I think it's also important to recognize here the degree to which we have willfully moved towards "de-skilling" the lower half of the workforce.
Fifty years ago, a loan officer in your local bank needed to _actually evaluate customers' trustworthiness to repay loans_. And that method of handing out credit had serious problems in terms of discrimination, but it also meant that successful loan officers had to have some real skills at evaluating people's finances. Now, instead, the "loan officer" is just filling out a web form, and getting the applicant's sign off to access their credit report, and the whole evaluation happens behind the scenes. So the programmers who make that system are "high productivity workers", and the loan officers are "low productivity workers", and in theory this probably lets us process loans more easily and cheaply -- not that the end consumer ends up paying any less. Mostly, private investors pocket that expanded margin.
And of course, all of that "highly productive" mortgage processing code, without the oversight of people who were both skilled at judging whether customers would actually pay back, and motivated to make that judgment correctly, got us the crisis of 2008.
This is a throw the baby out with the bathwater type of argument.
The credit crisis of 2008 had little to nothing to do with automation and everything to do with credit standards and a credit bubble. Small credit unions and savings and loans businesses with a heavier personal evaluation component were extending just as much bad credit as bigger banks. And credit crunches have been happening for a long, long time: the Tulip Bubble, the Great Depression, the Panic of 1819, Panic of 1837 and of 1893 and of 1857 and of 1873 (thanks google autocomplete!) etc...
And when the credit process was more purely judgement-based in suffered all kinds of problems with prejudices, blind-spots, personal patronages, etc... The credit report system didn't replace only because of automation, it was also better at predicting who would default.
But anyways, I'm interested in your main thesis, but I'm not really following the illustrative example. Loan officers today are lower-skilled in credit judgement because they's been somewhat replace. Their job now is more about customer service and sales. Is that every job though? Is that really illustrative of the whole labor market?
And behind the scenes there's an awful lot more happening than just a few programmers. There's whole teams of compliance and legal and finance people running a million checks on the loan data coming in, not just to evaluate financial performance but also to ensure there's no disparate impact against protected minority groups. That's something the mom and pop shops were notably bad at demonstrating (whether you believe it's because they are actually discriminating or you believe they simply don't have the tools to evaluate potential discrimination).
I mean, I agree that we don't want to get rid of automation; the issue is that we can choose how we pursue it. Like, with factory automation done right, you actually end up with high-skill, high-productivity machine tool operators, who are responsible for troubleshooting the equipment when stuff goes wrong, and providing feedback into the system that creates and programs the tools. When it's done badly, the people on the assembly line are basically drones themselves who follow some step-by-step manual with no understanding of what they're doing.
It's definitely _easier_ in the short run to pursue the second type of strategy, because you can hire anyone off the street and give them zero training, and you can threaten to fire them if they give you any lip, because as long as there's a pool of reserve unemployed labor, you can go back out and find a replacement. Full-employment monetary policy is extremely threatening to this business plan, and rewards the "high-productivity all the way down the chain" strategy instead.
It's always painful to be replaced or lose a job. But at the same time it's good we're not still driving around in horse-drawn carriages. Welfare programs like unemployment are designed minimize the pain to allow society to reap the benefits.
With the labor market is as good as it's been in a long time the pain for lower-skilled workers is as minimal as it's been in a long time. There's job openings everywhere: childcare, bus drivers, restaurants, etc, etc, etc.
And in this economy, jobs that are fairly skilled are often just complemented by technology. I work in fraud detection and technology is mostly just allowed workers to scale up and actually be more valuable. It's not replacing them.
In an economy that has a big mass of unemployed people, Amazon's automated "just pick up stuff and leave" magic overhead cameras would be a problem for grocery workers. In an economy where there's a hiring boom, and the problem is that we can't find enough people to fill all the jobs that need to be filled in order to meet demand? Not so much.
Also, I want to challenge the idea that people "simply can't become high-skill workers". Like, sure, not everyone has the aptitude to be a programmer. But on the other hand, most programmers don't have the aptitude to be a plumber. Most people _can_ learn on the job, by shadowing a co-worker or through a formal training program, to do more than just the kind of pure rote tasks that are easy to automate. Some people have actual learning or developmental disabilities, and finding a place for those folks in the economy is complicated. But by and large, people are smarter than the "low-skill worker" designation gives credit for.
I think there is ample "aptitude" remaining for people in "low-scale-skill" professions, to join "high-skill" professions. They probably would join at the lower end of productivity within those professions, but would they be non-productive?
Don't underestimate the degree to which the availability of low-scale-skill jobs can affect the shape of the high-scale-skill job market. It's not just demand, but supply-shaping too. If there was a plethora of available workers I'm sure it wouldn't be too long before we'd have more assistants supporting those in the high-scale-skill professions, and that part of the job market wouldn't just expand but change shape too.
It seems to me that people are leaving out a key concept in this discussion. Aptitude.
And I want to be clear aptitude is not synonymous with IQ. When Eric Adam talks about the service workers and the corner office, what he is really saying (and assuming) is that the workers don't have the aptitude for whatever corner office job there is.
On the aggregate this might actually be true, but for all we know the hypothetical messenger is a brilliant student who is working his way through school.
Now let's go back to aptitude, and let me attempt to explain it. Aptitude is whether a person has the potential to successfully learn and perform a job or skill.
Now... let me be clear here. Aptitude is not just IQ. Let me give some examples:
Computer programmer: not only have the ability to think in code and logic, but also needs the patience and drive to want to do it for long periods.
Special Forces Soldier: must be able to handle stress. have quick reflexes. hand eye coordination. etc...
CEO: have the general ability to understand finance and business. Also has to have people skills (theoretically)
Cowboy: (yes I just watched Yellowstone). Be able to deal with animals. Hand eye coordination. Tolerance for discomfort. Etc...
Finally... my job in inspecting gas turbines. Must know NDT (a subset, which involves eddy current, ultrasonics, etc), hand eye coordination (we use borescope deep in unit), some computer skills (we have to keep track of 100s to 1000s of photos, label them, and write a report).... but the reason I get paid as well as I do is... must have the aptitude to enjoy unpredictable and long periods of travel. Approximately 20% of people we hire quit because of the travel.
Now getting back to productivity and high skilled, low skilled, etc... A certain jobs pay is based on the skills or education needed to perform it... some might require a longer lead time.. such as doctor, and then how many people have the aptitude to perform that job, and then how valuable that job is.
What's any job is worth is a function of. (how many people have the aptitude to do it) x (how long it takes to learn in) x (how many people exist currently that had the aptitude and training) x (how important that job is to the company... multiplier effect)
Another anecdote. My brother is a digital logic engineer for Boeing Space Systems. When he was hired by Boeing after graduation, his boss straight up told him that the University only had taught him 10% of what he needed to know. Boeing hired college graduates because completing a degree in electronic engineering was a sign that they had the aptitude to do the specific job.
What we are seeing now in some industries... especially programming, is that Google and Apple aren't solely relying on Stanford to signal they have the aptitude. They are giving chances to non-college graduates who display the aptitude via tests or past performance.
Now on to Bill Gates and Zuckerberg and being drop out. They are drop outs out of elite Universities. I think it's safe to say that when they entered Harvard or Stanford or whatever, they had a better education that some college graduates.
The Left's go-to move (and I most certainly exclude Noah from this) is to look at a problem, say that the names are wrong, propose changes, then declare victory. And when the underlying problem stubbornly persists, well, then it is time for another round of changes to the names.
A low-skill job is, in my mind, one that any healthy adult can perform. One must have led a gilded life to have never dirtied one's hands with such work. Nearly all of us start here. And plenty stay here, for a myriad of reasons. But very few of those working low-skilled jobs could simply jump into a high-skilled position. And, dear reader, there's almost certainly a shinier job for which your current skills are insufficient. This is reality, and not an insult. And as difficult as it may be to swallow, there are countless skills for which you simply lack the raw ability. I'm not getting on an NBA court unless it be with a mop! And I don't have the mind needed to work as a doctor. Or an artist. And I've seen people in my own domain who are frightfully intelligent and combine it with a drive I've never possessed.
If you want to change the situation, well, on a personal level you could treat people laboring in lower-skill positions with basic human respect. The way some of us treat waiters and store employees is a disgrace. On a political level, you could support a decent minimum wage, and various other measures that would allow people on the lower rungs of the economic ladder to lead a comfortable life. Take a look at Switzerland to see what sort of life (and country!) one can have when liveable wages are paid.
As for providing better education and restructuring society so that each of us can better realize his potential... these are fine thoughts but, sadly, far beyond our current skills to act upon. Our democracy is crumbling and the world is aflame, and we are not up to the task. When you cannot recognize the fire in front of your nose, there's little use in complaining that you never got your chance at the corner office in the Department of Public Safety.
I don't doubt that improving minimum wages is a good policy, all things considered.
I just don't think it's sufficient. It's the same issues with universal basic income: redistributing tiny pieces of a pie can occlude you from realizing that the real problem is why people need tiny pieces of a pie.
Higher wages may also accelerate more outshoring of jobs to places where labour is cheaper and more automation in industries that can afford it - retail for instance.
To the other point of basic decency, it's not just going to happen. The morality of the world is a morality of power. Respect is actually not reciprocal. It never was.
I never said that any of my proposals would be sufficient! What's ever sufficient? We might, perhaps, agree that getting to the root of the issue would require radical change, and such change just isn't going to happen. Still, we can strive to be clear-headed and practical and take small but concrete steps towards a better world. In fact, the Right has been a real inspiration in this regard, indefatigable in their ability to chip away, year after year, at a system they wish to change. Pity that their goals are so sinister.
As an aside, if the morality of the world is a morality of power, then there's little point in trying to change anything. If the guy I'm trying to help up just wishes to place his boot on my neck, well let him rest there. But I think you are a bit too cynical on that score.
"If the guy I'm trying to help up just wishes to place his boot on my neck, well let him rest there." That really cracked me up.
I don't think I'm being too cynical though. There's an extensive litany of unjustified acts of betrayal in history. I do think that if roles are reversed anywhere, pretty much similar things will happen because we are all mostly pretty much similar people.
Places that work simply create and respect systems and institutions that hold people accountable and create incentives for the good aspects of our nature to prevail.
On the other hand, I fully agree with you about the Republican Party's way more efficient approach. Even if this is partly due to the fact that the left is less of a single party with a clear philosophy and more of just many many factions agreeing to tentatively cooperate.
Why do you think that raising the minimum wage would help people on the "lower rungs"? It seems at least as likely to me that you'd merely eliminate the lower rungs, leaving people with lower skills, less education, and fewer social connections with no place to start a career, at least legally.
I'm especially puzzled why you cite Switzerland as an example of enlightened labor policy - Switzerland has no nationwide minimum wage, and the cantons that do have a minimum wage don't apply it to all workers. But they do have a high standard of living, and very low unemployment. Perhaps we should lower, not raise, the minimum wage?
In defence of that comment, while there is still fairly contentious debate over the effects of a minimum wage, I do think evidence is on the side of positive effects - a 2019 study by Arindajit Dube found that after a comprehensive survey of all previous research, disemployment effects were rather marginal and there were significant boosts for income of low wage workers.
And I'm not surprised that's the case to be honest. Simply because at the end of the day, while higher wages may cause fewer people to be employed or cause fewer work hours, at the end of the day, employers still need labour. And as long as all the other costs of production stay equal, most employers will be able to bear a slightly increased burden.
There may also be psychological & physical benefits to an increased wage that cause people to work harder.
To the second point, Switzerland isn't rich because of the absence of national minimum wages.
It has rather high wages in fact. It is rich because of native powerful industries, an effective shadow banking system, and a lot of other factors you find in other advanced European nations.
And there are several countries, in Africa most prominently, who have no minimum wage policy and very high rates of unemployment coupled with very low standards of living.
Minimum wage hikes don't decrease the number of jobs. Seattle moved to $15/hour minimum years ago and has been doing fine in terms of job creation. There was also a good study of the effect on the Washington/Idaho border. Basically, it got harder to hire on the Idaho side and businesses did better on the Washington side. Workers would cross the state line for better pay and then spend their money there.
I'm intrigued by this study you mention. Could you give more information? When was it published, and where? Who conducted it? I'm especially surprised that these effects were observed with respect to Seattle's minimum wage increase, since Seattle is 300 miles by road from the Idaho border.
I'm not quite sure if I should take this as honest questioning, provocation, or just an axe you wish to grind. I never spoke about labor policy or minimum wage, but rather how Switzerland, at least when I was living there, payed a liveable wage for stocking shelves. If memory serves (and it rarely does!), it was around CHF 40k/year, and I think the franc, euro, and dollar were roughly equal back then. So a family of two made enough money to take foreign holidays. I'd compare this to France whose minimum wage (SMIC) is a paltry €1.6k/month, received by perhaps 10% of the country. And the difference in homelessness is and remains stark. One of those countries is working (and both senses of the word).
I'm not going to sit here and pretend that I know why one system produces so much better outcomes than the other, but one cannot help but notice the difference. And if Switzerland can manage it (and Denmark too, despite a very different approach), then it would seem to be possible elsewhere. But when I hear you suggest that lowering the minimum wage will raise the effective wage, I have to wonder if you are serious or trolling. If I'm a business owner paying my employees the minimum $10/hour, and that minimum suddenly falls to $5/hour, just what would make me turn around and pay them $15?
Perhaps I misunderstood you. You supported raising the minimum wage, and cited Switzerland as an example of success. Whatever you think of Switzerland, it's hardly an argument for raising the minimum wage, since it doesn't have a minimum wage. I agree that Switzerland is prosperous, but not because of a minimum wage.
France's minimum wage is €1539 per month (significantly higher than in US), and has a history of high unemployment, particularly among the young, immigrants, and Muslims. The minimum wage is hardly the only reason for France's high unemployment - labor market rigidities are probably a bigger reason.
I'm not sure exactly what you mean by the "it" that Switzerland and Denmark achieve, but I wouldn't call it prosperity, at least compared to the US. Aside from the very poorest, Americans across the income distribution do better than Danes at the same percentile. Denmark may have more equal income distribution than the US, but it's because the middle class and rich are poorer than in the US, not because the poor are better off.
As far as lowering the minimum wage, what is the effective wage for a person without a job? If people with no demonstrated job skills and no employment history can't get a job because the minimum wage is higher than their potential value to an employer, the minimum wage prevents them from getting started. This is, at least possibly, an impediment to moving to well-paying jobs.
So, reducing the minimum wage might have the immediate effect of raising the effective wage of people who can't currently get a job. It might have the longer term effect of raising the effective wage for people who can use a first job to acquire skills and demonstrate value so they can get a better job.
I'm not an economist and you may well command a superior grasp of the issues. While I suspect that a higher minimum wage is good, I'm sure there are other factors involved. And I'm sure that I'll never put in the sort of time required to have anything better than a lightly informed opinion. I rely on people like Noah (and Dean Baker!) to help lay out the issues.
However, as someone who has lived in Denmark, Switzerland, and France, each for multiple years, I do know what I saw. Denmark had a far higher level of real-world living in every way, apart from material consumption. At that time, there were TWO people living on the streets of Copenhagen: the near-mystical type who actually chose that life and were not psychologically damaged. The population were taller, healthier, better educated and more worldly. It was my first experience aboard, and something of a culture shock, to be honest.
Switzerland was much like Denmark in feel but with lots of extra money to spend. It felt truly wealthy through and through.
France was and remains a country with a lower standard of living, even if I adore it. Its problems run deep, and I can never decide if it just needs a few tweaks or a radical overhaul. Much of the population is working poor. Or worse.
In the end, looking to other countries to see what is possible (and so what sort of cant we can dispense with) is great, but these countries can never serve as guides. The economy isn't a buffet from which we can pick and choose.
I’ve always thought of “skilled labor” as a technical economic term that specifies training as a barrier to entry for a labor market. Think this is captured in a dictionary definition of the term [1]
> labor that requires special training for its satisfactory performance.
I think this barrier for entry is an important distinction when considering different labor markets. In this context, “unskilled labor” implies that anyone can be hired to perform the job regardless of their previous training/education. All firms and workers compete in a single large “unskilled labor” market. E.g., Amazon and Walmart increasing starting wages can lead to siphoning of employees from other firms in this market or force these firms competing for this labor to raise wages.
In contrast, there is not a single “skilled labor” market, but instead numerous disjoint markets, each requiring different skill sets. At times, the training requirement to enter a specific skilled labor market can benefit workers by limiting supply of workers. Although it is still possible for supply to exceed demand within a specific “skilled labor” market and drives wages down. E.g., the lawyer glut that started appearing in the 90s.
In this context acquiring formal training to enter a specific “skilled labor” market is viewed as an investment of time and money with the aim of increasing earnings. We can analyze the financial returns to an individual for purchasing their own training and incurring the opportunity cost of education versus working. We can also look at government-funded training programs through an economic lens and compute the expected return on investment to society for a specific program.
It can be argued that “skilled” doesn’t necessarily need to refer exclusively to formal training, but can instead also encompass on the job training. E.g., a line cook with years of experience is more productive than someone hired without previous experience. Yet I think it useful to separate “skills” and “experience” and consider them as two orthogonal dimensions. For example, a junior accountant role only requires the formal “skills” of specific education/certification, whereas a senior role additionally requires sufficient on the job experience.
I note that you left "power" out of your explanation for wages.
And, sure, power is partly a reflection of supply and demand (your replacement cost to your employer would be an even better approximation)
But power can be organised. Labor unions are obvious but union busting is just as much of a power move. Ditto getting to define what amounts to abusive anti-compete clauses in workers' contracts. Etc.
Lmao, this is hilarious. When he says that workers get paid less than their marginal product, what do you think this implies? Do you think Noah doesn't accept the monopsony explanation for part of the reason why a minimum wage doesn't actually fuck over a ton of people?
I don't want to say you're bad faith, because hey that's why they say never attribute to malice what can adequately be explained by stupidity. But when economists almost universally acclaim huge amounts of monetary/fiscal stimulus for the pandemic compared to the ARRA, and when economists are almost universally pro ALL types of immigration, and when economists make huge headways in welfare and criminal justice reform, you really have to wonder why you actually say these things.
The obvious reply to Adam's comment is : "so what, those skills are all vital (except the Dunkin Donuts business which should be shut down because its a purveyor of diabetes and obesity).
In fact those skills are more valuable than the overpaid predators at Goldman Sachs - "doing God's work" - who caused the GFC.
The problem is three fold: First, Managers do not like promoting hard working employees as production will decrease without them there. Second, Managers promote or hire people who are similar to themselves which results in an echo chamber of rectal-nasal integration. The third point being that Managers feel they are entitled to their salaries even when they are utterly incompetent but because the next higher up has the same mentality none of them understand why the business is going down the drain and moral is abysmal, this usually happens after the founder dies and the business is left to the bean counters.
You can talk about skilled and unskilled all you want, but when merit or experience have no bearing on pay raises or promotions you have a situation where the incompetent boot lickers are the ones that rise to top and only promote those who act the same as them.
I think of low skill vs. high skill jobs differently. I think that picking fruit or being a dishwasher in a restaurant are low skill jobs because no matter how much you train or how long you hold the job, your efficiency (measured as throughput) will increase very little. Accordingly, there is very little motivation for employers to screen for aptitude.
High skill jobs may or may not be trainable through education but they are trainable. Often this training is best achieved by doing the job.
Good article, but minor nit... never ever use Payscale, or for that matter, Glassdoor, to get recent salary data for software engineers. Those sources use self-reported data sometimes from years past, which doesn't reflect current wage reality.
I assure you, as a software startup founder, if there are engineers getting 10K to do any work of any level of quality, I will a.) immediately double their salary b.) hire 20 of them right now.
SWE salaries in India for decent engineers are up to around 50K US, far higher if they are working in FAANG companies, where the salary + equity packages are well over 1 Crore (around 250K US last time I checked) for people at the middle/upper engineer ranks.
Or it could be that there is something entirely different going on that is just being obfuscated by all the measures of wages, education and so called "productivity"- that's a joke term surely?
Like the CCP spends one third of what the US spends on Defense and churns out more naval ships, equipment ,space rockets etc in a few years than the US can in a decade.
Its like we have hypnotized ourselves to believe our own "BS" as if it explains the world and affords us a strategy.
In those immortal words - “Everyone has a plan until they get punched in the mouth.” <searches for mouth guard :) >
Wasn't the context an argument for returning "highly skilled" workers to the office? That seems to have gotten lost in the discussion. Everyone knows that "low skilled" is a euphemism for "poorly paid, hourly, lacking benefits and generally easy to jerk around". Throw in COVID and that list includes "essential" meaning that they had to show up for work to get paid unlike "more skilled", i.e. "non-essential", workers.
Adams was arguing in favor of getting everyone back to the office. Personally, I think that's a dumb idea, but one can make a class equity arguments for it. It's the old "rich man's money, poor man's blood" argument that ravaged New York City back in the 1860s. Did I mention class? Adams won the working class vote, so he'll appeal to the working class. Maybe he feels a lot of working class people are tired of being the only ones risking their lives and health to keep the city going.
Needless to say, once again, Twitter, once again, demonstrates something important about our elite discourse. It's clearly not about "skills" in the sense of being able to do things, like think before yammering, that we're talking about.
I'd agree that the terms low-skill, high-skill are inaccurate shorthand. If I was to try and fix that shorthand, I would say gradual-scale-skill, steep-scale-skill. I'm not a great cook. If you hired me to work in a restaurant's kitchen, I'd work more slowly, make more mistakes, and produce less quality. But the degree to which I'd be more slow, more error prone, and lower quality, when compares to a cook with 30 years of experience would be less dramatic than if the average cook tried to do my job (operating large scale IT systems).
The effect translates into the value of each incremental hour of experience. Swap someone with 30 years of IT experience out for someone with 10 years of experience, and productivity drops by a factor of 10, for someone with 5, by a factor of 100, and for someone with 1 year, by a factor of 1,000.
Swap a cook with 30 years, for one with 10, and productivity drops by 2, for 5 years, 4, 1 year, 8. (Numbers are examples.. I'm sure there's some good studies on various professions here.. and if you disagree with the general view.. we can find them)
This does two things.. it means that if your forced to choose between making these two trade-offs, you'll make the first. So if you have a person with 15 years experience cooking, and 15 years experience in IT, he'll rationally be offered more to use his IT skills than his cooking skills. 15 years of cooking skills and 15 years of IT skills might be considered the same cost to acquire (some real differences.. but I'd hold the primary investment is the time of the person doing the learning), but the cost to sacrificing the IT experience is greater and so the value in acquiring them is higher.
I think Mr. Smith has a particular mental image of "skills", how they are acquired, how they are evaluated, and what this means for employment and income. I don't agree with all of this.
Specifically, I think he believes that education provides useful skills for a variety of jobs, that these skills are reflected in workers' earnings, and that employers find these skills to be useful in setting requirements for hiring, promotion, and compensation. Earnings data shows that workers with more education tend to earn more, and Mr. Smith finds this as confirmation for his view.
I propose an alternative view, based on my own experience toiling in the corporate world.
Education, if pursued enthusiastically, can develop many skills: understanding the political background of the civil war, conjugation of irregular German verbs, derivation of mathematical theorems, analysis of Shakespearean tragedies, performing least-squares linear regression, and many other things. Any of these are potentially "high skills", at least in an academic environment, but most are not directly relevant to any employment outside the academy. It is also highly questionable how much of such material is retained by students beyond the course completion.
Supporters of college education might argue that the important skills are not the ones I listed above, but more general skills such as critical reasoning, research, logic, and persuasive writing. These could certainly be useful skills, but there have been widely-reported tests showing that graduating seniors have not improved their skills in these areas during four years of classes.
I think that the college wage premium is largely driven by the fact that many large employers require a college degree for hiring into "professional" jobs. In most cases, any college degree will qualify, so employers aren't expecting specific technical skills. In many cases, college degrees weren't required for the same positions 50 years ago. Paralegals, manufacturing engineers, buyers, news reporters, and bookkeepers are all positions that did not require college degrees, but now generally do. The change is not because the fundamental job requirements have changed.
Large employers now routinely require college degrees, I believe, because of a constellation of factors: increase in the number of people with college degrees, professionalization and specialization of the HR function, and prohibition on use of tests for skill and aptitude.
In 1970, only 11% of the US population had a college degree; in 2020, 37% did. Since so many more people have college degrees, it is easier to use "lack of degree" as a screening factor for "unambitious, incapable employee". A hundred years ago, most adults did not have a high school diploma, yet were still able to function in demanding jobs. As high school completion became the norm, "high school dropouts" were considered unsuitable for hiring in most jobs. The same is happening with respect to college. When I was hired at a Fortune 50 industrial company in 1993, most manufacturing engineers did not have college degrees, and many who did earned them while working as manufacturing engineers. Today, that company requires a college degree to apply for the job.
In 1970, "human resources" was not a career field, and did not have dedicated college programs or certifications. Now, that has changed. Human Resource managers mostly have no experience outside the Human Resources field, and have control of the hiring and promotion process. They are themselves college graduates, and have been taught that a college education is a key employment credential. So, a college degree is a requirement for more and more positions.
In 1970, many companies used aptitude tests to evaluate potential hires. Those who didn't develop their own focused tests could use IQ tests to identify promising hires. Now, such tests are subject to legal challenge for discrimination against protected classes, so companies use them much less. However, companies can safely use a college degree as a requirement. Since protected minorities are underrepresented among college graduates, I'd think this requirement could be challenged for disparate impact, but I haven't heard of any such challenges, successful or not.
Some of the arguments Mr. Smith marshals to support the value of education and skills seem to me to have opposite interpretations that are just as compelling. For instance, he cites a study that students in academic difficulty who nevertheless completed a degree earned better than students forced out by academic difficulty. I would interpret this study to show that students who had a diploma earned more than students with essentially identical learning who did not have a diploma. It seems the diploma, not the learning, is the important thing.
He cites a study showing that mafiosos with college degrees earn more than those without. My interpretation of this study would be that the high-ranking mafiosos send their sons to college to earn respectability, and these graduates are put in high-ranking positions due to family connections.
If skills and knowledge from higher education are the keys to higher earning, it is very easy for anyone to acquire them - classrooms in most schools are open to anyone who walks in off the street. Smaller classes may take attendance and identify interlopers, but large lectures are uncontrolled - or at least were before current trends in campus security. Class syllabi are available to anyone, or at least were before the current electronic classroom technology. A high school dropout from New Haven could sit in on Yale classes and pick up all the knowledge and skills offered. But he couldn't get a Yale diploma.
It is certainly true that worker skills matter - they influence the success of their employers, and of the overall economy. To some extent, they also influence worker success in their jobs, but current trends toward bureaucratizing HR processes, and measuring diversity goals rather than performance goals make an individual's skills and performance less important than they were 50 years ago.
> Now, such tests are subject to legal challenge for discrimination against protected classes, so companies use them much less. However, companies can safely use a college degree as a requirement.
https://slatestarcodex.com/2017/07/26/dont-blame-griggs/ argues that the commonly cited form of this narrative is unlikely to be true. Griggs v. Duke, sometimes cited as the original precedent for banning IQ tests as discriminatory, did so in its specific case on the basis that such tests weren't relevant to the job (the plaintiffs were power plant workers), & struck down a requirement of educational credentials with the same reasoning: "If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited. On the record before us, neither the high school completion requirement nor the general intelligence test is shown to bear a demonstrable relationship to successful performance of the jobs for which it was used. Both were adopted, as the Court of Appeals noted, without meaningful study of their relationship to job-performance ability. Rather, a vice president of the Company testified, the requirements were instituted on the Company's judgment that they generally would improve the overall quality of the work force. The evidence, however, shows that employees who have not completed high school or taken the tests have continued to perform satisfactorily and make progress in departments for which the high school and test criteria are now used." (from the Supreme Court's ruling, https://en.wikisource.org/wiki/Griggs_v._Duke_Power_Company/Opinion_of_the_Court ) Besides, in a later case (Ricci v. DeStefano, 2009, https://en.wikipedia.org/wiki/Ricci_v._DeStefano ) where a local fire department decided not to promote some of its employees after its civil service exam found the white & Hispanic applicants to be better qualified than the black ones, the Supreme Court ruled that the fire department shouldn't have feared a successful disparate-impact lawsuit, & that it had unlawfully discriminated against the non-black employees by not promoting them. So the precedents regarding disparate impact of aptitude tests seem to be rather less broad than you describe, & also apply to education credentials (which, as you note, also tend to underrepresent most ethnic minorities).
I think you're agreeing with my point more than disagreeing. My point was that college degrees are used as a mandatory credential for most "good" jobs in many areas of the economy, and that this is a (relatively) new trend, and does not reflect real requirements for college knowledge.
I think it's also important to recognize here the degree to which we have willfully moved towards "de-skilling" the lower half of the workforce.
Fifty years ago, a loan officer in your local bank needed to _actually evaluate customers' trustworthiness to repay loans_. And that method of handing out credit had serious problems in terms of discrimination, but it also meant that successful loan officers had to have some real skills at evaluating people's finances. Now, instead, the "loan officer" is just filling out a web form, and getting the applicant's sign off to access their credit report, and the whole evaluation happens behind the scenes. So the programmers who make that system are "high productivity workers", and the loan officers are "low productivity workers", and in theory this probably lets us process loans more easily and cheaply -- not that the end consumer ends up paying any less. Mostly, private investors pocket that expanded margin.
And of course, all of that "highly productive" mortgage processing code, without the oversight of people who were both skilled at judging whether customers would actually pay back, and motivated to make that judgment correctly, got us the crisis of 2008.
This is a throw the baby out with the bathwater type of argument.
The credit crisis of 2008 had little to nothing to do with automation and everything to do with credit standards and a credit bubble. Small credit unions and savings and loans businesses with a heavier personal evaluation component were extending just as much bad credit as bigger banks. And credit crunches have been happening for a long, long time: the Tulip Bubble, the Great Depression, the Panic of 1819, Panic of 1837 and of 1893 and of 1857 and of 1873 (thanks google autocomplete!) etc...
And when the credit process was more purely judgement-based in suffered all kinds of problems with prejudices, blind-spots, personal patronages, etc... The credit report system didn't replace only because of automation, it was also better at predicting who would default.
But anyways, I'm interested in your main thesis, but I'm not really following the illustrative example. Loan officers today are lower-skilled in credit judgement because they's been somewhat replace. Their job now is more about customer service and sales. Is that every job though? Is that really illustrative of the whole labor market?
And behind the scenes there's an awful lot more happening than just a few programmers. There's whole teams of compliance and legal and finance people running a million checks on the loan data coming in, not just to evaluate financial performance but also to ensure there's no disparate impact against protected minority groups. That's something the mom and pop shops were notably bad at demonstrating (whether you believe it's because they are actually discriminating or you believe they simply don't have the tools to evaluate potential discrimination).
I mean, I agree that we don't want to get rid of automation; the issue is that we can choose how we pursue it. Like, with factory automation done right, you actually end up with high-skill, high-productivity machine tool operators, who are responsible for troubleshooting the equipment when stuff goes wrong, and providing feedback into the system that creates and programs the tools. When it's done badly, the people on the assembly line are basically drones themselves who follow some step-by-step manual with no understanding of what they're doing.
It's definitely _easier_ in the short run to pursue the second type of strategy, because you can hire anyone off the street and give them zero training, and you can threaten to fire them if they give you any lip, because as long as there's a pool of reserve unemployed labor, you can go back out and find a replacement. Full-employment monetary policy is extremely threatening to this business plan, and rewards the "high-productivity all the way down the chain" strategy instead.
Replacing 10 low-skill jobs with 2 high-skill jobs is great for the economy, but what do the low-skill workers do?
Many of them simply can't become high-skill workers.
Isn't this just the luddite argument?
It's always painful to be replaced or lose a job. But at the same time it's good we're not still driving around in horse-drawn carriages. Welfare programs like unemployment are designed minimize the pain to allow society to reap the benefits.
With the labor market is as good as it's been in a long time the pain for lower-skilled workers is as minimal as it's been in a long time. There's job openings everywhere: childcare, bus drivers, restaurants, etc, etc, etc.
And in this economy, jobs that are fairly skilled are often just complemented by technology. I work in fraud detection and technology is mostly just allowed workers to scale up and actually be more valuable. It's not replacing them.
You're right, I was arguing as if this were a different (but related) policy argument about wages.
Matt Yglesias' piece today is (indirectly) addressing this point.
https://www.slowboring.com/p/the-myth-of-the-great-resignation
Although I think that might be subscribers-only.
In an economy that has a big mass of unemployed people, Amazon's automated "just pick up stuff and leave" magic overhead cameras would be a problem for grocery workers. In an economy where there's a hiring boom, and the problem is that we can't find enough people to fill all the jobs that need to be filled in order to meet demand? Not so much.
Also, I want to challenge the idea that people "simply can't become high-skill workers". Like, sure, not everyone has the aptitude to be a programmer. But on the other hand, most programmers don't have the aptitude to be a plumber. Most people _can_ learn on the job, by shadowing a co-worker or through a formal training program, to do more than just the kind of pure rote tasks that are easy to automate. Some people have actual learning or developmental disabilities, and finding a place for those folks in the economy is complicated. But by and large, people are smarter than the "low-skill worker" designation gives credit for.
I think there is ample "aptitude" remaining for people in "low-scale-skill" professions, to join "high-skill" professions. They probably would join at the lower end of productivity within those professions, but would they be non-productive?
Don't underestimate the degree to which the availability of low-scale-skill jobs can affect the shape of the high-scale-skill job market. It's not just demand, but supply-shaping too. If there was a plethora of available workers I'm sure it wouldn't be too long before we'd have more assistants supporting those in the high-scale-skill professions, and that part of the job market wouldn't just expand but change shape too.
It seems to me that people are leaving out a key concept in this discussion. Aptitude.
And I want to be clear aptitude is not synonymous with IQ. When Eric Adam talks about the service workers and the corner office, what he is really saying (and assuming) is that the workers don't have the aptitude for whatever corner office job there is.
On the aggregate this might actually be true, but for all we know the hypothetical messenger is a brilliant student who is working his way through school.
Now let's go back to aptitude, and let me attempt to explain it. Aptitude is whether a person has the potential to successfully learn and perform a job or skill.
Now... let me be clear here. Aptitude is not just IQ. Let me give some examples:
Computer programmer: not only have the ability to think in code and logic, but also needs the patience and drive to want to do it for long periods.
Special Forces Soldier: must be able to handle stress. have quick reflexes. hand eye coordination. etc...
CEO: have the general ability to understand finance and business. Also has to have people skills (theoretically)
Cowboy: (yes I just watched Yellowstone). Be able to deal with animals. Hand eye coordination. Tolerance for discomfort. Etc...
Finally... my job in inspecting gas turbines. Must know NDT (a subset, which involves eddy current, ultrasonics, etc), hand eye coordination (we use borescope deep in unit), some computer skills (we have to keep track of 100s to 1000s of photos, label them, and write a report).... but the reason I get paid as well as I do is... must have the aptitude to enjoy unpredictable and long periods of travel. Approximately 20% of people we hire quit because of the travel.
Now getting back to productivity and high skilled, low skilled, etc... A certain jobs pay is based on the skills or education needed to perform it... some might require a longer lead time.. such as doctor, and then how many people have the aptitude to perform that job, and then how valuable that job is.
What's any job is worth is a function of. (how many people have the aptitude to do it) x (how long it takes to learn in) x (how many people exist currently that had the aptitude and training) x (how important that job is to the company... multiplier effect)
Another anecdote. My brother is a digital logic engineer for Boeing Space Systems. When he was hired by Boeing after graduation, his boss straight up told him that the University only had taught him 10% of what he needed to know. Boeing hired college graduates because completing a degree in electronic engineering was a sign that they had the aptitude to do the specific job.
What we are seeing now in some industries... especially programming, is that Google and Apple aren't solely relying on Stanford to signal they have the aptitude. They are giving chances to non-college graduates who display the aptitude via tests or past performance.
Now on to Bill Gates and Zuckerberg and being drop out. They are drop outs out of elite Universities. I think it's safe to say that when they entered Harvard or Stanford or whatever, they had a better education that some college graduates.
The Left's go-to move (and I most certainly exclude Noah from this) is to look at a problem, say that the names are wrong, propose changes, then declare victory. And when the underlying problem stubbornly persists, well, then it is time for another round of changes to the names.
A low-skill job is, in my mind, one that any healthy adult can perform. One must have led a gilded life to have never dirtied one's hands with such work. Nearly all of us start here. And plenty stay here, for a myriad of reasons. But very few of those working low-skilled jobs could simply jump into a high-skilled position. And, dear reader, there's almost certainly a shinier job for which your current skills are insufficient. This is reality, and not an insult. And as difficult as it may be to swallow, there are countless skills for which you simply lack the raw ability. I'm not getting on an NBA court unless it be with a mop! And I don't have the mind needed to work as a doctor. Or an artist. And I've seen people in my own domain who are frightfully intelligent and combine it with a drive I've never possessed.
If you want to change the situation, well, on a personal level you could treat people laboring in lower-skill positions with basic human respect. The way some of us treat waiters and store employees is a disgrace. On a political level, you could support a decent minimum wage, and various other measures that would allow people on the lower rungs of the economic ladder to lead a comfortable life. Take a look at Switzerland to see what sort of life (and country!) one can have when liveable wages are paid.
As for providing better education and restructuring society so that each of us can better realize his potential... these are fine thoughts but, sadly, far beyond our current skills to act upon. Our democracy is crumbling and the world is aflame, and we are not up to the task. When you cannot recognize the fire in front of your nose, there's little use in complaining that you never got your chance at the corner office in the Department of Public Safety.
> One must have led a gilded life to have never dirtied one's hands with such work. Nearly all of us start here.
I think a lot of the journalist class hasn't done this, so they don't know what the work or the workers are like.
I don't doubt that improving minimum wages is a good policy, all things considered.
I just don't think it's sufficient. It's the same issues with universal basic income: redistributing tiny pieces of a pie can occlude you from realizing that the real problem is why people need tiny pieces of a pie.
Higher wages may also accelerate more outshoring of jobs to places where labour is cheaper and more automation in industries that can afford it - retail for instance.
To the other point of basic decency, it's not just going to happen. The morality of the world is a morality of power. Respect is actually not reciprocal. It never was.
I never said that any of my proposals would be sufficient! What's ever sufficient? We might, perhaps, agree that getting to the root of the issue would require radical change, and such change just isn't going to happen. Still, we can strive to be clear-headed and practical and take small but concrete steps towards a better world. In fact, the Right has been a real inspiration in this regard, indefatigable in their ability to chip away, year after year, at a system they wish to change. Pity that their goals are so sinister.
As an aside, if the morality of the world is a morality of power, then there's little point in trying to change anything. If the guy I'm trying to help up just wishes to place his boot on my neck, well let him rest there. But I think you are a bit too cynical on that score.
"If the guy I'm trying to help up just wishes to place his boot on my neck, well let him rest there." That really cracked me up.
I don't think I'm being too cynical though. There's an extensive litany of unjustified acts of betrayal in history. I do think that if roles are reversed anywhere, pretty much similar things will happen because we are all mostly pretty much similar people.
Places that work simply create and respect systems and institutions that hold people accountable and create incentives for the good aspects of our nature to prevail.
On the other hand, I fully agree with you about the Republican Party's way more efficient approach. Even if this is partly due to the fact that the left is less of a single party with a clear philosophy and more of just many many factions agreeing to tentatively cooperate.
Why do you think that raising the minimum wage would help people on the "lower rungs"? It seems at least as likely to me that you'd merely eliminate the lower rungs, leaving people with lower skills, less education, and fewer social connections with no place to start a career, at least legally.
I'm especially puzzled why you cite Switzerland as an example of enlightened labor policy - Switzerland has no nationwide minimum wage, and the cantons that do have a minimum wage don't apply it to all workers. But they do have a high standard of living, and very low unemployment. Perhaps we should lower, not raise, the minimum wage?
In defence of that comment, while there is still fairly contentious debate over the effects of a minimum wage, I do think evidence is on the side of positive effects - a 2019 study by Arindajit Dube found that after a comprehensive survey of all previous research, disemployment effects were rather marginal and there were significant boosts for income of low wage workers.
And I'm not surprised that's the case to be honest. Simply because at the end of the day, while higher wages may cause fewer people to be employed or cause fewer work hours, at the end of the day, employers still need labour. And as long as all the other costs of production stay equal, most employers will be able to bear a slightly increased burden.
There may also be psychological & physical benefits to an increased wage that cause people to work harder.
To the second point, Switzerland isn't rich because of the absence of national minimum wages.
It has rather high wages in fact. It is rich because of native powerful industries, an effective shadow banking system, and a lot of other factors you find in other advanced European nations.
And there are several countries, in Africa most prominently, who have no minimum wage policy and very high rates of unemployment coupled with very low standards of living.
Correlation is not causation.
Minimum wage hikes don't decrease the number of jobs. Seattle moved to $15/hour minimum years ago and has been doing fine in terms of job creation. There was also a good study of the effect on the Washington/Idaho border. Basically, it got harder to hire on the Idaho side and businesses did better on the Washington side. Workers would cross the state line for better pay and then spend their money there.
I'm intrigued by this study you mention. Could you give more information? When was it published, and where? Who conducted it? I'm especially surprised that these effects were observed with respect to Seattle's minimum wage increase, since Seattle is 300 miles by road from the Idaho border.
Section II here has a lot of minimum wage studies: https://slatestarcodex.com/2014/12/12/beware-the-man-of-one-study/
But reading Section I will help you understand the context.
There are thousands of studies on the minimum wage and you can find dozens to say what you want.
I'm not quite sure if I should take this as honest questioning, provocation, or just an axe you wish to grind. I never spoke about labor policy or minimum wage, but rather how Switzerland, at least when I was living there, payed a liveable wage for stocking shelves. If memory serves (and it rarely does!), it was around CHF 40k/year, and I think the franc, euro, and dollar were roughly equal back then. So a family of two made enough money to take foreign holidays. I'd compare this to France whose minimum wage (SMIC) is a paltry €1.6k/month, received by perhaps 10% of the country. And the difference in homelessness is and remains stark. One of those countries is working (and both senses of the word).
I'm not going to sit here and pretend that I know why one system produces so much better outcomes than the other, but one cannot help but notice the difference. And if Switzerland can manage it (and Denmark too, despite a very different approach), then it would seem to be possible elsewhere. But when I hear you suggest that lowering the minimum wage will raise the effective wage, I have to wonder if you are serious or trolling. If I'm a business owner paying my employees the minimum $10/hour, and that minimum suddenly falls to $5/hour, just what would make me turn around and pay them $15?
Perhaps I misunderstood you. You supported raising the minimum wage, and cited Switzerland as an example of success. Whatever you think of Switzerland, it's hardly an argument for raising the minimum wage, since it doesn't have a minimum wage. I agree that Switzerland is prosperous, but not because of a minimum wage.
France's minimum wage is €1539 per month (significantly higher than in US), and has a history of high unemployment, particularly among the young, immigrants, and Muslims. The minimum wage is hardly the only reason for France's high unemployment - labor market rigidities are probably a bigger reason.
I'm not sure exactly what you mean by the "it" that Switzerland and Denmark achieve, but I wouldn't call it prosperity, at least compared to the US. Aside from the very poorest, Americans across the income distribution do better than Danes at the same percentile. Denmark may have more equal income distribution than the US, but it's because the middle class and rich are poorer than in the US, not because the poor are better off.
See this article for more detail: https://coyoteblog.com/coyote_blog/2015/10/do-we-care-about-income-inequality-or-absolute-well-being-2.html
As far as lowering the minimum wage, what is the effective wage for a person without a job? If people with no demonstrated job skills and no employment history can't get a job because the minimum wage is higher than their potential value to an employer, the minimum wage prevents them from getting started. This is, at least possibly, an impediment to moving to well-paying jobs.
So, reducing the minimum wage might have the immediate effect of raising the effective wage of people who can't currently get a job. It might have the longer term effect of raising the effective wage for people who can use a first job to acquire skills and demonstrate value so they can get a better job.
I'm not an economist and you may well command a superior grasp of the issues. While I suspect that a higher minimum wage is good, I'm sure there are other factors involved. And I'm sure that I'll never put in the sort of time required to have anything better than a lightly informed opinion. I rely on people like Noah (and Dean Baker!) to help lay out the issues.
However, as someone who has lived in Denmark, Switzerland, and France, each for multiple years, I do know what I saw. Denmark had a far higher level of real-world living in every way, apart from material consumption. At that time, there were TWO people living on the streets of Copenhagen: the near-mystical type who actually chose that life and were not psychologically damaged. The population were taller, healthier, better educated and more worldly. It was my first experience aboard, and something of a culture shock, to be honest.
Switzerland was much like Denmark in feel but with lots of extra money to spend. It felt truly wealthy through and through.
France was and remains a country with a lower standard of living, even if I adore it. Its problems run deep, and I can never decide if it just needs a few tweaks or a radical overhaul. Much of the population is working poor. Or worse.
In the end, looking to other countries to see what is possible (and so what sort of cant we can dispense with) is great, but these countries can never serve as guides. The economy isn't a buffet from which we can pick and choose.
Reading Noah improves my vocabulary “ ossified” is a banger
I’ve always thought of “skilled labor” as a technical economic term that specifies training as a barrier to entry for a labor market. Think this is captured in a dictionary definition of the term [1]
> labor that requires special training for its satisfactory performance.
I think this barrier for entry is an important distinction when considering different labor markets. In this context, “unskilled labor” implies that anyone can be hired to perform the job regardless of their previous training/education. All firms and workers compete in a single large “unskilled labor” market. E.g., Amazon and Walmart increasing starting wages can lead to siphoning of employees from other firms in this market or force these firms competing for this labor to raise wages.
In contrast, there is not a single “skilled labor” market, but instead numerous disjoint markets, each requiring different skill sets. At times, the training requirement to enter a specific skilled labor market can benefit workers by limiting supply of workers. Although it is still possible for supply to exceed demand within a specific “skilled labor” market and drives wages down. E.g., the lawyer glut that started appearing in the 90s.
In this context acquiring formal training to enter a specific “skilled labor” market is viewed as an investment of time and money with the aim of increasing earnings. We can analyze the financial returns to an individual for purchasing their own training and incurring the opportunity cost of education versus working. We can also look at government-funded training programs through an economic lens and compute the expected return on investment to society for a specific program.
It can be argued that “skilled” doesn’t necessarily need to refer exclusively to formal training, but can instead also encompass on the job training. E.g., a line cook with years of experience is more productive than someone hired without previous experience. Yet I think it useful to separate “skills” and “experience” and consider them as two orthogonal dimensions. For example, a junior accountant role only requires the formal “skills” of specific education/certification, whereas a senior role additionally requires sufficient on the job experience.
[1] https://www.dictionary.com/browse/skilled-labor
I note that you left "power" out of your explanation for wages.
And, sure, power is partly a reflection of supply and demand (your replacement cost to your employer would be an even better approximation)
But power can be organised. Labor unions are obvious but union busting is just as much of a power move. Ditto getting to define what amounts to abusive anti-compete clauses in workers' contracts. Etc.
https://noahpinion.substack.com/p/why-15-minimum-wage-is-pretty-safe go nuts
Lmao, this is hilarious. When he says that workers get paid less than their marginal product, what do you think this implies? Do you think Noah doesn't accept the monopsony explanation for part of the reason why a minimum wage doesn't actually fuck over a ton of people?
I don't want to say you're bad faith, because hey that's why they say never attribute to malice what can adequately be explained by stupidity. But when economists almost universally acclaim huge amounts of monetary/fiscal stimulus for the pandemic compared to the ARRA, and when economists are almost universally pro ALL types of immigration, and when economists make huge headways in welfare and criminal justice reform, you really have to wonder why you actually say these things.
The obvious reply to Adam's comment is : "so what, those skills are all vital (except the Dunkin Donuts business which should be shut down because its a purveyor of diabetes and obesity).
In fact those skills are more valuable than the overpaid predators at Goldman Sachs - "doing God's work" - who caused the GFC.
https://www.washingtonpost.com/opinions/2020/04/30/heroes-we-cannot-possibly-repay-you-your-sacrifice-so-we-will-make-no-effort/
The problem is three fold: First, Managers do not like promoting hard working employees as production will decrease without them there. Second, Managers promote or hire people who are similar to themselves which results in an echo chamber of rectal-nasal integration. The third point being that Managers feel they are entitled to their salaries even when they are utterly incompetent but because the next higher up has the same mentality none of them understand why the business is going down the drain and moral is abysmal, this usually happens after the founder dies and the business is left to the bean counters.
You can talk about skilled and unskilled all you want, but when merit or experience have no bearing on pay raises or promotions you have a situation where the incompetent boot lickers are the ones that rise to top and only promote those who act the same as them.
I think of low skill vs. high skill jobs differently. I think that picking fruit or being a dishwasher in a restaurant are low skill jobs because no matter how much you train or how long you hold the job, your efficiency (measured as throughput) will increase very little. Accordingly, there is very little motivation for employers to screen for aptitude.
High skill jobs may or may not be trainable through education but they are trainable. Often this training is best achieved by doing the job.
Good article, but minor nit... never ever use Payscale, or for that matter, Glassdoor, to get recent salary data for software engineers. Those sources use self-reported data sometimes from years past, which doesn't reflect current wage reality.
I assure you, as a software startup founder, if there are engineers getting 10K to do any work of any level of quality, I will a.) immediately double their salary b.) hire 20 of them right now.
SWE salaries in India for decent engineers are up to around 50K US, far higher if they are working in FAANG companies, where the salary + equity packages are well over 1 Crore (around 250K US last time I checked) for people at the middle/upper engineer ranks.
Or it could be that there is something entirely different going on that is just being obfuscated by all the measures of wages, education and so called "productivity"- that's a joke term surely?
Like the CCP spends one third of what the US spends on Defense and churns out more naval ships, equipment ,space rockets etc in a few years than the US can in a decade.
Its like we have hypnotized ourselves to believe our own "BS" as if it explains the world and affords us a strategy.
In those immortal words - “Everyone has a plan until they get punched in the mouth.” <searches for mouth guard :) >
Darrell Owens once differentiated the groups as "credentialed" and "uncredentialed" workers and that stuck with me.
Wasn't the context an argument for returning "highly skilled" workers to the office? That seems to have gotten lost in the discussion. Everyone knows that "low skilled" is a euphemism for "poorly paid, hourly, lacking benefits and generally easy to jerk around". Throw in COVID and that list includes "essential" meaning that they had to show up for work to get paid unlike "more skilled", i.e. "non-essential", workers.
Adams was arguing in favor of getting everyone back to the office. Personally, I think that's a dumb idea, but one can make a class equity arguments for it. It's the old "rich man's money, poor man's blood" argument that ravaged New York City back in the 1860s. Did I mention class? Adams won the working class vote, so he'll appeal to the working class. Maybe he feels a lot of working class people are tired of being the only ones risking their lives and health to keep the city going.
Needless to say, once again, Twitter, once again, demonstrates something important about our elite discourse. It's clearly not about "skills" in the sense of being able to do things, like think before yammering, that we're talking about.
I would be interested to see a list of jobs where skills/productivity don't match the salary (like overpaid BS jobs). Real estate agent comes to mind.
I'd agree that the terms low-skill, high-skill are inaccurate shorthand. If I was to try and fix that shorthand, I would say gradual-scale-skill, steep-scale-skill. I'm not a great cook. If you hired me to work in a restaurant's kitchen, I'd work more slowly, make more mistakes, and produce less quality. But the degree to which I'd be more slow, more error prone, and lower quality, when compares to a cook with 30 years of experience would be less dramatic than if the average cook tried to do my job (operating large scale IT systems).
The effect translates into the value of each incremental hour of experience. Swap someone with 30 years of IT experience out for someone with 10 years of experience, and productivity drops by a factor of 10, for someone with 5, by a factor of 100, and for someone with 1 year, by a factor of 1,000.
Swap a cook with 30 years, for one with 10, and productivity drops by 2, for 5 years, 4, 1 year, 8. (Numbers are examples.. I'm sure there's some good studies on various professions here.. and if you disagree with the general view.. we can find them)
This does two things.. it means that if your forced to choose between making these two trade-offs, you'll make the first. So if you have a person with 15 years experience cooking, and 15 years experience in IT, he'll rationally be offered more to use his IT skills than his cooking skills. 15 years of cooking skills and 15 years of IT skills might be considered the same cost to acquire (some real differences.. but I'd hold the primary investment is the time of the person doing the learning), but the cost to sacrificing the IT experience is greater and so the value in acquiring them is higher.
I think Mr. Smith has a particular mental image of "skills", how they are acquired, how they are evaluated, and what this means for employment and income. I don't agree with all of this.
Specifically, I think he believes that education provides useful skills for a variety of jobs, that these skills are reflected in workers' earnings, and that employers find these skills to be useful in setting requirements for hiring, promotion, and compensation. Earnings data shows that workers with more education tend to earn more, and Mr. Smith finds this as confirmation for his view.
I propose an alternative view, based on my own experience toiling in the corporate world.
Education, if pursued enthusiastically, can develop many skills: understanding the political background of the civil war, conjugation of irregular German verbs, derivation of mathematical theorems, analysis of Shakespearean tragedies, performing least-squares linear regression, and many other things. Any of these are potentially "high skills", at least in an academic environment, but most are not directly relevant to any employment outside the academy. It is also highly questionable how much of such material is retained by students beyond the course completion.
Supporters of college education might argue that the important skills are not the ones I listed above, but more general skills such as critical reasoning, research, logic, and persuasive writing. These could certainly be useful skills, but there have been widely-reported tests showing that graduating seniors have not improved their skills in these areas during four years of classes.
I think that the college wage premium is largely driven by the fact that many large employers require a college degree for hiring into "professional" jobs. In most cases, any college degree will qualify, so employers aren't expecting specific technical skills. In many cases, college degrees weren't required for the same positions 50 years ago. Paralegals, manufacturing engineers, buyers, news reporters, and bookkeepers are all positions that did not require college degrees, but now generally do. The change is not because the fundamental job requirements have changed.
Large employers now routinely require college degrees, I believe, because of a constellation of factors: increase in the number of people with college degrees, professionalization and specialization of the HR function, and prohibition on use of tests for skill and aptitude.
In 1970, only 11% of the US population had a college degree; in 2020, 37% did. Since so many more people have college degrees, it is easier to use "lack of degree" as a screening factor for "unambitious, incapable employee". A hundred years ago, most adults did not have a high school diploma, yet were still able to function in demanding jobs. As high school completion became the norm, "high school dropouts" were considered unsuitable for hiring in most jobs. The same is happening with respect to college. When I was hired at a Fortune 50 industrial company in 1993, most manufacturing engineers did not have college degrees, and many who did earned them while working as manufacturing engineers. Today, that company requires a college degree to apply for the job.
In 1970, "human resources" was not a career field, and did not have dedicated college programs or certifications. Now, that has changed. Human Resource managers mostly have no experience outside the Human Resources field, and have control of the hiring and promotion process. They are themselves college graduates, and have been taught that a college education is a key employment credential. So, a college degree is a requirement for more and more positions.
In 1970, many companies used aptitude tests to evaluate potential hires. Those who didn't develop their own focused tests could use IQ tests to identify promising hires. Now, such tests are subject to legal challenge for discrimination against protected classes, so companies use them much less. However, companies can safely use a college degree as a requirement. Since protected minorities are underrepresented among college graduates, I'd think this requirement could be challenged for disparate impact, but I haven't heard of any such challenges, successful or not.
Some of the arguments Mr. Smith marshals to support the value of education and skills seem to me to have opposite interpretations that are just as compelling. For instance, he cites a study that students in academic difficulty who nevertheless completed a degree earned better than students forced out by academic difficulty. I would interpret this study to show that students who had a diploma earned more than students with essentially identical learning who did not have a diploma. It seems the diploma, not the learning, is the important thing.
He cites a study showing that mafiosos with college degrees earn more than those without. My interpretation of this study would be that the high-ranking mafiosos send their sons to college to earn respectability, and these graduates are put in high-ranking positions due to family connections.
If skills and knowledge from higher education are the keys to higher earning, it is very easy for anyone to acquire them - classrooms in most schools are open to anyone who walks in off the street. Smaller classes may take attendance and identify interlopers, but large lectures are uncontrolled - or at least were before current trends in campus security. Class syllabi are available to anyone, or at least were before the current electronic classroom technology. A high school dropout from New Haven could sit in on Yale classes and pick up all the knowledge and skills offered. But he couldn't get a Yale diploma.
It is certainly true that worker skills matter - they influence the success of their employers, and of the overall economy. To some extent, they also influence worker success in their jobs, but current trends toward bureaucratizing HR processes, and measuring diversity goals rather than performance goals make an individual's skills and performance less important than they were 50 years ago.
> Now, such tests are subject to legal challenge for discrimination against protected classes, so companies use them much less. However, companies can safely use a college degree as a requirement.
https://slatestarcodex.com/2017/07/26/dont-blame-griggs/ argues that the commonly cited form of this narrative is unlikely to be true. Griggs v. Duke, sometimes cited as the original precedent for banning IQ tests as discriminatory, did so in its specific case on the basis that such tests weren't relevant to the job (the plaintiffs were power plant workers), & struck down a requirement of educational credentials with the same reasoning: "If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited. On the record before us, neither the high school completion requirement nor the general intelligence test is shown to bear a demonstrable relationship to successful performance of the jobs for which it was used. Both were adopted, as the Court of Appeals noted, without meaningful study of their relationship to job-performance ability. Rather, a vice president of the Company testified, the requirements were instituted on the Company's judgment that they generally would improve the overall quality of the work force. The evidence, however, shows that employees who have not completed high school or taken the tests have continued to perform satisfactorily and make progress in departments for which the high school and test criteria are now used." (from the Supreme Court's ruling, https://en.wikisource.org/wiki/Griggs_v._Duke_Power_Company/Opinion_of_the_Court ) Besides, in a later case (Ricci v. DeStefano, 2009, https://en.wikipedia.org/wiki/Ricci_v._DeStefano ) where a local fire department decided not to promote some of its employees after its civil service exam found the white & Hispanic applicants to be better qualified than the black ones, the Supreme Court ruled that the fire department shouldn't have feared a successful disparate-impact lawsuit, & that it had unlawfully discriminated against the non-black employees by not promoting them. So the precedents regarding disparate impact of aptitude tests seem to be rather less broad than you describe, & also apply to education credentials (which, as you note, also tend to underrepresent most ethnic minorities).
I think you're agreeing with my point more than disagreeing. My point was that college degrees are used as a mandatory credential for most "good" jobs in many areas of the economy, and that this is a (relatively) new trend, and does not reflect real requirements for college knowledge.