Putting too much faith in employment "Recalculation"

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I have great sympathy for Arnold Kling's "Recalculation Story" of high unemployment. But he shoe-horns in some foolishness into his otherwise sound theory to try to head Keynesian interventions off at the pass. The main shoe-horned foolishness is that, magically, businesses will hire back everyone laid off, and hire also new workers entering the job market. I ask, Why? It does not follow at all - Businesses have never had so many techniques for keeping their staffs low, and all the techniques are improving in quality, as well.
The interventions to "cure" high unemployment _will_ be Keynesian. Because every other race of economists pretends that high unemployment is not a problem. I am exaggerating, but only a little bit.

I would not mind a "better" form of Keynesian, but those who are in the best position to provide those improvements are too busy pretending that high unemployment is not a problem. Or that businesses have techniques to turn marginal employees into highly productive employees, and they will use those techniques instead of the tried and true methods of raising productivity and shedding employees at the same time. Because of the time wasted on these fallacies, we will get the old Keynesian cure from the old Keynesians, because the Keynesians are immune to these particular fallacies (being too busy with their own fallacies).

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The interventions to "cure" high unemployment _will_ be Keynesian, whether I like it or not, whether anyone likes it or not. Prepare accordingly - labor legislation in the United States _will_ greater resemble Continental Europe - because the current and expected social costs of high unemployment are very real (including lost taxation and lost consumer demand, besides criminality induced by idleness).

The Job Assignment Problem, Arnold Kling | EconLog | Library of Economics and Liberty: "
> I agree that high productivity growth is very good news and that it portends increases in hiring.
Running a business, if I have productivity growth, and, for whatever reason, I wanted productivity to go back down, the fastest way to do it would be to hire more employees.
I am not supposed to admit this, but I feel compelled to be honest. Higher unemployment and higher productivity growth have no demonstrated inverse relationship.
When the social costs of unemployment come home to roost, we will see legislation to enforce lowered productivity. I can complain about it, but it would be foolish to not see it coming. Somehow, I will be compelled to hire more employees, and productivity will go down. Because employees bring with them the burden of mandated entitlements and the burden of their own inner sense of entitlement. Like it or not, it is foolish for me to pretend otherwise.
> What people are calling a "jobless recovery" is what I would call the market taking a long time to solve the job assignment problem.
The market has solved the job assignment problem by not hiring. And productivity has increased. During the 'good times', the market was more tolerant of low productivity - now less so. Businesses act accordingly. Because, at this time, businesses are not compelled to bare a share of the current and expected social costs of high unemployment (including lost taxation and lost consumer demand, besides criminality induced by idleness).
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A depressing follow-up to a reply to my comment:

> I disagree with manuelg' first comment regarding legislation to compel more utilization of human capital - that's been attempted by, among others, the Luddites, the Wobblies, and the Communists.

I didn't say it would work as advertised! ;-) It will "work" to reward a particular voting block, as one would expect. High unemployment provides the "cover".

> ... the workforce will either develop or rediscover markets that require human capital (R&D, personal service) or the supply will re-train to enter other labor markets a la buggy whip makers and farmers

Or neither. New positions never opening up at an adequate rate is a distinct possibility. Take R&D - why not use 40 Indian PhD's to do the work of 60 US PhD's? Take personal service - a goodly portion of the work of a personal assistant can be done remotely - again employing someone without the same expectation of quality of life and compensation in a place with a much lower cost of living.

The majority of the work will be of poor quality, but the cost savings will be compelling. Like the craftsmanship of a pocket-watch compared to the time display on a plastic cell phone. People spend a smaller fraction of their income on telling the time (pennies out of the cost of the phone and service), and lose daily contact with items to true quality, and that prior level of quality becomes a boutique luxury item, and employs far fewer people.

> ...re-train to enter other labor markets...

It may in fact be easier to "retrain" a US worker to become a ethnic Chinese worker (chopstick skills, walking stooped to pass through lowered doorways, reading/writing Chinese letter-forms) than it would be to retrain a US worker to have the skills and sense of responsibility and lack of sense of entitlement that the new employment positions opening up require. Look at the malaise of Japan's labor economy as the positions disappeared for lifetime employment by a single employer, never to return. Even after years of a desperate situation, it is not 100% certain that a human will change their attitudes to match a new reality.

Not to put too fine a point on it.

Bob Sutton: Selecting Talent: The Upshot from 85 Years of Research

This is interesting, hiring and Aptitude or IQ. The issue is that testing has to be based on the job description. Yeah, I have over-estimated my ability to interview people. Even a hokey test would be better than just an interview, to at least force me to think hard about who I wish to hire.

http://www.hiresuccess.com/is-employment-testing-legal.htm

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IN A WORD - One word answers the question "Is Employment Testing Legal?", that word is "YES". However, the "yes" must be qualified as long as a Professionally Developed employment test is administered according to the test developer's intended use. For example, it is legal to test accounting applicants with a math test, however, it could be considered a discriminatory practice to screen custodial employees with the same math test as the math competency for an accountant is very different than a custodian. It isn't the test that is "legal" or "illegal", it is the APPLICATION of the test that makes the difference! APTITUDE TESTS - One type of employment test is the Aptitude Test. Some employers want to test an applicant's knowledge of a particular subject that pertains to the job for which they are being considered. This is perfectly legal, and when applied properly, can be a valuable tool. Be sure and consider the following, however, before administering any Aptitude or I.Q. test: Be sure the test is "Professionally" developed. You can read more in the links below about a Supreme Court decision that requires Aptitude and I.Q. tests to be "professionally" developed. (See Griggs vs. Duke Power.) HIRE SUCCESS™ On-line Aptitude Tests have been professionally developed by one of our consultants with a Doctorate Degree in Education. If you are considering other tests, ask for the credentials of who developed the test. If you find that a computer programmer or sales manager developed the Math, Spelling and Vocabulary tests, for example, be very cautious before using such a test.

Bob Sutton: Selecting Talent: The Upshot from 85 Years of Research: "

The upshot of this research is that general mental ability (IQ and related tests) was the best predictor and work sample tests (e.g., seeing if people can actually do key elements of a job -- if a secretary can type or a programmer can write code ) were the second best of the 19 examined. Here is the rank order of the 19 predictors examined:

1. GMA tests ('General mental ability')

2. Work sample tests

3. Integrity tests: surveys design to assess honesty ... I don't like them but they do appear to work.

4. Conscientiousness tests: essentially do people follow-through on their promises, do what they say, and work doggedly and reliably to finish their work.

5. Employment interviews(structured)

6. Employment interviews(unstructured)

7. Job knowledge tests: To assess how much employees know about specific aspects of the job.

8. Job tryout procedure: Where employees go through a trial period of doing the entire job.

9. Peer ratings

10. T & E behavioral consistency method: 'Based on the principle that past behavior is the best predictor of future behavior. In practice, the method involves describing previous accomplishments gained through work, training, or other experience (e.g., school, community service, hobbies) and matching those accomplishments to the competencies required by the job. a method were past achievements that are thought to be important to behavior on the job are weighted and scored.'

11. Reference checks

12. Job experience (years)

13. Biographical data measures

14. Assessment centers

15. T & E point method

16. Years of education

17. Interests

18. Graphology (e.g., handwriting analysis)

19. Age

Certainly, this rank-ordering does not apply in every setting. It is also important to recall that there is a lot of controversy about IQ, with many researchers now arguing that it is more malleable than previously thought. But I find it interesting to see what doesn't work very well -- years of education and age in particular. And note that interviews, although of some value, are not an especially powerful method, despite their widespread use. Interviews are strange in that people have excessive confidence in them, especially in their own abilities to pick winners and losers -- when in fact the real explanation is that most of us have poor and extremely self-serving memories.

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Why Public Primary Education? Why not Private or Charter Primary Schools?

Comment posted to Will Wilkinson "What Policy Can Do for Growth and What Politics Won’t"

Wilkinson:

I agree that human capital and physical infrastructure are crucial to growth. I’m even happy to agree that government investment in education has more than paid for itself over the years in added growth. But I also think the evidence points to the idea that returns to public investment in the status quo system of education have diminished to basically nothing. No Democrat is going to do anything to run afoul of their party’s most powerful client in order to promote the deep structural changes needed in primary education to actually improve the quantity and quality of American human capital. So instead we get free money for college, which is Obama’s way of saying “thank you” to the loyal, powerful bloc of Democrats who make their living pouring valuable human capital into nineteen-year-olds by making them pretend to have read Plato and Beloved.

My comment:

Wilkinson:

> ...promote the deep structural changes needed in primary education to actually improve the quantity and quality of American human capital...

But the fact remains that when businesses hire, a person having gone to a private primary school or a charter primary school (as opposed to a public primary school) commands no higher wages.  I hire; the issues affects me personally.  If the private school or charter school had a document certifying modern workforce training to the student (with the ability to test to confirm, and retrain at no cost to the business if the skills are actually below what is certified), I would be pretty damn impressed.  If such a thing exists for private or charter schools, it is well hidden and very scarce.  Until then, why would a business pay a premium for a person who received primary school education at a private or charter school?  And if public school is good enough, how can change be expected to happen?

Dan:

> ...I think far too many people are getting pushed into college...

Business do pay a premium for college educated students.  Again, if there was a form of technical schooling (associate degree) that had some certifying/testing/retraining guarantees for work skills, businesses would be pretty damn impressed, and would hire those people above people with some college education.  I would like to see such resumes.