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20190317 – The Once and Future Worker

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MAIN IDEA:

The main idea of this book is that all problems of American Society come from devaluation of work and the solution for most of the problems is restoration of strong labor market: “labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy”.

DETAILS:

Introduction: The Working Hypothesis

Here author defines his main idea, which he calls “the Working Hypothesis” and claims that neither of two main American parties really working on behalf of workers and labor market. Republicans trust market too much so they do not interfere enough in economy leading to division into winners and losers that leave working classes behind, resulting in grossly unequal distribution of wealth. Democrats do not trust market so they interfere too much, limiting market forces and degrading economic productivity in the name of identity politics, green and other special interest. The consequences of these policies are less and less wealth created and available for distribution. Author expresses believe that public policy “not that much failed as succeeded at the wrong things”, so it could be fixed via negotiation and tradeoffs between political forces leading to restoration of healthy labor market.

PART I WHAT WORK IS WORTH

  1. As American as Economic Pie

Here author traces history of consensus development between Center Left and Center Right that growing economic pie is enough to maintain health of society and whatever problems raise they could be resolved vie redistribution. He points out how the flaws of this view have led to the abandonment of too many American workers. One such flaw author defines as agreement that interests of consumers are more important than interests of producers. There is also brief review of elite opinion about closed vs. open, which by open means easy access to world cheap labor market that benefits consumers at the expense of destruction of their society.

  1. Productive Pluralism

Here author presents what he calls productive pluralism: the idea that the objective of policies should be not just material production, but non-material benefits of working such as self-respect and meaningful lives. Author presents his idea of constructive definition of prosperity, which includes not only economic but also social well being of society. Author also discusses his productive pluralism from the point of overall investment into the next generation via support for family, social cohesiveness and other indicators of prosperity that go way beyond just GDP and other economic metrics. Author states that productive pluralism is also includes things like sustainability and high quality environment. One interesting point author makes is that specialization is not always positive factor and that overall diversity of knowledge and skills could be more beneficial for the health of society, especially in conditions of fast technological change when overspecialized individual with obsolete skills have hard time to switch to something else.

  1. The Labor Market

This is an analysis of labor market: how economy aligns what needs to be done and what people can actually do and stresses that it is not good enough to achieve high level of production if lots of people fail to succeed and author reviews tools that could be used to correct market.  One of these tools is entrepreneurship. Author believes that entrepreneurs could always find way to apply additional labor if they are not restricted by government rules and requirements. In this view unemployment is mainly artificial creation of the government. Author reviews multiple factors that impact labor market: Demand, Supply, Boundaries, Transactions / Relationships, and Taxes.

  1. A Future for Work

Here author discusses how technology changes nature of work so the workers also had to change to maintain relevant skills and abilities that market rewards. Author discusses automation that kills jobs and creates new ones, usually not at the same time and not for people with the same skill set or flexible enough to learn the new ones. Author characterizes the problem of the future that productivity raises, while output does not.  He contrasts current situation with 1950-60s when productivity grew even faster than not, but so was output. Author then analyses literature and statistic on manufacturing and consumption by different layers of society with top making much more income than bottom, but consuming on average only 2 times more of everything. In addition to material and non-material consumption author discusses geographical distribution of population noting that attractiveness of big cities is seemingly decreasing and people again start moving away.

PART Il TURNING AROUND

Here author discusses political interferences in economy that most influence labor market.

  1. The Environment and the Economy

This is about environmental regulations. Author defines his position as believe in necessity of environmental regulation combined with requirement for regulator to be wise and make necessary trade offs between clean environment and production of goods and services. After that author proceeds to use multiple examples to demonstrate that environmental regulation is not product of wise trade off, but rather often product of power crazy bureaucrats who are trying to stifle productive abilities of society in order to satisfy their psychological needs to control everything.

  1. How the Other Half Learns

This is about education and how it helps people develop marketable skills or more often fails to do this. Author starts here with obvious fact that huge spending on education does not produce a lot of educated people. As it is popular now, author calls for more occupational training and less expense on formal college education of individuals who do not want it or are not capable to obtain it. Author calls for removing federal standards and mandates, directing funds instead of formal college education to support of multiple paths to acquire marketable skills, knowledge, and experience.

  1. Of Borders and Balance

This is about international aspects of labor market: trade and borders, or more precisely who produces goods and services, where it happens, and who consumes all this. Author discusses low skill immigration as causing wage suppression and discusses confusion about economy growth via immigration vs. growth via higher productivity. There is discussion here of Arizona experiment of limiting illegal immigration that did decrease overall GDP, but increased GDP per capita and wages. Author also provides suggestions on how to fix problems with immigration and foreign trade:

  • Build on American advantages created by free market
  • Deter unfair practices like IP theft
  • Address financial imbalances by scrutinizing more capital acquisitions from foreign countries especially China that transfer IP and technology
  • Support American workers by forcing businesses take into account impact of production transfer to cheap labor countries
  1. More Perfect Unions

This is about labor unions and how they impact labor market. Basically author supports unions, but on condition of less adversarial and more cooperative relationship with business similarly to one in Europe, especially in Scandinavia

  1. The Wage Subsidy

This is about direct political impact on market via taxes and subsidies. Author look at Foxconn plans in Wisconsin as example of huge subsidies in form of tax cuts from government to business to create jobs. Author discusses history of wage subsidies and critic of both approaches: Democratic for directing public resources to welfare programs and republicans for directing resources to businesses via tax cuts.  He suggests different way provide support that would not have usual problems.

PART Ill BEYOND THE MARKET

  1. For Those Who Cannot Work

This chapter is about safety net to protect those who cannot work without discouraging those who can. Author finds it paradoxical that every dollar taken from productive people and given to unproductive decreases incentive to be productive. Author reviews a number of welfare programs concluding that the formal objective – to help poor would be much better achieved by just giving them money. He also quite reasonable criticizes a static character of help that does not take into account dynamic character of working, when growing experience even at the lowest levels of work make individuals more marketable. With too much help people do not have incentive to start working and consequently have no opportunity become more marketable.  Author also looks at similar problems with low-income housing and other areas. Overall he believes in need to substitute no demand safety net by resource-transfer model that would promote self-sufficiency. He refers to wage subsidy as tool that could do just that.

  1. The Social Wages of Work

This is about social norms and culture that pretty much defines what work worth. This in turn can increase both material and psychological returns on participation in labor market, which author considers being critical for healthy society.

Conclusion: The Lost Generation

The generation that author refers here, the one that could become lost, are people born in 1980s when combination of cultural decline of value of work, normalization of welfare as way of live, and availability of cheap goods produced in poor countries made it difficult to find satisfaction in work, pushing people to all kind of pathologies from opioids to crime. Author suggests building the new broad socioeconomic coalition that would concentrate on supporting effective job market. This would provide meaningful jobs that would support not only material, but also psychological needs of people.

MY TAKE ON IT:

I would pretty much agree with author diagnosis that high productivity, automation, global shift in production to low wage countries, and massive cultural devaluation of traditional values of family and hard work caused not just difficult problem, but actually moved society to disintegration. However I do not think that it could be easily fixed. Current achievements in AI make it more and more probable that not only it would be impossible to find meaningful jobs for people with low levels of skills, but also the same will apply to people with high levels of skill that become obsolete. It would increase destruction of family and other cultural values because one needs resources to support these values, which welfare, however generous, could not possibly provide. My solution: equal rights for resources with continuing rights trade between resource over and underusers, which would make everybody active market participants with unequal outcomes and therefore opportunity to improve this outcome. When everybody has something to trade, he/she would acquire skills necessary for market participation, while wide access to practically any information and ability of training in virtual reality could provide everybody with meaningful and gainful opportunities.

 


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