Are jobs a cost?

Tim Worstall says:

Jobs are a cost of producing renewables, not a benefit of them, just as with anything else. We want to produce whatever it is we want to produce with the least use of human labour, not the most.

I'm not so sure.

Tim would be right if we had full employment. In such a world, the opportunity cost of having a worker in a low-productivity job is having him in a higher-productivity job. In this sense, low-productivity jobs are a cost. Tim's right, therefore, that - in the long-run, and assuming displaced workers find employment - the sort of technical progress which "destroys jobs" is actually a good thing - as it frees people up to do more useful things*.

However, the more astute of you might have noticed that we don't have full employment. And this changes things. This is because unemployment is costly. The social cost here is not so much the welfare benefits paid to the jobless: these are, in effect, a transfer from taxpayers to Lidl, Matalan and landlords. It is rather that the unemployed are much, much less happy than the employed. This is not simply because they have lower income. "Becoming unemployed is much worse than is implied by the drop in income alone" say (pdf) Di Tella and colleagues. One reason for this is that the jobless suffer from feeling that they are violating social norms about the value of work.

From this perspective, jobs are a benefit; they help - perhaps only partially - to restore people's self-respect and well-being. This might even be true of work that's of questionable conventional "value"**. In Bridge on the River Kwai, Lt. Colonel Nicholson gets his men to build a great bridge - even though it would help the Japanese war effort - because it's a way to improve their pride and morale. I suspect that story generalizes; even digging holes and filling them in again might help increase happiness by improving the unemployed's social contacts and friendships. (It is, of course, a long leap from saying this to saying that work programmes must be compulsory.)

That said, this is is not an argument for creating low-value jobs. Within a voluntary job guarantee scheme, there's an opportunity cost to paying people to dig holes and fill them in again; it's that they could be doing something more useful***.

In this sense, Tim's right that we should pay attention to the quality of jobs that are being created. But to say that "jobs are a cost" is - at our current juncture - far too simple.

* One might quibble here about the quality of jobs. But I suspect the idea that call-centre work is worse than mining or old-style farming owes more to romantic nostalgia than to facts.

** I hate the word "value".

*** The fiscal cost of a job guarantee scheme is another question; if multipliers are below one, it is a cost, but if it's above one, it's not. But this is not the point Tim's making, which is probably just as well.

Comments

[Frank Rizzo]

Tim Worstall with an aggressive and simplistic argument? No..

[Tim Worstall]

Eek, Yah, mebbe.

I'm arguing about something rather different though. The propensity of politicians and other reprobates to insist that their plans are wonderful because they create lots of jobs.

I accept your distinctions above: but in the political rhetoric of our day we do have this idea that "creating jobs" is almost the be all and end all of the benefits of a policy. I'm insisting that we should look at jobs as the cost of a policy or programme, not a benefit.

It may well be that some of the side effects of a job are worthwhile. But the job itself is a cost, not a benefit. It's obviously a cost to the person that has to pay to get the job done. It's similarly clearly a cost to the person doing the job: otherwise, why would anyone demand payment for doing a job? And societally, there's the opportunity cost of having someone doing this work not that other.

That there are benefits, as you say, to employment does not change the point that we should always be regarding a job as a cost.

We must, at least, get jobs on the right side of our cost/benefit analysis. Otherwise we'd end up being Neal Lawson and that's a fate too horrible to imagine.

[Oli]

I once went to an excellent talk by a chap who actually built the bridge on the river Kwai. He was rather upset about the film: their real motivation was to show their captors they couldn't break them. Amazing man, but the point doesn't undermine you.

[Neil Wilson]

Fiscal multipliers below one are not necessarily a cost.

That assumes

(i) that saving has no value - clearly it does.
(ii) that you are preventing something else happening by the government engaging people. At the moment the alternative is nothing else happens.

Beware of using fixed exchange, fixed quantity arguments..

[Larry]

If "jobs are a cost not a benefit", then why do so many people seem to want one?

[Richard Gadsden]

Larry, it's not a job people want, but a salary.

Most people can't imagine getting paid without working - but try asking "would you rather have a job or win the lottery?" and you'll soon see.

[Neil]

If it's all about the opportunity cost, why do people waste time writing awful 'clever-clever' cliches on their blogs, rather than do something they're actually good at?

[rogerh]

Build capital kit - transfer workers to other useful work. Not to do so is to miss out on other goodies - talk shows, soaps, journalists, anaesthetics, the occasional inventor etc etc. The reductio ad absurdum is that we all end up as high-level advisers, theoretical physicists, poets and chess experts or just laze around whilst across the world robots till the fields and drill for oil.

We are only in the foothills of the above Nirvana and in trouble already. Those who cannot be found work are stuck with 'living on the parish', they are stigmatised - a few quite rightly. But what is not said is 'You with the job - yes you, hand over a wedge to look after those without'. Why? Because we have not built all the robots yet - the alternative is to send the unemployed off to the pie factory - and you are next in line.

So, will we ever build all the robots? Will Nirvana turn into hell? As things stand the political narrative is medieval and as untruthful as ever. BTW, what do you do for money in Nirvana - who gets the hovel in Middlesborough and who the villa in Tuscany?

[Larry]

@Richard Gadsen Yes, or try asking people "do you want your job, or shall we fire you?" and you'll soon see.

People generally want jobs - it shouldn't really be a controversial point.

The broader point is this: if I give you £10 for nowt, that is a cost to me and a benefit to you. So whether something is a cost or a benefit depends on which end of the deal you're on.

The mantra that "jobs are a cost not a benefit" rather ignores this obvious point.

[Peter Risdon]

It depends on the direction from which you're viewing the transaction. Widget are less emotive: they're expense for the buyer and income for the seller. It's nonsense to say that widgets are a cost to the seller because the seller wants money for them.

Jobs are a benefit to the employee and a cost to the employer.

Maybe someone could invent a system of bookkeeping that reflects this double aspect of transactions.

[Zorblog]

Tim Worstall is right, both in his statement and his comment.
Jobs are a way of producing goods and distributing goods. When you can think of another way for producing goods (such as robots or low-paid Asian workers), you should also think of another way of distributing them (or distributing money).
I'm afraid that for once Chris is victim of a moralistic approach (one that may be the biggest flaw of Marxists by the way).

[Zorblog]

By the way, there are plenty of other ways of keeping people busy other than jobs.
Hobbies, sport, culture, charities, food, etc.
There is about a quarter of the population (including aristocrats and retirees) that don't have a job and don't need one for their living. Are those people unhappy (apart from a few desperate housewives)?

[Damien]

@Zorblog: I mostly agree with you, but with one caveat. In present society, there's a huge difference between being retired and being unemployed. Pensioners are by and large perceived as people who have been working their whole lives and are now enjoying some well-deserved rest. The unemployed, on the other hand, tend to be perceived as lazy scroungers who'd be having a job if they really wanted to. Being unemployed is much more stigmatized: if someone ask you what you do at a party, would you rather say you're retired or unemployed?

Of course, the ideal solution would be to change people's view of the unemployed. But I'm sceptical about it. It comes from the same deep-seated instinct as the idea that "creating jobs" is always a good thing because more work equals more prosperity, and the concept of output doesn't enter the picture.

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