Got a newsletter this morning from Planet Money where they caught up with the authors of Why Nations Fail (written about 10 years ago) and talked about modern-day America. They pointed to all the normal stuff that people say about modern America, including:
Acemoglu and Robinson see the rising tide against liberal democracy in America as a reaction to our political failure to deal with festering economic problems. In their view, our institutions have become less inclusive and our economic growth now benefits a smaller fraction of the population. Some of the best economic research over the last couple decades confirms this. Wage growth for most has stagnated. Social mobility has plummeted. Our labor market has been splitting into two, where the college educated thrive – and those without a degree watch their opportunities shrivel, after automation and trade with China destroyed millions of jobs that once gave them good wages and dignity.
Yep, yep, yep. Feel free to check out this recent screed I did on automation and greed, actually.
Down near the bottom of this newsletter, the authors of Why Nations Fail propose some solutions to the current American situation, which are subsequently encapsulated in this post.
That post talks about the standard narrative we all say: “We need to create good jobs,” because ya know, good jobs are tied to a solid wage + dignity, and that’s what human beings need. I don’t think anyone would disagree with that.
Problem is, right up front on that link, the MIT-employed author says:
The market has a natural tendency to undersupply good jobs. Good jobs often come with more upfront investments and costs for firms, but the gains they create are shared with workers through the higher wages and better working conditions. Because firms do not take these worker gains into account, they naturally shy away from such jobs in favor of lower-paying jobs with lower upfront costs.
If you don’t believe that, let’s move to a visual, shall we? We’re all visual learners at some level, no?
This is based on something called Job Quality Index.
Since 1990, per above, it looks like we’ve created 2x the amount of “bad jobs” as “good jobs.”
When the more affluent virtue-signal about their role in society, one thing they often say — which is accurate — is that they are “job creators.” Cool!
But if they’re creating a bunch of crappy jobs, why do we keep up the “we need good jobs!” narrative?
Execs and job creators tend to be rich, right? We have a lot of evidence that, fundamentally, the rich don’t care much about the poor.
Here’s what this MIT dude says, again:
An economy powered by shared prosperity is not out of reach. But we need to abandon the fantasy of building a better society just by redistributing income and we must take urgent action to support higher employment and more vigorous wage growth. A successful policy must focus on using our technological capabilities to enhance productivity and generate good jobs. Shared prosperity requires revitalized labor market institutions to counteract the bias towards lower-paying, lower-quality jobs. And the government must refocus on building a better social safety net, providing worker protection, investing in the skills of all citizens, and implementing robust regulations to prevent monopolies from choking off high-wage job creation. A return to the era of shared prosperity is not out of reach, but it calls for a new approach to government policy, not just tinkering at the edges.
Couple of concerns herein:
- “Using our technological capabilities,” to most people (esp. the wealthy) means “Fun shit on our phones” and “Less peon jobs.”
- “Lower-paying, lower-quality jobs” means more money flows upward.
- “Social safety net” is what we need, yes, but it’s completely against ideas of “freedom” and “individual pathways” that dominate America. Cue sneering at Finland.
- “Worker protection” died in about 1974.
- “A new approach to government policy” is hard when the richest people have the most access to government policy-setters.
- “Preventing monopolies” is confusing because, well, aren’t monopolies kinda the whole point of capitalism in the eyes of world-builders? “I must achieve scale.”
This leaves us at a somewhat tricky spot. I wouldn’t think a lot of current executives and founders, as they achieve scale, are worried about the creation of good jobs. Some are, of course. But if you creating good jobs means you lose to a rival, or have a smaller house or smaller bank account than some prick in your industry, do you really want to do that?
We need to factor human psychology, greed, and existing trends — look at the chart above — into this discussion.
Is the goal really the creation of good jobs, or the creation of lower-paying jobs where the margin for the top is higher?
Ask yourself that.
