Are More Jobs the Answer? The “BIG” Bait and Switch

L. Randall Wray | July 1, 2013

Last week Allan Sheahan published a piece arguing that “Jobs Are Not the Answer” to America’s unemployment problem. Here’s his reasoning:

“The current unemployment rate of 7.5% percent means close to 20 million Americans remain unemployed or underemployed. Nobody states the obvious truth: that the marketplace has changed and there will never again be enough jobs for everyone who wants one — no matter who is in the White House or in Congress. Fifty years ago, economists predicted that automation and technology would displace thousands of workers a year. Now we even have robots doing human work. Job losses will only get worse as the 21st century progresses.”

In fact, economists have recognized this possibility since at least the early 19th century, when David Ricardo posed it as “the machine problem.”  “Robots” have been doing “human work” since the time of Adam Smith’s pin factory. Or, indeed, since the first proto-human discovered the fulcrum and lever so that one could do the work of four.

However, “unemployment” has existed only since the development of production for market. Our tribal ancestors “worked” about a dozen hours a week to provide the food, clothing, and shelter required for the standard of life they deemed acceptable. They occupied themselves the rest of the time with all the other human activities that we regard as “culture”: dancing, singing, tattooing, shaman-ing, piercing, ritualizing sacrifices, child rearing, storytelling, marrying, fighting, debating, drawing, and thinking.

Neither were our peasant forebearers, who had access to the main means of production—agricultural land—unemployed. They might have worked much longer days, and they grudgingly turned over an ever-rising portion of their production to rapacious feudal lords, but they were not unemployed. It is only once they lost access to land through enclosures, etc, that their livelihood depended on the whims of the employing class.

Why didn’t the inexorable trend to greater use of “robots” from the time of Smith forward lead to the dis-employment of all (or most all) human labor? First we raised living standards (arguably, of course, since it is not altogether clear that we live better than our tribal cousins in all important respects), always finding other ways to employ humans to produce products that our ancient ancestors never knew they needed. Second, we reduced the workweek—adding “weekends” and “holidays,” and reducing the daily grind from 16 hours to 12, and hence to 10 and finally 8. And there it got stuck—at least in America.

Further, being a Puritanical/Calvinist sort, Americans really never embraced the idea of vacations, anyway, and so unlike every other civilized society on earth, there is no considered right to a vacation and most Americans either don’t get them or don’t want them.

In recent years, it seems that involuntary unemployment and underemployment in the US has been rising. There are a number of reasons. First, the really lousy jobs have left the country and headed to developing nations like India, China, and Vietnam. For reasons that escape me, many of my progressive friends want to bring them back. Somehow they’ve idealized life in the factory (one suspects because they’ve never read Dickens or Marx, nor actually done manufacturing work, and apparently slept through the history lectures on the Lawrence, MA fire at the Pemberton Mill factory: According to the Boston Globe: The scene after the fall was one of indescribable horror. Hundreds of men, women, and children were buried in the ruins. Some assured their friends that they were uninjured, but imprisoned by the timbers upon and about them. Others were dying and dead. Every nerve was strained to relieve the poor unfortunates, when, sad to relate, a lantern broke and set fire to the wreck. In a few moments the ruins were a sheet of flames. Fourteen are known to have been burned to death in the sight of their loved ones, who were powerless to aid them.)

No matter how often one reads about fires or structural collapses in Asia that kill hundreds of workers at a time behind locked factory doors, our progressives want to bring back those “good jobs” to America.

At the same time, they disparage the kind of work done by the vast majority of workers in all rich, developed, capitalist societies: services. These jobs come in all shapes and sizes: personal, financial, customer, educational, health care, entertainment, and insurance. They are the jobs of the past, the present, and the future but are forgotten or denigrated by progressives who pine for the days when American workers serviced machines.

Some of those service sector jobs will be taken by robots, others will be lost to increased productivity. It is inevitable, of course.

I saw in the news that the prostitutes of the future will be robots. I’m not sure what to think of that development, but it is probably inevitable and will displace a lot of human workers. (Will future progressives bemoan the loss?)

My own profession—education—will almost certainly see technological displacement as we increasingly use “on-line” and “distance learning” methods to reach greater numbers of students. Doctors are already doing diagnosis and even providing care at a distance, and robots will soon enough do the delicate procedures at the operating table that are too difficult for even well-trained human hands.

Again, I do not know whether it is better to have a robot’s digits exploring body cavities, but it is going to happen.

I’ve focused on the advanced economies, but the same thing is happening everywhere. Unemployment globally had already reached a record high before the GFC hit in 2008. Chinese manufacturing employment will soon begin to trend downward at a rate that will make USA factory job losses look trivial. The truth is that global demand for manufactured products cannot possibly be high enough to support more than a relatively small proportion of global jobs (much like agriculture before it).

Like it or not, humans everywhere will rely mostly on the service sector for paid employment. I like to joke that we’ll all be in one of the “P” jobs: performance, personal care, politics, or prostitution.  Maybe that’s really only three categories since members of the third can be combined with the first or last.

And—who knows—maybe the best comics and magicians and preachers of the future will be robots. I already suspect that most comments provided to blogs are submitted by robots—a hunch strengthened by a recent stunt perpetrated by Brad DeLong (who programmed a “sub-turing robot” to harass David Graeber;  see here)

Indeed, note that all the tribal “cultural” activities that I listed above that were created to occupy time are now respectable and paid professions: dancing, singing, tattooing, piercing, ritualizing, child rearing, storytelling, marrying, fighting, debating, drawing, and thinking. Add accounting, banking, and marketing and you’ve pretty much identified the whole damned service sector. The difference from tribal (and other pre-capitalist) societies is that we moved to what economists from Marx to Veblen and through to Keynes called a “monetary production economy”—one in which much of the provisioning process is undertaken using money with a view to make “more money” (for the technically trained, that is M-C-P-C’-M’).

By no means should this be taken to mean that all production is monetary—most kids do not pay their parents for child care (yet)—but much of it is, and increasingly we have brought more of our provisioning activities into the market. While it is true that we also provide many of those activities through government, those, too, involve money. Indeed, I’ve argued that the monetary system was created to mobilize resources for the “public purpose”—but we need not go into that.

The important point is that our modern government uses the monetary system to mobilize resources (think national security) or to ensure access to them (think Social Security and Medicare). (Of course, we can consume some publicly provided resources—such as parks—without paying fees, but generally the state has directly or indirectly paid the wages required for upkeep.)

And, if it really should be the case that robots take away even our service sector jobs, then the answer (of course) is to reduce the work week—to share the work that living humans can contribute toward production.

In a capitalist society, access to many of the resources needed for the good life requires money, and access to money is linked to employment. Neither of these is a one-to-one correspondence, of course. To a greater or lesser degree, we “take care of our own” even when they do not have money or jobs. Still, there is an expectation that healthy people of appropriate ages “work for a living.”

As I said before on this blog, when discussing a “new meme for money,” we expect that those who are able to do so will “pay for” their own support. Everyone knows what “pay for” means—we all go to the shopping mall, and we pull out our wallets to “pay for” the Gucci handbag. You do not grab the bag and look around for someone else to pay. “Hey bro’, I’m a bit short today; can you spare a few hundred to buy this for me?” No, if you cannot afford the Gucci you buy the Wal-Mart store brand made in China. It does little good to argue that those who can “afford” to pay more ought to do so for the benefit of those who need welfare. That is what the charity meme is for. Of course we all ought to give to charity—from each according to ability to each according to need. If the tax system comes down to charitable contributions, then it should be based on voluntary contributions.  The mixing of these memes will at best lead to confusion, but more predictably it will lead to tax revolt and social spending cuts.

So here’s the strange reaction of Allan Sheahan to the observation that we’ve got “growth without sufficient jobs,” not only at the USA level but also at the global level: we don’t need no more stinking jobs. He says:

“Job creation is a completely wrong approach because the world doesn’t need everyone to have a job in order to produce what is needed for us to live a decent, comfortable life. We need to re-think the whole concept of having a job. When we say we need more jobs, what we really mean is we need is more money to live on. One answer is to establish a basic income guarantee (BIG), enough at least to get by on — just above the poverty level — for everyone. Each of us could then try to find work to earn more.”

In short, he claims we need the BIG (basic income guarantee). Those who cannot find jobs will simply live on publicly supplied hand-outs.

Now, I’m all for charity, even publicly organized charity. As Hyman Minsky put it, this has nothing to do with reducing poverty caused by unemployment, but rather, as he said “expanded, improved, and modernized programs of transfer payments and income in kind for the aged, the infirm, the disabled, and needy children are necessary. As I see it, this has little to do with the War on Poverty; it has mainly to do with our national conscience and affection for man.” He (rightly) predicted way back in 1965 that a War on Poverty based on charity would not lower the poverty rate at all—and it did not. It relieves our national conscience but it does nothing to alleviate poverty.

The BIG proponents, like Sheahan, always use a “bait and switch” approach. They love to point to the supposed success of Alaska’s “permanent fund” program that shares the profits from oil production with state residents. This, it is claimed, separates income from work, allowing all residents to choose to pursue a life of leisure free from the necessity of work. That life of leisure allows all Alaska residents to voluntarily contribute to the higher life of the community—free of the daily grind of work, they can pursue charity, or the arts, or a life of quiet contemplation. And then we find out exactly how much Alaska provides in the form of a “BIG” income guarantee:

“In 1982, the state of Alaska began distributing money from state oil revenues to every resident. The Alaska Permanent Fund gives about $1000 to $2000 each year to every man, woman, and child in the state. In 2012, the amount fell to $878. There are no work requirements. The grant has reduced poverty and the inequality of income in Alaska.”

Uhhmmm: there’s no typo there. You read it right: $878 smackaroos for the year. In Alaska that buys approximately two Big Macs plus a Coke every other month to feed a family of four, living out their dreams of a life of leisure among the Grizzlies.  Now, let me see. If we added several zeros to that number, we might get close to what BIG promises, holding all else constant.

But all else would not be constant if we paid “every man, woman, and child” in the US, say, $87,800 per year. Because we’d add just about two or three zeros to all prices and wages in the US—at least within a reasonably narrow margin of error. We’d simply raise the price of that life of leisure the BIG proponents promise, until we’d priced out the couch potatoes who are now willing to live on $878 a year in Alaska without work, but would want the same $87,800 that a BIG actually requires. (To be sure, it will get messier than that, but you get the idea. It amounts to little more than a quick devaluation of the currency. It could even be much, much worse than this if we all together decide to become couch potatoes to live out the BIG promised life of leisure–and then that $88k would buy just about nothin’.)

I love the best quote ever from Dean Baker, to the effect that, in general, economists are not very good at economics. We could go further. BIG folks are just plain horrible at economics.

Look, I love welfare. I’ve got a huge bleeding liberal heart. I think our nation should take care of its own. But this incoherent nonsense argument that we don’t need no stinking jobs is just plain stupid. Even the progressive’s favorite argument that we need to bring back to the US all those old horrible factory jobs is better than BIG.

But why not advocate for decent pay in good service sector work, jobs for all who want to work, and an Employer of Last Resort to make the promise something more than empty?

As Hyman Minsky remarked barely one year into President Johnson’s battle against poverty, “The war against poverty is a conservative rebuttal. . . . It can spread poverty more fairly. . . . However, this approach, standing by itself, cannot end poverty.” The critical missing component in 1964, and that remains AWOL today, is a government commitment to full employment. Only a targeted jobs program, paying decent wages, will successfully fight poverty among the non-aged in a politically acceptable manner.

Minsky went on: “We have to reverse the thrust of policy of the past 40 years and move towards a system in which labor force attachment is encouraged. But to do that we must make jobs available; any policy strategy which does not take job creation as its first and primary objective is but a continuation of the impoverishing strategy of the past decade. A necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not by itself, eliminate a large part of the poverty that exists.”

And to conclude with my favorite quote from J. M. Keynes:

“The Conservative belief that there is some law of nature which prevents men from being employed, that it is ‘rash’ to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness is crazily improbable–the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years….”

(cross-posted at EconoMonitor)

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