Frank Pasquale –
Mainstream economists tend to frame employment policy as a series of tragic trade-offs. If policymakers raise the minimum wage, they are told, employment will inevitably fall, perhaps precipitously. Requirements for vacations, too, might crash the job market. (Never mind that dozens of other prosperous countries mandate paid vacation time.) Technocrats of the center left complain about employer-sponsored insurance as a dreadful distortion of the labor market. Sick pay, family medical leave, maternity and paternity leave—all have been blasted by one economist or another as a drag on economic growth and employment levels. “You are only hurting the people you are trying to help,” labor activists are told, again and again.
Such models are intuitively plausible, thanks to what James Y. Kwak has called “economism:” simplistic perspectives resulting from mechanical applications of supply and demand models to complex social phenomena. In general, the more costly something is, the less consumers will demand it. That reasoning leads, in turn, to more sweeping claims about the need to deregulate labor markets. If there is one policy issue most likely to consolidate bipartisan consensus among economically minded technocrats, it is a suspicion of barriers to entry in the workforce, including occupational licensure and “credentialization.” They lament the former as a paradigmatic example of state power hijacked by private interests to enrich themselves. Credentialization is framed as a market failure: The unjustified preference of bosses for workers educated in ways not directly related to the tasks they will be performing at work.
The bottom line of this economism is grim. To the extent the state requires certain qualifications of workers, or workers themselves demand time off or other entitlements, there will be fewer jobs. Economist Tyler Cowen asks whether “whether workers might not enjoy ‘too much’ tolerance and freedom in the workplace.” While cash wages are taxed, “perks” are not, so employers will be tempted to oversupply perks at the expense of wages (or, even more troublingly to neoclassical diehards, at the expense of shareholders).
In a brief response to Cowen, philosopher Elizabeth Anderson swiftly dispatches with this line of reasoning. She admonishes Cowen not to “trivialize basic requirements of human dignity and well-being, such as freedom to use the bathroom, as mere ‘perks.’” She also critiques the state’s “very heavy thumb on the scales against worker autonomy, standing, and dignity, through its legal establishment of dictatorship as the default constitution of workplace governance.” The very corporations that libertarians like Cowen are so quick to defend from government regulation, are themselves creatures of government, and dependent on a favorable framework of laws to persist and grow.
Moreover, the much lamented “cost” of credentials for workers (and, indirectly, for employers and customers) is almost invariably a direct benefit to those providing training and credentials, to businesses, and to customers or clients who benefit from more qualified staff. First, consider the effect of credential requirements on the education sector. No matter how cynically some critics may model them as a troll at the bridge of opportunity, extracting payments in return for a credential, most non-profit institutions of higher education do offer high quality instruction and research in fields that range from the instrumentally to the intrinsically valuable. That knowledge creation and dissemination is a public good. Ironically, the effort to further “marketize” higher education has itself been the leading cause of truly predatory institutions: the for-profit colleges that have bilked hundreds of thousands of students.
Clients and customers also benefit when a worker is well-trained. For example, consider the recent National Academy of Sciences report recommending college degree attainment by caregivers for young children. Between ages of 2 and 8, children experience an extraordinary level of social and intellectual development — and vulnerability. Understanding the latest in psychology, brain science, and related disciplines could help child care workers do their job in a much more effective fashion and help them gain the professional status they deserve. Yet too many economically-inclined commentators blasted the guidelines as an expensive burden on labor.
In doing so, these partisans of economism fell into the classic trap of austerity-driven logic: presuming that students must bear the cost of their education. Citizens of the developed world fought to establish primary and secondary education as a right. The next stage of this struggle is to recognize higher education as publicly funded, public good. Pragmatic half-measures have brought us some of the way there, but much more is to be done. Education improves workers’ ability not merely to complete current tasks, but to imagine better ways of organizing patterns of production.
So, too, does sick leave obviously improve quality of service. Who wants to eat a burger that has been sneezed on? And vacations leave workers refreshed to provide better service. As the Chicago Teachers Union reminded Rahm Emmanuel in 2013, instructors’ conditions of work are the students’ conditions of learning. The regulation of work is not a zero-sum game in which every dollar or prerogative gained by workers is a loss for customers, clients, or shareholders.
A macroeconomic perspective also shows the short-sightedness of laissez-faire fundamentalism. Even if, in the short term, a “low road” of exploitive labor practices benefits many in their role as consumers, they will eventually end up losing out as producers. A retailer may be thrilled to see robotic instructors break a teacher’s union (anticipating lower property taxes thanks to cheaper schools) — only to find that teachers no longer have the money to shop at his store. This is not a new problem: John Maynard Keynes recognized it in the early 20th century as a “paradox of thrift,” threatening to condemn struggling economies to a downward spiral of deflation. Lower prices, lower pay, and a consequent unwillingness of consumers to buy even low-priced goods leads to even cheaper prices, and a reinforcement of the same disastrous dynamic. From the United States in the 1930s to the Japan of the 2000s to the southern Europe of the 2010s, this paradox of thrift has afflicted real economies. And it is clearly one of the biggest problems likely arising out of a future of mass automation, where tens of millions of workers may be replaced by machines if policies of complementary automation are not implemented.
Making work better for one group of laborers either via higher wages, or better working conditions will just as likely create jobs for other workers as reduce them. Context is critical. The real question for political economists is to determine which sectors to encourage investment in, and which to prune.
Frank Pasquale is a Professor of Law at University of Maryland Francis King Carey School of Law.