Employment and Unemployment

While we may think that it makes intuitive sense to encourage at-risk youth to seek employment, our findings in recent work funded by the National Institute on Drug Abuse suggest that the opposite could be true.

Employment can build character for many teens, especially as they balance work and school, learn how to manage their paychecks, and are accountable to their employers and coworkers. However, not all teens reap these benefits—and in fact, for some teens, employment can lead to unwanted habits and behaviors.

This commentary appeared in The Orange County Register on December 11, 2012.

For nearly all of the 20th century, employment of older workers decreased as increasing numbers retired. But since the mid-1990s, this trend has reversed. Employment among men at least 65 years of age, for example, has increased.

The Great Recession of recent years has masked this long-term trend and the reasons for it and has also led to some erroneous conclusions about it. Often older workers are seen as being in the way of younger workers who need them to step aside to free up jobs. Yet, there is hardly any evidence to back up such an argument.

A study published in last month's British Medical Journal concluded that shift work—that is, any work schedule that does not follow a typical daytime "9 to 5" routine—is associated with increased risk of heart attack and stroke.

As the authors note: "Shift work has long been known to disrupt circadian rhythm, sleep, and work-life balance; however, flexible work patterns remain a necessary component for a dynamic, diversified industrial economy."

Indeed, RAND Europe researchers have known this to be the case for quite some time. In 2009, a team of researchers examined the health and wellbeing of the British workforce as part of the Boorman Review.

Following the large increase in unemployment brought about by the recession, policymakers in Congress and the Administration expressed considerable concern regarding the economic problems faced by veterans, particularly those disabled since 9/11. This concern has motivated a range of new federal programs aimed at improving veteran employment, including legislation passed in 2007—H.R. 2206 (in particular, Section 8211) of the 110th Congress, (P.L. 110-28), signed into law on May 25, 2007—which expanded the use of the Work Opportunity Tax Credit program (WOTC) to incentivize hiring of disabled veterans. However, there has been little attempt to gauge the effectiveness and relative costs of many programs focused on reducing veteran unemployment.

RAND researchers undertook a study designed to measure the impact of the 2007 WOTC tax credit expansion on the employment and earnings of disabled veterans. They found that the new tax credits expanded employment significantly among the target group of disabled veterans. Further, RAND researchers found that the cost of these tax credits is roughly on par with prior tax credit programs designed to increase the employment of other populations, but are significantly less costly than other federal initiatives designed primarily to create jobs, such as the American Recovery and Reinvestment Act ($151,000 per job-year).

It is generally recognized that the conceptual underpinnings for so-called stimulus programs lie in the theory developed by John Maynard Keynes in the 1930s. That the practical results of these programs in recent years have been negligible, if not negative, while their costs have been high, may be sufficient grounds for avoiding them in the future.

But what if the theory itself is flawed? For many economists, flawed theory would be a greater concern—surely more hurtful to professional pride—than ineffectual results from programs based on a valid theory. Moreover, it would mean no amount of effort to improve the design of stimulus programs is likely to help.

This commentary appeared on Financial Times on August 31, 2011.

In his article "A realm dismal in its rituals of rigour" (Analysis, August 26), John Kay provides a useful critique of economic modelling.

A model is like a map. It provides a schematic representation of the path from point A to point B. If one follows a map, but finds an overnight storm has felled a tree that blocks the path, one just takes a detour until the path can be restored or lays a new road if the damage is irreparable.

Models are metaphors, and all of them fail in certain situations, but there is much to be learnt from why and how exactly they fail. The best of economists — and you can include the originators of the dynamic stochastic general equilibrium paradigm among them — readily see the fallen tree. It appears one cannot fault them for not foreseeing all the ways in which their paradigm could have run into trouble, just as one cannot fault the meteorologist for not seeing which particular tree would fall in a perfect storm, or the epidemiologist for not seeing the Aids virus would jump from monkeys to human beings.

In absolute terms, the U.S. increased its GDP, population and military spending from 2000 to 2010. In relative terms, the story is not always as good, especially in GDP. This commentary appeared in Wall Street Journal on April 13, 2011.

It's fashionable among academics and pundits to proclaim that the U.S. is in decline and no longer No. 1 in the world. The declinists say they are realists. In fact, their alarm is unrealistic.

Early declinists like Yale historian Paul Kennedy focused in the 1980s on the allegedly debilitating effects of America's "imperial overstretch." More recently, historians Niall Ferguson and Martin Jacques focus on the weakening of the economy. Among pundits, Paul Krugman and Michael Kinsley on the left and Mark Helprin on the right sound the alarm.