Society

The Importance of Labor Flexibility

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As I was reading this fairly recent article on Denmark’s labor markets, the following jumped out at me:

The strong correlation between labor freedom and low unemployment rates seems to explain why Denmark has one of the lowest unemployment rates in the EU.

…A well-functioning and efficient labor market is, no doubt, one of the ingredients which account for Denmark’s economic prosperity. It is certainly responsible for the low unemployment rates the country has enjoyed over the last decades. The Danish experience should open the eyes of those European governments that refuse to undertake reforms which liberalize their labor markets. The evidence is clear: labor flexibility results in lower unemployment. Will the Danish example be followed by those countries badly hit by the plague of unemployment?

The papers the author cites are worth highlighting. The first is a 2012 IMF paper analyzing 97 countries from 1985 to 2008. The researchers report,

Our findings indicate that, after controlling for other macroeconomic and demographic variables, increases in the flexibility of labor market regulations and institutions have a statistically significant negative impact both on the level and the change of unemployment outcomes (i.e., total, youth, and long-term unemployment). Among the different labor market flexibility indicators analyzed, hiring and firing regulations and hiring costs are found to have the strongest effect.

Overall the results of the paper suggest that policies that enhance labor market flexibility should reduce unemployment. At the same time, this raises the issue of the design and possible sequence of such reforms, and the adoption of policies aimed also to improve the quality of employment and to minimize possible negative short-term effects, not investigated in this paper, on inequality and job destruction. While data available for our large set of countries lack the necessary level of details to answer this question, micro- and macro-studies on OECD countries over the decade showed that it is important to protect workers, rather than jobs, by coupling of unemployment benefits with pressure on unemployed to take jobs and measures to help them (Blanchard, 2006). Moreover, employment protection should be designed in such a way to internalize social costs and not inhibit job creation and labor reallocation. Artificial restrictions on individual employment contracts should also be avoided (pg. 12).

Bernal-Verdugo et al., 2012, pg. 13.

The next piece is a 2016 working paper that explores labor markets in Italy from 2001-2013. It explains,

Why have unemployment dynamics been so different in European countries? One of the most often cited explanation is the difference in labor market institutions that prevents wages from adjusting downward. If wages cannot decline, negative aggregate demand shocks (such as the Great Recession) result in unemployment growth. On the other hand, if wages can fall, labor markets reach a new equilibrium with unemployment rates returning to normal levels. Downward adjustment of wages in response to macroeconomic shocks is especially important in the euro area where labor markets cannot accommodate shocks through exchange rate depreciation or through internal labor mobility (migration among EU countries is much more limited than, for example, labor mobility across US states).

…We find that the wage differential between formal/regulated and informal/unregulated sectors has increased after 2008. Moreover, while wages in the informal sector decreased by about 20 percent in 2008-13, wages in the formal sector virtually did not fall. This is consistent with the view of a substantial downward stickiness of wages in the regulated labor market. Importantly, before the recession, wages in the formal and informal sectors moved in parallel — confirming the validity of the parallel trends assumption required for a difference-in-differences estimation and showing that both regulated and unregulated labor markets have a similar degree of upward flexibility of wages.

We also analyze the impact of the crisis on formal and informal employment. We find that formal employment decreases substantially while informal employment does not change. Since the aggregate demand shock affects both labor markets, this finding implies that upon losing a job in the formal sector at least some workers move to the informal sector. We calibrate a simple model describing such spillovers between formal and informal labor markets. Using the existing estimates for demand and supply elasticities for the Italian labor market, we estimate the degree of integration of formal and informal sector (i.e. the share of workers who move from the formal to the informal labor market after the crisis). Our model also allows to carry out a counterfactual analysis of the formal sector’s response to crisis in a scenario where formal wages were fully flexible. We find that in this case the crisis would have resulted in a much smaller decline in formal employment between 2008 and 2013 (1.5-4.5 percent rather than the actual 16 percent) (pg. 3-4).

Guriev et al., 2016, pg. 26.

Important information for policy makers.

Is the “China Shock” Even a Thing?

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Image result for china trade

Gallup’s Jonathan Rothwell conducted a study toward the end of last year that found “those who view Trump favorably have not been disproportionately affected by foreign trade or immigration, compared with people with unfavorable views of the Republican presidential nominee. The results suggest that his supporters, on average, do not have lower incomes than other Americans, nor are they more likely to be unemployed.” Now, Rothwell is back with another study suggesting that the supposed “China Shock” is actually overblown. Rothwell writes,

…[O]ne important achievement of [Autor, Dorn, Hanson, 2013] is its innovative methodology and framework, which has allowed scholars to better understand how import competition affects local areas. Nonetheless, my analysis and extension — which greatly benefited from Autor et al.’s coding and data — conclude that their findings about the harm from import competition at the community level are not robust, beyond the manufacturing sector, and, even then, only in the later period. At the individual level, and consistent with results from Autor et al. (2014), I find that workers in import-intensive industries have a strong attachment to the labor force and are as likely to be employed as workers in other industries.

…Though [Autor et al.’s] paper makes an enormous methodological contribution and provides further and robust evidence that Chinese imports—rather than only technological change—reduced U.S. manufacturing employment, the evidence presented here suggests the paper’s most important findings do not withstand further scrutiny.

…If China had remained a communist country and closed to trade, it is quite likely that manufacturing workers around the world would have enjoyed higher wage growth. While manufacturing job loss probably would not have been as significant, the increased competition from China did not create labor market conditions that appear dramatically different than what workers face in other industries such as retail, restaurants and engineering firms. In fact, the evidence is clear that manufacturing work remains a source of relatively high pay, long tenure, and low layoff risk, despite the intensity of import competition (pg. 20).

What is likely surprising to many, Rothwell found that

for the 1990-to-2000 period, there is no evidence that import competition resulted even in manufacturing job loss. Indeed, many of the manufacturing-specific models show that import competition resulted in a large increase in the average wages of manufacturing workers. The positive wage effect is evident outside of the manufacturing sector, particularly for noncollege educated workers and males. Taken literally, these models show that import competition during the 1990s caused a substantial increase in wages for the average worker. These models also show that import competition increased employment growth for college-educated, nonmanufacturing-sector workers and population growth for people aged 35 to 64.

Of the 45 models with significant effects in the stacked regression, only five retain significance in the expected direction during 1990 to 2000, and each of these pertain to transfer payments. These results could be explained by the population growth of pre-retirement-age workers, as health problems and risk of retirement are increasingly sharply with age. Overall, it appears that import competition in the 1990s was, if anything, largely beneficial to the average worker in the local areas most exposed to competition (pg. 18).

A new job market paper deals another blow to the “China Shock” theory. Using microdata from the US Census Bureau, the author

showed that the employment of US manufacturing firms rose in response to increasing Chinese imports in US output markets. More exposed firms expanded employment (i) in manufacturing, as they hired production workers whom they paid higher wages, and (ii) in non-manufacturing, by adding jobs in R&D, design, engineering, and headquarters services. In other words, China caused a relative expansion of US employment in firms operating in industries that experienced the largest growth in Chinese imports. I argued theoretically, and provided reduced-form evidence, that this was possible through firms’ reorganization toward less exposed output industries, in which the US had a comparative advantage relative to China. In these output industries, firms expanded skilled employment by taking advantage of falling production costs due to increased offshoring to China.

The evidence provided in this paper indicate that the employment losses at the establishment level, measured by the previous papers (Acemoglu et al., 2016; Autor et al., 2013), were compensated by the employment gains that resulted from two sources. First, within-firm reorganization allowed US manufacutring firms to escape the negative impact of the China shock; US manufacturing firms reorganized their activities in many dimensions in response to the China shock. On the one hand, they reorganized their US activity from exposed to non-exposed US output markets. On the other hand, they reorganized their input sourcing as they replaced domestic suppliers with foreign suppliers and increased foreign direct investment. Second, employment at US manufacturing firms expanded in response to the combined effect of increased Chinese imports in US output and input markets. This is because increased imports in the input markets put downward pressure on US manufacturing firms’ cost of sourcing material inputs. Thus, the China shock to the firm’s input markets acted as a favorable cost shock that compensated for some or all of the negative impacts of the increased output market competition.

All of these suggest that the China shock impacted US manufacturing employment in a more nuanced way than simply increasing output market competition at the establishment level, which captures only the losses that resulted from the shock. Reorganization at the firm level and the combined effects of input and ouput market shocks can lead to net job creation. However, this may not involve the same workers in the same industries, in the same regions of the US or the same establishments of the firm (pg. 51).

When one considers the other benefits of trade, it becomes increasingly clear that globalization is not the demon it has been made out to be.

Is “Moral Outrage” Largely Self-Serving?

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Image result for angry protester

That seems to be the case, according to a new study. Reason reports,

When people publicly rage about perceived injustices that don’t affect them personally, we tend to assume this expression is rooted in altruism—a “disinterested and selfless concern for the well-being of others.” But new research suggests that professing such third-party concern—what social scientists refer to as “moral outrage”—is often a function of self-interest, wielded to assuage feelings of personal culpability for societal harms or reinforce (to the self and others) one’s own status as a Very Good Person.

…To test this guilt-to-outrage-to-moral-reaffirmation premise, Rothschild and Keefer conducted five separate studies assessing the relationships between anger, empathy, identity, individual and collective guilt, self perception, and the expression of moral outrage.

Their findings?:

  1. Triggering feelings of personal culpability for a problem increases moral outrage at a third-party target.
  2. The more guilt over one’s own potential complicity, the more desire “to punish a third-party through increased moral outrage at that target.”
  3. Having the opportunity to express outrage at a third-party decreased guilt in people threatened through “ingroup immorality.”
  4. “The opportunity to express moral outrage at corporate harm-doers” inflated participants perception of personal morality.
  5. Guilt-induced moral outrage was lessened when people could assert their goodness through alternative means, “even in an unrelated context.”

The article concludes,

These findings held true even accounting for things such as respondents political ideology, general affect, and background feelings about the issues.

Ultimately, the results of Rothschild and Keefer’s five studies were “consistent with recent research showing that outgroup-directed moral outrage can be elicited in response to perceived threats to the ingroup’s moral status,” write the authors. The findings also suggest that “outrage driven by moral identity concerns serves to compensate for the threat of personal or collective immorality” and the cognitive dissonance that it might elicit, and expose a “link between guilt and self-serving expressions of outrage that reflect a kind of ‘moral hypocrisy,’ or at least a non-moral form of anger with a moral facade.”

I’m reminded of something economist Deirdre McCloskey wrote: “You sit down with a cup of dark coffee and a nice croissant to read the New York Times, venting daily your hatred of the cruelties recorded there, and as a result are yourself saved, regardless of whether policies of “protection” advocated in its pages do the poor and tortured any actual good.”[ref]Bourgeois Dignity: Why Economics Can’t Explain the Modern World (Chicago: University of Chicago Press, 2010), 428-429.[/ref]

Do Social Networks Matter More Than Institutions?

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Image result for world connection cell phone

I’ve posted before about McKinsey’s findings regarding digital globalization. They reported,

Data flows directly accounted for $2.2 trillion, or nearly one-third, of [globalization’s] effect [in a decade]—more than foreign direct investment. In their indirect role enabling other types of cross-border exchanges, they added $2.8 trillion to the world economy. These combined effects of data flows on GDP exceeded the impact of global trade in goods.

This in turn supported research by economist Andreas Bergh, who found that

the poverty-decreasing effect of globalization is bigger in countries where institutions are worse. The graph below shows how the marginal effect of information flows on poverty varies depending on the level of bureaucratic quality. The slope looks the same for all institutional indicators, suggesting that globalization is especially important for the poor in countries with high corruption levels and inefficient public sectors.

A new Harvard working paper supports these findings, suggesting that communication networks and social interactions are more important than institutions. The authors explain,

Telling institutional versus socio-technological interpretations apart has been challenging. This paper tests these two hypotheses by measuring convergence in income across Colombian municipalities along two distinct geospatial divisions: one institutional, one socio-technological. The institutional explanation would emphasize the role that belonging to a particular departamento, or state, has on the institutional arrangements and the provision of public goods, thus affecting the incentive structure of agents to operate with better technology.

Although Colombia is a unitary republic, not a federation, states have significant autonomy1 . Studies on Colombia, including those that take an institutional perspective such as Acemoglu et al (2015)…utilize state-level data, as do almost all studies of intra-national unconditional convergence worldwide. Under the institutional assumption, a municipality should tend to converge to the income of the state to which it belongs.

The socio-technological explanation would predict that municipal income convergence should occur within the cluster of municipalities that interact intensely with each other, whether or not they belong to the same state. This is due to the need for intensive social interactions for knowhow to diffuse. To form these socio-technological groupings, we utilize a unique dataset of cellphone calls to group municipalities so that most of the phone calls happen within rather than between these clusters. To facilitate comparison with the 32 states of the institutional state aggregation, we group municipalities into 32 communication clusters…Thus, communication clusters are groups of municipalities that are densely connected through phone calls, meaning that they are significantly more likely to call members of the cluster than they are to call other municipalities (pgs. 4-5).

The authors conclude,

To test these two interpretations in a more direct way, we use municipal level data for Colombia, which we aggregate using two different grouping criteria: the departamento or state to capture institutional variation; and the communication cluster to which a municipality belongs, to capture the intensity of social interaction. We use formal wages per capita as our measure of income per capita, as it can be measured at the municipal level. We use cellphone data to group municipalities into communication clusters of intense interaction.

In this setting, we find evidence of absolute convergence in Colombia at the municipal level. We find evidence that the process is accelerated when the municipality belongs to a richer communication cluster. However, we do not find evidence of a positive influence of belonging to a richer state. We interpret these results as evidence in favor of the idea that obstacles to technology diffusion may be related to the fact that the use of technology requires tacit knowledge which tends to move slowly between brains through a protracted process of imitation and repetition as occurs in learning by doing. Within communications clusters, there seems to be accelerated convergence. Obstacles to convergence in developing countries may be related to the paucity of social interactions between citizens of the same country

…From a policy perspective, the findings emphasize the fact that economic convergence requires intense social interaction, not just the presence of institutions of a certain quality. Regions that are formally part of the same nation-state but do not really interact with the more advanced parts of the country cannot expect to share similar development outcomes.(pg. 19).

Fascinating stuff.

Demographics & Inequality: 2015 Data

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Every year, economist Mark Perry draws on Census Bureau reports to paint of picture of the demographics of inequality. Looking at 2015 data, he constructed the following table:

incomeinequality

He concludes,

Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with household income. Specifically, high-income households have a greater average number of income-earners than households in lower-income quintiles, and individuals in high income households are far more likely than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income households are far more likely than their counterparts in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent households.

The good news is that the key demographic factors that explain differences in household income are not fixed over our lifetimes and are largely under our control (e.g. staying in school and graduating, getting and staying married, etc.), which means that individuals and households are not destined to remain in a single income quintile forever. Fortunately, studies that track people over time indicate that individuals and households move up and down the income quintiles over their lifetimes, as the key demographic variables highlighted above change, see C[arpe] D[iem] posts here, here and here.

Why Is Swearing Offensive?

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Warning: language.

That’s all swearing is, right?

I find swearing to be a interesting taboo, one I engage in without any real sense of guilt. In my religious community, I’ve heard the virtues of having “clean language” and how Mormons “don’t use that kind of language.”[ref]Apparently, they’ve never heard of J. Golden Kimball. Or perhaps read much of Brigham Young.[/ref] I’ve also heard variations of “if you cuss, you must not be intelligent enough to express yourself in another way.” Ironically, this is often thrown out by individuals possessing an unimpressive vocabulary and poor communication skills (jokes on them, according to recent research).

But why do we find swearing offensive? It’s obviously not something innate in the words themselves. It’s absurd to argue for a literal evil inherent in the arbitrary sounds that a certain group of people attach meaning to,[ref]I’m sure there is a linguist somewhere cringing at the amateurish nature of this description.[/ref] especially when those sounds are meaningless to those unaccustomed to them (Japanese, Russian, or French swear words mean nothing to me since I don’t speak any of the those languages). According to philosopher Rebecca Roache, swear words

have a special role in expressing and communicating emotion. The expressions ‘My car has been stolen’ and ‘For f**k’s sake, my f**king car’s been stolen!’ both assert the same thing, but the second also conveys a sense of anger, desperation, and annoyance, thanks to the inclusion of swearing. As the linguist Geoffrey Nunberg has remarked, ‘[s]wear words don’t describe your feelings; they manifest them’. It is this unique role in expressing emotion that separates swearing from other uses of language, including other types of taboo language.

This rings true to me. Before authoring The No Asshole Rule, Stanford’s Robert Sutton published an article in the Harvard Business Review on the subject. He recollects, “I argued that censored and watered-down variations like “the no jerk rule” or “the no bully rule” simply didn’t have the same ring of authenticity or emotional appeal, and I would be interested in writing an essay only if they actually printed the phrase “the no asshole rule.” …HBR not only published the rule…but the word asshole was printed a total of eight times in this short essay!”[ref]The No Asshole Rule, pg. 3.[/ref] Jerk or bully don’t carry the same intensity as asshole. They don’t convey the same amount of disgust, frustration, anger, or even hurt. It’s fairly easy to brush off, “You’re a jerk!” It stings a little more when you’re called an asshole.

Image result for pardon my french you're an asshole gif

In order to understand outbursts of expletives, “we need to consider not what the speaker is referring to or talking about, but what he aims to indicate about his emotions. This makes swearing, in such circumstances, more like a scream than an utterance: just like a scream, it expresses emotion without being about anything.” After further analysis, Roache gets to the crux of the problem:

[O]nce we have established preferences about behaviour, the capacity for certain behaviour to become offensive arises quite naturally…Suppose that you make a new friend named Rebecca, and you fall into the habit of addressing her as Rachel. After you have done this a couple of times, Rebecca politely points out that her name is Rebecca, not Rachel. If, after she has drawn your attention to this, you persist in calling her Rachel, she is likely to begin to feel annoyed, and she might repeat the request to call her Rebecca. If you ignore her request a second or third time, then – provided that she has no reason to believe you have failed to understand her requests, nor that you are incapable of easily complying with them – she is likely to eventually view your behaviour as offensive. What started out as merely a dispreferred (by Rebecca) way of speaking, then, becomes offensive.

…When you continue to call her Rachel even after she has reminded you of her name, she concludes that you are being unreasonably inconsiderate of her wishes. And when you persist in calling her Rachel even after she has pointed out several times that this is not her name, it is difficult for her to avoid the conclusion that you are deliberately using an inappropriate form of address in order to upset her.

..In this example, we do not find an explanation for the offensiveness of the dispreferred expression in the expression itself. There is nothing whatsoever that is offensive about the name Rachel. Rather, the expression grows to be offensive after it has filtered through a chain of inferences that speaker and audience make about each other and about each other’s inferences. In essence: you know that Rebecca’s name is not Rachel, and you know that she dislikes being called Rachel, yet you nevertheless continue to call her Rachel; Rebecca knows that you know all this, and concludes from your behaviour in light of this knowledge that you are hostile towards her; you, in turn, recognise all this yet persist in calling her Rachel; Rebecca sees that you do this and so takes offence. Let’s call this way in which the offensiveness of dispreferred behaviour arises from these sorts of inferences between speaker and audience offence escalation.

She concludes,

What does this tell us about whether or not swearing is morally wrong? It is helpful, once again, to compare swearing to etiquette breaches. Since it’s preferable not to upset people where we can easily avoid doing so, we have some reason not to swear in contexts where it is likely to offend. The same holds for etiquette breaches. Even so, in most cases, we tend not to view breaches of etiquette as immoral, even where it causes offence. You would find my refusal to thank you for your good turn rude, but you would probably not deem it morally suspect. You would make a similar judgment were I to swear in the course of a polite conversation.

The whole thing is worth reading, though perhaps not for those easily offended by foul language.

Theology of Work: Flourish

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Sunday will soon turn into Monday. The sun will set on the Lord’s Day–the Christian Sabbath–and rise again at the beginning of a new work week. This intimate connection reminds me of Jewish theologian and Civil Rights activist Abraham Heschel’s comments on work’s relation to the Sabbath:

Image result for the sabbath heschelAdam was placed in the Garden of Eden “to dress it and to keep it” (Genesis 2:15). Labor is not only the destiny of man; it is endowed with divine dignity. However, after he ate of the tree of knowledge he was condemned to toil, not only to labor “In toil shall thou eat … all the days of thy life” (Genesis 3:17). Labor is a blessing, toil is the misery of man. The Sabbath as a day of abstaining from work is not a depreciation but an affirmation of labor, a divine exaltation of its dignity. Thou shalt abstain from labor on the seventh day is a sequel to the command: Six days shalt thou labor, and do all thy work [Ex. 20:9]…The duty to work for six days is just as much a part of God’s covenant with man as the duty to abstain from work on the seventh day.[ref]The Sabbath: Its Meaning For Modern Man (New York: Farrar, Straus and Giroux, 2005 [1951]), Kindle edition, 15-16.[/ref]

I thought of this while reading this piece on developing a theology of work in the face of growing protectionism. As the author explains (in this admittedly long excerpt),

[T]he failure of modern conservatism to combat trade protectionism is not just a failure to communicate economics; it’s a failure to promote a holistic philosophy of life and a healthy theology of work, one that’s oriented not toward a self-constructed “American dream,” but toward an authentic pursuit of full-scale freedom, good stewardship and human flourishing…Though it will pain many Americans to hear it…work is not ultimately about you. Yes, work provides sustenance and stability. Yes, it puts bread on the table and a roof over our heads. Yes, these are baseline comforts of a stable society, and yes, self-preservation is a good thing.

But we are no longer isolated hunters and gatherers. We live and work within a far-flung economy, and our hands are united with a large community of people. We are part of civilization, a glorious handiwork of human laborers — creatures made in the image of a creative God — working and collaborating together, and that is a good thing.

As Lester DeKoster reminds us, work is ultimately about “service to others and thus to God.” With this theology at our backs, the economic fruits of free trade are simply fruits: byproducts of humans working and serving together as God created us to do.

“Work restores the broken family of humankind,” DeKoster writes. “Through work that serves others, we also serve God, and he in exchange weaves the work of others into a culture that makes our work easier and more rewarding … As seed multiplies into a harvest under the wings of the Holy Spirit, so work multiplies into a civilization under the intricate hand of the same Spirit.”

…If work is about service to others, no longer should Foreigner X or Migrant Worker Y or Unskilled Laborer Z be viewed as “stealing your job,” though the frustration will surely persist. Instead, we should realize that they, like us, are finally able to participate in the global economy, offering their own forms of service and their own unique gifts and talents in new and efficient ways. They are participating in God’s grand design for work.

Through this lens, the prospect of job loss is no longer an occasion to mope about what was or wasn’t an “American job” in years gone by. The pain and nostalgia will likely endure, but we can remain hopeful and confident in knowing our work is not done. In these cases, job loss is simply a signal of how we might best use our time on behalf of others. It’s an opportunity to adapt and retool, to serve the community in new and better ways, as uncomfortable and inconvenient as it may be. That’s going to require an entire shift in the imagination of America, but it’s one that will revive and replenish far more than surface-level economic growth.

Happy Sabbath. And happy Monday.

The Goldilocks Theory of Marriage and Divorce

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What age is just right for marriage if you want the lowest chance of divorce? Turns out it’s late 20s to early 30s. Sociologist Nicholas Wolfinger explains,

I analyzed data collected between 2006 and 2010 from the National Survey of Family Growth (NSFG). The trick is to use statistical methods that permit nonlinear relationships to emerge (click here for more information on these methods). My data analysis shows that prior to age 32 or so, each additional year of age at marriage reduces the odds of divorce by 11 percent. However, after that the odds of divorce increase by 5 percent per year. The change in slopes is statistically significant. The graph below shows what the relationship between age at marriage and divorce looks like now. This is a big change. To the best of my knowledge, it’s only recently that thirty-something marriage started to incur a higher divorce risk. It appears to be a trend that’s gradually developed over the past twenty years: a study based on 2002 data observed that the divorce risk for people who married in their thirties was flattening out, rather than continuing to decline through that decade of life as it previously had.

2006-10

Why? Wolfinger suggests a selection effect:

[T]he kinds of people who wait till their thirties to get married may be the kinds of people who aren’t predisposed toward doing well in their marriages. For instance, some people seem to be congenitally cantankerous. Such people naturally have trouble with interpersonal relationships. Consequently they delay marriage, often because they can’t find anyone willing to marry them. When they do tie the knot, their marriages are automatically at high risk for divorce. More generally, perhaps people who marry later face a pool of potential spouses that has been winnowed down to exclude the individuals most predisposed to succeed at matrimony.

…Many people who delay marriage nowadays for financial reasons marry as soon as they feel they can afford it. These are the people who wed in their late twenties, the years of peak marital stability. The folks remaining in the pool of marriage-eligible singles are the kinds of people who aren’t well suited to succeed at matrimony (irrespective of their financial well-being).

…This is all conjecture. But we do know beyond a shadow of a doubt that people who marry in their thirties are now at greater risk of divorce than are people who wed in their late twenties. This is a new development. This finding changes the demographic landscape of divorce, and lends credence to scholars and pundits making the case for earlier marriage.

 

age at marriage divorce

Can this be replicated? Wolfinger writes,

Replication is always crucial in the social sciences. I therefore sought to reproduce my findings with more recent data from the NSFG, the 2011-2013 survey (for details about my data analysis, click here). The primary result, depicted below, was almost identical to what I obtained from the 2006-2010 survey: the 28 to 32 age range remains the period of lowest divorce risk.

marrage age & divorce risk as of 2011-13 0 orderage divorce risk 2011 2013

When Wolfinger “controlled for respondents’ sex, race, family structure of origin, age at the time of the survey, education, religious tradition, religious attendance, and sexual history, as well as whether the respondent had a child prior to wedlock, and the size of the metropolitan area that they live in,” there was “a gentler increase in divorce risk for people marrying after their early thirties.”

marriage age & divorce 2011-13 controls

He concludes, “I have now shown the Goldilocks effect using two different data sets, the 2006-2010 and the 2011-2013 National Surveys of Family Growth, and more than 10,000 respondents. Its existence is beyond question. Explaining the Goldilocks effect, however, will require additional scholarship.”

Stop Treating Women Like Men in Business

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At least that’s what one consultant advocates over at the Harvard Business Review blog. “As long as men and women are treated exactly the same by organizations,” says Avivah Wittenberg-Cox,

most women will continue to be shut out of senior roles. And yet for the past 30 years, managers have been taught to do just this: treat men and women exactly the same. That is considered the progressive thing to do. Any suggestion of difference was, and often still is, labelled a bias or a stereotype, especially by many women, eager to demonstrate that they are one of the guys, or the in-group.

The business world’s denial of differences hurts women, and excludes them in a myriad of ways – consciously and unconsciously – from leadership. Because differences are not recognized, women are too often simply judged as “not fitting” the dominant group’s systems, styles and patterns. There were good reasons for pushing “sameness” in the past, and the laws of many countries underlie today’s companies’ insistence on similar treatment – being treated the same is, after all, better than being treated worse. But today, those are not our only options. It’s time for companies to adapt to women – or watch them walk out the door to competitors who will. In all the companies I work with, lack of recognition of basic differences like career cycles, communication styles, or attitudes to power is enough to eliminate one gender and prefer the other.

As an example of role reversal, she points out

that because eight out of nine U.S. teachers today are women, schools today judge boys learning styles subpar because they deviate from the norm set by girls and women. Instead of adapting to boys’ differences (“more physical energy, developmentally less mature, use language differently,” as he put it), we insist that both genders behave the same, and medicate our sons to calm them down. According to [Michael] Thompson, 11% of American boys are diagnosed as having ADHD and are on drugs for it. That’s 85% of the global ADHD drug consumption. And since the late 1990s, boys have been more likely to drop out of school than girls. Imbalances like these help account for the growing gender imbalance in higher education (60% of university graduates will soon be women in the U.S.).

She quick to explain that she is not calling for “special treatment.” She is also not arguing for the innateness of gender differences. “After all,” she says,

businesses don’t debate whether the differences between Chinese and American employees are innate. They know that to work with and for the Chinese requires learning their language and culture. Working across genders is similar. Companies and managers, as well as teachers and educators, will need to learn the real and imagined differences between genders – and adapt to them if they want to work with and for both men and women. They urgently need to become “gender bilingual” if they want to tap into today’s talent pool.[ref]This is why you see consulting in “gender intelligence.”[/ref]

Worth thinking about.

Are Patents Slowing the Productivity of Some Firms?

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According to Noah Smith, a 2015 OECD report “looked at productivity not at the global or national level, but at the corporate level. Different companies have different technologies, different management systems and different levels of talent…At a small number of companies, productivity growth hasn’t slowed at all. If you look at only these “global frontier” companies, there has been no productivity slowdown at all! This is especially true in services industries…The top performers have blazed ahead, while other companies have stagnated or even become less productive.”

Smith offers a number of possibilities for this difference, but the most interesting one revolves around patents:

[I]ntellectual property law is making it harder for companies to use ideas developed at other companies. There has been an explosion in the number of patents granted in the U.S. since the early 1980s. In Japan the increase has been even more dramatic. Some of the fastest growth has been in patents for business methods — exactly the kind of thing that ought to diffuse across companies and equalize productivity. In earlier ages, businesses could freely copy each other’s way of doing things; now, it is often illegal. 

Some level of patent protection, of course, is necessary to encourage innovation. But many economists believe that we now give out far too many patents, often for innovations of questionable originality.[ref]Economist Alex Tabarrok has criticized the mismatch between patent law and patent theory.[/ref] This is something we would expect to increase the gap between the most productive companies and the rest. 

Whatever the reason for the divergence between companies, we need to find it and fix it if we can. The divergence could be affecting a lot more than productivity. A torrent of research in the past decade suggests that much of the increase in wage inequality in developed countries is due to differences in wages between different companies — work for a good company and you get better pay, work for a bad one and you’re out of luck. Fixing the productivity divergence might help us fight inequality as well. 

Interesting stuff.