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Economy

On Jobs

An issue on which economists’ thinking differs most distinctly from that of non-economists is jobs.

The economist understands that jobs are always available. In fact, each of us has so many potential jobs that we can’t possibly do all of them. Paint the house, clean the garage, bathe the dog, mow the lawn, mow the neighbor’s lawn. The list is endless. Trouble is, few of these jobs pay very much.

The economist also understands that jobs are not a benefit, but a cost. That is, what each of us wants is not the job itself. We don’t work because doing so affords us the obligation to toil, sweat, and agonize. Rather, we’re willing to toil, sweat, and agonize only because we value sufficiently highly the income we get paid to do so.

In short, what we want are not jobs per se but opportunities to earn income.

The economist understands, therefore, that the value of paid employment depends on the economy’s productivity. If the economy is producing lots of goods and services that people find attractive, then each paying job will be worth more than if the economy’s output were meager or unattractive. Even the best jobs in a primitive society afford a level of well-being that every modern American would find unbearably deficient.

In fact, we Americans of 2023 would be horribly discontented if we were suddenly transported back a mere half-century, and employed in that era’s high-wage sectors. What did the best-paid American workers buy in 1973?

Cadillacs – without airbags, remote keyless entry, blindspot monitors, back-up cameras, and the wireless connectivity that gives today’s drivers access to GPS navigation, streaming music, and approximately one trillion satellite radio stations. Those Cadillacs of yesteryear did, however, all come with AM-FM radios.

Bulky, non-HD television ‘sets’ – that received three or four channels, few of which broadcast ’round the clock. The colors on the images projected by these televisions were not quite natural, and they often bled into each other. These TVs also frequently broke down. Almost none had remote controls.

Rolodexes – which did not fit conveniently in your coat pocket or purse.

Turntables and LPs – the latter of which, when played on the former, often would ge would ge would ge would ge would get stuck. Any speaker that produced decent sound was approximately the size of a school bus.

Telephone service – and the privilege of paying a small fortune for each long-distance call. None of these phones were cordless or suitable for bringing along in the car or for a walk in the park. And these phones were utterly useless for taking photos to be shared on Facebook or texted to friends. (No matter the last, as in 1973 there was no Facebook or instant messaging.)

You get the point. Ordinary Americans today enjoy access to a range and quality of goods and services that were undreamed of by our parents when they were young. We today enjoy this access because our economy is so dynamic and productive.

Unfortunately, economic dynamism is commonly condemned. When a new spark of dynamism enables machines to perform tasks once requiring human muscle or brainpower, or when an overseas source of supplies opens up, politicians, pundits, and reporters focus on the resulting loss of domestic jobs.

“It’s awful,” some people cry. “We need tariffs and other interventions to stop this sort of thing!”

This reaction misses the big picture. Only by finding more productive ways to use resources (including human labor) does our standard of living rise. For example, it’s only because of the colossal growth in agricultural productivity that fewer and fewer people need to farm. Today, children and grandchildren of farmers are chefs at fusion restaurants, managers at Target, Lasik surgeons, fortune-reaping developers of apps for smartphones, and on and on without end. As consumers, our standard of living would be much lower had no agricultural jobs been ‘destroyed.’

And so, too, our lives are better as workers. When, decades ago, the prospects of earning a good living on the farm fell, the farmer wondered anxiously how his grandchildren would earn their living. He could not have known that some would work for companies called Apple, Google, FedEx, and Ikea, while others would be freelance web designers working out of their lofts in SoHo. (Fifty years ago, all web designers crawled on eight legs.) These jobs would never have existed had not human creativity and energy been freed from older occupations — which gets us to the most important thing that economists know about jobs.

In a free economy, we have jobs that we don’t want to lose only because we are free to lose the jobs that we have.

The great majority of jobs that permeate the modern economy are created by our freedom as consumers to spend our incomes as each of us sees fit – including our freedom to change how we spend our incomes – combined with our freedom as entrepreneurs to create new spending opportunities for consumers.

If this dynamic process of consumer freedom and entrepreneurial experimentation were stopped, in an effort to freeze all existing jobs into place, the very logic of our economy would go haywire. Rewards to entrepreneurs would disappear and consumers would at best be locked forever into an unchanging pattern of buying the same things year after year, decade after decade.

A much more likely outcome, however, of a regulatory regime that attempts to prevent economic change is that living standards would actually fall. Such a regime would suffocate entrepreneurship. Economic creativity and alertness to new opportunities would be killed. The reason is that entrepreneurship is necessary even to maintain the economy at a steady level of prosperity.

When existing sources of inputs start to run low, entrepreneurship is required to find adequate replacements. When consumers’ tastes change, only entrepreneurs can successfully discover – in competition with each other – how to reallocate resources in ways that don’t result in a decline in living standards. Ditto when there are changes in demographics. Entrepreneurship, though, can’t be awakened only when needed to ensure that living standards remain steady, and kept comatose whenever it might spark economic change that results in economic growth.

Determined efforts by the government to protect existing jobs by preventing economic growth would almost certainly turn out to be efforts that result in severe economic decline. And every job in such an economy – possibly excepting those of government bureaucrats – would wind up paying much lower wages in exchange for much harder work.

No job for economists is more vital than making this truth widely known.

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