Jobs are not a scarce resource
[An economist] would say we are going to create new types of jobs: analysts, consultants, programmers, engineers, educators and technicians, right? That was Robert Reich’s idea when he was secretary of labor under Bill Clinton. The problem with that premise is that no business I work with believes that these kinds of jobs will absorb the workforce of the world. We will create all sorts of new jobs, we’ll create new skills and we’ll create new technologies. But these new high-tech specialists and professional jobs are not mass labor, they’re boutique. You’re never going to see mass workers in software companies, nanotech companies and biotech companies.
This is what my co-blogger calls make-work bias, the belief that jobs will be scarce unless the government helps to make them. Rifkin and other non-economists fear that higher productivity will reduce employment.
The basic economic analysis of productivity growth goes like this:
1. As long as human wants are unlimited, there is no constraint on the demand for labor to satisfy those wants. As long as markets are permitted to operate, with workers and firms free to choose wages and other contract terms, productivity growth will not cause unemployment.
2. Productivity growth will make people richer, and as people get richer they tend to prefer leisure. They may choose shorter work weeks. They do not need government regulation to make such a choice.
3. If “mass labor” disappears, that does not mean long unemployment lines. It means that people will continue the shift toward services. See Manufacturing a Crisis.
One of the most important developments in the twentieth century was the substitution away from housework. We spend a lot less time cooking and cleaning than we did a century ago, thanks to vacuum cleaners, dishwashers, permanent-press clothing, etc. However, if we were to adopt Rifkin’s view of the world and treat jobs as scarce resources that have to be rationed (by regulating the work week, for example), then housework could make a comeback. As people earn less in the market, they will be forced to substitute their labor for capital at home.