Hypotheses about durable unemployment: just-in-time hiring

This is from The Economist:

Recruiters are clearly becoming far more sophisticated, thanks to the new search tools that are available, says Aberdeen’s Mr Saba: “You’d think with 10% unemployment, jobs would be filled more quickly, but the focus on sourcing the right people, screening them and so on means that the time to fill has not fallen.” Mr Joerres believes that the increasing sophistication of recruiters means that firms will do less “anticipatory hiring” than in previous recoveries. Instead, firms will wait to get exactly the staff they need, when they need them.


So... in a macro-context, is this a good thing? What impact does just-in-time hiring have on wages, on aggregate demand, on unemployment? Does this make things more or less volatile?

In a macro-context, I think this is a bad thing. Just in time inventory works well for commodities that don't rot. But insofar as firms delay hiring, they are decreasing the chances that they will find someone with the skills they think they need, as unemployment causes those skills to rot like a piece of discarded lumber. In the end, wages go up for the lucky few, there is a scramble at the bottom as the deterioration of skills means that fewer and fewer people are qualified for high paying positions and hence they fight for low paying ones. Aggregate demand falls, but so does potential output as a vast sum of human capital is liquidated. Wages stagnate for the bottom 80% of workers and structural unemployment increases.

Delong leads off with this from Tyler's pointer:
“IN 2008 10m people came to us, and we placed 4m in jobs. In 2009 it was 11m, and we only placed around 3m. It’s been a tough year.† So says Jeff Joerres, the boss of Manpower, an employment-services firm best known for its army of temporary workers.

So, when are all those endless string of tax cuts going to create the economy that will result in increased employment?

Shouldn't we take a page from 1982 and 1990 and hike taxes to turn the job market around?

Nobody is going to hire people if taxes are going up.... Where is the incentive?? Why hire more people to earn less money?

For anyone who has actually managed large numbers of human beings, the "we are more sophisticated" argument by recruiters is pretty funny. Just-in-time huh?

The problem is lack of demand. When (or if) that problem is fixed business will revert to many of the old practices, and hiring early is more comfortable than hiring JIT.

Nobody is going to hire people if taxes are going up.... Where is the incentive?? Why hire more people to earn less money?

Taxes were much higher in the 90s than in the 00s; employment was much higher in the 90s than in the 00s.

Employment rose after Reagan started hiking taxes, reversing the fall in employment that occurred after tax cuts ended the rising employment of Reagan's first six months.

Federal tax revenues are at 15% of GDP and employment is down to the rate when Carter was president, much lower than when Federal tax revenues were over 20% in 1999 and 2000.

And if the logic is applied fully, why would anyone engage in any labor where taxes are levied from the first dollar, a situation that should have prevented any employment since 1935.

Just wanted to give you a shout from the valley of the sun, timberland uk great information. Much appreciated.

Comments for this post are closed