1. Announcements for the exam:
Lecture 11
Tuesday, October 9
High Road Capitalism
Announcements for the exam:
The exam will be in the regular Bascom room from 11-12:45, Thursday.
Review session: Wednesday, 12:00 - 1:15pm in SocSci 5208

2. An example of a question about the statistics in the book
Average weeks of paid vacation in the U.S.
Average weeks of paid vacation in
most of Europe a
1 week
4 weeks b
6-8 weeks c
Just under 4 weeks
2-3 weeks d e
6 weeks

3. A Economic Balance sheet for the United States at the beginning of the 21st Century

4. AVERAGE WEEKLY EARNINGS (IN 2007 dollars, adjusted for inflation)

5. Annual rate of growth of family income by income group
compared to

6. Productivity
Average compensation
Median compensation
2007
1973

8. Patterns of Job Growth in the US, 1960s versus 1990s

10. Imports, Exports, and trade balance as a percent of GDP, 1947-2007
Era of trade deficits

13. 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.”

14. High Road versus Low Road Capitalism
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

15. Problems moving from the low road to the high road

16. The Relation of skill levels of workers to profits of firms
Low
High
Skill Level of Workers in a firm

17. Two ways to increase profits
Skill enhancement
deskilling
Profits
Low
High
Skill Level of Workers in a firm

18. THE TRANSITION TROUGH TRAP
Low Road
High road
Ability to compete in international competition
Time
Transition trough from low road to high road

19. The Training Deficit Trap: a free riding problem (from lecture 4 & 5)
You provide training
YES NO
All other
firms provide training
$20,000 A
$30,000 B
-$10,000 C $0 D
The Training Deficit Trap:
a free riding problem (from lecture 4 & 5)
Training costs = $10,000
Extra Gross Profits with trained workers = $30,000
Net extra profits if you provide training and keep workers = $20,000
Net extra profits if you provide training and workers leave = -$10,000

20. The relationship of union strength to competitiveness of firms
The anti-union trap:
The relationship of union strength to competitiveness of firms
Competitiveness
Low
High
Strength of worker organization and participation

21. The relationship of union strength to competitiveness of firms
The anti-union trap:
The relationship of union strength to competitiveness of firms
Competitiveness
The USA today
Low
High
Strength of worker organization and participation

22. The relationship of union strength to competitiveness of firms
The anti-union trap:
The relationship of union strength to competitiveness of firms
continuing the low road
Competitiveness
Moving toward the high road
The USA today
Low
High
Strength of worker organization and participation