Cracker Barrel on Regulating Responsibility

Business and the Environment

Ethical labels…coming

Probably the biggest barrier to getting consumers involved in using their purchasing power to influence corporations to be more ethical is the absence of labels on end products.  Clearly, products whose compoments are produced in multiple factories with varying levelsof quality cannot have one single ethical label.  Marks  and Spencer, though changing how it manages its supply chain has been able to come up with a label for some goods.

It will be interesting to see how unlabeled M&S goods do against labeled goods.  Specifically, will consumers attribute ethical characteristics to M&S goods whether there is a label or not allowing some goods to free-ride on the reputation of a few produced ethically?

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xkcd explains why I am starting a PhD program…

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“What are rights without enforcement?”

I like how groups in England are thinking practically about how to enforce laws that are on the books not creating new ones that may be just as ineffective.


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Formalizing Informality?

A few weeks ago New York University’s International Public Service Association (IPSA) hosted a conference on trade and poverty alleviation.  As a co-organizer of the event I had an opportunity to get to know the speakers well and help frame the discussion.

Sean Sweeney, director of Cornell’s Global Labor Institute, represented global trade unionists and made some thoughtful comments when I asked him to describe labor’s view of the informal economy.  Unsurprisingly, global trade unions use formal work environments as their frame for understanding how labor rights are attained and preserved.  Therefore, “informal” workers have been seen as “soon-to-be-formal” workers.  Efforts, then, have not been concentrated on organizing the informal economy.

Some World Bank research from Mexico illustrates that sometimes formal workers are choosing to exit the formal system in favor of informal employment.

There is little evidence to support the traditional dualistic view of a labor market segmented between formal and informal sectors as the principal paradigm through which to view the informal sector. The division between good jobs and bad jobs seems to cut across issues of formality-and for many workers, inefficient labor codes and low levels of human capital may make employment in the informal sector more desirable.  – Maloney, 1998.  “Are Labor Markets in Developing Countries Dualistic?”

So, perhaps it is time for a reconceptualization of the informal economy.  We also need to think about the factors that are making the informal economy a rational choice.  And what’s so great about formality anyway?  Could there be a combination of the two that works for more people?

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Actions Speak Louder?

One of the best things that Google has offered me/us is the Google News Archive Search.  Users can type in any word or phrase and Google will search as far back as the news goes and report news stories that contain your search word.

A search for “sweatshop” shows that the use of the term has been falling from 2000 to present.

“Fair Trade labeling” has a spotty presence in the news.

What is most encouraging perhaps is the use of the word “sustainability.”  Usage goes from near zero levels in the 1990s to off-the-charts.

Just a little exercise in data analysis.

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Unpaid but not Un-empowered

The Economist this week trails the New York Times article from last year that exposed unpaid internships as exploitive.

For an example of social enterprise in London that empowers interns to get the experience they desire (and deserve) check out Internocracy (they claim to be rather nice).

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Unions by any other name.

Overall, union membership is trending downward globally though the growth of unions is tied to the business cycle and changes within the labor movement as a whole.  If we were to truly concentrate on labor market outcomes then we might be better able to reject labor unions or adjust their strategies to achieve real benefits for members while “offering employers services that employers value” (Wallerstein and Western 2000, 354).  Because of the heterogeneous nature of labor unions we are unable to reliably reject the hypothesis that unions are good or bad in an absolute sense.  The link between quantity of union members and benefits bestowed to members still needs to be explored.

Farber and Western (2001) survey unions in the private sector during the years 1973-1998 and assert some of the same arguments for union decline as Clawson and Clawson (1999): union and non-union sector growth rates and changes in the NLRB (National Labor Review Board) -supervised election rate impact growth in membership and density.  Farber and Western conclude that the fate of unions is actually outside their control owing to market and regulatory changes.  The market forces that diminished the role of unions did so because “unions could no longer guarantee their workers higher wages while maintaining reasonable levels of job security” (459).  Farber and Western attempt to answer a specific policy question: does increasing organizing activity increase union membership?  And, if so, is it then a good mechanism to revitalize unions?  Farber and Western come up with two scenarios that would make it likely that unions would resurge: the U.S. would have to withdraw from the global economy, if only partially, or the NLRA would have to be modified – which has proven politically infeasible.  Farber and Western self-consciously admit that the two scenarios they offer are highly unlikely to occur.

One key finding of Farber and Western is that union memberships have always grown in spurts, but remain unsure about how to trigger them.   The article focuses on how to increase the quantity of individuals organized into a union but does not discuss any of the gains these organizations can be expected to achieve.  To be sure, having more members makes strikes more effective but other mechanisms within U.S. labor law cited by Clawson and Clawson make it unlikely that strikes will lead to net gains for strikers.  As Farber and Western point out: “Many workers are skeptical that unions can provide real value in the workplace without sacrificing job security; employers actively resist union organizing efforts; and the NLRA, as currently administered, makes the organization process drawn out, expensive, and uncertain” (478).

This circles back to a question that is not directly addressed by the articles we read: How valuable are unions to members?  Are unions useful for employers?  Maybe there is a tipping point where marginal returns become greater for both parties – once the NLRA hurdle is passed, organizing may become easier and more effective way to see gains in the workplace for workers.  Farber and Western conclude that for union growth to increase then “owners of capital [should be] indifferent between investing in the union and nonunion sectors” (482).  This seems unlikely because of the confrontational nature of many union movements and other factors mentioned earlier.

Wallterstein and Western (2000) begin to approach the “why” question of what benefits unions can uniquely provide.  Wallerstein and Western look specifically at centralized wage setting as a key task of labor unions and not that “incentive pay schemes and profit-sharing arrangements subvert negotiated wage scales” (356).  Wallerstein and Western find that an important effect of centralization of wages is the effect on equality of wages.  As wage setting becomes more decentralized – set by employers and not by industries – inequality increases.  Wallerstein and Western survey the literature in the debate over what really matters in wage setting – is it partisan governments, is it the independence of the central back? – and are inconclusive.

A key claim of Wallerstein and Western is that “the benefits of unionization depend on the proportion of the work force organized, but the cost of organization to the union depends on the absolute number of new union members recruited.  As a result, the optimal level of unionization for the union falls as the size of the labor force increases” (360).  As discussed, unions also experience greater strength in environments where wage bargaining is centralized.  In an environment where employers have more control over wages, it is more likely that they will resist unions and block the kinds of gains unions are meant to provide.

Clawson and Clawson are more alarmed by the “larger loss of efficacy” (97) among remaining union members than by the declining rate of union membership.  Unions are becoming less involved in, and perhaps less good at, tasks where they have historically been useful.  For instance, increased use of grievance systems and new work rules that facilitate and solicit worker involvement individually (see, for example, Lean Manufacturing and other participatory management systems) threaten key tasks of unions, create competition for their services and make unions less of a vehicle for worker involvement.  Unions can, and in the absence of other mechanisms should, serve a social purpose for rank-and-file workers and “create a new culture among workers, developing their abilities and transforming their political understanding” (107).  Capacity building is a crucial issue for workers in global supply chains and unions serve a cultural and educational role that is promoted by numerous Western donors as a theory of change for sweatshop working conditions.

Clawson and Clawson provide a more nuanced argument about union growth and strength.   It is in finding ways to turn these challenges into new opportunities for organizing that unions can regain strength.  Clawson and Clawson cite Banks and Metzgar’s (1998) argument that “employee involvement should be treated as a form of ‘union organizing on a new terrain,’ and used as an opportunity ‘to enhance worker and union power’” (105).  Clawson and Clawson offer an interesting discussion of breaking the idea of “union” and thinking strategically about the outcomes that workers and employers truly value and using these alternative strategies to make gains.  This is an approach that can be tailored to specific situations and enhanced over time to provide workers and employers with outcomes that they value, regardless of the gains in union membership.

Note: This blog post is based on a literature review of three pieces on labor union decline.  I am happy to provide additional source information upon request.

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When t ≠ T.

Ben-Porath (1967) asserts that human capital is earned based on a given time horizon that expires at a known labor market exit point – retirement.  (Or, in the model, when t = T.)  In this case, increasing one’s individual human capital is a rational investment that requires weighing of earnings from entering the labor market today or entering after some time spent out of the labor market acquiring skills (via higher education).  Last week’s piece by Granovetter (2005) on the impact of social structure on economic outcomes becomes relevant when considering the amount of human capital that can be built by going to a graduate school where you can build a network of future employers.

Ben-Porath’s key finding is that, “The basic model generates some of the qualitative characteristics of the observed life cycle of earnings – typically, an initial period of no earnings followed by a period in which earnings rise at a declining rate and, eventually, decline.  Actual, or observed, earnings turn out to be always lower, to change faster, and to peak at a later age than the attainable maximum, the earning capacity of the individual” (352-353).

Ben-Porath’s argument is interesting and empirically sound if you consider that T really does mean that human capital generated no longer holds any value.  This argument is refuted by various organizations that value retired individuals that still have skills to contribute; the PeaceCorps, ACDI/VOCA and Wal-Mart greeters are all jobs that individuals beyond retirement age can continue to work in.

Whether T is a finite time horizon or not will probably have little impact on the rational decision of an individual to acquire human capital.  While various jobs exist to employ retired individuals, it is unreasonable to think that an individual would invest in their own human capital because they aspire to these positions – PeaceCorps volunteer, etc.

References:  Ben-Porath, Yoram. 1967.  “The Production of Human Capital and the Life Cycle of Earnings.” The Journal of Political Economy. Vol. 75. No. 4. Part 1. pp. 352-365.
Granovetter, Mark.  2005. “The Impact of Social Structure on Economic Outcomes.”  The Journal of Economic Perspectives.  Vol. 19. No. 1. pp. 33-50.

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Human Capital and Specificity in Industrial Clusters. Implications for worker behavior?

In “Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984 – 2000,” Poletaev and Robinson (2008) ask, “What kinds of involuntary job switches can take place without major losses of specific human capital” (390)?

Poletaev and Robinson attempt to measure the wages lost by workers who switch industries and/or skills due to exogenous displacement.  They determine that workers can avoid extreme wage loss by seeking a job that requires a similar skill-set and is in the same industry as their previous job.  Workers who switched industry experienced higher percentages of lost wages.  Poletaev and Robinson also note a difference between what they call “fluid” and “crystallized” skills.  Fluid skills are highly transferrable and crystallized skills are those one gets better at over time through learning and repletion and are likely specific to a certain job only.

Importantly, Poletaev and Robinson consider two outcomes of job displacement and skill usage, “First, different types of skills may be the main ones used on the new job compared to the old job, losing the specific capital in the old skills.  Second, the new job may have a skill portfolio with proportions similar to that of the old job, but use less of the skills, and hence underutilize some of the specific capital in the old skills” (416-417).  Industry clusters may have the potential to create a pocket of industry specific work skills making it easier to transfer between jobs and skill-sets making Poletaev and Robinson’s analysis applicable to these situations.

What are the implications of this theory about skill transfer and human capital building in developing country manufacturing sectors?  Does the introduction of corporate social responsibility concerns into supply chain management cause workers to anticipate exogenous displacement through plant closures and weak buyer-supplier relationships leading to “cutting and running” at the first sign of poor labor conditions?  Has this anticipation had an effect on how workers view themselves in the workplace?  What are the implications for skill transfer within industries in that case?

In the event of involuntary job loss, how are workers sorted by potential employers after plant closures?  What does this evidence suggest about how a worker should behave while at work?

Reference: Poletaev, Maxim and Chris Robinson.  2008.  “Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984 – 2000.” Journal of Labor Economics. Vol. 26. No. 3. Pp. 387-420.


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Getting the thing you want but not in the way you wanted to get it.

Great article from the NYTimes about Kansans who don’t think the climate is changing but love the benefits that renewable energy can bring therefore averting climate change.

How do you talk about climate change to people who don’t believe the climate is changing?  In this case, not by convincing them that climate change exists but showing them the benefits from something they do care about.

I think we can learn some lessons about getting what we want, but not in the way we hoped to get it.

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