Thursday, July 08, 2010

Why are good jobs bad for the economy?

Richard Florida, Financial Times:

[T]he blue-collar jobs we pine for were not always good jobs: we made them good jobs. When my father came back from the second world war, his poorly paid factory job had been transformed. He was able to buy a house, put his two sons through college and participate fully in the American dream. Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques.

The same thing can and must happen in the service sector. It is starting already. Companies such as Wegmans, Whole Foods, the Container Store, Best Buy and Zappos already account for a fifth of the top 100 best places to work in America.

The problem with posing any economic question in terms of a need for "good jobs" is that good jobs are bad for the economy, if we define the economy as private gain. That is why people who propose more of them inevitably fail, whether they are unions or elected officials. Subsequently, a consensus takes shape around the need for jobs without adjectives because "jobs" and "job creation" play a central role in the kind of capital accumulation that defines a good economy. Good jobs hurt the economy by diverting wealth to people, which, under preferred circumstances, preclude greater profits.

There are circumstances in which good jobs contribute to capital accumulation by increasing the buying power of consumers. But the advantages which come from empowering a subset of consumers in the market are trumped by those derived by multiplying the number of consumers overall. One of the ways this is achieved is by lowering the cost of consumption to a point where poorer people can participate. In order to do that, you have to produce things much cheaper. This means you are working with the incentive not to create "good jobs" because paying people enough to live is either going to take a bite out of profits, which under conditions of competition can't be endured, or it's going to make the product more expensive, constraining its market appeal.

What is called "globalization" is a specific form economic integration intended to drive down the costs of production in order to broaden the consumer base at the same time. This is really where all the corporate interest in poor people is coming from, because there are so many of them, and if you can get them to buy your 10-cent yogurt packets, like Dannon in Africa, for example, that's just the tip of the iceberg. We're used to thinking about poor people as cheap labor, but what if they can become a lasting consumer base?

What's especially promising, along this line of thought, is the notion that we'll be able to drive down the standards of living worldwide, while establishing consumer societies at the same time. In theory, that kind of scenario could be sustained for a long time, because if everyone's desperate, then "just being grateful you have a job" really might become the predominant religious attitude, since without a job, you don't have a right to live. As an entrepreneur in BusinessWeek recently said about rising costs in the Chinese labor market, "[The] Chinese don't want to work in factories any more" -- so he's moved production to Vietnam. There's a very interesting philanthropic pretense that accompanies this impulse to employ the poorest of the poor, "lifting them out of poverty," etc., which I've commented on before that deserves continued examination.

If, for Richard Florida, "participating fully in the American dream" is going to come mostly from "enormous improvements in productivity wrought by improved technologies and management techniques," well, welcome to the future! We can see for ourselves what astronomical improvements in productivity and improved technologies and management techniques are doing for us, which is to get us to produce more while enjoying a whole hell of a lot less!


Picador said...

Florida is right that, in the 40s through the 60s, rising productivity resulted in higher wages for the middle class. However, starting in the 1970s, the two trends were decoupled, resulting in our current situation whereby the median wage is the same as it was in 1973 despite a 50% or greater increase in worker productivity. The fact that he hasn't looked at the numbers and still seems to think that the pre-1970 trend still holds is a pretty stark indictment of his seriousness.

JRB said...


Yes: "Decoupling" is the whole issue -- and its relationship to "improved technologies and management techniques" would ultimately prove to be the opposite of what Florida claims.

Anonymous said...

interesting posts- two comments for thought.

1) while the decoupling factor between real wages and productivity is for real, one cannot measure the gap accurately (particularly for "good jobs") using real wages but must use "total compensation." This is because "good jobs" often times came with benefits such as health insurance and pensions that "back ended" the productivity increase; that is, the growth in benefits coupled with wages were somewhat closer to the proscribed increase suggested by productivity.

2) I think your definition of "standard of living" is somewhat misleading. when you say "drive down the standards of living " you are likely referring to wages as a proxy of standard of living rather than what those wages will buy. indeed, "standard of living" not only includes wages but the goods and services those wages purchase. while the (ongoing) financial crisis may have dented previous "standards", there is no doubt, that the standard of living has and will continue to increase.

JRB said...

Hey Anonymous,


1) I agree!

2) On this point I wasn't clear: by a decline of "standards of living worldwide" I meant the break up of the middle classes in the advanced consumer economies, which have represented the highest standard of living for the most people since the mid-20th century -- a direct consequence of the constraints (political, technological, etc.) placed on capital at the time.

Freed of such constraints, people will naturally give more to production while getting back less, in every sense, in return.

I would point to financial contagion and the destruction in the Gulf, etc., just as readily as I would point to wages and what our money is really buying us when it comes in the form of cheap, disposable commodities on a mass scale.

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