Tag Archives: labour market

Humans, robots and wages

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Jonathan Schlefer has an interesting HBR post about income inequality and the rewards to factors of production. He has a book out that looks interesting – [amazon_link id=”0674052269″ target=”_blank” ]Assumptions Economists Make[/amazon_link]. He discusses the question of the substitutability of capital and labour, and consequently rewards to labour, in the context of an automobile production line. The line of argument is that neoclassical economics wrongly assumes ease of substitutability, and that if labour gets too expensive, firms will bring in more robots. It doesn’t happen like this – apart from anything else, as he implies, there is a lot of tacit knowledge in workers’ heads and muscles that machines can’t replace. In the auto context see, for example, Ben Hamper’s brilliant book [amazon_link id=”0446394009″ target=”_blank” ]Rivethead: Tales from the Assembly Line[/amazon_link].

[amazon_image id=”0446394009″ link=”true” target=”_blank” size=”medium” ]Rivethead[/amazon_image]

However, Prof Schlefer overdoes his argument in one way. The cost of labour can increase enough to trigger a move to more capital-intensive methods. Just think of all those new machines in the supermarkets that make you do your own check-out: “There is an unexpected item in the bagging area.” It’s a lumpy switch rather than continuous adjustment.

On the other hand, I think he under-does the argument in other contexts. There are many organisations in modern economies where almost all activity depends heavily on tacit knowledge, and cannot be monitored easily. Creating a new computer system. Answering calls in a call centre. Many more are the product of team efforts, with individual contributions impossible to evaluate and monitor. Boris Groysberg’s book [amazon_link id=”0691154511″ target=”_blank” ]Chasing Stars: The Myth of Talent and the Portability of Performance[/amazon_link] demonstrates the importance of teams and institutional context, rather than individuals, in the finance sector.

Either way, Prof Schlefer is right to challenge the simplistic neoclassical labour market thinking that manifests itself in some public policy discussion (although, ironically, the good labour market economists have long since stopped thinking like the textbook mode the HBR blog post condemns).

[amazon_image id=”0674052269″ link=”true” target=”_blank” size=”medium” ]Assumptions Economists Make[/amazon_image]

Female talent meets male brains

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What if anything can evolutionary theory tell us about the explanation for gender disparities in the workplace? According to a fascinating new book, [amazon_link id=”B007BP3B0S” target=”_blank” ]The War of the Sexes: How Conflict and Co-operation Have Shaped Men and Women from Prehistory to the Present[/amazon_link], by Paul Seabright, a pre-historic division of labour between men and women resulted in economic inequalities that have lasted until now for two reasons.

One is that women have different preferences, having a wider set of goals in life, and choose to work fewer hours and take career breaks. “These choices have an adverse effect on women’s advancement not just in the child-rearing years but for decades afterwards.” The unfair economic penalty women pay for this difference in preferences is amplified by the fact that men are rewarded for bargaining aggressively over pay, whereas women are not. (Linda Babcock’s excellent book, [amazon_link id=”069108940X” target=”_blank” ]Women Don’t Ask[/amazon_link], also looked at this specific dilemma.)

The second is that there are small differences in the way men and women network, partly as the result of women leaving the workforce for some years, so that women less likely than equally talented men to have a connection with the powerful people in the workplace that can be exploited for advancement.

Although these disadvantages are rooted in our ancient evolutionary history and legitimised by long custom, the book is mildly optimistic (because of increased demand for skilled labour) about overcoming the ancient disadvantages of sexual selection. Not that it offers public policy recommendations. Rather, the advice is directed at individual women, with suggestions for signalling talent more clearly to even the most antediluvian employers.The bottleneck for women’s talent is the limited attention in other people’s (men’s) brains, so the key is being known and noticed. Scarce attention has been an interest of Paul Seabright’s for a while now – see his recent Princeton in Europe lecture and the earlier Toulouse School of Economics workshop (pdf) – while the linking of anthropology and evolutionary theory to economics dates back to his previous book, [amazon_link id=”0691146462″ target=”_blank” ]The Company of Strangers[/amazon_link]. Like that book, The War of the Sexes is a fascinating read. I love its interdisciplinarity. I’m just not sure that it persuades me to be even mildly optimistic about improving economic justice for women, given the record of what happens when male brains confront female talent.

[amazon_image id=”B007BP3B0S” link=”true” target=”_blank” size=”medium” ]The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present[/amazon_image]