December 31, 2007
Starbucks vs. Mom & Pops
One of the enduring myths about market competition is that it necessarily implies winners and losers. We go on believing this despite the fact that when we drive along the highway we notice clusters of gas stations, burger joints & office supply stores all next to each other.
There's a new Slate article available which tells a story whose ending will be counter-intuitive to many.
Ever since Starbucks blanketed every functioning community in America with its cafes, the one effect of its expansion that has steamed people the most has been the widely assumed dying-off of mom and pop coffeehouses. Our cities once overflowed with charming independent coffee shops, the popular thinking goes, until the corporate steamroller known as Starbucks came through and crushed them all, perhaps tossing the victims a complimentary Alanis Morrisette CD to ease the psychic pain. In a world where Starbucks operates nearly 15,000 stores, with six new ones opening each day, isn't this a reasonable assumption? How could momma and poppa coffee hope to survive? But Hyman didn't misspeak—and neither did the dozens of other coffeehouse owners I've interviewed. Strange as it sounds, the best way to boost sales at your independently owned coffeehouse may just be to have Starbucks move in next-door.
Many have complained about the tough tactics labor unions use when trying to limit the competition by non-union employers. A side benefit of this article is the window it gives on how companies such as Starbucks ruthlessly attack their competition through means other than the market.
One thing the article doesn't touch on is how, if at all, Starbucks has caused labor market costs to rise (or fall) for mom & pop coffee shops. Based on data I have looked at with other retailers I would assume there has been a slight effect causing mom & pop shops to raise wages & benefits.
September 08, 2007
Labor Market Rigidity Questioned
A rapidly expanding empirical literature has addressed the widely accepted claim that employment-unfriendly labor market institutions explain the pattern of unemployment across countries. The main culprits are held to be protective institutions, namely unemployment benefit entitlements, employment protection laws, and trade unions. Our assessment of the evidence offers little support for this orthodox view. The most compelling finding of the cross-country regression literature is the generally significant and robust effect of the standard measure of unemployment benefit generosity, but there are reasons to doubt both the economic importance of this relationship and the direction of causation. The micro evidence on the effects of major changes in benefit generosity on the exit rate out of unemployment has been frequently cited as supportive evidence, but these individual level effects vary widely across studies and, in any case, have no direct implication for changes in the aggregate unemployment rate (due to ``composition" and ``entitlement" effects). Finally, we find little evidence to suggest that 1990s reforms of core protective labor market institutions can explain much of either the success of the ``success stories" or the continued high unemployment of the large continental European countries. We conclude that the evidence is consistent with a more complex reality in which a variety of labor market models can be consistent with good employment performance.
September 03, 2007
Mexican Trucks On a Highway Near You
The Teamsters Union's request to halt a Bush Administration plan to allow trucks from Mexico on U.S. highways has been rejected by the 9th U.S. Circuit Court of Appeals. This move will affect both union and non-union truckers further shaking up the labor market and U.S. trucking firms. The Bush Administration's plan will also compromise border control and highway safety. I am a bit surprised there isn't more of an uproar over this.
The plan will only be in effect for a year as a test or experiment. I guess next year at some point they will tally up how many fatalities were caused by unsafe trucks from Mexico and then decide on whether or not to expand the program?
I don't know the full extent of the program i.e. how will they ensure these vehicles meet U.S. standards, what labor laws will govern these drivers etc but I will look into it.
October 01, 2005
Dan Drezner is blogging on a recent article in the Economist on the decline of manufacturing jobs. Well worth checking out.
Does anyone know of any academic papers or books that look at the decline of Manufacturing jobs & plants in light of United States security interests?
September 27, 2005
White Collar Unionism
Here are some excerpts from the first article mentioned above:
Mr. Davis represents one of the few bright spots for the struggling U.S. labor movement: Despite a blue-collar image, many of the fastest growing unions in the U.S. represent white-collar professionals, including physicians, nuclear engineers, psychologists and judges.
The growth of white-collar unions says much about the precarious nature of jobs of all types in the current economy. Decaying job security and benefits and the effects of global trade on labor costs all have begun to reach into the ranks of professional workers.
"Professionals join unions because they feel that their work is being devalued. Many of these workers had good pensions and good benefits, and they don't anymore," says Kate Bronfenbrenner, director of labor education research at Cornell University in Ithaca, N.Y. Professionals, she adds, may fear being replaced by independent contractors or seeing their jobs outsourced.
September 22, 2005
The Next Proletariat
I've run across an interesting article on the site - Tech Central Station. The author argues that the same forces behind the decline of labor unions is also undermining the European economic model.
The Next Proletariat? (free)
September 19, 2005
The End of Work?
In the 1990s many labor market and employment scholars predicted the end of traditional work. The new economy would be run by firms that acted as organizers of free agents (workers) who shifted from firm to firm as projects were completed.
A new book, Working in the 21st Century, argues that those predictions were premature. Today's FInancial Times takes a look at this new book and explores some of the employment predictions put forward in the 90's. Below I provide a link to the full article as well as some excerpts:
The Sinking of the Free Agent Myth (Financial Times $ubscription Required)
New technology and change are constant themes, but they do not spell declining employment. Instead, they may point to longer-term working patterns, as employers seek to equip staff with new skills. Consequently, the length of time people spend with the same employer has risen slightly.
The authors reject the idea that there is a significant trend of more workers becoming self-employed, setting up micro-businesses, or becoming temporary or portfolio workers. Permanent jobs, whether part or full-time, are the norm. There is no revolution in the structure of employment, but there may be a revolution in the content of jobs: much modern work revolves around the labour intensive business of managing relationships – building contacts, selling, networking and teamworking.
William Bridges has. The American consultant and author of Jobshift: How to Prosper in a Workplace Without Jobs says that if he were writing today, he would not stress the numerical decline in jobs, but the “qualitative” change in the nature of those jobs. “This idea that everyone has to show they are adding value in their work is really very far reaching,” he says.
But Jeremy Rifkin has not. His 1995 polemical bestseller The End of Work argued that technology would bring an end to mass wage labour in developed nations by “substituting” workers with machines. He reckons he was conservative in his original predictions. The official rate of US unemployment, at 4.9 per cent, is an improvement on what it was in 1995. But he argues it is nearer 9 per cent once temporary workers, part-timers who want full-time work, people who give up looking for work and so fall out of the figures, and the 2 per cent of the workforce in prison, is taken into account.
“Structural unemployment is going up almost everywhere,” he says. “There is not a single CEO that I speak to who plans to increase their workforce because it is now possible to do more with fewer workers.” Modern “boutique industries” will never employ the proportions of people who worked under Fordist-style manufacturing, he argues.
September 13, 2005
An Explanation for the Tight 1990's Labor Market?
The Blog Marginal Revolution points to an interesting article that appeared in the NY Times yesterday. The article points to an interesting study that suggests companies such as Enron were responsible for the tight labor markets seen in the 90s:
The Crime: Slow Job Growth. A Suspect: Enron. (NY Times Registration Required)
In a recent National Bureau of Economic Research working paper, Professor Philippon and a colleague, Simi Kedia, assistant professor of finance and economics at Rutgers, argued that the widespread accounting problems for which Enron was emblematic might have helped suppress employment growth - in the affected companies, and in the industries in which the misreporting was concentrated.
Professors Philippon and Kedia examined the roster of companies that restated earnings from January 1997 to June 2002, as compiled by what is now the Government Accountability Office, and matched it up with available employment data. It was a regrettably large sample: 919 restatements by 845 public companies. About one-tenth of publicly traded companies announced at least one restatement.
Not surprisingly, companies that were misrepresenting their financial results - intentionally or inadvertently - helped juice employment growth in the late 1990's as they added employees. "During periods of suspicious accounting, firms hire and invest excessively," the professors said. From 1997 to 1999, the restating companies added 500,000 jobs, a 25 percent increase.