Want to help micro-enterprises? Teach them something about business

Anyone who has ever visited a low-income country notices the very large number of very small enterprises that generate very little net income.  Would training in basic business concepts help these small firms?  To find out, three economists conducted a randomized study of 900 entrepreneurs in Zacatecas Mexico.  Half were invited to take a 48 hour course in business skills spread over six weeks.  They received instruction on costs, pricing, legal rights and organizations, product mix, marketing and sales skills.  Then the economists studied the experimental and control groups for the next 2.5 years.

The most striking finding is that those invited had more customers, higher sales and more profits than those who were not invited.  They also reduced costs and changed their product mix away from lower to higher margins.  The good news: profits grew by 20 percent; the sobering news, profits were initially $11 per day for all concerned.  

My take: it is hard to demonstrate the value of business education.  Simple comparisons of income by major or degree level are difficult to interpret because higher income of MBAs or business majors may be due to other factors such as diligence or skill.  The value of this study is that it provides experimental evidence that business training provides a genuine competitive advantage. 

What have the UI benefit cuts in NC done so far?

I just ran across three blog posts on what has happened to the North Carolina labor market since unemployment benefits were cut drastically in July.  One account is from the left, one from the right and one is data-focused.  (Aside: 2 of the 3 appeared in Tyler Cowen's Marginal Revolution website.)

Basic labor econ 101 says that the cuts in benefits will mean fewer unemployed persons and a smaller labor force.  Those collecting benefits must document job search efforts to continue receiving a check; if fewer people can collect checks, some of them will cut back on their search intensity and drop out of the labor force.

The impact on employment is more difficult to gauge.  One possibility is that the unemployed will become willing to work at lower wages and this would lead to faster transitions from joblessness to employment.  On the other hand, net income from a low wage job might not be all that much higher than the income generated from income maintenance programs and informal market activity, so there may be no change in employment.

I took a quick look at the data for NC from the US Bureau of Labor Statistics.  So far (June versus November) employment is unchanged, the number of unemployed is down by 18 percent, and the labor force has shrunk by 1 percent.  The unemployment rate is down from 8.8 to 7.4 percent, but it entirely reflects unemployed people dropping out of the labor force.  The good news is that there are fewer unemployed; the bad news is that they are not employed and have lower incomes.

A new twist on work hours

Work schedules are usually cut and dried.  The worker is scheduled for certain hours on certain days.  There is an implicit understanding that the worker may not be able to report in case of illness or accidents and that the job may not be there in case there is a flood or power failure.

Recently NPR ran a story about a new form of work scheduling at retail outlets.  Employees are still told to come in for specific shifts, but not as many as before.  Then they are given other shifts where they are instructed to call in two hours before to see if they are needed.  In essence the employees have to keep their schedule open so that the employers have a call option on their services.

Companies are selling software packages to help employers make better scheduling decisions.  According to NPR's account, the software advises managers to call more workers in on days when sales are running strong and vice versa.  Obvious problem #1 -- just because the noon rush is big, does that have anything to do with afternoon or evening sales?  Obvious problem #2 -- the focus here seems entirely on cost control; what about losing sales when lines get too long?

Nonverbal communication matters

Entrepreneur magazine ran a piece by Maryville University professor Dustin York who did an experiment with four identical classes.  He brought in a guest speaker for all classes who had the same script and slide deck for each class.  In two classes the speaker followed best practices of nonverbal communication during presentations: eye contact, vocal variety, moving around, hand gestures, and enthusiastic facial expressions.  In the other two classes the speaker made minimal eye contact, spoke in a monotone, clutched the podium and had a flat facial expression.

York then quizzed the students at the end of each talk.  Guess which classes did 30 percent higher?  It is not just what you say; it is how you say it.  Students in NC State's MBA program get lots of practice at presentations; this practice yields a lifetime of high dividends.