Monday, January 23, 2012

Create Value, Not Jobs? How about AND?

Gurri makes a very good point (HT: Cafe Hayek), but one that wouldn't be immediately embraced by people the way it is regularly framed. (It's also not the only good point to be made on the subject, either, but that's another day's lecture.) The issue not "Create value. Not jobs." It is to create jobs of value. It is to enable people to create value and jobs will follow, sustainably. Partly this is semantics, but I think the semantics are important in terms of effecting policy.

It's easy enough to create make-work jobs. Keynes opted for digging holes and filling them up again. Germany (and many others) have expensive humans repave roads poorly that machines could do much better, much faster, and less expensively. While I do believe in the principal of having someone work for what they gain to avoid idleness and the evils of a dole, it ought to be work that makes at least one other person's life better off.

Slightly more tricky is creating make-work jobs that produce something more. India has a number of good programs that create jobs that also produce something of value, for instance.

Among the great things the market does well is reward people for making other human beings better off. If you serve people well, they give you money to continue serving them. The greatest servants can become quite rich (though that is not the only pathway there).

To create lasting jobs, we need to get people in a place where they can create value - make other people better off. That might be through education and training as a private good; that might be through creating a public good (roads that improve market access or agricultural research that improves smallholder productivity); that might be through improving the set of property rights and contract enforcement so the labor market works better with reduced transaction costs so that it becomes more profitable for firms to hire more workers.

Most of the 80% "unemployed" in Nigeria work, but in jobs that create very little value. Gurri warns that in the initial stages, creating an environment that enables workers to create value may also lead to fewer non-jobs even as it creates more "real" jobs.
Certainly technology can and is disrupting human labor markets–but that isn’t going to “further weaken the global economy”. It is going to increase our productivity, make it easier to provide consumers value for cheaper. It will make it hard for people replaced by machines to figure out how they can create additional value, for a time.
But we need to get our priorities straight; what we want to do is help people create value. Unless giving someone a job will enable them to create more value than it costs, the existence of that job is counterproductive.

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