLS itself, while the US's official unemployment statistics come from data collected by the Census Bureau, which makes it even tougher to compare.
But let's say for the sake of argument that the two surveys are both accurate enough to provide a roughly accurate picture of the labour market.
Even then, it does not make sense to use the official unemployment figure to measure slack.
Instead we should use the BLS's alternative measure of involuntary under- and unemployment, reported as U-6, which stood at 7.8 per cent in June. That figure is difficult to compare to the JOLTS number, but we can give it a (rough) shot by working backwards from the BLS's number.
Essentially, the U-6 is a read of the 162m Americans who are in the labour force (meaning employed or currently looking) and the 1.4m who are “marginally attached”. That implies about 12.8m people were involuntarily underemployed or unemployed in June, including seasonal adjustments. The next JOLTS data will be released Tuesday, so we will be able to provide a more direct comparison then. Even so, unless the figure doubles from April data -- which would be a shock, as it generally moves with employment (see Chart 2 here) -- that implies a decent amount of slack.
What's this “shortage” problem about then? Here is how economist Mark Zandi describes it, in a pre-vetted quote:
“Business’ number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement. “These labor shortages will only intensify across all industries and company sizes.”
The key word in Zandi's quote is “qualified”, which is an extremely fuzzy concept. Moreover, what constitutes a “qualified worker” or a “skills mismatch”? And how do employers define and evaluate “skills”, anyway?
Something doesn't add up, especially after the “labour shortage” piece from April that made a splash. The WSJ reported that companies are hiring teenagers because their “median pay is half that of older adults, and they typically don’t demand perks such as health-care benefits or retirement contributions”. Is there any particular reason that is considered a sign of a shortage of workers rather than rampant age discrimination?
And most importantly: Why is strong employment data not being heralded as a sign that companies and their shareholders might finally be forced to give employees a larger share of their profits -- or even train non-teenaged workers (just imagine!!) -- thereby boosting the American middle class's real purchasing power and prompting organic growth in spending and consumption?
The answer to all of those questions can be found in the central belief of the cult of meritocracy: Americans live in the best of all possible economies.
This idea is propagated aggressively by the topmost tier of the self-styled meritocratic hierarchy, a small group that includes executives, investors and other thinkfluencer types. But that line of thought involves some contradictions -- and they are, err, sharpening.
If you accept that we live in the best of all possible economies, you must also accept the growing inequality within it and the scarcity of upward mobility, even though upward mobility is supposed to be the engine of a meritocratic system. Essentially, the meritocrats have decided that the engine is still running, even though no one is moving. That in turn necessitates the belief that everyone deserves their current spot, despite vast inequality in the quality of public goods (education in particular).
And that is where the US finds itself: a societal cognitive dissonance that threatens to drown out all reasonable scholarship or thought about human value and development.
That is a shame, because there is plenty of evidence to show that the best way people learn to work is by practicing their work. While individuals certainly have innate proclivities and talents, those won't teach them the nuance of doing a job. As Nobel laureate economist James Heckman has observed: IQ is overrated.
Even so, US employers don't seem to want to pay people to practice unless they can try to capture future potential (see: teens) or social connections (see: patronage). This not a cult of capitalism.
Indeed, sometimes employers don't want to pay people to practice at all:
If you’re complaining about unpaid internships I am 100% sure you aren’t ever gonna make it
— adam22 (@adam22) July 5, 2018
While that view seems short-sighted and a generally like bad idea, indoctrination can be tough to shake.
And according to the dogma, if companies are having trouble “finding qualified workers”, it must simply be an Act of God Nature. From the CNBC story, with our emphasis:
The economy has “bumped against the proverbial labor wall,” David Rosenberg, chief economist and strategist at Gluskin Sheff, said in his morning note Thursday. “Inflation pressures will intensify and the Fed will be forced to act more aggressively, just as has been the case in the past. There is no Presidential Tweet that will stop Mother Nature from taking its course.”
We have not been able to find a shred of evidence that the aforementioned proverb about a “labor wall” actually exists. A Google search turned up 1) a line from the book of Proverbs that says labour is worthwhile and “empty talk will make you poor,” and 2) a headline about a contractor who could not procure building materials for his work because he was not in a union. Times have certainly changed.
This is not the first time this blog has pointed out that the dogma about a “natural rate” of employment, above which inflation accelerates, might be a bloodless myth.
The official abbreviation for that economic idea is NAIRU, which stands for “non-accelerating rate of unemployment”. Former Alphavillain Matt Klein was early to NAIRU's problematic politics, and more recently David Zervos, an economist at Jefferies, came up with the excellent alternative name: a “ Non-Accurate Ideology Rendered Useless.”
Related links:
Sorry to Bother You, reviewed -- New Yorker
How to win a debate in the cult of meritocracy -- FT Alphaville
Tidak ada komentar