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Lecture 11Lecture 11Tuesday, October 7Tuesday, October 7
High Road CapitalismHigh Road Capitalism
Announcements for the exam:
1.The exam will be in the regular classroom, Thursday, 2:30-3:45
2.Room for extended time: Sterling 1321, 2:30-4:30
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A Economic Balance sheet for A Economic Balance sheet for the United States at the the United States at the
beginning of the 21beginning of the 21stst Century Century
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Average real weekly earnings of private production nonsupervisory workers, 1947-2011 (2011 dollars)
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Annual rate of growth of family income by income groupAnnual rate of growth of family income by income group1947-79 compared to 1979-20051947-79 compared to 1979-2005
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Trends in productivity and compensation, 1973-2011
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Annual growth in productivity and compensation during periods of economic expansion, 1975-2011
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Patterns of Job Growth in the US, 1960s versus 1990s
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Era of trade deficits
U.S. Exports, Imports and trade balance: 1947-2012
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What should be done?
“Close off the low road, pave the high road, and help firms and workers move from the first to the second.”
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“Low Road” “High Road”
Basis of firm competition
Nature of product market
Typical jobs
skills
training
Training process
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
Typical jobs
skills
training
Training process
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs
skills
training
Training process
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills
training
Training process
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills low skill: “trained gorilla” high skill
training
Training process
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills low skill: “trained gorilla” high skill
training job specific & concrete skills meta skills transferable across jobs
Training process
short job training provided by employers
life-time training and retraining provided by employers and public institutions
Job autonomy
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills low skill: “trained gorilla” high skill
training job specific & concrete skills meta skills transferable across jobs
Training process
short job training provided by employers
life-time training and retraining provided by employers and public institutions
Job autonomy Low high
hierarchy
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills low skill: “trained gorilla” high skill
training job specific & concrete skills meta skills transferable across jobs
Training process
short job training provided by employers
life-time training and retraining provided by employers and public institutions
Job autonomy Low high
hierarchy rigid differentiation of managers and workers with many managerial layers
low differentiation of managers and workers with few layers
wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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“Low Road” “High Road”
Basis of firm competition
primarily price primarily quality
Nature of product market
mass goods, homogeneous products specialized/customized goods
Typical jobs very specialized multi-task
skills low skill: “trained gorilla” high skill
training job specific & concrete skills meta skills transferable across jobs
Training process
short job training provided by employers
life-time training and retraining provided by employers and public institutions
Job autonomy Low high
hierarchy rigid differentiation of managers and workers with many managerial layers
low differentiation of managers and workers with few layers
wages relatively low wages relative high wages
High Road versus Low Road CapitalismHigh Road versus Low Road Capitalism
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Problems moving from the Problems moving from the low road to the high roadlow road to the high road
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Profits
Skill Level of Workers in a firm
Low High
The Relation of skill levels of workers to profits of firms
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Profits
Skill Level of Workers in a firm
Low High
Two ways to increase profits
deskilling Skill enhancement
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Low Road
High road
Ability to compete in international competition
Time
Transition trough from low road to high road
THE TRANSITION TROUGH TRAP
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You provide training
YES NO
All other firms provide
trainingYES
$20,000
A
$30,000
B
NO
-$10,000
C
$0
D
The Training Deficit Trap: a free riding problem (from lecture 4 & 5)
Training costs = $10,000Extra Gross Profits with trained workers = $30,000Net extra profits if you provide training and keep workers = $20,000Net extra profits if you provide training and workers leave = -$10,000
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Co
mp
eti
tive
ne
ss
Strength of worker organization and participation
Low High
The anti-union trap:The relationship of union strength to competitiveness of firms
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Co
mp
eti
tive
ne
ss
Strength of worker organization and participation
Low High
The USA today
The anti-union trap:The relationship of union strength to competitiveness of firms
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Co
mp
eti
tive
ne
ss
Strength of worker organization and participation
Low High
Moving to
ward the high ro
ad
continuing the low road
The USA today
The anti-union trap:The relationship of union strength to competitiveness of firms