Read on Twitter
I do find good nuanced twitter convos possible, but challenging sometimes. So today I’ll try again.
On work incentives, once again... https://twitter.com/tammyschirle/status/1273082063361581056
On work incentives, once again... https://twitter.com/tammyschirle/status/1273082063361581056
First, we all agree that several things play a role in the decision to work and the choices we need to make. We just tend to focus on different parts at different times. So, I’ll try to get through a few here…
One big part of the decision to work, and how much, is the financial incentive to do so. A while back this all led to a bit of a twitter course on the language we use around this: https://twitter.com/tammyschirle/status/1255283279323893760?s=20
CERB was designed as an emergency measure to convince people to stay home, & there’s a group who responds to that. I hoped an extension would account for that explicitly in the efforts to reopen. Many ideas out there. Here was one @CDHoweInstitute : https://www.cdhowe.org/intelligence-memos/tammy-schirle-–-designing-cerb-supports-efforts-re-open-economy
Note that idea to phase out benefits was costed by the @PBO_DPB (costing less than I would have thought, actually): https://www.pbo-dpb.gc.ca/en/blog/news/RP-2021-010-M--proposed-changes-extension-to-canadian-emergency-response-benefit-cerb--modification-prolongement-proposes-prestation-canadienne-urgence-pcu
But an obvious part of incentives is the wage being offered. That is a simple point to make: there’s 2 sides to this market. Earlier, firms boosted wages to bring in workers. (Sorry, employers weren’t just suddenly appreciating low-wage workers more) https://www.cbc.ca/news/canada/kitchener-waterloo/covid-19-shifting-perception-of-valuable-jobs-prof-says-1.5511768
While I think our basic models are useful for understanding individual, & some firm, decisions, I’ve become more cynical about how well they help us understand the market. Do those at the bottom of the distribution really get paid their value of marginal product? I doubt it….
Why cynical? Many reasons, but start with a look at the spike in wage distributions at exactly the minimum wage, that mostly just moves over when MW increases. There’s more to it than our models of perfectly competitive markets would suggest.
But for financial incentives to really matter, we have to see jobs available. We know those hit hardest by layoffs were those with the lowest wages, least bargaining power. https://twitter.com/CDHoweInstitute/status/1271431419173187584?s=20
We all have anecdotes, but I’ll add one. In *normal times*, I’ve known people who don’t want to admit to their poor job prospects among friends - especially those friends with good jobs - & joke about being “on vacation with pay”...
Your friends may be struggling, and might appreciate some sympathy from friends. Really, listen to them
Anyways, entire bodies of literature can be written on each piece of this thread, but I need to get to the rest of my day job. See you later!
Actually, 1 more point - just as in our convos re:UBI experiments, there’s a big difference between incentives in short-term programs & permanent ones. A good job where employers treat you well, even at MW, is worth taking. Even more so when jobs look scarce. Long run view here
