LABOUR ECONOMICS I

During the lecture I mentioned that the founder of the education signalling model, Michael Spence of Stanford University, won the Nobel Prize in Economics. Here is the citation for him when he won the prize, with two other renowned economists (George A. Akerlof and Joseph E. Stiglitz), in 2001:

Michael Spence identified an important form of adjustment by individual market participants, where the better informed take costly actions in an attempt to improve on their market outcome by credibly transmitting information to the poorly informed. Spence showed when such signaling will actually work. While his own research emphasized education as a productivity signal in job markets, subsequent research has suggested many other applications, e.g., how firms may use dividends to signal their profitability to agents in the stock market.

For his prize lecture and more information on prize winners in 2001, go to http://nobelprize.org/nobel_prizes/economics/laureates/2001/spence-lecture.html

Today Nobel laureate Professor Gary S. Becker of University of Chicago wrote on The Asian Wall Street Journal ("Missing Children", p. 15) about low fertility rates many countries are trying to deal with. He mentioned about Japan, Russia, Korea, etc. as countries that are struggling to reverse the falling fertility rates, but, interestingly, failed to mention Singapore. Anyhow, his take on the prospect of reversing the falling fertility rate through government policies in those countries is rather pessimistic. He suggests that the only way to prevent the population in those countries from shrinking is to open their gates to immigration:

If I am right, the only solution for countries that continue to be concerned about a future with declining and aging populations is to open their gates to immigration. Yet in most countries large-scale immigration creates political, economic and social problems. Immigration is an especially unwelcome alternative for Japan, given the history of Japanese reluctance to have many foreigners settling in their country. As a result, Japan, Russia and many other countries face a worrisome demographic and economic future.

In large part, I agree with his view. My own study shows that financial incentives have only moderate effects on fertility rate in Singapore, as in many other countries. As Singapore has been most open to immigration among Asian countries and now tries to be even more open, Singapore may be just the country that should not worry too much about shrinking population.

It is a pity that Professor Becker did not know what Singapore is trying to do. He would have been delighted.

Dear Colleagues

It is with great sadness that I report that Jacob Mincer died on Sunday August 20.  With the passing of Jacob Mincer, labor economics has lost a giant of the field who made fundamental contributions to the development of our analyses of human capital, earnings functions, labor supply and time allocation.  An appreciation of his contributions was published in the introduction to a JOLE special issue that honored him in 1993, see http://client.norc.org/jole/SOLEweb/MincerIntro.pdf.
 
Jacob Mincer was co-winner, with Gary Becker, of the first lifetime achievement award presented by the Society of Labor Economics in 2004.  Henceforth, the award has been known as the Jacob Mincer Award.

Members may address their condolences to

Flora Mincer
448 Riverside Drive Apt. 72
New York NY 10027
USA
 
Francine Blau
President of the Society of Labor Economics
 
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Who is Jacob Mincer?

He is the one who first formulated the relationship between human capital and earnings. He is the one who estimated "returns to education" for the first time. His method has been replicated, modified, and applied by hundreds, if not thousands, of researchers. His method is still in use ("Mincerian earnings equation").

“The close blending of theory and data represented in Mincer’s work has shaped the direction of labor economics and influenced and inspired all those who have followed him.” (Professor David Card, UC Berkeley)

For more information about him, see The New York Times article ("Jacob Mincer, 84, Pioneer on Labor Economics, Dies").

Less self-assured Singaporeans have never been comfortable about the competition for jobs. The downright hostile ask whether newcomers - whether migrant settlers or sojourners on work passes - are not too 'foreign' for the society's texture and of questionable 'talent'. (Editorial, 22 August 2006)

A recent article in the New York Times, "Why ‘Outsourcing’ May Lose Its Power as a Scare Word" (August 13, 2006), reports some studies done on the effects of outsourcing on the US labor market. Many studies found that only a handful percentage of jobs have been taken away from American workers by low-wage foreign workers overall, and that many more jobs are created for domestic workers than those lost even in sectors where outsourcing has happened in significant numbers:

In December 2005, the McKinsey Global Institute predicted that 1.4 million jobs would be outsourced overseas from 2004 to 2008, or about 280,000 a year. That’s a drop in the bucket. In July, there were 135.35 million payroll jobs in the United States, according to the Bureau of Labor Statistics. Thanks to the forces of creative destruction, more jobs are created and lost in a few months than will be outsourced in a year. Diana Farrell, director of the McKinsey Global Institute, notes that in May 2005 alone, 4.7 million Americans started new jobs with new employers.

...

There is evidence that within sectors, lower-paying jobs are being outsourced while the more skilled ones are being kept here. In a 2005 study, Catherine L. Mann, senior fellow at the Institute for International Economics, found that from 1999 to 2003, when outsourcing was picking up pace, the United States lost 125,000 programming jobs but added 425,000 jobs for higher-skilled software engineers and analysts.

So it does not seem that outsourcing is going to devastate workers' and their families' lives in developed countries, at least in the US, as some claimed.