Comments on economics, mystery fiction, drama, and art.

Thursday, February 26, 2015

Is the decline in employer support for training worrying?

Timothy Taylor pointed out, at The Conversable Economist, that employer support for employee training has declined, consistently, between 1996 (when 19% of employers reported that they paid for some training, and 13% said they provided formal OJT) and 2008 (11% and 8%).  I linked to that on a listserv (on teaching economics), labeling it the depressing fact of the day.  One of the other people there (Michael Nuwer) raised a valid point: 

According to human capital theory such a decline in on-the-job training makes perfect sense when the rate of job turnover increases. Many of us tell our students to expect numerous employers throughout their careers, which means these employers are less willing to invest in firm specific skill. But this tells us nothing about what might be happening to the
acquisition of general skills. Feeling depressed might be premature.
Quite right.  But are quit rates increasing?  I looked.  The Department of Labor has a data series (JOLTS--Job Openings and Labor Turnover Survey) available online, going back to 2001 (so not a very long time series). As it happens, the percentage of (employed) people who quit their jobs in any month tends to rise during recoveries and booms, and fall during recessions (no surprise there).  So quit rates fell from early 2001 to the end of 2002, and then rose until late 2006--well before the most recent recession began--and peaked at a level well below the January 2001 level (2.6% in 2006, 2.9% in January 2001).

And the quit rate fell, steadily, bottoming out at 1.4% in September 2009.  By December 2014 (the most recent data), the quit rate, at 2.2% was still well below its pre-Great Recession peak.

We can also look at total separations (quits plus layoffs plus other separations-retirements, deaths, for example).  There are obviously more of these that there are of quits, but the pattern is similar--falling from January 2001 (a 4.9% total separation rate) to March 2002 (4.0%), and remaining flat until April 2009 (during that period, quits fell and layoffs increased).  From April 2009, the total separation rate fell to 3.3% in January 2012.  It has since increased to 3.9%--still below its level during the Great Recession.

My take-away from this is that it's not obvious that increased labor mobility is driving the decline in employer support for employee training.  And that the decline in employer support for employee training is, as Taylor suggests, in fact something to be concerned about.

Sunday, February 15, 2015

Legalization and the market for marijuana

I don't want to make too much of this, but apparently the price of marijuana has plummeted in the state of Washington since (in a limited way) production and sale of pot was legalized--down from around $2,000 per pound, or $125 an ounce (wholesale) to around $800 per pound ($50 per ounce).  (Depending on a number of factors, one can apparently get between 30 and 100 cigarettes from an ounce of pot.)

Almost everyone expected,  both the demand and the supply of marijuana increased (i.e., both the demand curve for and the supply curve or marijuana shifted to the right) upon legalization.  For buyers, the risk-adjusted price of use fell, while for sellers, the risk-adjusted price rose.  So, in nominal terms, the price to buyers fell and the price to sellers rose.

What I'm not sure everyone expected is that the supply effect would be so much greater.  But even that was largely predictable.  Legalization occurred in a restricted geographical area.  To buy pot legally, you have to buy there--you, as a buyer, have to travel.  Technically, the only legal marihuana is supposed t be grown in Washington, but how do we enforce that?  It's fairly easy (and inexpensive) to transport pot from Oregon or California to Washington, and, in effect, to turn illegal pot into legal pot...with legal pot selling for a higher risk-adjusted price.

(For more, see this.)
For a long-run analysis of pot pricing, this.)

Tuesday, January 13, 2015

A brief note on Bitcoin

There's a new organization (Coin Center) which has as its reason for existence promotion of bitcoin, or similar technologies.  As the founder and director of the center, Jerry Brito puts it: 

“We’re advocates.  We’re not advocating on behalf of any particular company or industry. We think simply that this technology offers a lot of benefits to consumers and to the wider economy and the world generally.”
Brito says the mission of the center has three elements (quoting from the article, not verbatim fromBrito):   "...educate lawmakers and regulators about what Bitcoin is and is not; perform policy research; and act as a booster for Bitcoin...."

Note the association of policy research and boosting a specific product.  What does that suggest to you about the objectivity of the policy research that will be performed?

Bingo.

Wednesday, January 07, 2015

Euros

There's absolutely no point to this...just a picture of Euro coins left over from a vacation.

Monday, December 22, 2014

Jane Jacobs would love this

In which Timothy Lee proposes that urban freeways should be torn down and replaced by surface streets...a point of view that I tend to agree with, actually.

Sunday, December 21, 2014

Interest Rates and Privater, Non-Residential Fixed nvestment

In a very interesting post, Robert Waldman writes:

In a recent post, I noted that actual non-residential fixed capital investment doesn’t show the pattern one would expect based on optimizing models at all. Ugh that sentence was convoluted and so is the post it describes. In fact, the puzzling pattern is really very simple. Non residential fixed capital investment (nrfinv) is high when interest rates are high. 
 And

This correlation is strange for two reasons. First the sign is surprising. Other things equal, one would expect high interest rates to cause low investment. note the brick red curve in the graph is the Federal Funds rate — a policy instrument. Second the interest rates are nominal [but the investment data are real---inflation-adjusted: DC]. Sooner or later, I will try to understand what was going on.
This rather intrigued me, so using data from FRED,  I put together a data set including the following data:
Real Private Non-Residential Fixed Investment (PNRFI)
Real GDP (and the average annual rate of growth of RGDP over the subsequent 2 years) (RGDP and GrRGDP)
Real Moody's AAA corporate bond rate (RAAARate)

(Details of how I calculated all this if anyone is interested enough to ask)

This gave me 255 usable quarterly observations.  I regressed RPNRFI on GrRGDP and RAAARate.  The resulting regression is shown in the following table:




Variable

Coefficient

T-statistic

Constant

GrRGDP

RAAARate

+847.4

-69.6

+48.7

+10.88

-4.09

+5.41

R2
F
D-W

0.422
23.35
0.018

 

Even adjusting nominal interest rates to real interest rates, I find, essentially the same thing Waldmann found.  (The D-W--Durbin-Watson--statistic indicate that there is serial correlation in RPNRFI.)  The simplest explanation for this is that the changes in the real interest rate are a result of shifts in the demand for funds to purchase new capital equipment.  The argument that high real interest rates will be associated with reduced investment assumes that the demand for funds curve is unchanged, and that changes in interest rates move the economy along that curve. 

This is, in a sense, a very Keynesian result--that changes in investment are a result of changes in expectations of future profits, much more than simply being a response to rising or falling interest rates.
*************************************************
Addendum.  I played with some alternative specifications.  In every case, the D-W statistic continued to show autocorrelation.  In most of the alternatives, the coefficient on the GDP variable was positive.  And the coefficient on the real interest rate was always positive.  Here's one example.  In this instance, I computed the percentage change in PRNRFI from 8 quarters prior, the percentage change in RGDP from 8 quarters prior, and the actual change in the RAAARate from 8 quarters prior.




Variable

Coefficient

T-statistic

Constant

%ChRGDP

ChRAAARate

-3.64

+1.84

+0.22

-4.03

+15.78

+1.63

R2
F
DW

0.497
124.5
0.209

 

Note:  I was unable to figure out how to post this in the comments on Waldmann's blog.

Monday, December 15, 2014

Words of wisdom from the masters

As I was reading something light, purely for entertainment, I ran across this quotation from the writings of one of the major thinkers of the past 300 years:
 
"...the government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatsoever..."
That's Adam Smith, folks.
...
(From Arthur Herman's "How the Scots Invented the Modern World.")