On work
I come from a long line of hard workers: my great aunt, still an adolescent at the time of the Great Depression, went to work to support her family; my grandmother, with several small children at home, started work in 1951 managing the accounts for the hospital and didn’t retire until 1996 when she was 70; my father was eight when he started his first job — as a paperboy — and is still working today.
Work — hard work, and the dignity that we assign to it — is a cornerstone of our culture. This is important and correct, but something odd has been happening with jobs and work over the past several decades. The current political discourse would push the blame off on the off-shoring, automation and globalization — and cite a steep decline in manufacturing jobs as a result. In turn, the loss of manufacturing jobs would be blamed on the turn to populist politics. One needs only to look at the numerous articles written explaining how the “rust belt” voted for Trump to see the logic: globalization = fewer manufacturing jobs = susceptibility to populist politics.
The only problem with this is that the fall of manufacturing, in the US and many other parts of the rich world, came far before the upsurge in populist politics. In fact, as the graph below shows, manufacturing has been in steady decline as a source of jobs for many decades, and if anything, the financial crisis in 2008 helped manufacturing as a source of employment.
Manufacturing jobs as a percentage of all jobs (the blue line) has declined steadily since the 1960s, which means that the percentage of voters who work in manufacturing has declined dramatically and evenly since the 1960s. In fact, since the financial crisis (marked with a thick gray bar around 2008), the declining blue line has evened off, rather than declining.
The second trend (the red line), is that the number of manufacturing jobs in total, which grew (unevenly) in the 1960s and 1970s, and started a decline in about 1980s which plunged dramatically around the year 2000 (China joined the World Trade Organization in 2001 — and while this may not be the cause of this trend, it certainly looks like globalization did in fact have something to do with it). Curiously, numbers actually rise after the 2008 financial crisis.
So if it’s not the decline in manufacturing jobs which makes voters turn to populist politics, what is it instead? My own hypothesis is that it’s about the quality of jobs (their benefits, their buying power, the sense of satisfaction they provide, and their ability to generate wealth rather than just income) in the service industry. 67% of people work in services, which covers a wide variety of sins, from highly paid lawyers and bankers, to hairdressers, teachers and workers in the fast-food industry.
In the less skilled part of the service sector, there has been a hollowing out — people no longer work for themselves (for example in small businesses), they work in low-paid jobs for enormous publicly traded companies, which have been empowered by the weed-like growth of financial services, spreading to ensure that even non-financial firms make some 25% of their profit from providing financial services to Americans. The reason that Target and Banana Republic and other companies offer you credit cards is because they no longer make income solely by selling products; instead, they compliment their income by charging interest. And the profits to be made on this type of business are very large — large enough to explain why CEOs of such companies make so much more than the people who stock the shelves and ring up the bills. Because those workers have not contributed to the share of profit that is being made, those profits were made through finance. The democratization of banking profits among all types of firms created an oligarchy of wealthy individuals.
Small businesses, in contrast, have two positive features. Though they are risky, and many fail, if they succeed they allow for owners to accumulate wealth. But even while doing so, they maintain a much tighter cap on income inequality between those who own the business and those that work for them than do large, publicly traded firms.
In other words, it is in fact inequality which has driven the turn to populist politics, but this inequality is not driven by the globalization of manufacturing jobs, but rather the consolidation into large firms (the big box phenomenon) as well as financialization of the service industry.
Where does this leave us in terms of solutions? One popular one, which seemed fringe just six months ago when Andrew Yang discussed it from the Democratic Presidential debates, but now has been normalized with the issuance of checks to 90 million Americans in the wake of Coronavirus (and similar plans elsewhere in the world), is a universal basic income.
The turn to income support (or non-conditional cash transfers) is very good for the majority of people who are less resilient to this crisis because of their starting conditions. But if it becomes the single go-to solution for the post COVID-19 world, we’ll be missing out on addressing the underlying conditions which got us here in the first place. A universal basic income, or a freedom dividend as Yang would call it, is more than a band-aid; it’s more like a tourniquet for a gunshot wound. We still need to stop gun violence in general and ensure that the patient with the gunshot wound is treated surgically to ensure that things genuinely improve.
So bring on universal basic income (despite some concerns from the left that it devalues hard work — as we’ve seen, hard work isn’t enough in today’s economy to get ahead), but don’t forget to use the lessons of this crisis to solve the larger economic issue: dramatic income inequality driven by economic consolidation and financialization.
