The Workweek: A Round-Up of Labor Market Links for the Week Ending 5/5/17

This week’s labor market news on Idaho’s noncompetes, the flight of company headquarters and a New York manufacturing revival.

Welcome back to The Workweek, the Indeed Hiring Lab’s round-up of the latest research, news, and perspectives that made us think deeply or differently about the labor market this week. It’s your guide to the most important new insights about work.

Here are our picks for this week:

A robot stole my raise

What happens when labor markets get tighter? Standard economic theory suggests that wages should go up. That is one argument for limiting immigration: reduce the supply of labor so that domestic workers get fatter paychecks. But the real world is, as usual, more complicated.  Employers have another choice when it’s hard to find workers—instead of raising wages, they may be able to replace humans with robots. New technology should make workers more productive and create new jobs, but that’s small consolation to the people who are replaced by machines. The real world turns out to be frustratingly complicated. In today’s economy, even if a robot doesn’t take your job, it may cost you the raise you were hoping for. [FT]

A downside to upskilling?

Germany has an enviably low unemployment rate as well as a reputation for effective worker training programs. A new proposal by that country’s Social Democrats (SPD) would extend unemployment benefits for those who pursue additional education. But the idea is receiving mixed reviews. One concern is that it may take more time and effort to “upskill” lower-skilled workers than it does to retrain higher-skilled workers. That could mean that most of the benefits of the policy may go to those who find it easier to retrain rather than those who are most in need of more education, leaving the lower-skilled even further behind.  [Deutsche Welle]

 The impact of the minimum wage on burger patties

A recent working paper is introducing a new angle on the long-running debate on the impact of minimum wage hikes. Instead of looking at the overall effect on businesses, the study focused on restaurants reviewed on Yelp, finding that minimum wage increases affected restaurants differently depending on their rating. Highly rated restaurants seem unaffected by minimum wage hikes, but restaurants on the lower end of the ratings scale face greater odds of shutting down. The bottom line? By weeding out mediocre eateries, a higher minimum wage just might boost average restaurant quality.  [The Economist]

“Regular” work makes a comeback in Japan

Japan’s tightening labor market looks to be bringing a return to “regular” work: full-time permanent contracts rather than temporary “non-regular” positions that have dominated hiring in that nation for much of the past decade. As workers gain bargaining power, employers are having to offer permanent contracts in order to attract applicants. Employers may still prefer non-regular contracts. But the stronger labor market means that job seeker preferences are starting to win out. [Bloomberg]

Far from perfectly competitive

Is the US labor market rigged? In a scathing article this week, economist Alan B. Krueger offers a resounding yes. He points his finger specifically at the noncompete agreements required by many employers, along with other anticompetitive behavior. Standard economic models assume the economy is sufficiently competitive to leave little bargaining power to either the employer or the worker. We know this isn’t how the US labor market really works. But Krueger takes the argument further. He maintains we are now so far from perfect competition that employers are able to manipulate the labor market in ways that suppress worker compensation, job creation, and productivity. He proposes more enforcement of antitrust laws to restore the balance of power. [Milken Institute Review]