Competition & working conditions

Tyler Cowen argues against (pdf) Elizabeth Anderson's view (pdf) that capitalist bosses exert oppressive power over workers and, implicitly, against my view that capitalist work is alienating. This, I suspect , is one of the many issues in the social sciences where both sides are right to some extent.

Tyler is right that competition for workers can drive up working conditions, and it is surely true that those conditions are vastly better in the west now than they were in the early days of the industrial revolution.

Nevertheless, I fear that Tyler might be claiming too much.

First, though, some facts. The evidence that capitalist work is oppressive doesn't consist merely in extreme cases of bosses' tyranny. Alex Bryson and George MacKerron have measured people's experienced happiness during 39 different activities, and found that paid work comes 38th of 39; only being ill causes more unhappiness.

This is consistent with the unemployed having lower life-satisfaction than the employed. Life-satisfaction is a different thing from experienced utility. It consists (in part) in having a role in life and being unemployed removes a source of this role - even though it is painful to fulfill it.  

I reckon there are four reasons why the mechanisms Tyler describes aren't strong enough to sufficiently improve the working environment.

The most obvious is mass unemployment. Even after years of recovery, the wider measure of US unemployment is still high, at 11% of the workforce. And in the UK on top of the official 1.9m unemployed there are 2.2m "inactive" wanting a job and 1.3m part-timers wanting full-time work. That's a total of 5.4m or one in six of the labour force. This means that the labour market is a buyers' market, which allows many employers to drive down standards or at least not worry sufficiently about improving them.

Secondly. I fear that Tyler is under-rating the importance of job-specific human capital. We know that this is widespread simply because workers who lose their jobs earn less (pdf) when they return to work. This in turn means that workers lack bargaining power to get better conditions because they are locked into their employer. This might help explain one of Bryson and MacKerron's findings - that better-paid workers are no happier in work than worse paid ones. It could be that such workers, having more job-specific human capital, feel that they lack bargaining power.

In this context, perhaps Tyler (and everyone else!) is misdescribing monopsony. Maybe monopsony is a feature not so much of firms but of transactions: a firm might have monopsony power with respect to workers with job-specific human capital, but not with respect to those with more portable skills*.

Thirdly, the wheels of competition don't grind very finely. Nick Bloom and John Van Reenen show (pdf) that there is a long tail of badly managed firms. If competition doesn't drive out bad management, why should we assume that it drives out poor working conditions?

A final problem is one of a lack of ecological diversity. Imagine if most countries in the world were communist dictatorships in which people were free to emigrate. Competition to retain people would alleviate the harshness of government. But nobody would pretend that it maximized well-being, simply because of the lack of attractive alternative governments.

Maybe a similar problem afflicts capitalism. Managerialism, short-termism, hierarchy and theory X are so widespread that it's hard to escape them: for example, Marina Warner's complaint about managerialism in universities applies to many universities, not just to one or two.

Now, it might be that there is nothing much that can be done to lessen the alienating and oppressive elements of capitalism: maybe work really is Adam's curse. But we should at least investigate this question. Although I disagree with Tyler about the extent to which there is a problem here, I have a much stronger complaint against those who don't even want to consider the issue - which includes pretty much all politicians.

* A caveat. Job specific human capital might create a bilateral monopoly; the firm needs the workers' specific skills as much as the worker needs the firm. I suspect, however, that in many cases the firm's second best option is better than the worker's, which gives the firm bargaining power.

Comments

[bob]

Evolution has put the eyes in your head. What is it that would make anyone think that it is incapable of putting the thoughts there too?

This is an essay on the nature of tyranny and freedom and the human condition.

https://illusionsofexistence.wordpress.com/fairytale/

Here in the early part of the 21st century, the preceding several decades of full speed ahead globalisation, driven by the forces of economics and wealth creation, have mixed culture replicators like never before. Those economic forces have been raising the materially impoverished out of material poverty, but take little to no account of cultural differences beyond those which affect the P&L, why should they, they are not coded to. Economies and financial markets are coded to grow and when they can no longer grow by creating wealth via innovation and investment they evolve alternative ways to grow, such as through speculation driven by ‘quantitative easing,’ negative interest rates, currency devaluation and so on. Those alternative ways may be absurd and destructive for society but until new code evolves grow is all they are coded to do and the peril for society is of no concern to the code until such concern is evolved into the code.

[Peter Dorman]

So as not to repeat myself, here is the link to a post from three years ago that addresses the issue of whether labor markets correctly “price” bad working conditions like physical risk, alienation and harassment: http://econospeak.blogspot.com/2012/07/pay-for-oppression-do-workers-in-fairer.html

[Luis Enrique]

I fear you're going to think this trite, but how much happier were workers in the soviet bloc? My point is merely an objection to your habit of assigning to capitalism things that apply more broadly, and capitalism isn't even always the worst offender

[David]

Luis, the Soviet Union was well known for its very relaxed and egalitarian work conditions. It was part of the social contract that kept the Party in power.

[Oakchair]

Luis, the USSR didn't have worker control; instead everything was controlled by government mangers so a better comparison would be average firms with worker co-opts or unionized workplaces.

[Luis Enrique]

the point remains - alienated and/or otherwise miserable workers is not the exclusive preserve of capitalism. David I have read a little about working conditions in the USSR. "Relaxed and egalitarian" is not the impression I was left with.

[Jö Miller]

You're probably going to find this trite, Luis, but aren't you committing the tu quoque fallacy (as you often do)?

[Luis Enrique]

Jo

um, not sure. Don't think so. (and what's with the "as you often do"?)

I don't think I am responding to Chris by accusing him of hypocrisy. I am saying he is wrong to attribute to capitalism something that also happens under other economic systems.

I don't see any fallacy there. For example, suppose you are in 1970s Tanzania and you attribute corruption to high levels of state control, you might (erroneously as it turned out) think that economic liberalization might reduce corruption. If somebody came along and said er hang on you also get corruption in free market economies, would you call that tu quoque?

[gastro george]

@David - as an antidote to glamorised views of Soviet Bloc workers, you could well watch the works of Andrzej Wajda - in particular "Man of Marble" and sequels.

[Igor Belanov]

'Glamorised' or not, in countries like the DDR work discipline was lighter because unemployment was non-existent and the regimes made at least some attempt to fulfil their role as the 'embodiment' of the working class.

[gastro george]

I'd agree Igor. I was only countering the idea of "very relaxed and egalitarian work conditions", which appears somewhat glamorised.

[Do Not Contradict Me]

I think the unemployed would be much happier if the pay was better. Unemployed lottery winners are generally happier than call centre workers!

[An Alien Visitor]

Luis Enrique is doing his normal job as the perfectly constructed apologist for capitalism.

I doubt being a worker in the Soviet Union was much better than being one in the West, and at least the West had bright colours. But the point is that Marx painstakingly argued why capitalism alienates man, it was a deep theoretical argument. This is what is being tested, not whether system x, y or z also alienates. If you don't think capitaism alienates man argue why.

What we can say is that within this theory Marx gives his closest hint at how a society free of alienation would look. That would be another interesting debate i think.

[nick]

Luis Enrique is actually doing a perfectly sensible job of asking that although there are negative aspects of capitalism, is there any evidence of a significantly better alternative?

[Luis Enrique]

thanks nick. I think my point is also that if you want to understand why workers get alienated, it matters for your explanation if alienation happens under different economic systems.

Just like if you are trying to understand link between diet and disease, it would matter if heart attacks are common under latin american, anglo-saxon and central asian diets. It would be odd if you kept just confined your painstaking deep theorising to latin american diets. If you wanted to avoid heart attacks, saying: avoid the latin american diet is not enough.

I am quite prepared to believe that less worker-alienating systems may exist, but if they do, there's going to be more to it than simply being not-capitalist.