JOBS and Government Policy
Tue, Nov 6, 3:32 PM ET, by Bob McTeer
(My previous post examined for students the anatomy or pathology of the October jobs report. This post continues with some policy philosophy or suggestions related to jobs.)
At the national macro-economic or policy level, having higher levels of employment and lower levels of unemployment are highly desirable. Having more people pulling the wagon and fewer people riding in the wagon makes the wagon move along a lot easier and faster.
In my opinion, the role of government related to jobs is to promote a healthy economic environment so that the demand for workers, primarily by the private sector, will accommodate all those who are able, willing and want to work. But jobs for jobs sake, is probably not a proper goal of government policy.
Jobs should not be the primary goal of public policy, but the by-product of other desirable goals. Jobs should be the means to an end, and not the end itself. Let me illustrate what I mean by extreme examples, using Frederic Bastiat's technique of reductio ad absurdum.
You can increase the number of jobs by outlawing heavy construction equipment and requiring construction workers to use shovels. You can get even more jobs by substituting spoons for shovels.
Large hurricanes, like Sandy, can create clean-up jobs and stimulate GDP growth, although, as Bastiat pointed out in his Broken Window Fallacy, much of the spending will be diverted spending rather than net new spending. Nevertheless, in a slack economy with high unemployment, I would expect some net stimulus.
Government can increase employment by hiring the unemployed to dig ditches on Monday Wednesday and Friday and fill them in on Tuesday and Thursday. All these things will create jobs, but they are obviously not good ideas. I'm not recommending them.
They are not good ideas because better ideas are much more plentiful than the workers available to execute them. There is always more worthwhile things to do than people available to do them. That scarcity problem is largely what economics is about. I repeat: the shortage is not in our needs, but in the workers available to fulfill those needs.
Governments can save jobs by discouraging new technology or outlawing labor-saving devices like automatic elevators and automated telephone service. Think of all the elevator operators and telephone operators we've lost in recent decades, but we are better off for losing them because those people moved on to do other jobs that machines can't do so well.
Think of all the farm jobs lost to tractors and other farm equipment, and all the factory jobs lost to labor-saving technology, equipment, and computers. Think of the lowly bar code that makes the lines go faster at the check-out counters, raises the productivity of the check-out girls and boys, and relieves them of the need to do arithmetic. Someone ought to write an ode to the lowly bar code.
You get the point.
I'm reminded of what they used to call the factory of the future a few years ago: The factory of the future had only 2 employees: a man and a dog. The man was there to feed the dog, and the dog was there to keep the man from touching the computer. My point is not to count jobs, but to make jobs count.
Actually, and this sounds very counter-intuitive, you can probably measure national economic progress more by the jobs destroyed, than by the jobs created.
It once took about 90 percent of our population to grow our food. It now takes about 2 percent of our people to grow more and better food. Do we bemoan the farm jobs lost or celebrate the productivity gains that they represent?
The farm workers, or more likely their children, got to go to the factories and mills for good, higher-paying manufacturing jobs. But over time, manufacturing jobs gave way to service-sector jobs—because of invention and innovation on the factory floor. This job churn hasn't been abrupt, but it has been unrelenting.
Do we try to turn the clock back and regain those farm and factory jobs, or do we educate and train ourselves for the new higher value-added jobs of the future. The most impressive young people I've run across lately have been the young people working behind the genius bars at Apple stores. Come to think of it, apples to Apple might be a good metaphor for our economic progress over the decades.
Good guidelines for government policy on jobs might be: Don't try to protect jobs made obsolete or unproductive by technology or trade (domestic or international). Don't try to protect jobs by tolerating or creating inefficiencies. Go ahead and accept the productivity enhancements in one area and let the lost jobs migrate to other areas. Instead of trying to save particular jobs or groups of jobs, the government should encourage a vigorous private sector so that aggregate demand will be able to absorb those caught up in creative destruction or the job churn.
What causes wages to increase in real terms and what ultimately causes increases in our standards of living are productivity gains—increases in output per hour worked. Ironically, such productivity gains that improve the lot of workers are based on acceptance of new technology, including labor-saving technology. Workers benefit from more output per worker, not more workers per task.
So, you students get your job security through education and keep your job security through lifelong education—and not necessarily in the classroom. If you listen to Prairie Home Companion on the radio on Saturday afternoons—which you probably don't, but should—you would be familiar with the ad for power-milk biscuits. They give you the strength to get up and do what needs to be done.
Let's do what needs to be done, and the jobs will come.
SDI Glossary: "GDP" Definition
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