Tuesday, August 10, 2010

Complex processes are hard to simplify

One thing that I have noticed is that simple narratives about employment often gloss over important details. Mark has an example with teacher employment. Yves Smith has another one, where she points out that employers who are having trouble finding employees often manage this only by offering very poor terms of employment:

This does not add up. If the company can afford to spend ten weeks training people (and the additional cost of setting up a course), that suggests it could have offered more than $13 an hour, particularly given the opportunity cost of the orders it could have filled if it had had people on board sooner. The article later notes that Mechanical Devices “hire[s] through staffing agencies to help control health-care costs and maintain flexibility.” Um, that means they fire people as soon as orders fall.

I think that this issue is an old idea that we often forget. The jobs that are difficult to fill (in a functional economy) either require complex skills/credentials or have a known downside. I would worry that Yves Smith understates the case with her example: the worst of jobs are the ones where you never actually become unemployed but for which you don’t have a predictable income. Economists back to Adam Smith have noted that a lack of job security tends to raise wages.

Are we surprised that experiments with unpredictable income and low wages don't always work out? After all, there is a minimum income threshold below which basics like food, shelter and hygiene may start to become difficult to maintain.

In the same sense, why are we worried that it is hard to break into education? Many professions are hard to break into without, for example, credentials. Neither lawyers nor medical doctors can practice without the specific credential? Why is the lack of a graduate degree making it hard to become a teacher in competive markets an issue?

I suppose we could re-imagine the economy from the ground up. But top down approaches to comprehensive social and economic reform don't always result in wild successes and may generate adverse effects in the process.

This is not to say that there are not real issues to be resolved that can occur due to technological change. I just worry when the proposed solutions to a complex problem are extremely simple. That suggests either an agenda or a failure to appreciate all of the moving parts involved.

Now, before I get to be labeled an arch-conservative, I tend to think that slow and incremental reform is the best choice in most cases. There can be specific cases where the slow reform approach has failed completely and where the options are limited, but I'd rather be cautious rather than aggressive in finding them.

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