Undercover Economist

August 14, 2010 12:58 am

Why we have got our work cut out creating jobs that matter

In a weak economic climate, there are circumstances in which make-work schemes might make sense

My wife and I only argue about the big issues, such as whether it’s a good idea for her to leave utensils in the sink. For the record, clearly not: it means that coffee-filter cones and colanders which need nothing more than a quick rinse are infected with deposits of grease from other dishes. My wife is simply creating work.

The other day, as I was running a sink of hot, soapy water in order to clean a coffee-filter cone, I mused on an inconsistency: we celebrate creating jobs in the wider economy, but complain bitterly about creating them around the house.

We can see the obsession with creating jobs everywhere in public discourse. It seems to be easier to sell renewable energy subsidies through the idea that it will create jobs than the suggestion that it might slow climate change. The coalition’s plans to cut public spending appear to me to be more unpopular on the grounds of lost jobs than lost services. International trade – and before it, new technology, which from an economist’s viewpoint looks much the same – is also condemned because it destroys jobs.

There is much that is silly about all this, and we should pay more attention to the kitchen-sink insight that it’s not a great idea to create needless work. Even if I was inclined to hire a cleaner to wash pointlessly dirty dishes, the apparent job-creation is illusory. The money I felt forced to spend on a cleaner I might instead have spent on a night out, employing cooks and waiters. And even if I had saved it, it would have swollen the pool of savings and made it cheaper for someone to borrow money and set up a business.

Economic growth is a continual process of job destruction. Start with agriculture, which destroyed the jobs of hunter-gatherers, and keep going until you get to e-mail, mobile phones and the word processor, which have destroyed the jobs of secretaries. Historically, some of the people whose jobs have vanished find something more useful to do than the grinding task of finding enough calories: teaching, practising medicine or learning engineering.

In principle, increasing labour productivity (aka “destroying jobs”) could lead to us doing less work for the same material gains. This could be pleasant – welcome to the five-hour working week – or horrible, with an employed elite and an unemployed and marginalised majority. In fact, to the bafflement of yesteryear’s futurologists, we do not lead lives of leisure while robots handle every chore. Instead, we have chosen to enjoy the benefits of greater labour productivity as greater wealth. (We do enjoy more free time too: longer holidays, shorter hours and working lives which start later and finish earlier despite a longer overall lifespan. But we take far less leisure time than we might.)

All that said, there are circumstances in which make-work schemes might make sense. One is the situation in which we find ourselves: a weak economic climate in which public sector job cuts could depress the private sector too. The coalition has a decent argument for making cuts: tax rises would also depress the private sector, while continued borrowing is unsustainable. But the idea that the cuts themselves will help create private-sector jobs is nonsense.

And what of areas whose economies have persistently struggled to recover from the death of an industry? A simplistic economic model suggests that wages will fall, private sector companies will rush in, and growth will resume. Reality suggests a grimmer diagnosis, but not one for which either the left or the right has produced a cure. What is needed are jobs that matter. We don’t yet have a reliable recipe for creating them.

Tim Harford’s ‘Dear Undercover Economist’ is now out in paperback

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