Women Earned The Majority of Doctorates In 2009

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Impact of Recessions on Earnings

People who get laid off during a recession lose their skills because they cannot get another job quickly and skills depreciate.  Plus, employers discriminate against people who have been unemployed (or underemployed) for an extended time.  These factors and others like the depression that often haunts the unemployed have long-lasting effects.  Kevin Drum:

Here's a gloomy chart from a new Brookings paper. It shows the average wages of men under 50 who lose their jobs in a "mass layoff" event.

• The red line is for men who are laid off during good economic times. On average, these men have steeply rising earnings in the five years before the layoff and then experience a big earnings plunge. They eventually get back to their old earnings level, but that's it. Their earnings never again get above that.
• The blue line is for men who are laid off during recessions. They also have steeply rising earnings in the five years before the layoff and then experience a big earnings plunge. However, they never even come close to their old earnings level. They max out at about $36,000 compared to peak earnings before the layoff of $45,000.

The steeply rising earnings before the layoff are a little perplexing to me, and I wonder if this is related in any way to the probability of being laid off in the first place. The main takeaway, though, is that if you lose your job during a recession, you are probably screwed for the rest of your life. Even ten years later you'll earn about 20% less than you did before. This price has been paid needlessly by hundreds of thousands of workers because our political leaders have never had the courage to take action strong enough to get our economy moving again.

Gender, Height, Intelligence, and Status

 Unlike the psychologist below, I do not endorse the idea that men are more intelligent than women on average because it is really hard to define intelligence.  Men are more intelligent than women on some kinds of tasks and clearly less intelligent than women on other kinds of tasks.  Given that men largely created the IQ tests, it should not be too surprising if they selected tasks that felt they were good at to put on the IQ tests.  It is impossible for me to say which kinds of intellectual tasks are the most important parts of intelligence, so I do not claim that one gender is more intelligent than the other.  However, I have never seen a behavioral quality where men have less variance than women.  No doubt some exist, but all the (somewhat limited) studies I have seen have demonstrated that men are more variable.  That is important for explaining differences in extremes between men and women. For example, most mentally retarded people are men and most geniuses are too.   Psychology Today:

The orthodoxy in intelligence research for the second half of the 20th century had been that men and women had the same average intelligence, but men had greater variance in their distribution than women.  Most geniuses were men, and most imbeciles were men, they said, while most women were in the normal range.  This conclusion, however, was manufactured out of political expediency.  Not wanting to discover, or a priori denying, any sex differences in intelligence, psychometricians simply deleted from the standardized IQ tests any item on which the performance of men and women differed.
More recently, however, especially since the turn of the millennium, there have been an increasing number of studies that cast doubt on this politically correct conclusion.  Studies with large representative national samples from Spain, Denmark, and the United States, as well as meta-analyses of a large number of published studies throughout the world, all conclude that men on average are slightly but significantly more intelligent than women, by about 3-5 IQ points.  So this has now become the new (albeit tentative) consensus in intelligence research.
...Psychometricians have known since the end of the 19th century that height is positively correlated with intelligence:  Taller people on average are more intelligent than shorter people.  And men in every human population are taller than women.  So one possibility is that men are more intelligent than women, not because they are men, but because they are taller.
... In fact, once we control for height, women are slightly but significantly more intelligent than men.  Further controlling for health, physical attractiveness, age, race, education, and earnings does not alter this conclusion.  Height has exactly the same effect on intelligence for men and women:  Each inch in height increases the IQ by about .4 point.  The partial effect of height on intelligence is more than three times as strong as the partial effect of sex.
So it is not that men are more intelligent than women, but that taller people are more intelligent than shorter people, but net of height women are more intelligent than men.  Women who are 5’10” are on average more intelligent than men who are 5’10”, and women who are 5’5” are on average more intelligent than men who are 5’5”.  But, more importantly, people who are 5’10” are significantly more intelligent than people who are 5’5”, and most people who are 5’10” are men and most people who are 5’5” are women.

Kanazawa continues:

why are taller people more intelligent than shorter people? ...we don’t know for sure, but there are two possible explanations.  First, both height and intelligence may be indicators of underlying health.  According to this view, people who are genetically and developmentally healthier simultaneously grow taller and become more intelligent than those who are less healthy, producing the positive correlation between height and intelligence.

Kanazawa has evidence that health and intelligence are uncorrelated and he believes that intelligence and height are correlated because both are sexy!  His only evidence is the correlation between the three:  

...Taller people are on average physically more attractive than shorter people; physically more attractive people are on average more intelligent than physically less attractive people; taller people are on average more intelligent than shorter people... But the issue is far from resolved.  While there is no doubt that taller people are indeed more intelligent than shorter people, the question of why this is so is one of the remaining puzzles in evolutionary psychology.

 So, maybe the reason that tall people and beautiful people earn more than the rest of us is that they are smarter on average.  If so, then work hard on your schoolwork because smarts can be developed by exercising your brain.  An alternative hypothesis is that height, and beauty, are correlated with self-confidence and status and that leads to higher achievement on intelligence tests and higher earnings.  Again, confidence and status can be developed by working hard to achieve mastery.  Social support helps increase learning, confidence, and status.  Encourage your friends to work (and think) hard. 
Society awards status to tall, beautiful people and that increases confidence.  One study found that it is one's relative height in adolescence that increases later smarts and earnings rather than one's height at other ages.  It is hard to think of a biological reason why height in adolescence would increase later earnings and smarts, but it is easy to see why it would increase status and confidence during an extremely socially awkward time in most people's lives.  Similarly, several studies have found that it is relative height that gives a lifelong advantage to soccer players (in Europe) and hockey players (in Canada).  The kids who have birthdays near the youth league cutoff dates typically end up as the professional athletes.  That is because the older kids are relatively tall compared with other kids in their leagues growing up and that creates status and confidence and helps them get a lot of practice and love of the game.   

Cynical Thoughts On The Minimum Wage | ThinkProgress

Cynical Thoughts On The Minimum Wage | ThinkProgress:

Arindrajit Dube surveys the post-Card/Krueger minimum wage literature and concludes that their study basically holds up. My general view, with apologies to empirical econometricians doing policy-relevant work everywhere, is that one can generally Google up a study supporting whichever conclusion one prefers.

Consequently, I’ve always thought the most persuasive evidence on this was simply the big picture:

It’s clearly not the case that the high real minimum wage of the 1960s led to unusually elevated unemployment during that decade. And the fact is even more striking when you consider that the real wages of folks in the top quintile were way lower back then.

Zero Marginal Product Workers

Worthwhile Canadian Initiative: ZMP workers and output quotas:

Imagine, just imagine, that the government put a quota on the total output of, say, cars. Because some rabid environmentalists told them to. The result would be a drop in employment of auto workers. Some of those workers, who had skills useful in other sectors, would be able to find jobs elsewhere. Others, who had little or no alternative skills, would be unemployed.

Would we describe those unemployed car workers as being Zero Marginal Product workers? Not really. They are still exactly as capable of producing extra cars as they were before. It's just that their potential employers are no longer able to sell any extra cars.

Would we describe those unemployed workers as being Zero Value Marginal Product workers? Yes and no. Depends what you mean. The extra cars they could produce would have zero value to the firms trying to sell them, because they aren't allowed to sell any extra cars. But those extra cars would have exactly the same value as before to the people who wanted to drive them, but who now can't, because of the output quota on cars.

Would wage cuts help employment of car workers? Not really. An individual car worker who was willing to work for lower wages might get the job that would otherwise have gone to another worker, but that doesn't help aggregate employment of car workers. Maybe if they all cut wages their employers would use more labour-intensive methods of producing cars. That could help employment of car workers. But it would hurt employment of all the other factors used to produce cars. If all factors used in producing cars cut their "wages", that wouldn't help aggregate employment of all factors (not just workers) used in producing cars.

Now imagine, just imagine, that the government put a quota on the total output of everything, not just cars. Because the environmentalists told them that GDP is bad, and needs to be controlled. Now it's not just car workers who are unemployed. All sorts of workers are unemployed. And the unemployed workers who have skills useful in other sectors can't get jobs in those other sectors. Because there are no other sectors.

Are the unemployed workers Zero Marginal Product workers? No. Are they Zero Value Marginal Product workers? Yes and no. Depends what you mean. The extra output they could produce is still valued by the people who don't have it (who are mostly the unemployed workers themselves), but it's not valued by the firms producing it, because they aren't allowed to sell it. Would wage cuts help? Maybe a little, but not really. If wages of labour fell relative to the wages of land and machinery, firms would maybe use more labour-intensive methods of producing the same total output. But that would simply replace unemployed labour with unemployed land and machinery. If the wages of all factors fell, it wouldn't help total employment of all factors.

Let's push this analogy further. Suppose the rabid environmentalists have heard about tradeable quotas, and that they are a good idea. They issue a fixed number of "GDP permits" to households. Each household can spend its permits on whatever good it likes, at whichever firm it likes.

The Statistics Canada employees who normally measure each firm's contribution to GDP are asked to check that each firm actually receives from households the requisite number of GDP permits. And because of the standard value-added intermediate goods problem in measuring GDP, the Statistics Canada employees convince the environmentalists and government that it's much easier if each firm collects GDP permits equal to the value of its sales, and in turn pays its suppliers with those same GDP permits. So the GDP permits flow all the way down the supply chain to the owners of the ultimate factors of production, and then those households in turn use the GDP permits they earn to buy goods from firms. This makes enforcement a lot easier, since the firms will want to ensure they get the GDP permits when they sell goods, because they need those permits to pay their own suppliers, workers, and owners. It's a bit like the GST (VAT), only in reverse.

The Statistics Canada employees recognise that the tradeable GDP permits are themselves valuable, so measure the prices of goods to include the value of the GDP permits received in exchange. A tradeable permit is just like a tax, and Statistics Canada decides to measure GDP inclusive of indirect taxes like VAT and the GDP permits. So firms compete for those GDP permits, by trying to offer low prices for high-quality goods. And the lower the price, the fewer GDP permits the firm needs to collect when it sells the goods. Eventually the GDP permits become so valuable that the firms are willing to give away their goods for free, except for the GDP permits. And households too are willing to give away their labour for free, except for the GDP permits. "You can drive this car off the lot for 15,000 GDP permits!". "Staff wanted; pay is 15 GDP permits per hour".

Now, the environmentalists in my story may be a bit rabid, but they do understand the stock-flow distinction. They know that a fixed stock of GDP permits may permit many different levels of GDP, which is a flow. It all depends on how quickly GDP permits circulate from households to firms, and back to households again. They introduce the concept of the "velocity of circulation" of GDP permits. Since it's too hard to put a "use by" date on each GDP permit, they decide to adjust the stock of GDP permits in circulation to try to offset changes in velocity. If velocity rises, so GDP rises above the environmentalists' target they reduce the stock of GDP permits in circulation by buying them back. They create a special "Central GDP Permit Bank" just for this purpose. And if velocity falls, so GDP falls below the environmentalists' target, the central bank increases the stock of GDP permits in circulation.

And the environmentalists in my story may be a bit rabid, but they also understand the distinction between nominal and real GDP. Since all goods and labour are now free, except for the GDP permits you need to pay in exchange, all prices are now measured in terms of GDP permits. If the stock of GDP permits is too small, individual firms and households will cut prices in terms of GDP permits, trying to compete for GDP permits against other firms and households. So the value of each permit will rise. And if the stock of GDP permits is too large, individual firms and households will raise prices in terms of GDP permits, since they worry less about competition from other firms and households. So the value of each permit will fall. So the environmentalists use their central bank to adjust the stock of GDP permits in circulation to try to prevent their value rising or falling too quickly.

Then one day the system breaks down. Something causes the velocity of circulation of GDP permits to fall. The central bank fails to respond quickly enough to increase the stock of GDP permits. (Because environmentalist hawks are afraid this would cause the value of GDP permits to drop). So the value of those permits starts to rise, so people hoard even more GDP permits against an uncertain future, which reduces velocity still further.

So we end up with a lot of apparently Zero Value Marginal Product unemployed workers.

Everything changes when you don't just use barter to trade stuff, but have to use money/GDP permits instead.

(This started out as a response to Bryan Caplan. But then I got carried away.)

Also see Tyler Cowen's article in Foreign Policy where he argues that high unemployment is caused by a decrease in the productivity of American workers:

...Many conservatives in the United States have placed the blame for high unemployment on the shoulders of President Barack Obama, arguing that his administration's liberal agenda has complicated the recovery. But the statistics suggest otherwise. Again, corporate profits and consumer spending are fine. Indeed, it's the sector in which the government has most directly intervened -- health care -- that has maintained the most robust job growth over the past two years, adding 20,000 new jobs in November alone. And don't go blaming job losses on illegal immigrants taking jobs from documented workers: Latino immigrants have left the country in large numbers since the start of the financial crisis.

As time passes, it is harder to avoid the notion that a lot of those old jobs simply weren't adding much to the economy. Except for the height of the housing boom -- October 2007 through June 2008 -- real GDP is now higher than it has been in the entirety of U.S. history. The fact that the United States has pre-crisis levels of output with fewer workers raises doubts as to whether those additional workers were producing very much in the first place. If a business owner fires 10 people and a year later output is almost back to normal, it's pretty hard to make the argument that they were doing much in the first place.

The story runs as follows. Before the financial crash, there were lots of not-so-useful workers holding not-so-useful jobs. Employers didn't so much bother to figure out who they were. Demand was high and revenue was booming, so rooting out the less productive workers would have involved a lot of time and trouble -- plus it would have involved some morale costs with the more productive workers, who don't like being measured and spied on. So firms simply let the problem lie.

Then came the 2008 recession, and it was no longer possible to keep so many people on payroll. A lot of businesses were then forced to face the music: Bosses had to make tough calls about who could be let go and who was worth saving. (Note that unemployment is low for workers with a college degree, only 5 percent compared with 16 percent for less educated workers with no high school degree. This is consistent with the reality that less-productive individuals, who tend to have less education, have been laid off.)

In essence, we have seen the rise of a large class of "zero marginal product workers," to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves -- and arguably bad for society at large -- but it simply doesn't damage profits much. It's a cold, hard reality, and one that we will have to deal with, one way or another.

...the U.S. economy is going through some major structural shifts. It's not a question of getting back to where we were, but rather that the economy must solve a new problem of re-employing a lot of people who were not, in reality, producing very much in the first place. That's a steeper challenge than we had realized early in the stages of this recession -- and so far policymakers have failed at meeting it.

Analysts still disagree on how rapidly the U.S. economy will recover. But they're missing the point. The era of low unemployment may be in our rearview mirror for a long time to come.

Why Texas Creates Jobs

Mulligan's problem is that he forgets that demand matters more than supply. In the case of immigration, there is approximately zero change in unemployment because the immigrants bring demand too. This is a common fallacy by the anti-immigration side of the immigration debate, but it is surprising that Mulligan makes it.

Casey B. Mulligan: More Evidence That Supply Matters - NYTimes.com: "The supply of various types of workers has increased during the recession, continuing an earlier trend. That such trends continue to be associated with trends for employment contradicts the Keynesian claim that supply suddenly stops mattering during recessions and “liquidity traps.” A number of bloggers have pointed out that employment in Texas has been rising and has almost reached prerecession levels. Paul Krugman’s explanation is that the supply of people available and willing to work has been increasing in Texas, continuing a previous trend.
One example of that supply is the inflow of immigrants from nearby Mexico; another is the migration of Americans seeking cheaper housing. Recession-era supply episodes like these are important to identify, because they can prove or reject Keynesians’ fundamental assertion (so far unproven) that supply does not matter during a recession or a “liquidity trap” such as we’ve experienced since the recession began.
...
Consider, hypothetically, an immigration trend that continued even after the recession. In my view, the market would create jobs for many, but not all, of the immigrants and would continue to do so after the recession.
In the Keynesian view, immigration might create jobs before the recession, but could not create them once the recession began because “what’s limiting employment now is lack of demand for the things workers produce,”Professor Krugman wrote. “Their incentives to seek work are, for now, irrelevant.”
In the Keynesian view, all that extra supply does during the recession is add to unemployment rather than adding to employment. In other words, supply trends normally affect employment, but Keynesians assert that they cease to affect employment during a recession or liquidity trap.
The chart below shows monthly employment (left scale) and unemployment (right scale) in Texas since 2007. Despite the fact that our nation is in a liquidity trap (near-zero interest rates on Treasury bills, the results of the extra supply in Texas since 2009 have been to increase employment much more than increase unemployment.

Data From The Federal Reserve Bank of St. Louis
Or consider that more recent cohorts have found themselves in careers that involve less manual labor, producing a increasing number of people reaching age 65 and still willing and able to continue their work. In my view, elderly employment would rise and might even be rising enough to more than offset a demand reduction during a recession.
In the Keynesian view, all that extra supply does during the recession is add to unemployment rather than adding to employment.
When it comes to analyzing specific events during the recession, fiscal stimulus advocates often take the common sense approach that labor supply affects employment. But when it comes to making promises about the anticipated results of a large fiscal stimulus, they insist, without proof, that supply doesn’t matter.

For another view: Jobs and Population Growth | ThinkProgress: 

Texas’ robust job growth is a consequence of its robust population growth so if you want to replicate Texas results on a national basis then you need some story about increasing America’s population growth rate. An alternate story, being pressed on me via email over the weekend, is that people are moving to Texas because that’s where the jobs are. I have two reasons for doubting this, one empirical and one theoretical.

Empirically speaking, it’s just not the case that Texas has an unusually low unemployment rate. If people were trying to move toward labor market opportunities they’d be leaving Texas and moving to the Great Plains. The basic point is illustrated by the fact that Texas has consistently maintained a faster population growth rate than Iowa even though Iowa has always had a lower unemployment rate. In some sense the labor market “wants” people to move to Iowa. But in practice, people want to move to Texas. And in the aggregate, jobs are moving to Texas where the people are:

Theoretically, America has an overwhelmingly service driven economy. People sell things to each other. In China, entrepreneurs to build factories in places with “factory friendly” locations and then people move there. But this is not how the American economy works. It’s more like the reverse. If you run Darden Restaurants and you decide you have reason to believe that population growth is going to surge in West Virginia then you say to yourself “with more people living in West Virginia, there will be more business opportunities for the Red Lobster in West Virginia.” Then you go about building restaurants, creating construction jobs and cook jobs and waiter jobs. Along with restaurants, the people moving to West Virginia will need accountants and lawyers and doctors and big box stores. They’ll need houses to live in. The new, larger population will pay more in taxes and will require more police officers and teachers and DMV clerks. Population growth, in other words, will lead to job growth.

The opposite isn’t going to work. If the Governor of West Virginia rings up Darden HQ in Orlando and says “hey, we have a really business friendly environment you should open up some more restaurants” the answer is going to be “well, no, you have a poor state with a declining population.”

Now I don’t want to deny that it’s impossible for job creation to lead to population growth. If the Defense Department relocates its headquarters to West Virginia, people will move to West Virginia. If they discover diamond mines in West Virginia, people will move to West Virginia. But in the contemporary United States most people earn a living providing services to other people, so population movements should create jobs more than job-creation leading to population movement. This is why, I think, we see strong population growth in Texas amidst meh unemployment performance even as people remain reluctant to move to low unemployment plains states.

So, why are people moving to Texas??  It has a lot going for it.
1. Climate.  All warm weather states have seen greater population growth than cool-weather states since air conditioners became affordable. 
2. Few zoning regulations make for cheap housing.  Texas housing is a big reason why people move there.  It also helps that construction is cheaper in mild climates because of shallow pipes, foundations, less insulation, no furnace (use heat pump technology instead - it is just an air conditioner in reverse), etc.
3. Longest Mexican border.  Texas has had a much bigger influx of Latin American immigration than most of the country. 
4. Largest Hispanic population at 38% of population after New Mexico.  Hispanics have higher fertility rates than average in America, particularly recent immigrants which are a large percentage of Texans.  

Texas has one of the highest population growth rates of any state because of the above qualities.  Should you move there to get a job too? 
1. Per-capita income in Texas is right in the middle.  About half of states have higher incomes.  Real living standards are boosted by the mild climate and cheap housing, so this may understate the case for Texas. 
2. Unemployment in Texas is right in the middle.  About half of states have lower unemployment rates as of the most recent data (June 2011). 

Statistical Discrimination and Unemployed Workers

Help-Wanted Ads Exclude the Long-Term Jobless - NYTimes.com:

The unemployed need not apply. That is the message being broadcast by many of the nation’s employers, making it even more difficult for 14 million jobless Americans to get back to work.

A recent review of job vacancy postings on popular sites like Monster.com, CareerBuilder and Craigslist revealed hundreds that said employers would consider (or at least “strongly prefer”) only people currently employed or just recently laid off. there are legitimate reasons that many long-term unemployed workers may not be desirable job candidates. In some cases they may have been let go early in the recession, not just because business had slowed, but because they were incompetent....
Idle workers’ skills may atrophy, particularly in dynamic industries like technology. They may lose touch with their network of contacts, which is important for people in sales. Beaten down by months of rejection and idleness, they may not interview well or easily return to a 9-to-5 schedule.

“We may be seeing what’s called statistical discrimination,” said Robert Shimer, a labor economist at the University of Chicago. “On average, these workers might be less attractive, and employers don’t bother to look more closely to pick out the good ones.”Employers receive so many applications for each opening that some may use current employment status as an easy filter. ...
...Many firms that are not intentionally screening out the unemployed may still disqualify such applicants for having bad credit histories after having fallen behind on the bills — which they of course need a job to pay.
...The best solution, economists say, would be to encourage job growth more broadly, which may initially involve poaching people from other companies but could eventually draw even the least desirable workers back into jobs. During the boom years of the late ’90s, the labor market was so tight that ex-convicts had relatively little trouble finding work.