Saturday, November 26, 2011

The Age of the Superfluous Worker

Here's another op-ed worrying about rapid destruction of jobs, this time by a Columbia sociology professor in the NYT. It is a rather grim little piece. 

In the old days — before Social Security, welfare and mediciaid - poverty-caused illnesses killed off or incapacitated some of the people who could not find jobs. Even earlier, some nations sold their surplus workers as slaves, while the European countries could send them to the colonies. In addition, wars were once labor-intensive enterprises that absorbed the surplus temporarily, and sufficient numbers of those serving in the infantry and on warships were killed or seriously enough injured so that they could not add to the peacetime labor surplus. 
 The old ways of reducing surplus labor are, however, disappearing. Decades of medical and public health advances, as well as Medicare and Medicaid, have reduced the number of poverty-related deaths. The Iraq and Afghanistan wars have left many more service members injured than killed.

Add to this the cost of imprisoning "dark-skinned men for actual and  invented offenses".

Sigh. This really is the old left. Capitalism, he argues, will continue to eliminate as many or more jobs than it creates. So what is the solution?

America will have to finally get serious about preserving and creating jobs — and on a larger, and more lasting, scale than Roosevelt’s New Deal. Private enterprise and government will have to think in terms of industrial policy, and one that emphasizes labor-intensive economic growth and innovation. Reducing class sizes in all public schools to 15 or fewer would require a great many new teachers even as it would raise the quality of education.

In the long run, reducing working time — perhaps to as low as 30 hours a week, with the lost income made up by unemployment compensation — would lead to a modest increase in jobs, through work sharing. New taxes on income and wealth are unavoidable, as are special taxes on the capital-intensive part of the economy. Policies that are now seemingly utopian will have to be tried as well, and today’s polarized and increasingly corporate-run democracy will have to be turned into a truly representative one.

In other words, traditional liberalism, but even more so. Job-sharing and industrial policy. Hiring more unionized teachers.


That world has passed as well.

Monday, November 21, 2011

Responses to rising inequality

Larry Summers writes about inequality in today's FT:

It would, however, be a serious mistake to suppose that our problems are only cyclical or amenable to macroeconomic solution. Just as the evolution from an agricultural to an industrial economy has far-reaching implications for almost all institutions, so too does the evolution from an industrial to a knowledge economy. Trends that pre-date the Great Recession will be with us long after any recovery.

The most important of these is the strong shift in the market reward for a small minority of citizens relative to the rewards available to most citizens. .... In 1965, only 1 in 20 men between 25 and 54 was not working; by the end of this decade it will probably be 1 in 6, even if the full cyclical recovery is achieved.

So what should be done about it? More open auctions for public assets like electromagnetic spectrum or implicit insurance, he says, as well as keeping the estate tax, and containing the rise in college costs. It does seem like a small-scale response to a massive shift in the underlying nature of economy.The argument I've been making is we need to think about underlying incentives and behavior and public ethics. That is why I have (a little to my own surprise) found myself discussing Aristotelian virtue or contemporary ideas about happiness as much as, of not more than, the labor market and growth.