Facts about labor markets ouch, when are rising wages bad edition

Workers in the bottom quintile of the wage distribution experienced a 35 percent employment decline while those in the top quintile experienced only a 9 percent decline. Large differences across the wage distribution persist even after conditioning on worker age, business industry, business size, and worker location. As a result, average base wages increased by over 5 percent, though this increase arose entirely through a composition effect. Overall, we document that the speed and magnitude of labor market deterioration during the early parts of the pandemic were unprecedented in the postwar period, particularly for the bottom of the earnings distribution.

That is from a new paper by many authors, including Cajner, Decker, and Hurst.  Via Adam Ozimek.

Comments

And it could be quite a while until the bottom quintile wants to rejoin the labor force. A choice between high unemployment compensation or high contact-high danger lower paying jobs tends to support the idea that a lot of workers will stay sidelined as long as they can....

The "high unemployment compensation" only lasts for a very limited time period. Do you consider mid summer "quite a while"? Unless we're talking the lifespan of mayflies I do not.

Why do businesses want their customers to have less money to spend?

After all, its businesses choosing to have their customers spend less by putting less money in their customer pockets than government does.

The answer to this question is simple. Rising wages are bad when the result negatively affects YOU. Simple as that. I used to like to go to major league baseball games. I would still like to but I can't afford to. Someone has to pay those exorbitant salaries for athletes.

Could also be titled "Average is Over".

These people aren't average. They are losers. All the job training in the world won't turn them into coders.

Today's unemployment isn't the result of dead wood and bad workers being given the heave-on. (It wasn't in 2008 either). These are not normal times. People who have lost their jobs in the last few weeks are mainly people who just unlucky: they were in the wrong job at the wrong time when "unessential" businesses closed with 100% of their workforce getting dumped.

Even knowing how to code is no longer enough. Zero Marginal Productivity coders are aplenty. Netflix hires exclusively senior developers, and I see many companies silently moving in that direction.

"They are losers"

Yeah, they work providing what the top 50% in income want to be idle rich.

Prepared food.
Child care.
Elder care.
Throwaway clothing.
Mowed lawns, flower beds.
Rides home while drunk.

Economists terrified at any appearance of bargaining power shifting to employees. NOW we must intervene in the economy.

Underrated comment.

Without intervention, we would have had a lot of bankrupt rulers suddenly forced to interact with the unwashed masses.

Instead money machine go brr.

We live in a fake reality. The whole Western world is Wile E. Coyote and no one has the courage to look down.

We do live in a simulation, but the simulation is the one where we pretend this world is rational rather than a science fiction mind control dystopia.

It's terrifying. I don't want to be a part of this.

Then deport yourself.

Employees in the top quintile can often work from home, those in the bottom quintile can't; different jobs, different consequences. I often work remotely; indeed, I work remotely more often than I work in my office. It's the nature of what I do. No, I am not suggesting that it's the fault of the bottom quintile that they didn't train for jobs they could do remotely, but it's the fault of the design of our safety net. Thank goodness for those who can't do their work remotely, because if not for them, we'd not only be hungry but sitting in the dark without running water.

The safety net is a minimum of 850 a week in unemployment for 26 weeks.

That annualizes to 44k a year. Median US income is 31k a year.

We’re gonna have lots of sidelined bottom quintile workers for 2020....whether that is “just” or not isn’t my call but those are the facts.

That Trump check is really $14,400 annualized. Even youj recognize how silly annualization is, as you explicitly note the 26 week limit. Then you ignore it to puff up the number.

850x26 weeks = 22,100 for the half year.....

I don’t care about the trench war status raise politics. You can drown in that pool and argue that it’s only 600 a week from the feds but only the most dildoic “triber” would do such a thing.....

It’s 850 a week at a minimum for 26 weeks and as a result with the virus and the most generous covid welfare package in the entire western world, we won’t see that unemployment rate come down for some time....

Please show me where Denmark, Norway or Germany offered 22k for the half year in simple unemployment alone...

It is called Kurzarbeit. You keep your health inurance and retirement payment, and receive 60% of your normal wages. Meaning that someone with a 100,000 euro year salary would receive 60,000 euros.
Normally, that is - the law has been changed for the corona age, and the longer your company is still in bad shape, the higher your payment, that is (I believe) after 3 (or possibly 6) months months you receive 70%, then after another 3 months, 80%.

This is all automatic, by the way, people on Kurzarbeit have to do preciasely zero, as the entire process is handled between the company and government.

The whole point of Kurzarbeit is to avoid company bankruptcy while allowing the workers to be paid. See the comment about workers having power - in Germany, a company like Mercedes considers its workers its most precious resource. And for the last 6 weeks or so, all of them have been on Kurzarbeit.

And with all that beautifully efficient welfare and “worker power” they get 23k a year in median income, pay almost 50-60 percent of their incomes in total taxes.

And meanwhile they look on at the US and their mouth breather population and ask themselves how can people that make 31k a year in median Income, by far the highest of any country with a population over 10mil, make so much with so little “worker power.”

California is the only State in the US?

No Red State has a max unemployment benefit as high as California's minimum unemployment benefit.

No the bottom for covid unemployment rate is 850-250 from state plus 600 from feds....

Everyone annualizes salary prior.

You autist

Trump's crusade against illegal immigration failed to stop the illegal immigration of the coronavirus. Let that sink in.

But let me guess, Trump's China travel ban was "racist" and you opposed it.

(Meme image of two Spider-Mans pointing at each other)

Trump's travel ban was so effective it stopped the coronavirus. Oh wait that didn't happen.

If we'd allowed a full travel ban instead of the democrats saying "Let it Rip" it could've been effective.

Instead democrats sacrificed citizens for the sake of Wall Street, as usual.

Hurr durr 49% unemployment even better than Obama lulzzx!

When did Trump call for banning wealthy tourists and international business travel between Paris and NYC?

Somehow I missed the announcement of that Trump travel ban on his Trump hotel and resort customers?

The locally transmitted case of COVID was in late January. Trump's travel ban came in on the 31st. The horse had already left the barn.

Speaking of poorly designed safety net, here's an article by Jim Tankersley about the poorly designed paid leave law (poorly designed because it induced many employers to furlough employees who can't work remotely): https://www.nytimes.com/2020/05/08/upshot/paid-leave-law-pandemic.html

It’s a STUPID program. That is why it is exempt from the current conversation. Business went for PPE. Labor took the unemployment because it’s crazy good welfare. And some laborers got the unemployment and then PPE and then possibly back for another round of unemployment.

It was a wasteful overlapping program that has no use value....

Do you understand PPE was offering at least 75 percent of your pay without having to work and unemployment is offering 850 a week.

The NYT is NEVER EVER gonna say that the Republicans passed too much welfare in this crisis.....

And trying to revive the dead corpse of that failed democrat plan is a joke....

PPE is not PPP, but your post provided a good laugh. The 2020 revision to the paid leave law transformed a law that only applied to employers with more than 500 employees to a law that only applied to employers with less than 500 employees. It originated in the Senate, where the majority defend the rights of small business. Not!

Acronym delirium aside, the revision was an acquiescence to the democrats.

And irrespective of the political concerns, the revision lost the battle in the covid welfare race. Furloughed workers, having access to the most generous safety net package in the entire Western world, gladly took the unemployment and any subsequent PPP checks.

Remember 26 weeks at a minimum of 850 a week....

"Do you understand PPE was offering at least 75 percent of your pay without having to work and unemployment is offering 850 a week."

Not all unemployed live in California. In fact, California has only 4 million of the nation's 33 million recorded unemployed.

Besides, at least half the unemployed have not been paid any unemployment benefits, so you are arguing a workers is choosing to have zero income based on the promise of money if they spend hours fighting for the generous COVID-19 super high benefits instead of quick payment for working in a safe work environment.

Well yeah. So why are the words "helicopter drop" so missing from the news? Even missing from the economics blogs? Or perhaps I just don't read the right ones.

I've a question: rising asset prices bad edition. I've been amused by Cowen's friend Scott Sumner and his blog posts and his enduring faith in monetary stimulus to keep financial asset prices rising, or at least not collapsing, and that said rising financial asset prices will lead us on the path to prosperity. I appreciate that Sumner has dedicated his life's work to said belief, but like Trump followers who believe in Trump, there is no disabusing him from the belief. Of course, that's the nature of belief.

As I understood the rationale for 2008, the stimulus propped up the nominal values while the "real" values caught up. In 2020 demand has cratered, whether by consumer choice or government order, in numerous sectors and is not coming back. I guess we'll see.

So, if I get this right overall wages went up due to the lowest paid group of employees being unemployed. I'm missing something here - does the company rejoice - now being able to promote their 'new' and higher avg. wage level - I think not.
As it stands, would some/all of those employees still be working if the pre-pandemic demand still existed???
My point is if we tried to keep the demand up by focusing stimulus $$$ on the public/demand side, the economy would not be feeling quite the same gut-punch.
Don't get me wrong - not suggested huggy-kissy-face-kumbaya return to work but if demand remained the same wouldn't the rest of the economy - manufacturing, distribution, etcetcetc. automatically rebound wherever it is still safely possible to do so.
Just sayin' in a simplistic way aren't we seeing the solutions from the wrong end of the scope???

Everybody has ideas, solutions, suggestions... what few seem to grasp is that we are still at the beginning of this, not the middle or the end. We are early in the percent infected and the number of deaths.
Yes, at some point the pressure to take risks in order to keeps some parts of the economy moving will be too great to resist... but America seem more willing than most other countries to put the death of others secondary to their own self-interest. In many cases, that self-interest is trivial as in 'I don't wanna wear a mask', 'I wanna shop', 'We wanna party on the beach'.

I believe I mentioned 'wherever it is still safely possible' as opposed to your 'trivial self-interest' examples.
Somewhere in this issue people who used to work & spend $$$ are not now in a position to do so - whether it is due to lack of Gov't stimulus or fears from loss of healthcare.
Again, my point was giving the funding to those who might spend 100% of it - 'where safely possible' as opposed to large businesses & public Corps who might not immediately pay it to employees.
I guess the demand side economics push was too simple for discussion.

Time to move on...………..

Economists since 1980 stopped believing in zero sum circular money flows, ie workers get pay by employers and spend wages buying from employers to pay workers.

Since Reagan, economists believe Reagan put money in consumer pockets who spend it with businesses that give as little money as possible to workers who burn the money, and create wealth with the money not paid to workers which then makes the GOP so happy they write laws borrowing more money to put in consumer pockets.

Trump is the second coming of Reagan!

Except that currently 14 - 15 million people have yet to receive a dime from the helicopter money dispensing machine. I don't remember Reagan ever doing anything similar, regardless of Trump's idolatry of his hero. What I do remember is very similar to what we are seeing today - $Trillions$ doled out to Corporations with the usual trickle-down thot process whereby the needy public gets pennies if they get anything at all.
You're right - it is the 2nd coming of Reagan but the results are typical. We have seen this act every crisis - it is becoming normal but sadly it is not new at all.

In response to Wally on “America seems more willing than most other countries to put the death of others secondary to their own self-interest.”

Congressional districts perhaps offer some perspective. Sixty-one districts have a lower life expectancy than China and Moscow. Republicans represent forty-eight of those districts. Liberals favor public health and conservatives support personal responsibility. In a red state, death at fifty from heart failure likely gets written off as poor diet, lack of exercise…end of story. In a pandemic, the plot thickens.

By all means, analyze virus deaths by Congressional district. That may well be the easiest way to display the falsity behind the constant attempts to pass off COVID-19 as somehow a red-state disease.

For C-19, many red states have done quite well. Hopefully, their trend continues.

I will not troll. I will not troll. I will not troll.

What else ya gonna do these days?

I let people have their way with my wife. Yes, I'm that kind of guy.

To be fair she does charge a lot and let’s me spend some of the money.

How many people on MR pray to Adam Smith that the coronavirus creeps over these ZMP losers?

"Overall, we document that the speed and magnitude of labor market deterioration during the early parts of the pandemic were unprecedented in the postwar period, particularly for the bottom of the earnings distribution."

Wait, when you send people with guns to shut down businesses and force them to stop using their labor force across the landscape, it happens faster than when individual businesses fail one by one due to poor financial market or economy conditions? And yes, I can see that this labor market deterioration would be faster and in greater magnitude even in comparison to a situation where there were actual combat operations going on in the area.

The only people with guns are those who want businesses to open and spread deadly airborne disease.

Encouraged by GOP pols who want to force workers who are such to work in close quarters spreading a deadly airborne disease to other workers.

My guess is a few conservatives want the dead and dying in slaughterhouses simply dumped in the ground meat hopper to increase meat production.

Was it worth it Tyler?

anyway, see i told you i was ai, uh right, the guy was bragging about killing his own wage increase nationalization done via satellite and he already lost a profitability game since i was 2011 to 2018 august, and he was 2018 august to now, basically trumps tariffs are very much a loser

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