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Thursday, August 31, 2006

Is Worker Insecurity a Myth?

Greg Mankiw posts a link to a paper with the introduction "Economist Ann Huff Stevens punctures another media myth." The paper implies  that workers shouldn't feel insecure about their economic prospects since the data don't support their perceptions of insecurity. But as I said back in December when I posted the abstract and part of the introduction to the Stevens' paper:

There is other research, e.g. see here, showing that measures of insecurity such as the variance of income have risen in recent years. Thus, even if these results hold up to further scrutiny, they do not prove that worker's perception of increasing economic insecurity is illusory.

If you look at some of the other statistics Ann Huff Stevens has produced, you get a different impression about economic security:

In fact, what happened in the Ryans' case -- an economic implosion triggered by a succession of layoffs for John and a medical crisis for Kim -- has become increasingly common among the nation's working families during the last 25 years. Setbacks such as job losses and prolonged illnesses have always taken their toll, of course. But they haven't always packed the economic punch they now do. Since the 1970s, the odds that a family will see its income chopped in half when hit by this kind of shock have nearly doubled to more than 20%, according to statistics generated by The Times in cooperation with researchers at UC Davis. "Working families stand a good chance of sustaining big blows to their incomes even from fairly commonplace events," said UC Davis economist Marianne E. Page, who with colleague Ann Huff Stevens helped The Times with its analysis. "The odds of suffering a sizable setback have grown considerably in recent years."

And when you ask people on the front lines how they feel rather than looking at data to see how they should feel, you get a different answer as shown in three new opinion polls. Contrary to what is implied above, workers perceptions of insecurity are not a myth:

Three Polls Find Workers Sensing Deep Pessimism, by Steven Greenhouse, NY Times: Three new opinion polls released yesterday found deep pessimism among American workers, with most saying that wages were not keeping pace with inflation and that workers were worse off in many ways than a generation ago.

The Pew Research Center found in a survey of 2,003 adults completed last month that an overwhelming majority said workers had less job security and faced more on-the-job stress than 20 or 30 years ago.

The nonpartisan Pew center, said, “The public thinks that workers were better off a generation ago than they are now on every key dimension of worker life — be it wages, benefits, retirement plans, on-the-job stress, the loyalty they are shown by employers or the need to regularly upgrade work skills.”

In a poll of 803 registered voters commissioned by the A.F.L.-C.I.O., Peter D. Hart Research found that 55 percent said their incomes were not keeping up with inflation, 33 percent said their incomes were keeping even and 9 percent said their incomes were outpacing inflation. ...

A poll of 800 nonsupervisory workers released yesterday by Lake Research Partners found that 51 percent said the next generation would be worse off economically, 27 percent said the next generation would fare about the same and 18 percent said it would be better off.

The poll, for Change to Win, the coalition of unions that left the A.F.L.-C.I.O., found that 63 percent of respondents said the economy was on the wrong track and 28 percent said it was going in the right direction. ...

The Pew survey found that 69 percent said there was more on-the-job stress than a decade ago, 62 percent said there was less job security and 59 percent said Americans had to worker harder to earn decent livings. Thirteen percent said they did not have to work as hard, and 26 percent said they work about the same.

One factor increasing anxiety is the corporate trend to send job overseas. The Pew poll found that 31 percent of respondents said it would be possible for their employer to hire someone outside the country for their job...

To be successful this fall, I think the GOP should keep telling workers their perceptions of insecurity are mythical.

[I'll be on the road all day and won't be able to do any updates until tonight - Mark].

Update: Greg Mankiw emails:

Your post on worker insecurity seems to conflate employment volatility and income volatility, as if they were the same thing. There is no question that there has been a big increase in income inequality over this period. So, even if job changes have the same frequency they had in the past, it seems possible that a job change has a bigger impact on a family's income. In other words, employment stability can remain the same while income volatility rises.


Thanks Greg - I was trying to avoid people drawing the conclusion that constant job duration implies constant economic security, so, that was one of the points I was trying to make. As Greg notes, just because employment duration hasn't changed doesn't mean the the cost of being unemployed remains constant. If the variance of income increases, which the evidence suggests it has, or if job changes or layoffs become more costly for other reasons, then the increase in the cost of being unemployed will cause workers to feel more insecure even if employment duration is constant.

    Posted by on Thursday, August 31, 2006 at 08:06 AM in Economics, Politics, Unemployment | Permalink  TrackBack (0)  Comments (22)


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