U6 Watch: December 2013

U6 Watch was a monthly feature I started in July 2013 to track the abysmal shape of the U.S. labor market and the distortion of labor market statistics to make it appear as though things are improving. I've since become too busy with personal responsibilities and my day job to update it each month. Fortunately, Dean Baker has you covered (at least for December), making the same points I've made in previous months:

The headline unemployment rate fell sharply to 6.7 percent in December. However, this is not good news. The drop was almost entirely due to people leaving the labor force as the number of people reported employed in December only rose by 143,000, just enough to keep the employment-to-population ratio constant.

Your faith is touching, but free markets are anything but efficient

Note to reader: I rewrote this post in order to better integrate it into this project.

Incentives do not rule

Dank Pink summarizes the research that--for the vast majority of jobs--monetary incentives do not actually improve employee performance. In many cases, incentive pay actually harms employee productivity.

It's useful to keep in mind the fact that, by embracing the monetary incentive model, business interests demonstrate their utter incompetence at their own game, let alone their forays into influencing public policy. Businesses seldom have the slightest clue what is best for their own company; why should we believe that they know how to create jobs or fight poverty? This is one of the best examples of business' tendency towards ignorance of--if not outright hostility towards--evidence-based practice. And, if incentives don't even work for most types of paid employment, why do we design public policy around the idea that monetary incentives rule human behavior? 18 minutes well spent, after the jump:

The case against paying employees with tips

Image: Food service worker (source)

Would the market rapidly switch to a business model that provides higher quality goods and services and greater revenues? Go to the nearest sit-down restaurant to find out.

A couple of years after opening the Linkery restaurant in San Diego, the team and I adopted a policy of adding to each dining-in check a service charge of 18 percent—a little less than our tip average had been. We also refused to accept any payment beyond that service charge...When we switched from tipping to a service charge, our food improved, probably because our cooks were being paid more and didn't feel taken for granted. In turn, business improved, and within a couple of months, our server team was making more money than it had under the tipped system. The quality of our service also improved. In my observation, however, that wasn't mainly because the servers were making more money (although that helped, too). Instead, our service improved principally because eliminating tips makes it easier to provide good service...