Tuesday, September 6, 2011

Productivity Must Exceed Employment Cost

As I think of the language of this post, "We Need Jobs":
http://www.nytimes.com/2011/09/06/opinion/yes-we-need-jobs-but-what-kind.html?_r=2&ref=opinion

I think, "we" is meaningless in this term.  Everyone on the planet is in need of the means to make their way in the world, trading their time and expertise and inginuity to get the stuff they want - water, food, housing, and capital goods to expand their ability to create that which they can create better than most others.

The author says "we" meaning "US Citizens", but never offers his structure that would illustrate what influence politicans could have on making it more commonly possible for folks to increase their ability to "get what they need" in exchange for their time (aka, a job). 

He suggests government intervention, and seems to think arbitrary pay floors will have a positive impact.  I suppose he means things like minimum wages, and benefits packages, and he suggests folks need paid time off - ultimately, he is suggesting that coercive interventions can interupt a cycle in which people have to work so hard to get by, they can't get to even, they can't parent their children, and they can't break a cycle of helplessness. 

He seems to assume that the current state is a natural phenomenon, and that the unusual part is how hard it is for the folks he discusses. 

Here's my short mental test for his ideas.  Suppose we do establish a minimum level, a so called living wage, for each person.  Where does that money come from?  How do we know it can be paid for given their productivity and overall expense to pay for their employment?  If we're going to pay a living wage, why not pay enough to buy a big enough house for each person's family, a new and very reliable car, two weeks of vaction, enough to fully fund an IRA, and enough to start saving for the children's college education?  Heck, why stop there - if we can arbitrarily pay "more" than what these people are making now, why not just pay everyone $150,000 a year unless they can make more? 

To me, it is clear that government interventions ignore the complexity of where "jobs" come from, focusing on only those elements of what "jobs" are that can be seen - the need for them and lack of perfection in compensation, especially in an economic down turn.  The author's analysis also skips over the effect of existing interventions - for example, the 15% cost for social security and medical care, that could easily be paid in compensation to the worker at the same overall cost to the employer.  There is a long, long list of government interventions that make it more costly to hire employees, from mandatory time off (if you get 2 weeks vacation, that is the same as saying "I'll pay you less for fifty weeks in order to allow you to have two weeks pay without being here to contribute."  The costs come out in the wash, but don't actually change), to OSHA compliance to excessive costs for transportation due to government regulations and mis-management to an absurd tax system that pretends to tax those that employ "us" but really just makes our stuff cost more at the point of sale (effectively hiding the fact that governments take a lot more of our money than we know). 

In short, anything that makes it more expensive to hire a person makes it less likely that person can be productively employed.  There's no magic hat out of which to pull productivity.  If productivity does not exceed what it costs to employ a worker, the employer won't hire.  Ultimately, any interventions which raises the cost to employ has to have an equal or greater than equal opposite effect - somewhere, somehow, it's going to cost more than the benefit of the employment. 

The solution to the "jobs problem" is only for government to reduce the many ways in which it has made employment more costly. 

Nevermind the impact of the government's monkeying around with the financial systems, the banking industry, home mortgage industry, and the overall profligacy of one generation's politicians taking money from the next generation while promising "the great society." 

We all know that if we could get our lawns mowed for fifty cents, none of us would keep a lawn mower or take the time to mow our own lawns.  If we could get our cars washed for nothing, we'd have them washed daily.  If we could get our furnaces installed for $10, we'd all get new furnaces.  If we could get free health care, we'd be in the doctor's office on a whim, any time we had a moment's anxiety about our health.  Good intentions, sympathy for life's difficulty, sorrow at the ways in which children's lives are impacted by the current, government manipulated economy does not create a magic hat by which we can just increase wages and time off.

But if I'm wrong and in fact the professor has a magic money hat, let's just pay each other $100,000 to get up in the morning and be done with it, enough dorking around on the margins with silly stuff like minimum wages and mandatory time off.

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