Details about the course & Overview

Transcription

1 Personnel Economics Details about the course & Overview Nicole Schneeweis Nicole Schneeweis (JKU Linz) Personnel Economics 1 / 20

2 Details about the course Admittance... Material Edward P. Lazear and Michael Gibbs (2009): Personnel Economics in Practice, 2nd Edition, John Wiley & Sons Chapters 14, 713 Also possible: 1st Edition Edward P. Lazear (1998): Personnel Economics for Managers (other chapters) Several books are available in various libraries at the campus Master copy available in the oce (K149D, Ines Meister) Slides and additional material available at: team/nicole-schneeweis/ Nicole Schneeweis (JKU Linz) Personnel Economics 2 / 20

3 Details about the course Your presence in the course will not be documented No homework Meetings: Tuesdays, 15:30, BA 9910 Exam and Make-up exam Thursday, January 24, 2019, 12:00-13:30, HS1 Friday, February 15, 2019, 13:45-15:15, HS16 Contact & Questions I: Announcements via KUSSS Make sure there is the right address in the system! You: Ask me during and after the course or me Nicole Schneeweis (JKU Linz) Personnel Economics 3 / 20

4 Topics Introduction Why personnel economics? Stylized facts on the labor share Hiring employees (chapters 1/2) Setting hiring standards - How to choose the right candidate? Decisions with imperfect information - How to handle uncertainty? Overcoming problems of asymmetric information Screening: uninformed party takes the lead Signaling: informed party takes the lead Investment in skills (chapter 3) Education - What inuences the education choice? On the job training - Who pays for general and rm-specic human capital? Nicole Schneeweis (JKU Linz) Personnel Economics 4 / 20

5 Topics Managing turnover (chapter 4) Is turnover always bad? Poaching (headhunting), lay-os, retirement Job design (chapters 7/8) Tasks - What tasks and skills are combined into jobs? Has this changed over the last decades? Teams - When is it useful to assign a team? Free-riding? Paying for performance (chapters 9-13) Performance evaluation - Inputs? Output? Broad or narrow measure? Rewarding performance - Should compensation be linked to performance? Promotions and seniority pay Prot sharing and benets Nicole Schneeweis (JKU Linz) Personnel Economics 5 / 20

6 Why Personnel Economics? Human Resource Management (HRM) from an economic perspective: to understand how rms organize themselves and manage their employees Individual decisions from an economic perspective: investing in human capital, where to apply, what eort to make Employees most valuable asset of rms around 3/4 of all costs are human resource related around 70% of wealth is human capital (next to physical or nancial capital) Target: Analyzing conditions of the business & labor market environment to eectively utilize and develop human capital Nicole Schneeweis (JKU Linz) Personnel Economics 6 / 20

7 Human Capital `reduces human-beings to economically interesting quantities only' What we mean: bundle of skills and knowledge (innate ability, degree of acquired knowledge and skills, something that can be invested in) Nicole Schneeweis (JKU Linz) Personnel Economics 7 / 20

8 Economic Models Criticism: economic modeling is inhuman and therefore inappropriate for the solution of problems of HRM Of course, models do not perfectly image reality, instead (like maps) they simplify reality to give orientation. Good models omit unimportant details to clear the view on main mechanisms. Assumptions on behavior: utility maximization of individuals prot maximization of rms rationality (actors do not behave in a way that they harm themselves deliberately) Analysis of incentive systems Economics not instead but supplementary to HRM Nicole Schneeweis (JKU Linz) Personnel Economics 8 / 20

9 OECD Employment Outlook 2012 Chapter 3 Labor losing to capital: What explains the declining labor share? Nicole Schneeweis (JKU Linz) Personnel Economics 9 / 20

10 Labor versus Capital How much of the cake (national income) can be attributed to labor? = Terms: Labor share, Wage share, Lohnquote Questions: What is the labor share and what can it tell us? How did the labor share develop over time? What is the labor share in the production function? Nicole Schneeweis (JKU Linz) Personnel Economics 10 / 20

11 Measuring national income and the labor share National Income and Output: estimate total economic activity in a country Output approach (total value of all goods and services a nation produces) Expenditure approach (counting total output by nding the total amount of money spent) Income approach Equates total output to the total factor income received by residents Important components: Employee compensation (wages, salaries, benets) Interest income from capital goods net of interest paid Rental income net of expenses Nicole Schneeweis (JKU Linz) Personnel Economics 11 / 20

12 Y = Labor share, Wage share, Lohnquote. Labor Questions: share: development over time What can it tell us? How did the labor share develop over time? What is the labor share in the production function? 0.66 Share of Labour Compensation in GDP at Current National Prices for United States Ratio Source: University of Groningen fred.stlouisfed.org myf.red/g/7j3m Figure: Labor share in the US 1950 to Figure: Share of labor compensation in GDP in the US 1950 to Session I Personnel Economics October / 21 Nicole Schneeweis (JKU Linz) Personnel Economics 12 / 20

13 and 1980s in others (Bassanini and Manfredi, 2012). Labor share: development over time Figure 3.1. The decline of the labour share in OECD co % Level in 2009 a Level in 1990 b Percentage points SVK NZL NOR LUX POL IRL JPN CZE USA CAN AUS ISR c HUN ITA ESP EST DEU GRC FRA FIN AUT NLD SWE BEL GBR DNK SVN PRT KOR ISL *** ********* *** ********** NOR FIN IRL LUX POL AUT KOR SVN Note: Three-year averages, starting and ending with indicated years. ***, **, * significant at the Figure: Median dropped from 66.1% to 61.7%. significance refers to the coefficient of the time trend in a bivariate regression on annua variable. The wage of the self-employed is imputed assuming that their annual wage is th whole economy. Nicole Schneeweis a) (JKU Germany Linz) and Iceland: Personnel 1991; Estonia: Economics 1993; Poland: 1994; Czech Republic, Greece, 13 / 20 Hu

14 Decreasing labor share and income inequality Not necessarily accompanied by a decline in living standards for workers = Might be accompanied by faster economic growth (`larger cake') Signicant dierences across earnings groups On average, wage income share of top 1% increased by 20% Wage share of lowest income group declined over time Higher capital share is associated with higher inequality in the distribution of income (Piketty 2013, Capital in the twenty-rst century) Correlation of labor share and income inequality (Gini coecient: 0 perfect equality, 100 perfect inequality) Nicole Schneeweis (JKU Linz) Personnel Economics 14 / 20

15 income of the average capital owner tends to be higher than the income of the average worker. As a consequence, the decline of the labour share tended to evolve hand-in-hands with the Correlation of labor share and income inequality widening of market-income inequalities (see Figure 3.2). Figure 3.2. Changes in the labour share and in income inequality, 1990s to mid-2000s a Change in the Gini coefficient for market income 0.10 ITA Corr. coeff. = NOR SWE CAN DEU GBR AUS FIN USA DNK LUX BEL FRA CZE GRC NLD Change in the aggregate labour share, percentage points Note: Labour share: three-year moving averages centred around start and end dates. The wage of the self-employed is Figure: imputed assuming Decrease that their annual in Labor wage is the share same as related for the average to increase employee of the in whole income economy. inequality. The Gini coefficient is based on pre-tax and transfer income of the population aged 18 to 65 years. a) for Canada; for Denmark, the Netherlands and the United States; for Italy, Sweden and the United Kingdom; for Australia, Belgium, Germany and Norway; for Finland; Nicole Schneeweis for (JKU the Czech Linz) Republic, France and Luxembourg; Personnel Economics for Greece. 15 / 20

16 of income earners in total income and the share of labour income in total income of the top 1% of earners. The product of these two shares gives the labour share of the top 1% of income earners (except for Labor share excluding top earners discrepancies between national income and GDP). Therefore, subtracting it from the aggregate labour share yields an estimate of the labour share of the bottom 99% of earners (see OECD, 2012, for more details). The results from this exercise are summarised in the chart below. Labour share declines, excluding the top 1% of income earners in selected OECD countries, 1990 to mid-2000s Percentage point changes Change in the aggregate labour share Change in the labour share, excluding earnings of the top 1% of earners Australia Canada France Italy Japan Netherlands Spain United States Note: Three-year averages, starting and ending with indicated initial and end years. Initial year is 1990 for all countries, except for Japan Figure: (1991); mid-2000s Stronger data decline refer to 2007 iffor top Australia, earners 2000 for excluded. Canada, 2005 for France and Japan, 2004 for Italy, 1999 for the Netherlands, 2008 for Spain and the United States. Source: OECD (2012), Labour Losing to Capital, supporting material for Chapter 3 of the 2012 OECD Employment Outlook, OECD Publishing, Paris, available online at Once top earners income is excluded from the computation of the wage bill, the drop of the labour share Nicole Schneeweis (JKU Linz) Personnel Economics 16 / 20

17 What explains the decline in labor share? Total factor productivity growth Information and communication technologies (ICT): intervention of new capital goods and production processes (replacement of labor in certain types of jobs) International competition Delocalization of parts of production Reduction in bargaining power of workers Higher domestic competition and decrease in use of collective bargaining institutions Nicole Schneeweis (JKU Linz) Personnel Economics 17 / 20

18 machines have increasingly replaced humans in routine tasks, whether manual or cognitive. Yet, another explanation for increasing job opportunities in low-skill jobs has to Changes in occupations do with increasing labour market participation of women and the consequent substitution of low-skill market services for home production (Mazzolari and Ragusa, 2012). Figure 3.7. Changes in the shares of different occupational groups in total hours worked, Annual percentage rates % 1.5 Low-pay occupations Intermediate-pay occupations High-pay occupations AUT BEL DNK FIN FRA DEU GRC IRL ITA LUX NLD NOR PRT ESP SWE GBR Note: Annual growth of total hours worked in different occupations. Occupational groups are defined on the basis of their ranking in terms of average wages in each country over the period. Source: Goos, M., A. Manning and A. Salomons (2009), Job Polarization in Europe, American Economic Review: Papers and Proceedings, Vol. Figure: 99, No. 2, pp Decline in intermediate-pay occupations One striking fact that emerges from Figure 3.7 is that the growth rate of low-paying Nicoleoccupations Schneeweis (JKU was Linz) positive in most countries Personneland Economics even greater than that of high-paying 18 / 20

19 The labor share in the production function Cobb Douglas Production Function: Y = AK α L 1 α Producer optimization: Y L = w p and Y K = r p p... price Marginal products: Y L = (1 α)a( K L )α and Y K = αa( L K )(1 α) Expressions for labor and capital shares: (w/p)l Y and (r/p)k Y Labor share: ((1 α)a( K L )α )L AK α L 1 α = 1 α Capital share: (αa( L K )1 α )K AK α L 1 α = α Nicole Schneeweis (JKU Linz) Personnel Economics 19 / 20

20 Questions? Nicole Schneeweis (JKU Linz) Personnel Economics 20 / 20