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Janegca
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@Nick Rowe: Apologies, I'm not an economist or an economic student so I can only explain what led me to asking the question. Not knowing what Okun's law was I went on a google hunt and on seeing he came up with it in 1962 started wondering about what might have changed in the labour force since then (assuming GDP is essentially the same). The biggest change seems to be in employee/employer relationships. Found the OECD data and the variation in 'dependent employment' which it defines as: "Under the OECD definition – as well as Eurostat guidelines – temporary jobs are those forms of dependent employment which, by their nature, do not provide the prospect of a long-lasting employment relationship. The definition includes employees under fixed-term contracts, seasonal workers, temporary agency jobs, and those with a training contract of limited duration." The other definition I found for it was: "The concept of 'economically dependent workers' refers to those workers who do not correspond to the traditional definition of 'employee'- essentially because they do not have an employment contract as a dependent employee - but who are economically dependent on a single employer for their source of income." at http://www.eurofound.europa.eu/eiro/2002/05/study/tn0205101s.htm The noticeable change in this type of employment in the US and Ireland struck me as significant; especially as it was flat in Canada's data. Don't think this type of employment was a norm in the '60's when Okun formulated his law. The data he used would have been based on employment models used during his time, and earlier and so his rule might not apply given existing labour practices.
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Hiring practices are quite different than they were in 1962 when Okun formulated his law; could the rise in dependent (non-standard) employment also be a factor in the abnormal countries? Would companies be less likely to 'labour hoard' for jobs held by dependent employees? OECD stats (http://www.oecd.org/document/53/0,3746,en_2649_33927_42788213_1_1_1_1,00.html) show dependent employment in the US rose from 4.5% in 1999 to 11.6% in 2009. In Ireland, it went from 4.9% to 11.6%. Part-time employment in both countries was relatively flat (2-3% difference). In Canada, the dependent employment was flat with a 0.4% change over the same 10 year period; part-time employment also showed little change. The anomaly is Spain where dependent employment fell from 32.7% to 11.6% while part-time employment doubled, moving from 7.8% to 16.2%. Do companies relying on part-time labour, historically, 'labour hoard'?
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If "the original intent of minimum wage legislation was to protect low-wage workers from exploitation" isn't that what minimum wage studies should be focused on? If unemployment rates are low, poverty rates decrease. In a recession isn't it better to focus on policies that would directly support the unemployed rather than analysing the effect of minimum wage hikes on poverty? To a lay person these studies look like a back door argument for decreasing minimum wage. If the studies are being driven by an implicit assumption that a lower minimum wage would 'increase' employment where are the studies to support the assumption?
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Jan 7, 2011