The intelligent state

What’s the best way of protecting vulnerable workers? Two things I’ve seen recently poses this question.

First, Daniel Pryor notes that higher minimum wages do destroy some jobs, such as those of young unskilled ones in jobs that can be automated. And then James Bloodworth points out that banning Uber from London would cost the jobs of some drivers, many of whom are highly-indebted.

What we have in both cases are examples of how regulations have ambiguous effects. Minimum wages both raise the incomes of the low-paid and also put a few out of work. Cab regulations both protect customers from dangerous cabbies and destroy some jobs*. And in both cases, the cost is borne by the most marginal and vulnerable workers.

This is not to say such regulation is a bad idea: it’s perfectly possible that the benefits outweigh the costs. But it does pose the question is: can we do better?

Yes. The best way to help workers is to create conditions which increase their bargaining power – which give them the option of using Johnny Paycheck’s words: “take this job and shove it”. Such conditions would involve a mixture of over-full employment**; a jobs guarantee; stronger trades unions; and a citizens’ basic income which allows workers to either walk away from lousy jobs or to work only a few hours.

Such bargaining power has an advantage over regulations – flexibility. It would allow there to be low wages or poor employment conditions where workers wanted them and where the alternative was no job at all whilst empowering workers to do better for themselves in other circumstances. It harnesses the laws of supply and demand to raise wages, and also the dispersed local knowledge of particular workers so they can distinguish between situations where high wages would destroy jobs and where they wouldn’t.

In fact, such policies and institutions have another virtue. In generating a tight labour market they would raise productivity by forcing employers to economize on labour by investing, innovating and generally upping their game. It might well be no accident that the biggest rises in productivity in history occurred during the years of post-war full employment.

What I’m calling for, then, is an intelligent state – one that devolves regulation to workers who know how to implement it in response to particular localized conditions***.

Which poses the question: why don’t we have such a state? One reason is that managerialist ideology overstates the knowledge that central authorities can possess and under-rates the importance of dispersed knowledge. Another reason, though, is that I’m calling for workers to be fully empowered, and a state that has been captured by capitalists is inherently hostile to such a scheme.

* TfL is not revoking Uber’s license because of its poor employment practices, but many lefties are welcoming it for that reason.

** Although unemployment is very low, the very fact that wage inflation is so low tells us we are not yet at this point.

*** Also, an intelligent state wouldn’t regulate Uber out of existence, but rather compete it out of existence by setting up apps for cabbies to use themselves in more cooperative ways, as the NEF has suggested.

Comments

[Matthew Moore]

Very interested argument.

So, in a world of a generous UBI, would you support the repeal of all workplace regulation?

[TickyW]

"Bloodworth points out that banning Uber from London would cost the jobs of some drivers, many of whom are highly-indebted."

Uber drivers don't have jobs. Uber drivers are not employees. Uber has been to court to assert that.

UBI is a not starter, I'm afraid. It offends the public's distaste of a "something for nothing" culture which is deeply embedded in the public psyche. A job guarantee is a better scheme to achieve universal participation in society and markets.

Otherwise, Chris is on the money, IMHO. (I hope I'm humble, even ever so 'umble).

[e]

In the world of regulations, putting “a few out of work” is not the same as to “destroy some jobs” . This case may indeed destroy particular job prospects for particular individuals (it needs to). However, the target (in the long run) is a particularly antisocial business model. As you suggest, nothing wrong with the technology or the thriving worthwhile market it could promote.

[Jamie]

There are other solutions to improving worker bargaining power that deserve to be in the mix - including adult skills/education training.

I'm also very unsure how 'Khan's Cars' would actually work - surely it'd immediately hit a great big advertising problem, much like official price comparison websites tend to? (though as I type, I suppose it'd be quite a bit easier to do in a local market)

As for being able to out-compete Uber, I remember the Church of England/credit unions trying something similar with Wonga not so long ago...

[Joe]

Uber is a scam. It is a way not to earn money but to get "pay day loans", no questions asked, without having to repay the loan at exorbitant levels of interest.

The money "earned" is in the form of lower rates of interest than would be the case with a pay day loan. It is very clever, really...

https://www.youtube.com/watch?v=fgQPj90OrQE

[Steven Clarke]

"In generating a tight labour market they would raise productivity by forcing employers to economize on labour by investing, innovating and generally upping their game. It might well be no accident that the biggest rises in productivity in history occurred during the years of post-war full employment."

Robert C. Allen has argued that the Industrial Revolution took place in Britain because labour was dear and energy was cheap, providing an incentive for the use of the steam engine and machinery for making cotton.

[SimonF]

Chris,

You have a far bigger brain than me so I have probably missed something. On the one hand you want a tightening of the labour market so that those at the bottom end get greater bargaining power. However, you also support open borders which is most likely to suck in low skilled people.

Don't get me wrong, I also support open borders and having had parents brought up in the slums of Bradford I'm happy to help those at the bottom end. My problem is how to deal with the cognitive dissonance?

[Jim]

Ah, the intelligent Socialist State. That the Left keep telling us can be achieved, despite not one example from human history of it being managed without economic collapse and a pile of corpses. But this time its different comrades!

[cjcjc]

*TFL issues private hire licenses, not Uber. If insufficient checks have indeed been carried out then that is purely down to TFL.

** Can one ever have over-full employment (in one country) and have open borders at the same time?

*** Which workers are to be the taxi regulators? Drivers of black cabs would never have allowed much competition. How about customers?

[luiz cruz]

In Brazil, the taxi drivers use an app to compete with Uber. They have at least two which work nationwide (99 and Easytaxi)

[Walex]

«The best way to help workers is to create conditions which increase their bargaining power»

In similar shock news: the College of Roman Cardinals have discovered that the bishop of Rome is catholic. :-)

In practice the choice between a tight labour market, a loose labour market with regulation, and a loose labour market with no regulation is political, not a matter of "what's the best option from a philosopher-king point of view" as our blogger is effectively assuming.

A loose labour market with regulation is the result of a temporary compromise between the political side of labourers, that does not have the political power to ensure a tight labour market, and makes do with some regulation, and the political side of employers, who are no strong enough to eliminate all regulation, and take some regulation of a loose labour market as a second best, as that effectively much weakens all labour market regulation.

In other shock news, etologists studying large mammals have been amazed to find bear lesses in several woods,

[Walex]

«On the one hand you want a tightening of the labour market [ ... ] you also support open borders»

In a previous discussion I pointed out that our blogger also supported a generous basic income in the UK plus totally open immigration, in effect promising a 10-50 fold improvement in living standard to 1-3 billions people as long as they volunteered to travel to the UK...

In a subsequent refinement IIRC he argued that the basic income effectively available only to citizens, thus creating "first class" and "second class" residents, paying the same taxes but with different fiscal rights.

The yearning for having it both good ways is very laudable, not always totally realistic.

[Walex]

«As for being able to out-compete Uber, I remember the Church of England/credit unions trying something similar with Wonga not so long ago...»

Uber is run at a fantastic loss, that is it is hugely subsidized by investors who believe an Amazon-like "scale will bring profits" narrative.

No smaller organization can properly compete with that, at scale.

Still there are many online shops that compete successfully with Amazon in various ways, even if Amazon investors and bondholders effectively subsidize it (but nowhere as much as Uber is subsidized).
In a similar way minicab companies have not been completely vanquished by Uber, yet their business model is the same, except telephone based and locally based. But then most carriage business is exquisitely local...