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.)