The Economics of Labour Shortages

I spoke today at the Melbourne Institute’s conference on the topic of labour supply and labour shortages. For anyone who’s interested, here’s my powerpoint. I shared the stage with Judith Sloan, Jeff Lawrence, Heather Ridout and Guyonne Kalb, which made for a fun panel.

Incidentally, the lunchtime speaker was Brendan Nelson, whose introduction (presumably drafted by his office) referred to his various achievements in particular portfolios. The one that caught my attention was that getting the defence budget increased was touted as one of the successes of his time as defence minister. I couldn’t help wondering whether he would have made the same claim if he had been social security minister.

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5 Responses to The Economics of Labour Shortages

  1. Anon says:

    Is it possible to read the speaking notes as well?

  2. Thinking in old ways says:

    “There is good evidence that social rates of return are extremely high from: High‐impact early childhood programs targeted at disadvantaged children (Perry Preschool, Abecedarian Project)”

    I really wonder if this is the latest form of faith based policy.
    It is curious that there is now a whole industry of advocates for early intervention who wander around with a mantra of “Perry preschool – Abecedarian – get 7 times your money back –early intervention good”.

    These are two tiny projects 128 children in Perry and 112 in the Abecedarian – they were targeted at very specific groups of high disadvantage – and high discrimination. The Abecedarian target was African-American kids whose mothers had low education and an average maternal IQ of 85 and 75% were sole parents. Perry targeted kids with an IQ of 70-85.

    While both of the studies claim very high returns on investment – what is strange is that they obtain them through quite different mechanisms. In the Abecedarian cost benefit analysis over half the benefit is from maternal earnings – and another 10% because the kids smoke less. In Perry about 40% comes from reduced crime – and it would appear there was little impact on maternal earnings.

    More interestingly while such a large proportion of the benefit from Perry flow from the reduction in crime (on average the kids were only arrested 2.3 times each by age 27 compared to 4.6 times for the control group) there was no significant difference in the criminality of kids who went through the Abecedarian project.

    The two programs used quite different approaches: Perry was part time 30 weeks a year preschool for kids aged 3-4 while the Abecedarian was full-time full-year intervention from age 0 they are talked about in the same breath – with little comment on what component of which program had what effect (or even if it was a Hawthorn effect with regard to the mothers) – only that some wonderful concept of early intervention solves all problems.

    At the same time as these interventions are supposed to have had great effects my understanding is that many others have not. (And it is still incredible that two interventions from 45 and 35 years ago are still being cited as the proof of what we need to do today. The main more recent project sometimes quoted is Chicago CPC something which had far weaker outcomes – an arrest rate of 17% instead of 25%).

    Furthermore despite many different approaches to early intervention there is little evidence of what works and what does not. Is the Scandinavian learning through play better than pedagogical approaches? Does the French system of school from age 3 makes any difference in terms of the human capital of the French – compared to other national systems where kids may not start until age 5 or 6?

    I can fully understand why so much faith is being put in early intervention – since the returns on many later interventions (part of the Heckman message – we are wasting money on later interventions – although your data on staying on at school for another year suggests otherwise) we can only hope that some how these programs might give some kids a chance – but I think policy needs more than that.

  3. Andrew Leigh says:

    Anon, I didn’t make any speaking notes – sorry.

    Thinking, I agree with you that we need good Australian evidence on these programs. They’re both promising (another way of thinking about the sample size issue is to be impressed that impacts are statistically significant with such small groups), but Aussie kids might be impacted differently. Here’s a piece I wrote on the topic last year.

  4. conrad says:

    I have two further comments on these programs:
    1) If they really do work as well as claimed then thats amazing — I think the hardest group to get benefits out of are the low IQ kids. They should look at kids with average IQs more (especially in low SES districts) — there would probably be more gains to be got at from this group.
    2) More pessimistically, I think these studies are confounded with “in the drawer” effects, where lots of people have run similar programs but have found no benefit. I know people in my area who have run literacy style programs (myself included), but have found null or only tiny benefits. These results are almost impossible to publish, and so people don’t, or they end up as in-house reports no-one reads. Alternatively, the people that did get effects in their studies (who sometimes use identical or very similar programs that others have used and failed with), are of course able to publish them far more easily.

  5. Andrew Leigh says:

    Conrad, from recollection, mean Perry IQs in control group are 70 (and about 70-80 in the treatment group). Your point on file drawer bias is well taken, though it’s less of an issue where the methodology is innovative (as in randomisation).

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