JonLowder.com

Deskilling

Is a lack of demand for skilled labor contributing to America's stubbornly high unemployment rate?

What explains the current low rate of employment in the U.S.? While there has substantial debate over this question in recent years, we believe that considerable added insight can be derived by focusing on changes in the labour market at the turn of the century. In particular, we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together. In order to understand these patterns, we offer a simple extension to the standard skill biased technical change model that views cognitive tasks as a stock rather than a flow. We show how such a model can explain the trends in the data that we present, and offers a novel interpretation of the current employment situation in the U.S.

Hidden Costs

One of the interesting changes we're seeing in the US is the different behavior of health care consumers when they are actually allowed to act like consumers. From the Wall Street Journal:

Last fall, two big employers embarked on a radical new approach to employee health benefits, offering workers a sum of money and allowing them to choose their health plans on an online marketplace. Now, the first results are in: Many workers were willing to choose lower-priced plans that required them to pay more out of their pockets for health care.

The new online marketplace, operated by consulting firm Aon AON -0.29% Hewitt, a unit of Aon PLC, was used by more than 100,000 employees of  SearsHoldings Corp.  SHLD -0.86%  and Darden Restaurants Inc.,  DRI +0.43% as well as Aon itself, to pick plans for 2013. The employers gave workers a set contribution to use toward health benefits, and they could opt to pay more each month to get richer plans, or choose cheaper ones that might have bigger out-of-pocket fees, such as higher deductibles.

"When people are spending their own money, they tend to be more consumeristic," said Ken Sperling, Aon Hewitt's national health exchange strategy leader.

Go figure. When people are given pricing options and asked to consciously weigh costs/benefits and risks/rewards they make "consumeristic" decisions. Forget for a moment all the details about "Obamacare" and your feelings towards it, and instead ask yourself these questions: Can any health care reform program succeed if it doesn't allow people to behave like a logical consumer? How can a logical consumer exist in a market where pricing is obscured? To that end, the next time you go to the doctor's office try this exercise: ask them what your appointment is going to cost before they do anything. They likely won't be able to tell you because they simply don't know - the cost depends on what kind of insurance you have and the rates your insurer has negotiated with the doctor's network. Craziness, huh?

Changing gears, but sticking to the hidden costs theme, have you ever wondered why we it's been so difficult for people to grasp the true costs of the wars in Afghanistan and Iraq? It's because the bill has shown up in the form of an exploding deficit and not a "War Tax." Deficits are like credit card debt: you know they're bad and that they can be a drag on your financial well being, they are hard to get overly excited about because your daily life doesn't change much until you run out of credit and the bills come due. On the other hand if you're paying cash - or a War Tax - the cost of your action is immediately clear and you're far less likely to be so sanguine about whatever you're doing. 

So here's a rule of thumb we need to teach our children: if the cost of something is hidden, or if you aren't asked to pay for it up front, it is likely much higher than you think so you should really think hard before making that purchase decision. There should also be a corollary: if it's a politician doing the selling then you should probably just walk away or be ready to spend 100x whatever you think the cost is (see War, Iraq).