January 1998, Vol. 121,
what is Précis?
If you can't read
Trends in job
Can we measure job
Précis from past issues
- Precisely what is Précis?
- Our dictionary defines précis (n) as
"a brief summary of essential points, statements, or
facts." This department will, from the tremendous
amount of information that passes across our
editors desks, briefly summarize that which we find
to be at least interesting, if not essential. Our goal is
to précis (v.t) three or four articles, newsletter
items, reports, working papers, and so forth, per month
on this single page. Please let us know which items are
most interesting and feel free to suggest essential
reading that we may have missed.
- GS-11 CEOs?
- Some academic research and a great deal of
journalism hold the view that corporate chief executives
are paid like bureaucrats. That is, many studies report
there is at best a weak link between CEO pay and firm
performance. In a National Bureau of Economic Research
working paper, Are CEOs really paid like Bureaucrats?,
Brian J. Hall and Jeffrey B. Lieberman take exception to
- Using a 15-year panel data set that is
more recent, larger, or more comprehensive in its
measures of compensation than data used in earlier
research, Hall and Lieberman conclude that when
CEOs holdings of stock and stock options are
considered, the elasticity of pay to performance is about
3.9. This is roughly 30 times larger than earlier
estimates that considered salary and bonus only.
- However, say Hall and Lieberman, "We
do not claim that current CEO contracts are efficient.
Nor do we claim that current pay-to-performance
sensitivity is sufficiently high. . . . However, we
believe that our findings do contradict the claim that
CEO contracts are wildly inefficient because there is no
correlation between performance and pay. Our evidence
demonstrates that the fortunes of CEOs are strongly
related to the fortunes of the companies they
- If you can't read this...
- . . . you may face heavy financial
penalties in the American labor market, according to the
OECD Centre for Educational Research and Innovation
report Education Policy Analysis 1997. Of 12 countries
that participated in the first two waves of the
International Adult Literacy Survey, the United States
reported the largest relative earnings disadvantages for
workers who had very poor basic skills.
- The earnings disadvantage applied for poor
skills both at understanding information from written
texts and at applying arithmetic operations to situations
encountered in day-to-day living. Somewhat alarmingly,
about one-fifth of the U.S. population aged 16 to 64 was
found to be at Level 1 (very poor skills) on the
"prose scale" and a similar proportion were at
Level 1 on the "quantitative scale."
- On the prose scale, the smallest penalties
were reported in Sweden, while Germany had the smallest
penalty for very poor skills on the quantitative scale.
Only 7.5 percent of working age Swedes were at Level 1 in
prose and only 6.7 percent of Germans were rated as
having very poor quantitative skills.
- Trends in job security
- Federal Reserve Bank of San Francisco
analysts Rob Valletta and Randy OToole have taken
data from the CPS and its supplements to see what they
have to say indirectly about job security. Over the
longer term, they write in me Banks Economic
Letter, a small, but statistically significant, uptrend
in new permanent dismissals as a share of employment
combined with a more pronounced downtrend in new quits as
a share of employment suggest that job security has been
declining. When they turn to recent short-run data,
however, they find rates of permanent dismissal and quits
are not different from what one would expect given the
20-year trend and contemporaneous unemployment rates.
- Thus, they conclude that the impact of the
possible long-run deterioration of job security on
observable behavior by workers and firms has been
relatively small and the recent behavior of dismissals
and quits does not appear to represent much of a
departure from or acceleration of long term trends.
- Can we measure job quality?
- Twenty-five years ago we thought we could,
according to Chris Tilly in his Industrial Relations
Journal article, "Arresting the decline of good
jobs in the USA?" Before coming to his negative
conclusion on the issue, Tilly reviews the conceptual
difficulties that have grown around the measurement of
job quality. First is the very notion that jobs can be
ranked independently from, and prior to knowing the
characteristics of the incumbent. Second, there may be
multiple qualitative distinctions between jobs. Third,
aggregate measure of central tendency may conceal
significant variation. Fourth, the choice of absolute or
relative measures is always an issue. And, finally, the
definition of a good job is a moving target-todays
workers may value different things in a job than earlier
- These issues make it nearly impossible to
create an adequate single, summary measure of job
quality, according to Tilly. Thus, he suggests reviewing
evidence on seven dimensions of job quality, each of
which measure some important part of the concept for
todays labor market wages, fringe benefits, due
process (protection from arbitrary discipline), hours
flexibility, job permanence or security, upward mobility,
and control over the work process. Oddly enough, Tilly
leaves out a measure of occupational status. The status
concept is one of the two that in a summary of earlier
research he notes, "Despite their shortcomings,
earnings and occupational status are not bad as
quick-and-dirty measures of job quality. "
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