Small Business Men Not Suffering from the Blues
Robert Waldmann
Worthwhile Canadian point. Nick Rowe looks at Catherine Rampell’s graph, which everyone has been talking about, and notes the dog that didn’t bark. Very few small businessmen are complaining about the quality of labor. This basically proves that the argument that the incerase in unemployment is due to missmatch is wrong. If the problem were too many construction workers and no workers in other fields, than firms in other sectors would be complaining about trouble finding qualified workers.
I add that they might also complain about the cost of labor. These are really the same problem if the minimum wage and contracts negotiated with unions aren’t binding. Firms can always hire quality labor if they offer one million and hour.
Fortunately the graph has the fraction describing quality of labor and cost of labor as the number one problem one on top of the other and both shaded blue. The graph shows the fraction of small business men with the blues declining sharply.
I am kicking myself for not blogging about this before (I noticed the fact in the graph really I did). I try to make up for lost time after the jump.
Worthwhile US initiative.
And get a load of those yellow employers terrified by insurance companies. There was a sudden sharp drop in the fraction listing insurance as teh worse problem just about November 2008. Now part of this (as with the blues) is low sales driving other problems out of first place. Still the decline is very very dramatic. There is no similar decline in complaints about taxes (is there ever ?).
I think that small businessmen were naively optimistic about health care reform’s chances in congress and counted on HCR eliminating their problem buying insurance for newly hired workers so soon that it was worth hiring and paying through the nose for a year — oops in the event 6 years, but, hey, too late now employers.
I’d say the graph shows fairly strong evidence that HCR caused increased hiring by small firms. Now it might have reduced hiring by large firms (which feared a mandate which turned out to be fairly feeble).
For both the issue of the blues and the yellow, I’d like to see a graph of the fraction of small businesses naming something an important problem not just the most important problem. That way the numbers would not have to add up to 100% and one could really tell to what extent concerns about insurance, the quality of labor and the cost of labor declined and to what extent they were driven out of first place by collapsing sales.
“I’d say the graph shows fairly strong evidence that HCR caused increased hiring by small firms. Now it might have reduced hiring by large firms (which feared a mandate which turned out to be fairly feeble).”
how?
i see nothing in that graph that supports that.
other factors crowding out cost of labor has nothing at all to do with hiring.
so how to you get to “HCR increased hiring”?
there is not a single bit of employment data in that graph.
all it shows is that in a bad economy, firms are more concerned with sales that hiring. you hire when you are growing.
A small quibble. I generally don’t like stacked area charts because I think the only undistorted chart is the one on the bottom. The rest are influenced by what’s happening below.
Karl Smith makes an interesting point about poor sales moving in lock-step with unemployment.
I don’t see any obvious way to relate this to your point, though.
Cheers!
JzB
Robert:
A lot of people have posted about this and I am concerned about some of the sweeping conclusions I have seen. Some thoughts:
1. The population in this survey is extremely diverse, which always makes me cautious about drawing sweeping conclusions.
2. It is hardly a surprise that slow demand is so prominently featured, given our current macro circumstances. This seems to have been interpretted by others that small business owners really don’t care as much about taxes, which is a misinterpretation.
3. Similarly, when companies are not hiring labor concerns are reduced. I would be very careful about drawing any conclusions about labor quality or skills matching.
“I’d say the graph shows fairly strong evidence that HCR caused increased hiring by small firms.”
4. Huh? Since small firms do not seem to be hiring, I don’t follow your logic. And based on my conversations with a (small) sample of small business owners, HCR has then more confused than motivated.
I think we all agree on one thing, demand is problem #1.
robert-
i read you post very carefully. i think it is you who did not read my question.
i think you missed my point. you maike a claim about HCR causing increased hiring.
i am asking you how you reached that conclusion.
a lower amount of concern about the difficulty of hiring is not the same as increased hiring.
even if we could look not at the issue about which they are most concerned and look at all concerns and track hiring, that still only tells us about concern, not action. there is nothing in this data that allows you to say anyhting about actual hiring, only concern.
it’s easy to hire bacause unemployment is high. that is not a proxy for actual hiring.
all this data shows is that at the peaks of the business cycle, firms worry about hiring and the quality of hires while at the bottom the worry about sales.
Paul Krugman and Matthew Yglesias have plain old ordinary graphs.
One advantage of the stacked area chart is that it makes it very clear that the fractions must add up to exactly 100%. Otherwise people have to read the title (or legend) to understand that question was about the one worst problem so more complaining about sales crowds out complaining about everything else.
Also they don’t look at some complaints like insurance and inflation.
“There was a huge gigantic amazing collapse in the fraction who listed insurance as the number one problem exactly when Obama was elected.”
I’ll give you that statement, but notice how the fraction is getting larger as time gets closer to full enactment of HCR. Also, there was a large concern of increased taxes, government regulation, and poor sales that also came along with the election Captain Wonderful, which also get larger as time moves into the forward.