----- Original Message -----
From: "Gautam Mukunda" <[EMAIL PROTECTED]>
To: "Killer Bs Discussion" <[EMAIL PROTECTED]>
Sent: Friday, March 12, 2004 9:13 PM
Subject: Re: Race to the Bottom
> --- Dan Minette <[EMAIL PROTECTED]> wrote:
> > So, let me understand this correctly. You are
> > arguing that a smaller
> > increase in labor supply that is focused on a very
> > substantial increase in
> > low skill labor will have a larger impact on the
> > price (wage) of medium and
> > high skill labor than a larger increase in supply
> > that has a greater
> > percentage in the medium and high skilled labor
> > supply?
> >
> > In short, you appear to be arguingthat the impact of
> > an increased supply of
> > low skilled labor is more important to the price of
> > high and medium skilled
> > labor than the impact of an increased supply of high
> > and medium skilled
> > labor.
> >
> >
> > Dan M.
>
> It's possible that I'm misunderstanding you. I'm
> arguing that a (very large) increase in the size of
> the very bottom of the labor pool will have very large
> effects throughout that pool.
Right here is where I depart. The labor pool of possible employees
increased by 49% from '57 to '80, but by only 32% from '80 to '03. (The
participation in the work force increased 60% and 37%, respectively.
During the first time period inequality decreased; during the second it
increased. Not only that, but the increase was not just a transfer of
income share from the poor to the rich, it was a transfer from everyone to
the rich.
Let me get some approximate numbers from '60 to '80 to '00 to illustrate
the changes. They are approximate because education attainment is for >25,
while workforce is for >16, but that normalization shouldn't be a big
factor. We have three catagories of educated work force: less than a high
school education, a high school but no college education, a college
education. We have, for fraction changes from '60 to '80 and for '80 to
'00:
< high school high school college
'60-'80 -24% 121% 216%
'80-'00 -35% 45% 93%
As a result of the slowing of the enlargement of the labor pool, the
decrease in workers with less than a high school education has accelerated
slightly, while the increase of workers with high school and college
educations has slowed down noticably. If you factor in illegals, we
probably would have a deceleration in the decrease in workers with less
than a high school education.
So, if the job market were to expand in the same manner from '80 to '00 as
'60 to '80, there would be a significant undersupply of educated workers,
while uneducated workers would have about the same balance as before.
Looking at it another way, the average growth in GDP from '80 to '03 was
about 84% of the average growth from '57 to '80. But, the average growth
in employment from '80 to '03 was only 65% of the average growth from '57
to '80. I would argue that slowdown in the increase in the demand for
labor has a greater impact on the nature and magnitude of the growth in
income inequality than the change in the distribution of available labor.
Dan M.
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