Job Creation: The False Idol

 I think that there is far too much work done in the world, that immense harm is caused by the belief that work is virtuous, and that what needs to be preached in modern industrial countries is quite different from what always has been preached.

-Bertrand Russell, In Praise Of Idleness

Unemployment rates are hovering around 10%, and the media and the masses are outraged by government for not taking enough actions to correct this.  And why not, we’re entitled to our jobs!

We are entitled, aren’t we?

Let’s explore the facts:  There are more people in the workforce than ever before.  We have an increasing population, we have senior citizens working longer, we have longer work weeks, and we’ve had a massive in-flux of women in the workforce.  Additionally, we have modern machinery increasing efficiency in everything from database management to automated assembly lines.

We have a world that is more efficient, and this is a good thing.  It means more time for leisure, more time for art, more time for philosophy.  It means the lower-middle class can live like kings from just a century ago.  If only we knew how to handle this ever increasing efficiency to actually take advantage of it.  Instead, through mismanagement of the efficiency gain we end up with unemployment.

60 years ago, when most households were  beginning to get washing machine in their houses, it was a time of joy.  There would be no more hand scrubbing of dirty clothes for hours every week.  Now you just added some detergent and hit “go.”  This is a good thing, it meant more time for leisure, the arts, or playing with your children.  How many mothers (it was the 50’s, after all, so please don’t call me chauvinist) were complaining that these machines were taking their jobs?  How many mothers ran out to find new work to fill their time?

And yet, this is what the American workforce is doing.  They look at these new efficiencies and they panic – they are being obsoleted!

So why the different reactions?  In the washing machine example, it had no effect on the distribution of wealth. The homemaker would still get all the things she had before, the work would still be done, and the only situational change was that she had more free time.  But in the latter case, where an American worker is being replaced by a more efficient machine, there is a reduction in the equal distribution of wealth.  The business owners will make more due to increased inefficiency, and the worker will make nothing because s/he is unemploiyed.

So here we are, the world as a whole has more wealth, but the distribution of that wealth is decreased.  (The rich get richer).  The reason is because jobs, in a capitalist society, are the de facto method for this distribution.  But when we no longer need jobs (or far less, anyways), how else can we distribute?

Taxes are one method.  But taxes are managed by bumbling idiots and self-seekers.  They also fund wars and subsidize overuse of resources like oil.  And for taxes to be increased, the rich would need to support it.  Most won’t.

Inflation is another method.  Keep printing money (often to pay for the same wars and subsidies as taxes), and the value of the dollar goes down.  This means the rich get poorer, but unfortunately the poor do not get richer.

The last method is a a voluntary reduction in work by the rich.  The rich have jobs, usually well paying jobs, and the more they work, the more they take from the currently unemployed.  Much like the proposed Buffet Rule, this achieves a distribution of wealth, but it has three key benefits over the Buffett plan:

1. It keeps the money out of the hands of government

2. It rewards the rich with time for leisure, rather punishing them by taking away money

3. It’s voluntary.  Those who find this to be a good solution where everyone wins can opt-in.  Others can reject it.  I am one of the people that chooses to opt-in.

As I look at my plans for an extremely early retirement, I’m content in knowing that I’ll be doing my part towards the new form of wealth distribution that this country and world needs as we embark on the end of industrial growth that fueled capitalism so well.

Now if only the President would listen to me instead of the political opinionists.


5 Responses to Job Creation: The False Idol

  1. I’m with you on the idea of using our productivity gains for working less!

    Although, I’m not sure if the “Rich people working less” would actually result in more jobs for those who need them. Isn’t this a case of falling for the “Lump of labor fallacy” that economists feel is a misunderstanding of capitalism?

    Certain jobs create other jobs due to the fact that they pay a lot, and also tend to require lower-skilled people to deal with the products invented by these high-producing jobs. CEO, engineer, doctor, etc. If these people quit working, it would decrease the number of jobs available as a whole (shrinking the economy without allowing others to take their job).

    The economist-approved situation might be to have the rich voluntarily pay themselves less, even while they continue to do the work that produces jobs. They could then pay above-market salary and benefits to their workers.

    If the workers then choose to use their higher salaries in order to work less, instead of buying powerboats and F-350s, this could actually accomplish what you want – it would require the companies to hire MORE workers, and spread the income among a broader pool of people.

    So you’d need a culture change – the desire to share among the rich, and the desire to consume less among the poor and middle.

    People with more belief in government than yourself would suggest these culture changes could be nudged along by more a European style of regulations on companies and consumers – perhaps tax incentives for lower consumption and lower working hours, or a larger standard amount of vacation and maternity leave time.

    The objection would of course be in national competitiveness, but if this leads to a dramatic reduction in rich-person and company profitability and a moderate reduction in middle-class power boat purchasing, in exchange for more free time for everyone, some might call it a good deal for a sustainable culture. Especially if you happen to believe that our world has limited natural resources. :-)

    • Isn’t this a case of falling for the “lump of labor fallacy” that economists feel is a misunderstanding of capitalism?

      Yes, but just because some economists coined the phrase with the term “fallacy” doesn’t mean they’re right. 😉

      It seems there are two basic arguments against my lump of labor belief (let’s not call it a fallacy yet). First, that jobs create jobs – therefore the more high paying workers work, the more jobs we enable for others. In other words, labor is driven by production, not consumption. For example, I’m an electrical engineer – so if I design more motherboards, then more people are needed to build those motherboards. Hmm, but is that true? I don’t think so. I think people would buy someone else’s design, thus the manufacturing jobs are still required at another company (until my position is back-filled). My theory is that consumption drives production and not the other way around.

      But this is a microscopic example, so how about macroscopic? What if 10% of all doctors decided tomorrow that they had enough? They decide to retire effective immediately. Wouldn’t nurses, technicians and office janitors suffer too?

      As I see it playing out, the need for doctor’s services would still be required, so in the short term you’d see a rise in prices as the other 90% of doctors worked more hours and raised prices (supply and demand). They would employ more nurses/techs/janitors to keep up with the increased traffic. Once again, I see it playing out that consumption drives production, and not the other way around. Perhaps you might see a minor drop in nurse’s needs as the consolidation would drive more efficiency – or perhaps in some cases you’d see the opposite as the doctors would rely on the nurses more in order to keep up with the demand growth. Either way, I think it would be small.

      On the other hand, I do admit that there is one type of work that creates more work – creators. People who create new things that previously did not exist and whose market doesn’t cannibalize from other existing things. For example the Model-T, the iPad, and original cell phones. Although for the most part I’m not sure these things made the world a better place.

      The second argument for the “Lump of Labor Fallacy” is that if people were to work less, say 20 hours per week, employers would not hire more because of the overhead with bringing in more employees (recruiting fees, benefits ,etc). I believe this is true for two reasons – first that these costs are substantial, second because most people productively work less than 20 hours anyways. Employees would be more efficient. This is why France’s 35-hour work week would not work.

      But my proposal (which could have been more clearly stated) is for more people to retire early and leave the workforce altogether. In this case, as long as qualified replacements exist, the newly retired would be replaced by either an unemployed worker, or someone who is employed (who would thus need to be replaced in their old position). This only makes sense if you believe there is a finite amount of work needed, which I absolutely believe this to be the case since consumption drives production. And, in fact, because this would drive a better distribution of wealth, you would likely see the unemployed buy more – thus creating more jobs.

      I like your suggestion for the wealthy to voluntarily take less. I just don’t see how that could ever happen. Much like Buffett, I would gladly take less in order to support a better distribution of wealth. But I will only do this if everyone in my range does this (unlikely to happen), and I would need to be assured that the extra money would go to the right places (pretty much guaranteed not to happen). Do you have any proposals on how we could implement this in reality? Maybe restructuring the education system to discuss the virtues of knowing when enough is enough, instead of the virtues of working hard and becoming financially rich?

      • Adam says:

        Hi BNL,

        Love the blog, and this is one of many very interesting posts. I am taking my time reading through them from the start.

        Here’s a couple potential problems/questions with your proposal.
        1. The type of person who makes enough to leave the workforce altogether significantly earlier than usual is probably is a much higher quality worker than average. Are you worried about the “brain drain” that might occur from your plan, causing a decrease in quality/efficiency in the economy?

        2. If I work hard and retire from my professional job early, are you saying I can’t/shouldn’t re-enter the workforce doing something I enjoy more that pays less, because I’m supposed to vacate a spot on the “lump of labour”?

      • @Adam,

        1. The type of person who makes enough to leave the workforce altogether significantly earlier than usual is probably is a much higher quality worker than average. Are you worried about the “brain drain” that might occur from your plan, causing a decrease in quality/efficiency in the economy?

        I guess it depends on whether the “brain drain” is from something that is good for whatever you want to provide your goodness towards. If I was a social worker, loved what I was working towards, and felt I was making the world a better place – then you are absolutely correct. But I’m an electrical engineer. What I work on makes the internet go faster. I’m not too interested in the results of my work from a macro view, so pulling my brain from the collective effort weighs lightly on my conscience.

        2. If I work hard and retire from my professional job early, are you saying I can’t/shouldn’t re-enter the workforce doing something I enjoy more that pays less, because I’m supposed to vacate a spot on the “lump of labour”?

        Not at all. There’s nothing inherently wrong with “work.” The key is to not allow yourself to be a slave to the employment system. I have no plans to sit on my hands and do nothing of use once I retire.

  2. I feel strongly about this issue but my views are all over the place. I don’t want to be waiting around for a job no matter what my wealth is, I’d rather take action and create a job for myself.

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