tag:blogger.com,1999:blog-8702840202604739302.post6792444706354498159..comments2024-03-28T03:38:53.734-07:00Comments on MacroMania: Involuntary Labor Market Choices?David Andolfattohttp://www.blogger.com/profile/12138572028306561024noreply@blogger.comBlogger36125tag:blogger.com,1999:blog-8702840202604739302.post-32996758918450054162015-03-13T07:11:38.392-07:002015-03-13T07:11:38.392-07:00Well, first off, one can choose to starve while lo...Well, first off, one can choose to starve while looking for work or while out of the labor force. But seriously, in wealthy economies, people do not starve. They are, however, depending on circumstances, compelled to work at menial jobs just to support themselves and their families. I would call this "involuntary employment." But you and Roger appear to have no compassion for the working poor. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-31282930985674354562015-03-12T23:43:03.107-07:002015-03-12T23:43:03.107-07:00Starvation, a voluntary choice!Starvation, a voluntary choice!BradKhttps://www.blogger.com/profile/00311675925651145239noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-13653211338257039742015-03-12T07:17:36.161-07:002015-03-12T07:17:36.161-07:00David, surely you accept that not everyone who wan...<i>David, surely you accept that not everyone who wants a job is actively searching, right?</i><br /><br />If you define "want a job" as "wanting a good, fulfilling, and high-paying job with great career prospects but realize that such jobs are presently or forever out of reach" then yes, I accept that. <br /><br /><i>So why do you deny that there can be firms with jobs they'd in principle like to fill but aren't actively recruiting?</i><br /><br />I don't deny that. I have published papers that have this property.<br /><br /><i>Point me to where in my example i said there was only 1 job that needed doing? i said only one firm was actively recruiting.</i><br /><br />OK, sorry. Then you accept that there are many jobs that need doing. Far many than there are people on the planet. Good, I agree. <br /><i>Again, this is Farmer's point. If there is a cost to recruiting firms can have a job they'd in principle like to fill (if recruiting were costless) but still not actively recruit because the expected cost exceeds the expected benefit. After all, when people who want a job stop searching surely it can only be because the expected cost exceeds the expected benefit?</i><br /><br />I agree with this, but so what? I do not see where "involuntary" unemployment enters the picture if, as you implicitly admitted, there are far many more jobs to do than there are people.<br /><br />Read Lucas' statement below, posted by Jim Rose. He says, and I agree, there is a voluntary and involuntary aspect to unemployment. Involuntary in the sense that nobody chooses bad luck over good. But still, given bad luck, people have choices. Not great choices, but choices nevertheless and this is what makes labor market choices "voluntary." <br /><br /><br />And again, if the number of firms recruiting is less than the number of people searching then someone must fail to find a match.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-85590619307100600542015-03-11T17:12:59.885-07:002015-03-11T17:12:59.885-07:00David, surely you accept that not everyone who wan...David, surely you accept that not everyone who wants a job is actively searching, right?<br /><br />So why do you deny that there can be firms with jobs they'd in principle like to fill but aren't actively recruiting?<br /><br />Point me to where in my example i said there was only 1 job that needed doing? i said only one firm was actively recruiting.<br /><br />Again, this is Farmer's point. If there is a cost to recruiting firms can have a job they'd in principle like to fill (if recruiting were costless) but still not actively recruit because the expected cost exceeds the expected benefit. After all, when people who want a job stop searching surely it can only be because the expected cost exceeds the expected benefit?<br /><br />And again, if the number of firms recruiting is less than the number of people searching then someone must fail to find a match.Adam Phttps://www.blogger.com/profile/16316584837610367439noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-41690344197948925242015-03-11T10:36:30.907-07:002015-03-11T10:36:30.907-07:00Adam P, I do not agree at all with either your pre...Adam P, I do not agree at all with either your premise or your conclusions.<br /><br />First, suppose there is only one job and three workers. Are you kidding me? What world are you describing? The situation is the exact opposite. It is as Alchian is reported to have said (according to Jim Rose below):<br /><br />"Alchian said there are always plenty of jobs because to suppose the contrary suggests that scarcity has been abolished."<br /><br />So, first off, let's get serious. There are always more things to be done than there are people to do them. Throughout history it is *leisure* that has always been wanting, not work.<br /><br />Second, understanding what I just said to be true in no way suggests any moral statement concerning the choices people make in terms of how they choose to allocated time. Yes, of course, equilibria are generically suboptimal. Unemployment may be too high OR too low (it is easy to derive such results). We already have labels for this: suboptimal unemployment rate (why do we need the adjective "involuntary?"). <br /><br />Third, how do you propose to decompose "voluntary" vs "involuntary" unemployment in the data? Oh, and while you're at it, please do the same for employment. Yes, if you find the label involuntary unemployment useful, I think you must also find the label involuntary employment useful too, no? If not, why not? <br /><br />These are just silly, outdated labels, in my mind. They do more to confuse thinking that to clarify it. My 2 cents worth, at least.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-20570660013416437352015-03-11T10:02:50.721-07:002015-03-11T10:02:50.721-07:00David,
Let's imagine a world in which there a...David,<br /><br />Let's imagine a world in which there are 3 people searching for jobs and only 1 job opening (I am the employer who's recruiting).<br /><br />I may first encounter searcher 1, make a low wage offer which is refused and then move on to encounter searcher 2 with the same result.<br /><br />Now, searcher's 1 and 2 have both had the chance to be employed but chosen to continue searching (they do not know there is only me recuiting).<br /><br />I then encounter searcher 3, make the same low wage offer and this time it's accepted because since searcher 3 has spent two "periods" searching without encountering any potential match he/she has figured out that there is a dearth of openings.<br /><br />The question is, are searchers 1 and 2 involuntarily unemployed. In both cases they were offered a job and chose to continue to search, but on the other hand we know from the aggregate number of searchers and rectuiters that 2 of the 3 searchers would be unemployed. Had searcher 1 taken the job then the others never even meet a potential match, however they did do that.<br /><br />I think what I'm tryiing to say is that Farmer is using the term "involuntary unemployment" to describe an aggregate outcome, not an individual outcome. In the example I think we can say that the unemployment of at least 2 of the 3 searchers was "involuntary" even though in the actual event all 3 got to encounter a potential match and make a choice to accept or reject a wage offer.<br /><br />The key to all this is that firms pay a cost to recruit and thus aggregate recruting activity can be too low to possibly employ all those searching. Thus, regardless of individual choices we know for sure that someone will search and not find a job and that person's unemployment is unambigously "involuntary". That is the situation Farmer is using the term to describe and I think it is entirely appropriate language.Adam Phttps://www.blogger.com/profile/16316584837610367439noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-9905150188345177662015-03-10T20:52:01.276-07:002015-03-10T20:52:01.276-07:00I like your parallels of unemployment with the mar...I like your parallels of unemployment with the marriage market.<br /><br />Would it make sense for people to go around saying that they are involuntarily unmarried or involuntarily single?<br /><br />Of course you could go out and marry the first person you meet in the street, if they will have you, an important proviso, but I think both sides would know that that would turn out to be a pretty poor match.<br /><br />The notion of involuntary marriage and involuntary single illustrates the notion that talking about search and matching as voluntary unemployment and involuntary unemployment just doesn't help clarify what you attempting to understand.Jim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-82037505773270132552015-03-10T06:04:06.521-07:002015-03-10T06:04:06.521-07:00Thank you for this, Jim. My view on the matter has...Thank you for this, Jim. My view on the matter has evidently been greatly influenced by Lucas. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-28392121096826424112015-03-09T22:48:35.487-07:002015-03-09T22:48:35.487-07:00Robert Lucas in a famous 1978 paper argued that al...Robert Lucas in a famous 1978 paper argued that all unemployment was voluntary because involuntary unemployment was a meaningless concept:<br /><br />"The worker who loses a good job in prosperous time does not volunteer to be in this situation: he has suffered a capital loss. Similarly, the firm which loses an experienced employee in depressed times suffers an undesirable capital loss.<br /><br />Nevertheless the unemployed worker at any time can always find some job at once, and a firm can always fill a vacancy instantaneously. That neither typically does so by choice is not difficult to understand given the quality of the jobs and the employees which are easiest to find.<br /><br />Thus there is an involuntary element in all unemployment, in the sense that no one chooses bad luck over good; there is also a voluntary element in all unemployment, in the sense that however miserable one’s current work options, one can always choose to accept them."<br /><br />I agree that we all make choices subject to constraints. To say that a choice is involuntary because it is constrained by a scarcity of job-opportunities information is to say that choices are involuntary because there is scarcity. Alchian said there are always plenty of jobs because to suppose the contrary suggests that scarcity has been abolished. <br /><br />Lucas elaborated further in 1987 in Models of Business Cycles:<br />"A theory that does deal successfully with unemployment needs to address two quite distinct problems.<br /><br />One is the fact that job separations tend to take the form of unilateral decisions – a worker quits, or is laid off or fired – in which negotiations over wage rates play no explicit role.<br /><br />The second is that workers who lose jobs, for whatever reason, typically pass through a period of unemployment instead of taking temporary work on the ‘spot’ labour market jobs that are readily available in any economy.<br /><br />Of these, the second seems to me much the more important: it does not ‘explain’ why someone is unemployed to explain why he does not have a job with company X. After all, most employed people do not have jobs with company X either.<br /><br />To explain why people allocate time to a particular activity – like unemployment – we need to know why they prefer it to all other available activities: to say that I am allergic to strawberries does not ‘explain’ why I drink coffee. <br /><br />Neither of these puzzles is easy to understand within a Walrasian framework, and it would be good to understand both of them better, but I suggest we begin by focusing on the second of the two." Jim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-25925886400735313982015-03-09T18:15:07.802-07:002015-03-09T18:15:07.802-07:00HG, once you start along the voluntary/involuntary...HG, once you start along the voluntary/involuntary distinction, you run into all sorts of problems. How does one measure "voluntary" unemployment, for example? Or "involuntary employment?" Who cares how their labor market choices are labeled? We should care more about their material living standards (consumption). David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-87516627572912287792015-03-09T18:12:38.534-07:002015-03-09T18:12:38.534-07:00Yes, that's a valid concern as well, I think.Yes, that's a valid concern as well, I think. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-75677401170661128532015-03-09T18:12:13.123-07:002015-03-09T18:12:13.123-07:00I don't have much to disagree with there, Nick...I don't have much to disagree with there, Nick. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-53711981935906204202015-03-09T18:10:50.658-07:002015-03-09T18:10:50.658-07:00Basil, the Keynesian view of unemployment is that ...Basil, the Keynesian view of unemployment is that it is the outcome of a coordination failure. Sticky wages play no role in the analysis (indeed, Keynes wrote how he believed flexible wages would make matters worse). These are the types of models Roger works with. Individuals respect incentives but collectively, these incentives are all screwed up (even if markets clear in the conventional sense). David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-84184528913667749962015-03-09T14:28:21.676-07:002015-03-09T14:28:21.676-07:00I think you are spot on at the end about "unh...I think you are spot on at the end about "unhappiness" in employment outcomes, and the overall theme of voluntary/involuntary being vague.<br /><br />So, in light of this, would it be better to use "involuntary" as "actively searching for a job, but currently not employed" and "voluntary" as "not actively searching for a job and not currently employed"? <br /><br />This is how I have always thought about involuntary/voluntary unemployment, and it really didn't occur to me the implications of the words involuntary/voluntary.<br /><br />Though my definitions (and better words associated with the definitions would be useful) would basically just sort people into 2 categories, which may not be useful for thinking about employment. But, I think it's what many (though not all) people think about when they say "involuntary" unemployment. It's a "I would rather be employed than not" situation (though with actively searching as a condition).Heavy Grenadierhttps://www.blogger.com/profile/00378051173423469027noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-87892196817716428672015-03-09T13:07:45.213-07:002015-03-09T13:07:45.213-07:00I would stay away from "voluntary" and &...I would stay away from "voluntary" and "involuntary" simply because using these words can open the door to moral judgments, even if they were helpful in clarifying certain points. Economics really must always remain a positive science, otherwise we lose legitimacy of our results. As such, using more technical or clinical language would, I think, be preferred.Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-38178884504144010812015-03-09T08:38:32.110-07:002015-03-09T08:38:32.110-07:00Try not to be so boggled, Noni. Absent a decent sy...Try not to be so boggled, Noni. Absent a decent system of social supports, many people are "forced" to work. So why then do we not have a category called "involuntary employment?" My whole point is about language and how it potentially obfuscates the real issues at hand. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-55050242677946414212015-03-09T08:20:34.047-07:002015-03-09T08:20:34.047-07:00I am a bit boggled listening to this discussion, s...I am a bit boggled listening to this discussion, since it leaves out the fact that your worker, a living creature, does not have the unrestricted choice of how he will divide his time. He can work, not work, or search for work? Really? This conflates "working at a job" with "acquiring the necessities of life," but also, and very oddly, assumes that while he is searching or not participating, he still has access to the necessities of life in enough quantity that his leisure, or his searching, (or even his working!) is not interrupted by death.<br /><br />Absent a guaranteed income or a decent system of social supports, the above discussion is nonsense, having left out an essential element of the system.<br /><br />Noni<br /><br />Noni Mausahttps://www.blogger.com/profile/11198589990083966806noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-27339731418242527792015-03-09T06:44:28.124-07:002015-03-09T06:44:28.124-07:00What is the definition of "voluntary" em...What is the definition of "voluntary" employment then? And I thought he made it clear that it was pointless to label such things. The issue is how the environment (trade-offs, in his language) changes and (my point is) how people respond to this new environment. David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-22572725195515173492015-03-08T23:35:11.958-07:002015-03-08T23:35:11.958-07:00I like Nick Rowe's definition of "involun...I like Nick Rowe's definition of "involuntary unemployment".Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-22652136622399198722015-03-08T21:56:22.681-07:002015-03-08T21:56:22.681-07:00Suppose my labor is worth $5 an hour and the minim...Suppose my labor is worth $5 an hour and the minimum wage is $10. Then there is no point in searching for work--I will not be unemployed, I will exit the labor force. I suppose it would make sense in this case to label the person non-employed for reasons beyond his/her control. But the same would hold true for a person who is non-employed because they have to look after a sick relative. Who cares about these labels? I still don't get it.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-36318007080681232112015-03-08T19:38:12.797-07:002015-03-08T19:38:12.797-07:00Adding my twopenceworth, with a picture: http://wo...Adding my twopenceworth, with a picture: http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/03/involuntary-unemployment-as-worsening-trade-off.htmlNick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-34811511765171272312015-03-08T17:07:27.094-07:002015-03-08T17:07:27.094-07:00The adjective tells us that unemployment has incre...The adjective tells us that unemployment has increased because it has become harder to find a job with the same characteristics (wage, distance, etc.) than it was before. It tells us something about the constraint facing those who want a job, and how it has shifted.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-37852139069092631812015-03-08T16:51:17.738-07:002015-03-08T16:51:17.738-07:00Isn't the issue here that, if unemployment is ...Isn't the issue here that, if unemployment is caused by wages which are stuck above the market-clearing level, then both employers and the unemployed would be better if they could negotiate at a lower wage? And thus *employers* are responding to incentives by not hiring, but it doesn't really make sense to ask if the unemployed are responding to incentives, since the lack of market-clearing prevents them from even entering the market.<br /><br />(I'm not sure how to translate this into the language of search models)Basilhttps://www.blogger.com/profile/09102279868748204623noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-9951641346666224442015-03-08T16:24:09.213-07:002015-03-08T16:24:09.213-07:00This makes a lot of sense to me. For the most part...This makes a lot of sense to me. For the most part, we have no control over the situation with which we are faced. And "involuntary" doesn't mean "faced only with really terrible decisions." <br /><br />However, I think it is possible to be unable to find a job at any legal price. Lots of young people would like to work, for money, but can't. Nothing they can do would add value greater than minimum wage, and there's only so many commission-based jobs and waiting jobs out there. <br /><br />Now, one can say "well, they could work for nothing," and that's sort of true, but you have to call it volunteer work or an internship. <br /><br />I wonder what the inability to find paid work, because of minimum wage laws or child labor laws or some such, would be called?<br /><br />Prof Jhttps://www.blogger.com/profile/16539902592080231165noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-32362821432285100072015-03-08T15:59:30.447-07:002015-03-08T15:59:30.447-07:00Thank you, Roger. Good fun here. Just like the old...Thank you, Roger. Good fun here. Just like the old days. :)David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.com