The Victimized Consumer
Financial Times columnist Rana Foroohar criticizes the “shadow work” that used to be done by hired third parties but that greedy companies (as we are led to understand) have now pushed onto the consumers themselves (“The Real Cost of Shadow Work,” January 30, 2022). Examples include banking and travel booking, most of which is now done online. She quotes a former editor of Harvard magazine:
“I’m just amazed how we’ve been suckered into spending our own time straightening out things that other people used to do for us.”
Herself a victim, Ms. Foroohar asks:
Does it make sense for me, as a well-paid knowledge worker, to spend several hours a week struggling with tasks that used to be done far better by entry-level workers who needed the employment?
The basic answer is that she could hire a secretary or a computer geek to help her, if her time is really worth more than her assistant would cost. Since the Industrial Revolution, we should understand that a growing economy means more productive workers and thus higher wages. This explains why full-time domestic personnel has become so expensive and that only the very rich can afford it. Executive assistants, even at the entry level and even those who “need” the job, are expensive.
One could argue that all of this shadow work drives consumer prices lower, by reducing human labour. Perhaps. But is it productive for the economy as a whole?
Here again, I suggest that economic reasoning would be useful. “Shadow work” has developed in areas where most consumers find it cheaper to do it themselves than to hire somebody on the market. Think about IKEA furniture. Do-it-yourself is encouraged by high marginal income tax rates. And there is no “economy as a whole”: each individual makes the choices he (or she) thinks are best according to his own preferences. If one wants to stick with the misleading expression “economy as a whole,” one should understand that it only represents the configuration of all individual choices and their consequences. In short, there is nothing over and above that except elitist thinkers and government coercion. It won’t do to invoke the “negative externality of a market system in which companies are incentivised to offload labour costs” and to drop Joseph Stiglitz’s name. What about the negative externalities of government planning, economic ignorance, or virtue signaling?
The Financial Times columnist is drowning in the zeitgeist of our time when she suggests that government intervention is (of course) the solution:
Unless states improve education to keep pace with technology, many of these workers [displaced by technology] can’t get new jobs, and productivity and growth decline.
What should the state have done to prevent domestic workers from being replaced by domestic appliances? Didn’t they need the jobs?
One may share some of the columnist’s frustrations with the customer service of some companies—many of which actually being among the most government regulated. Banks and airlines are good examples. Some of her readers may even discover business opportunities where a fortune could be made offering better service to consumers—provided the latter are willing to pay the additional cost and that the entrepreneur is willing to face government bureaucrats. It is true that we live in an epoch or rapid technological and economic change, and that many people feel lost, even not counting mounting government surveillance and interventions. It looks like the times when trains or cars started roaming the land, when the telegraph and telephone spread, or when the political fad of eugenics gripped American governments. I would argue that these are no reason for advocating public policy to assist computer-challenged individuals.
In a very mixed economy, it is often difficult to know if the main cause of a problem lies in government meddling or in imperfect markets in an imperfect word. Or is it possible that Atlas is tempted to shrug? At any rate, private failings have one big advantage over the government sorts: in the former case, you are not literally forced to patronize your tormentors.
Feb 2 2023 at 10:04am
The basic answer is that she could hire a secretary or a computer geek to help her, if her time doing is really worth more than her assistant would cost.
Yes, but I suspect she doesn’t want to do that. She wants things arranged so that human assistants will be provided for her without her having to do anything (or pay anything extra out of pocket). She would like to return to a past where people of her station didn’t have to bother with any of those things and there were always minions provided as necessary (minions hungry for such entry-level work that would smooth her way). But she can’t put it that way (even to herself), so both she and potential entry-level workers are victims of the market system, corporate greed, etc.
There seems to be more than a bit of old fogyism in the piece, too. Travel arrangements for example — I’m just old enough to remember how much of a pain it was to have to have the corporate travel office make flight arrangements for me and what a joy it was when I was finally able to make my own arrangements online and just submit the expenses. It’s great, too, to be able to fill in medical information online and at home before arriving early to be able to sit there for 10 minutes with a clipboard re-answering the same questions only later to have the paper ignored (or see mistakes created when a clerk keys something in wrong). And why wouldn’t I want to bag my own groceries? After all, I’ve driven to the store, wandered the aisles to collect the items and am going to take everything back out to the car, take it home and into the house and put it all away. Why would I want somebody to step in and do the one simple, ‘putting things in bags’ step, while I’m standing there anyway doing nothing? And if I’d wanted to get out of all of the above, I’d order online and have the groceries delivered (a relatively new service, BTW, that creates some of that low-skilled work that she seems to love and think we need more of).
Feb 2 2023 at 11:20am
Mark W: Your last example is especially relevant to Ms. Foorohar’s column, but so is the rest of your comment.
Feb 2 2023 at 8:30pm
Reminds me of Agatha Christie. She said:
Feb 3 2023 at 5:53am
Fazal: Great quote! It illustrates a change in relative prices (domestic personnel wages compared to car prices) in a context of increasing real incomes. (Would you have a precise citation?)
Feb 2 2023 at 10:34am
I remember going to the A&P and you’d pick out a few items and you’d bring them up to the register and there’d be a line and Ethel would be up at the front of the line, they’d tell her the amount and she’d pull out a checkbook to write the grocery store a physical check. Next person would pay cash but he’d pull out coins to try to get the change back in a more preferred manner. So if you went in for one or two items, good chance you’d strongly consider a more expensive convenience store. After that you’d go to the bank and deposit a check, pull out some physical money and occasionally ask for coin rollers since you had a half gallon of coins in a jug back at the house. And of course if one works a typical “9-5” the bank and grocery store would have lines because you could only go to them at peak times.
What are you going to the bank for now? Your check is directly deposited. If you get a check, you use a mobile deposit. What are you concerned about? Losing out on a free lollipop? There’s very little change because you use cards to pay for virtually everything. As for coins I have $2.33 on my desk (the jug is gone) and I’ll spend that on a cup of coffee sometime.
Now as for grocery stores, the big box stores all have self-chekcout. Self-checkout is BETTER, it is FASTER. Walmart, Publix, I can now treat these stores LIKE C-stores. I regularly will go into them for one or two items. Scan, card, out….Easy Peasy. Its not just better, its ALOT better actually and if you don’t like it, they have registers still. Go sit on line with Ethel.
Feb 2 2023 at 11:26am
Craig: Interesting observations! Perhaps the Financial Times columnist should write a column against “the exploitation of Ethel.”
Feb 2 2023 at 12:17pm
Look, Ethel needs to get a debit card or there’s gonna be trouble!
I also remember as a kid I worked at a pharmacy and people did have credit cards, but for each credit card transaction I had to physically look up to see if that number was in the ‘book’ which was a book that the credit card companies sent to merchant on a monthly or quarterly basis to indicate credit cards whose numbers were fraud. And if it was over a certain amount, and this depended on merchants, but for my employer if it was over $200 you’d have to physically call to get an authorization from the credit card company OVER the phone. https://www.pond5.com/stock-footage/item/37602852-1982-manually-processing-credit-card-credit-using-imprinter
The cash register also didn’t scan things and in NJ there was a long list of taxable vs non-taxable items and after a while I just knew what was and what wasn’t subject to sales tax, but nowadays the machine just knows. For instance, at the time anti-dandruff shampoo (think Head & Shoulders) wasn’t subject to sales tax, but conditioner was. And there was a book next to the register for that too.
Feb 2 2023 at 5:14pm
Great story. I remember those books of fraudulent Mastercard numbers they pulled out. There had to be tens of thousands. I remember thinking that the number of bad people was higher than I had thought, but I forgot to take account of percentages. It was probably under 1 percent.
Feb 2 2023 at 11:37am
Coincidentally, not 30 minutes before reading this post I went on-line to make flight reservations for a late-March trip to Santa Barbara. (Here’s another coincidence: I’m going to Santa Barbara to attend a Liberty Fund conference organized by EconLog’s very own David Henderson.) Liberty Fund offered, free of charge to me, the assistance of a travel agent to make my flight reservations. But I chose to make my own reservations. The process of making these reservations took me no more than ten minutes, which is not much longer than I would have spent talking to a travel agent.
I chose to make my own reservations (and then submit to Liberty Fund my receipt for reimbursement) because, in doing so, I more quickly had access to all available options.
I honestly report feeling no sense of having been snookered or victimized.
Feb 2 2023 at 11:47am
Whereas I did use the Liberty Fund travel agent for my booking as I was making it during Finals Week, when 10+ minutes of my time on a website are very costly versus shooting off an email to an agent with my travel info.
It’s almost as if costs and benefits are subjective!
Feb 2 2023 at 12:06pm
My BoA card gives me 3% on travel so you spend $200 say, you get reimbursed and then BoA gives you $6 (many cc give you miles of course). Pennies add up to dollars. AMEX blue 6% on groceries, Chase 3% on restaurants, PNC 4% on gas, Chase second card gives me 5% on a quarterly category, Wells Fargo gives me 2% on anything else and I absolutely use them to max out the rewards. I even take advantage of any credit card offer that comes to me offering a reward for an initial purchase within the first 90 days or 6 months or whatever. For me its a sport.
$6 for 10 minutes = $36/hr tax free: “Finals Week, when 10+ minutes of my time on a website are very costly versus shooting off an email to an agent with my travel info.” — Rich student! 😉
Feb 2 2023 at 12:08pm
No. Busy professor. When the time came to book travel, I had about 48 hours to grade 200 final exams, 20 research papers, and submit grades.
Feb 2 2023 at 12:40pm
Sorry was thinking you were recounting being a student studying for an exam rather than a Professor grading the exam, indeed both will make one busy. Still I must say I AM still disappointed. I mean, after getting the points, those points offset another expense, an expense where you have to earn the money, get taxed on it, and then pay the credit card off. So naturally the result is that you negligently allocated resources to the government. Think the libertarians might revoke your libertarian card for that. 😉
Feb 2 2023 at 3:37pm
There’s a move afoot in Washington to make sure that you aren’t being victimized by the big, bad credit card companies. The powers-that-be want to make you better off by reducing interchange fees that indirectly pay for all those X% cash/points back. What would we do without our betters looking after our best interests?
Feb 4 2023 at 4:53pm
I don’t think they are trying to save Craig, but rather the low income people that are subsidizing the credit card companies so that they can afford to give Craig those points.
Feb 6 2023 at 8:13pm
Dylan: Perhaps you are right, but it will work this way only if the average “poor” uses his credit card more than the “rich.” The average “rich-like-Craig” seem to use them a lot, often but not always to get the points, and generally to purchase higher values. The average “poor,” whose credit cards are maxed, probably uses them less often, arguably contributing less to the profits generated by the network size. Other factors are at play. My guess would be that banning the interchange fees harms the average “poor” more than the “rich-like-Craig.”
Feb 4 2023 at 9:18am
I get the idea that most libertarians are not as paralyzed by choice as some of the rest of us are. I’ve got a trip coming up in a couple of weeks, the amount of time I’ve spent agonizing over details like which exact flight to take, where to stay, and researching rental car companies feels like it already borders on being longer than the vacation. Some of those things I’m glad I spent the time researching, since I learned that I need to do a decent amount of prep for a rental car in this company to avoid being hit with mandatory charges that can triple the cost of the rental. But, many others in the long run won’t actually matter to me. I’ve spent a few hours trying to decide on where to stay for the first two nights of my trip. Honestly, I’m not that particular and know that anywhere I stay will be fine, but once I have the choice of multiple places, I want to make sure I’m picking the best one.
You could say that I could still outsource this decision making, travel agents and the like still exist. But, even that doesn’t solve the problem, because once I know I have a choice, choosing to outsource it is another choice that I have to first carefully compare with all other options.
Feb 2 2023 at 5:40pm
There is always a “motivated” believing that the problem of a planned economy is that it was not planned by him/her.
That is very unlikely the case, despite the usual enthusiasm in the motivated’s “exposition of motives”.
What Ranar Foroohar has to do is starting the business of providing this service to the suckers “suckered into spending our own time straightening out things that other people used to do for us” using “entry-level workers who needed the employment” to provide the service.
If this is a business that makes sense, as she defends it is, she would make good money. But giving the idea away for free, very likely means she has no confident on its economic soundness.
Feb 2 2023 at 5:53pm
“Think about IKEA furniture. Do-it-yourself is encouraged by high marginal income tax rates.”
For instance, the business of assembling your IKEA furniture for you does exist. You can do-it-yourself or pay some “entry level worker” for doing that for you.
The uncoupling of the furniture good and the service of assembling the furniture makes total sense since they are two completely different experiences and the uncoupling increases the client’s choices.
Whether Ranar Foroohar thinks this is productive for the economy as a whole or not is irrelevant (except in the contest of a business plan exposition to future potential partners)
Feb 3 2023 at 7:29am
At work, I am forced to book my flights through a travel agency my employer has a contract with. It is extremely tedious, the process ends up being both more lengthy and more cosrly (by the time they’re done, the ticket prices have usually gone up). I hate it, all my coworkers hate it, but it’s a public sector, so nothing can be done about it. But I guess someone has their negative productivity job, so it’s okay.
Feb 3 2023 at 11:09am
I’m guessing Ms. Foroohar has not tried to hire any entry level workers lately. In a relatively low wage, low COL area, we pay $15 an hour to people to answer a phone, make coffee, make copies, etc. And at a prior job, that $15 an hour didn’t even get you somebody that could be trusted to make travel arrangements.
Unless you just get lucky, you have to pay around $22.50 an hour to get the type of assistant that you can really trust to do things without supervision at a level that really saves you time. Certainly if you had the $15 an hour specialize in some rote task, that’d be different, but you can mostly automate those types of tasks anyway.
Comments are closed.