Tuesday, December 29, 2020

America Can't Compete With Chinese Tech By Walling Itself Off [feedly]

I receive a blessing of optimism from pieces like this in bloomberg, and other biz press. It illustrates that the most decisive factors in the "the debates" on transitions from capitalism to more socialist societies will be driven by straight out science, income and productivity more than ideology. 

Noah Smith: America Can't Compete With Chinese Tech By Walling Itself Off
https://www.bloomberg.com/opinion/articles/2020-12-27/america-can-t-beat-chinese-tech-with-a-new-iron-curtain

The election of Joe Biden will not end the U.S.-China trade war. Biden has already vowed to keep outgoing President Donald Trump's tariffs as leverage for negotiations. That signals the dawn of a permanent new era of economic competition between the two superpowers. But beyond the flashy, headline-grabbing issue of tariffs and trade deals, there's another, more important economic struggle being waged -- the battle to control technology industries. And the U.S. is deploying some very risky weapons to win it.

As China approaches technological parity with the U.S. in a variety of high-value industries, the U.S. has acted to maintain supremacy. Under Trump, the Committee on Foreign Investment in the U.S. (CFIUS) dramatically stepped up its blockage of Chinese acquisitions of U.S. companies -- a major way that China appropriates advanced technology. Though natural security is the official justification for this, retaining U.S. commercial dominance is undoubtedly an additional goal.

CFIUS's tougher approach will probably continue under Biden. This is probably a smart move, as Chinese acquirers have little to offer the U.S. tech industry except capital, and it's already awash in that, thanks to low interest rates and continued inflows of foreign and domestic money. But what's less obviously smart is Trump's other big weapon against the Chinese tech industry: export controls.

Export controls prevent U.S. companies from selling technology to Chinese companies. Although China is getting more advanced, its flagship companies still depend on various specialized hardware and software products that are only produced by one or two highly specialized companies in the U.S. or other developed nations -- for example, equipment used to make semiconductors. Blocking the flow of these products can severely hamper a Chinese company's business. This weapon was first wielded against Huawei Technologies Co., China's premier telecom equipment maker and the leading contender in the race to supply 5G technology. For a while it looked as if Trump had relented, but this fall he cracked down even harder.

More from

The controls have succeeded in hurting Huawei's business substantially, at least in the short term. That has apparently encouraged Trump to double down on the tactic. His administration recently extended export controls to more than 60 Chinese companies, including flagship semiconductor maker SMIC and world-beating drone maker DJI. The official justification is these companies' involvement with the Chinese military. But the latest round of controls also seem aimed at preventing China from gaining dominance in any high-value, high-tech industry.

This is a very dangerous game. Stopping trade secrets from leaking from the U.S. to China is one thing. But trying to smash the Chinese tech industry is a far taller order, and it seems unlikely to succeed.

Countries specialize when they trade with each other. The U.S. is great at software, Japan at car manufacturing, Taiwan at making semiconductors, and so on. For China to be integrated with the world economy while not specializing in any internationally competitive high-tech products at all would be extremely strange. China is no longer the low-cost assembly platform it was in the 2000s, slapping together iPhones with components made in Korea and Japan; its tech talent and accumulated knowledge are now world-class. Someone, somewhere, will want to buy Chinese tech products, and the U.S. won't be able to stop them.

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And in the meantime, export controls are hurting U.S. companies. If China can't buy high-tech equipment, semiconductors, and software from the U.S., then it will go buy them from Japan or Europe or elsewhere. Or if the U.S. manages to block that too, then China will simply learn how to make the products itself. The main enduring result will be a loss of revenue for American manufacturers, who will now be permanently shut out of the Chinese market.

Thus export controls could easily end up hurting the U.S. more than China. The Peterson Institute for International Economics reports that as of July, China accounted for a quarter of U.S. semiconductor manufacturers' revenues, but China only got 5% of its semiconductors from the U.S. So American suppliers can be replaced more easily than the Chinese market can.

The PIIE report also notes U.S. equipment makers will lose business elsewhere too, because other countries are afraid the U.S. will try to stop them from selling products to China made with American equipment. And export controls deter foreign manufacturers from investing in the U.S., as then they might not be able to sell to China.

In other words, export controls are an attempt to force the global tech industry to divide neatly into two spheres — one Chinese and one American. But because the Chinese market is so huge, America could easily find its own sphere far smaller and more pitiful than the Chinese one. By sealing itself behind an economic Iron Curtain, the U.S. risks repeating the mistakes made by its vanquished Cold War rival, the Soviet Union.

Export controls are simply too dangerous a tool for economic competition. There are other ways to limit the reach of Chinese military technology, such as the increasingly successful effort to nudge the world away from Huawei's 5G tech. The U.S. should stick to tools like that, while upgrading its own technology industry and spending more on research.

The election of Joe Biden will not end the U.S.-China trade war. Biden has already vowed to keep outgoing President Donald Trump's tariffs as leverage for negotiations. That signals the dawn of a permanent new era of economic competition between the two superpowers. But beyond the flashy, headline-grabbing issue of tariffs and trade deals, there's another, more important economic struggle being waged -- the battle to control technology industries. And the U.S. is deploying some very risky weapons to win it.

As China approaches technological parity with the U.S. in a variety of high-value industries, the U.S. has acted to maintain supremacy. Under Trump, the Committee on Foreign Investment in the U.S. (CFIUS) dramatically stepped up its blockage of Chinese acquisitions of U.S. companies -- a major way that China appropriates advanced technology. Though natural security is the official justification for this, retaining U.S. commercial dominance is undoubtedly an additional goal.

CFIUS's tougher approach will probably continue under Biden. This is probably a smart move, as Chinese acquirers have little to offer the U.S. tech industry except capital, and it's already awash in that, thanks to low interest rates and continued inflows of foreign and domestic money. But what's less obviously smart is Trump's other big weapon against the Chinese tech industry: export controls.

Export controls prevent U.S. companies from selling technology to Chinese companies. Although China is getting more advanced, its flagship companies still depend on various specialized hardware and software products that are only produced by one or two highly specialized companies in the U.S. or other developed nations -- for example, equipment used to make semiconductors. Blocking the flow of these products can severely hamper a Chinese company's business. This weapon was first wielded against Huawei Technologies Co., China's premier telecom equipment maker and the leading contender in the race to supply 5G technology. For a while it looked as if Trump had relented, but this fall he cracked down even harder.

More from

The controls have succeeded in hurting Huawei's business substantially, at least in the short term. That has apparently encouraged Trump to double down on the tactic. His administration recently extended export controls to more than 60 Chinese companies, including flagship semiconductor maker SMIC and world-beating drone maker DJI. The official justification is these companies' involvement with the Chinese military. But the latest round of controls also seem aimed at preventing China from gaining dominance in any high-value, high-tech industry.

This is a very dangerous game. Stopping trade secrets from leaking from the U.S. to China is one thing. But trying to smash the Chinese tech industry is a far taller order, and it seems unlikely to succeed.

Countries specialize when they trade with each other. The U.S. is great at software, Japan at car manufacturing, Taiwan at making semiconductors, and so on. For China to be integrated with the world economy while not specializing in any internationally competitive high-tech products at all would be extremely strange. China is no longer the low-cost assembly platform it was in the 2000s, slapping together iPhones with components made in Korea and Japan; its tech talent and accumulated knowledge are now world-class. Someone, somewhere, will want to buy Chinese tech products, and the U.S. won't be able to stop them.

Opinion. Data. More Data.
Get the most important Bloomberg Opinion pieces in one email.
By submitting my information, I agree to the Privacy Policy and Terms of Service and to receive offers and promotions from Bloomberg.

And in the meantime, export controls are hurting U.S. companies. If China can't buy high-tech equipment, semiconductors, and software from the U.S., then it will go buy them from Japan or Europe or elsewhere. Or if the U.S. manages to block that too, then China will simply learn how to make the products itself. The main enduring result will be a loss of revenue for American manufacturers, who will now be permanently shut out of the Chinese market.

Thus export controls could easily end up hurting the U.S. more than China. The Peterson Institute for International Economics reports that as of July, China accounted for a quarter of U.S. semiconductor manufacturers' revenues, but China only got 5% of its semiconductors from the U.S. So American suppliers can be replaced more easily than the Chinese market can.

The PIIE report also notes U.S. equipment makers will lose business elsewhere too, because other countries are afraid the U.S. will try to stop them from selling products to China made with American equipment. And export controls deter foreign manufacturers from investing in the U.S., as then they might not be able to sell to China.

In other words, export controls are an attempt to force the global tech industry to divide neatly into two spheres — one Chinese and one American. But because the Chinese market is so huge, America could easily find its own sphere far smaller and more pitiful than the Chinese one. By sealing itself behind an economic Iron Curtain, the U.S. risks repeating the mistakes made by its vanquished Cold War rival, the Soviet Union.

Export controls are simply too dangerous a tool for economic competition. There are other ways to limit the reach of Chinese military technology, such as the increasingly successful effort to nudge the world away from Huawei's 5G tech. The U.S. should stick to tools like that, while upgrading its own technology industry and spending more on research.


 -- via my feedly newsfeed

Simon Wren-Lewis: It is inevitable that Labour in opposition will not be a champion of social liberalism [feedly]

It is inevitable that Labour in opposition will not be a champion of social liberalism
http://feedproxy.google.com/~r/MainlyMacro/~3/IaSQAt_oSt8/it-is-inevitable-that-labour-in.html

It is inevitable that Labour in opposition will not be a champion of social liberalism

 

Trump has been defeated, but only just. Trump, that most ludicrous and destructive of US presidents, still won 46.8% of the vote. More importantly, the number of votes between Biden and Trump in the Electoral College was very small. Voters still turned out for a Repubican party that backed Trump all the way. Perhaps worst of all, the aftermath of the election showed that the Republican party backed Trump's attempts to overturn democracy. What Republicans do on a smaller scale with gerrymandering they are happy to do at a national level. The future of the US is still very uncertain when one of the two main parties does not respect democracy.


The Conservative party in the UK is only beginning down that particular route, with its plans for voter ID. Yet do they need to rig elections, having ruled for more than twice as many years as Labour since 1979? (To put it very simply, while in the UK the opposition to the right had just one election winner in Blair, in the US they had Clinton and Obama and now Biden.) More particularly, UK Conservatives by following the US strategy of right wing populism based on social conservatism seem to have a winning formula under the FPTP system.


Labour has two structural disadvantages in General Elections. First, it is one of three socially liberal UK wide parties and two socially liberal parties in Wales and Scotland. Second, social conservatives benefit significantly from the FPTP system, because social liberals are concentrated in the cities. The 2019 election was a clear demonstration of that structural disadvantage: when an election is fought on social issues Labour loses badly.


Many on the left dismiss this social conservatism, reflected particularly in dislike of immigration, as reflecting racism or xenophobia. However social conservatism is more general than that. It is in large part a reaction to the tremendous success social liberalism has enjoyed since the 1960s. I discussed this at length in this post from a year ago, and a recent tweet from @cakeylaura gives a personal illustration of what I mean. But my post had a title that was weakly justified by its contents. Is it really true that in all cases Labour should argue for social liberalism?


Socially conservative views reflect the left behind in the sense that they are out of tune with both the law and the broadcast media. Conservative MPs are far more socially liberal than their supporters, which is why we have socially liberal laws. The media is populated by younger university educated people who reflect today's social liberal attitudes. This combination, over the last 60 years or so, has meant that social conservatives have been overwhelmed. As that earlier post pointed out aggregate attitudes have become more liberal. (Demographics help as well, of course.)


If that was the end of the story, then the resistance to socially liberal views expressed at the ballot box would be weak. However most of our newspapers reflect a different world, geared to the more socially conservative views of most of their readership. This socially conservative media both reinforces and organises social conservatives. Brexit is the exemplar of this, and is why views on Brexit were impervious to economic realities.


The left talked a lot about the left behind after the Brexit vote, but typically they meant the economically left behind. While undoubtedly there was an element of that, research suggests the left behind were more those who hadn't kept pace with society's social liberalism. Outside the cities, the south voted for Brexit as much as the North.


The key role played by the Brexit press in reinforcing and organising social conservatism makes it very hard for Labour to change minds. Perhaps for this reason the strategy that Labour has followed since Blair has involved appeasement rather than persuasion. The way to win elections, so this argument goes, is to make any election about economic (or more recently competence) issues, rather than social issues. The best thing Labour can therefore do is dodge alienating the Red Wall voter, and that seems to be Starmer's strategy. On its own that is not enough, as Miliband's defeat showed, so you need something positive to put to the electorate. Corbyn did that in 2017, but still lost. Can Starmer do better?


The alternative suggested by the title of my earlier post is for Labour to argue for social liberalism. The point I made in that post is that attitudes have changed over time, so it is possible to persuade on social liberal issues, particularly where they intersect with economics. More favourable public attitudes to immigration in the last few years is a clear example. Obviously social liberals would like to believe the main social liberal party can stand up for their beliefs, but how much of that is wishful thinking?


Again the role of the right wing press is crucial. The recent trend to more positive views on immigration will reflect in part the absence since 2016 of negative stories about immigrants in the press. The power of the right wing press to mobilise on particular issues when their government is in power should never be underestimated. Compared to articles in newspapers that are read every day, how can Labour politicians persuade on social issues when they get at best a soundbite on the main news?


I think it is important to distinguish between Labour in government and Labour in opposition. Governments get considerable exposure in the broadcast media, and so it is possible to believe that they can provide a counter-argument to the right wing press on social issues. In opposition it is much harder. While Labour should argue for social liberalism while in government, to do so in opposition would seem to be a recipe for worthy failure.


There is a third argument, in between persuasion and appeasement, which has been recently put by Timothy Garton Ash in a recent Prospect article. He writes

"What follows from this analysis is that, where possible, we need to slow down the rate of change to one that most human natures can bear, while preserving the overall liberal direction of travel…..This means, for example, limiting immigration, securing frontiers, and strengthening a sense of community, trust and reciprocity inside them."

I have strong doubts about this. It might make sense with immigration, but is it tolerable when it comes to enforcing rights and tackling discrimination? Even with immigration, I continue to argue it was newspaper coverage of immigration rather than its scale that raised concerns about immigration.


So it seems inevitable that without a progressive alliance and with a FPTP system biased towards social conservatism, it is bound to be the case that Labour will be forced to appease the Red Wall voter. That is why the leadership will vote for the Brexit deal, and why it will dodge all the socially conservative traps that the Conservative government puts in its path. When the marginal voter is socially conservative, that is what you have to do.


While this strategy avoids an almost certain loss at the next election, it is fraught with danger. If Labour seems to be adopting Blue Labour ideas, that risks alienating its own supporters sufficiently for them to abstain or vote for other social liberal parties. Even if the leadership manages this difficult balancing act, the right wing press can still suggest that at its heart Labour is now the party of social liberals, which of course is true. Labour's positive message on competence or the economy may fail to attract voters sufficiently to counteract voters socially conservative inclinations.


Just because the path is fraught with danger does not mean a better one exists. It may be the case that, with FPTP biased towards social conservative voters and competition for the social liberal vote, it is just highly unlikely that over the next decade or more that the Conservatives can be defeated. In the long run demographics are on Labour's side, but that is not going to ride to the rescue anytime soon.


 -- via my feedly newsfeed

Monday, December 28, 2020

China Has the World’s Largest Economy: Get Over It [feedly]

China Has the World's Largest Economy: Get Over It
http://feedproxy.google.com/~r/beat_the_press/~3/ul4azNcueMc/

It is more than a bit annoying to hear reporters endlessly refer to China as the world's second largest economy. It isn't. It's the world's largest economy and has been since 2017. Here are the data from the International Monetary Fund.

Source: International Monetary Fund.

As the chart shows, China's economy first passed the U.S. in 2017. It is projected to be more than 16 percent larger this year, and by 2025 is projected to be almost 40 percent larger by 2025. 

Purchasing power parity (PPP) measures of GDP are based on applying a common  set of prices for all goods and services produced across countries. While it is difficult to measure accurately, most economists view PPP as being the better way to calculate GDP, since it reflects living standards and does not fluctuate with currency values. China does have four time the population of the United States, so it is still much poorer on a per capita basis.

The fact that China has a larger GDP than the United States is important for policy debates since many people seem to hold illusions are about the ability of the U.S. to influence China. While United States can take steps that will damage China's economy, even the harshest measures will only have limited impact, and China will be able to take steps to overcome them through time. This is important background for debates on China policy.  


 -- via my feedly newsfeed

Friday, December 25, 2020

Kate Bahn: Improving U.S. labor standards and the quality of jobs to reduce the costs of employee turnover to U.S. companies [feedly]

Improving U.S. labor standards and the quality of jobs to reduce the costs of employee turnover to U.S. companies

Kate Bahn (Equitable Growth)
https://equitablegrowth.org/improving-u-s-labor-standards-and-the-quality-of-jobs-to-reduce-the-costs-of-employee-turnover-to-u-s-companies/

Overview

Implementing policies that improve job quality in the United States could come with a direct cost, such as the cost to a U.S. company from raising wages or providing more paid time off. For these reasons, business interests often argue against policies that improve U.S. labor standards. Yet these qualms are short-sighted. Research on the cost of employee turnover reveals that it costs an average of 40 percent of an individual employee's annual salary to find a replacement if that employee leaves in search of better job opportunities.

In contrast, U.S. labor market policies that improve job quality have been shown to increase job tenure. Reducing the cost of employee turnover and improving the well-being of workers reinforce each other to the benefit of both companies and workers.

This issue brief reviews the economic literature on the cost of employee turnover. We present the evidence that there is a dollar value to replace a worker and get the next hire up to speed, which could be deferred by keeping those workers in their jobs if it is an otherwise good fit for their skills and passions. The costs of turnover range from 2 percent to almost 150 percent and vary across industries, but the sum of this research demonstrates the case for providing better jobs in the first place.

The research on employee turnover also points us to the solutions. Raising the floor on job quality sorts workers into jobs for which they are best matched. And employers are less likely to risk losing good workers when they search for the benefits needed to improve their well-being. These policy solutions include increasing earnings with policy tools such as minimum wages, giving workers a voice in their workplaces, and enforcing anti-discrimination protections so that no worker feels stuck between a hostile workplace and unemployment.

How employee turnover costs U.S. businesses revenues and profits

For businesses, the cost of losing and replacing a worker goes well beyond the cost of a new hire. These costs can amount to big financial losses. Because jobs in high-turnover industries and occupations are associated with low wages and lack of access to employer-provided benefits, the rate at which employees leave and are replaced has important implications for both workers and employers. Yet many businesses do not know or underestimate the toll that high turnover has on their workforce, their sales, and their bottom lines.

Studies that estimate the cost of losing and replacing a worker generally takes into account direct expenses such as the resources that go into advertising an open position, interviewing and screening candidates, and onboarding a recently hired worker. Consider the analysis of Iowa's direct care professionals—home health aides, nurse assistants, and patient care technicians—that shows paying overtime to make up for the loss of capacity while a position is vacant, recruiting, and training a new hire amounted to $4,026 per worker in 2013. Because these positions tend to pay low wages, provide few benefits, and expose workers to injuries, that year's high turnover is estimated to have cost service-providing companies in Iowa almost $200 million in direct expenses alone.

And turnover also has indirect, less-easy-to-observe costs. A study analyzing the U.S. supermarket industry finds that when accounting for opportunity or indirect costs of an employee leaving (such as paperwork errors or the loss of customers due to a decline in the quality of service), per-employee turnover costs more than doubled. For instance, the direct replacement costs of a nonunion supermarket cashier averaged $736 in 2000, but this number jumped to $1,550 when factoring in indirect costs. As such, estimates can vary widely not only because expenses are different across sectors and job types, but also because academic researchers and employers use a wide range of inputs to arrive at a dollar value of losing and replacing a worker. As a result, calculations tend to represent a conservative estimate of the true cost of turnover.

That being said, high turnover is more prevalent in some industries than others. The rates of quits and layoffs—the total number of quits and layoffs in a given period of time as a share of total employment—are highest in leisure and hospitality, construction, and retail. That workers in service industries such as retail and leisure and hospitality are particularly likely to voluntarily leave their jobs is, in no small part, a function of low pay (these two sectors have the lowest average wages among the major U.S. industries), lack of access to employer-provided benefits, and management practices that chip away at workers' sense of well-being and job security, such as unpredictable work schedules. (See Figure 1.)

Figure 1

In this issue brief, we analyze 37 case studies in 14 research articles published between 2000 and 2020 (see Table 1 in the Methodological Appendix for a summary of the studies and calculations for each position). The main estimates pool 31 case studies in order to calculate turnover costs as a percent of a given position's average annual wage, and include jobs in the healthcare, education, hospitality, finance, retail, transportation, and manufacturing industries. The results are the following:

  • On average, turnover costs represent 39.6 percent of a position's annual wage. Across the 31 case studies included in our estimates, the median cost of turnover represented 23.5 percent of a worker's annual wage.
  • For workers earning less than the 2019 average annual wage ($53,490), turnover costs made up 19.3 percent of their annual wage.
  • In the two major sectors for which at least five case studies are available, turnover costs as a share of average annual wage are as follows: health services (32.7 percent) and hospitality (19.6 percent).

Emblematic of these findings are the overall costs of replacing a worker across industries up and down the U.S. wage ladder in the 21st century. (See Figure 2.)

Figure 2

Reduce employee turnover by increasing U.S. job quality

One of the most basic ways reduce turnover and increase job tenure is to improve job quality by increasing earnings. In the United States, the minimum wage is the strongest tool to do this. Like other labor policies, opponents of the minimum wage argue that it imposes too high of a cost on businesses, which will respond by reducing employment levels. Yet the breadth of high-quality research on the minimum wage demonstrates that increasing the statutory minimum wage did not reduce employment and increased worker tenure. Across low-wage work and within critical industries such as nursing homes, increasing wages has positive effects for workers and the provision of services, with minimal costs to businesses.

In an Equitable Growth working paper by Kevin Rinz and John Voorheis of the U.S. Census Bureau, the authors use administrative data to follow workers who, over time, were affected by a minimum wage increase in their local labor market. They find that workers in affected jobs experienced wage increases and did not lose employment, which ultimately leads to longer job tenure and increased earnings growth at the lower end of the income distribution. These findings are reinforced by the broad trend of estimating the impact of the minimum wage with administrative data and increasing the accuracy of findings. These estimates show that long-term earnings are increased without reducing employment levels.

The studies reviewed in this issue brief are across a wide variety of occupations, industries, and income levels, many of which would not be directly impacted by a minimum wage increase. But this does not mean statutory wage levels cannot be instituted across earnings levels to improve job quality and increase worker tenure. In Equitable Growth's Vision 2020: Evidence for a stronger economy, an essay by Arindrajit Dube of the University of Massachusetts Amherst develops a proposal for establishing wage standards by industry and occupation so that workers are able to receive earnings aligned with the value they create.

Reduce employee turnover by improving U.S. labor standards

Another metric of job quality is worker voice in their jobs, which, in the United States, is primarily achieved by unionization. In a paper on the impact of unions on job satisfaction and turnover, Trove Hammer and Ariel Avgar of Cornell University School of Industrial and Labor Relations find that unionized workers are more likely to remain in their jobs, yet this may reduce some job satisfaction. A study by Steven Abraham and Barry Friedman of the State University of New York at Oswego and Randall Thomas of Ipsos, formerly of Harris Interactive, surveys workers by union status on job satisfaction and intent to leave a job. They find that job dissatisfaction is more strongly correlated with intent to leave for nonunion members, compared to union members.

Union membership subdues the impact of other variables associated with intent to leave a job, increasing the job tenure of unionized workers. A body of research examines why unions may increase job dissatisfaction while still increasing tenure. One theory is that greater information is available to unionized workers, inducing what Richard Freeman and James Medoff called "voice-induced complaining" in their seminal text, "What Do Unions Do?". A very recent National Bureau of Economic Research working paper by David Blanchflower of Dartmouth College and Alex Bryson of University College London finds that the relationship between union membership and job satisfaction has become positive. Using data from the Gallup U.S. Daily Tracker Poll from 2009 to 2013, they find that unions had a positive effect on job satisfaction in the years following the Great Recession, as the protective effect of unions increased job security among members.

Reducing employee turnover is particularly important to public-sector work, where unions are also more prevalent and where recent attrition in the public-sector workforces is a particular cause for concern. Emma García and Elaine Weiss of the Economic Policy Institute find that there is a shortage of teachers in the Kindergarten through 12th grade education system that has increased in recent years. In a study on unionized teachers in New York state, Yujin Choi of Ewha Womans University and Il Hwan Chung of Soongsil University find a positive relationship between the strength of grievance procedures and a lower likelihood of turnover. And a report by Rich Jones of the Economic Analysis Research Network on Colorado finds that turnover in the public sector has increased in the state over the past 10 years—a phenomenon that could be offset by increasing collective bargaining, which would ultimately improve the provision of public services.

Efforts to increase the coverage of collective bargaining agreements in the United States include proposals in Harvard University's Labor and Worklife Program's "clean slate for worker power" agenda that could pave the way to increase unionization and, by association, reduce worker turnover.

In addition to increasing worker voice at their jobs through unionization, worker involvement in workplace decision-making may broadly reduce turnover. In a study with administrative data from Denmark, Elena Cottini of Università Cattolica del Sacro Cuore, Takao Kato of Colgate University, and Niels Westergård-Nielsen of Copenhagen Business School find that "high-involvement work practices," where human resources policies allow for workers to produce knowledge in a systematic way and have a say in workplace practices, reduce worker turnover.

Worker involvement in establishment decision-making can also be bolstered through policies such as co-determination, where worker representatives have a seat on corporate boards. In a recent study by Equitable Growth grantees Simon Jäger of the Massachusetts Institute of Technology and Benjamin Schoefer of the University of California, Berkeley, along with Jörg Heining of the German Institute for Employment Research, co-determination is not associated with higher wages at firms with workers on boards, but also does not negatively impact firm's bottom line.

Hostile workplaces are also more likely to experience employee turnover, particularly given currently poorly enforced labor laws such as anti-discrimination protections, which give workers little recourse other than to leave their jobs and potentially suffer long-term earnings consequences. Research on sexual harassment in the workplace finds that it increases employee turnover, which, in turn, constitutes the greatest cost of sexual harassment for companies—more than litigation costs.

Likewise, lack of representation across race and ethnicity can result in burnout from the few workers from underrepresented groups in a workplace. This dynamic is detailed in Adia Harvey-Wingfield's recent book Flatlining: Race, Work, and Health Care in the New Economy. Then, there is racial discrimination in healthcare workplaces, which is shown to increase employee turnover. Well-enforced anti-discrimination protections, where workers have recourse without fear of retaliation, and workplace inclusion would both create higher-quality jobs for workers of color and women workers.

Conclusion

Improving U.S. labor standards to protect workers from discrimination in the workplace and to boost earnings and workers' voices on the job would benefit their employers by reducing the costs of employee turnover. This issue brief documents that businesses prioritizing low labor costs over job quality are misguided because they do not take into consideration the significant costs of replacing a worker. The research reviewed in this issue brief finds that the cost of turnover is an average of 40 percent of a worker's salary. To avoid these significant costs, workplaces that provide higher-quality jobs, particularly those with decent pay and a voice at work, have lower turnover and longer employee tenure.

Policies to increase earnings through higher minimum wages and wage boards would take a first step in helping companies avoid losing workers. Expanding unionization would go a long way to increasing worker tenure as well. Workers also need to be protected from discrimination and harassment at work, so that they are not left to choose between job security and their own well-being, which often results in them choosing to leave jobs at a cost to both themselves and the company.

Improving the enforcement of U.S. anti-discrimination protections would give workers recourse within their jobs, potentially reducing turnover and limiting costs to the company at the same time. Improving job quality will increase the well-being of workers, who will then be more likely to stay at a job, thus increasing their firm-specific human capital and productivity in a virtuous cycle where workers are able to share in the gains of economic growth.


 -- via my feedly newsfeed