Jobs and production

In the comments to the “Sigh” post, rainman raises the following reason for government action against currently employed temporary workers:

What then do the displaced workers like the welder in this story do? Go on the dole?

Now, the primary argument against this is that the “displaced workers” aren’t solely displaced. The immigrants are doing a job making things, and therefore this will “create work” for other people.

However, there is another, more fundamental argument against that. And it comes from the idea that we aren’t actually after “making work” (work is a cost after all) we are after making stuff and having a nice living standard for people.

The make work fallacy and robots

A while back I was talking to a good friend of mine and she said “what would we do if robots made everything – then we would have no jobs!”. Now this is an interesting case – if robots made everything, people could satisfy their desires and they wouldn’t HAVE to do anything. There would be no costly work – people could do the things they want to do (within the bounds of how it affects other people).

In the above case with robots, the robots make all the stuff and then the government taxes the owners of the robots to redistribute income to the rest of society.

In this case things are great, but in people’s mind there is a problem as we sub-consciously associate work with income.


Now imagine that we got in migrants to work with our capital and build everything – and then all New Zealander’s “went on the dole”. In this case, stuff is being made for New Zealander’s and the businesses get a return. Government taxes business and redistributes through “the dole”.

If we can make people understand that they don’t have to feel bad about “not being in a strict job” then their life satisfaction won’t be influenced. In this case people can run around researching or working on things that they enjoy – implying that New Zealander’s would be really well off.

In this case, the temporary migrant workers act like the robots – creating value for New Zealander’s.

Yet because of the make work fallacy – we get annoyed about this. We turn around and punish migrant workers, and thereby punish ourselves.

  • moz

    I like the idea, but currently people don’t feel bad because they don’t have a job per se, they feel bad because they’re in poverty and dealing with punitive policies designed to make recipients miserable.

    So as well as a political change to recognise the obvious above, we would need a corresponding change so that non-working poor people are regarded similarly to non-working rich people who get a different set of subsidies.

  • @moz

    As the productivity of capital rises I think society will have to evolve to realise that being unemployed isn’t just about being lazy – it could be about the “work not being available at a livable wage”. I think we need to promote people moving into part-time work and getting the rest of their wage through transfers – as that is part of the result of progress …

  • moz

    Yes, definitely. “job share” if nothing else, but the idea that a “real job” requires at least 40 hours a week needs to be addressed. The French model is not encouraging on that front, however.

    Interestingly right now I’m looking for work and trying to sell potential employers on the idea that I’ll happily take less than half my previous rate if I can work 60% of the hours doesn’t work… they’re deeply wedded to the idea that jobs have to be full time (this is IT jobs FWIW, where it’s widely known and often ignored that productivity differences between employees regularly exceed a factor of five).

  • @moz

    Why would you want less than half your current pay for more than half of your current hours? Is your position at risk, or is there some other driver? Excuse my probing but I’m intrigued.

  • @moz

    I think all the authors on this blog agree that there are issues with the flexibility of hours in the workforce – that is a definite social issue that needs to be sorted out over time. I trust society to manage it – but we will see

  • @goonix

    My suspicion is that it is the value of leisure time that is worth it in this case – but I will let Moz answer for himself 😛

  • @Matt Nolan

    Why wouldn’t it just be pro-rata then?

  • @goonix

    Because the marginal utility of leisure is diminishing.

    Effectively, Moz wants to purchase leisure, and to purchase 16 hours of leisure he is willing to “spend” the income associated with 20 hours of work.

    If the marginal utility of leisure wasn’t diminishing (actually if the MRS between leisure and income wasn’t falling in leisure is more accurate) then it would be obvious that Moz would prefer not to work – but since the marginal utility of leisure is falling (and presumably the marginal utility of income is rising) it makes complete sense that he may be willing to work 24hrs for 20 hrs pay – and that he may prefer this bundle to the enforce 40hrs of work and pay that he is being pushed into.

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  • moz


    Realpolitik – I want to work part time a lot more than any employer is willing to let me do so. When talking job contracts employers react very negatively to extra holidays or part time work, so the only option I can see after the sales job fails is offering to work for less money. It helps that my field is paid very well so at 40% of the pay I’m still making more than the average wage.

    Or as Mark says, 20 hours of leisure is worth 24 hours of work to me.

    Could I also point out that “leisure” is strictly a technical term in this case, and means “unpaid activities” rather than “sitting round the house”. My preferred “leisure” activities are often substituting for paid work and can easily see me doing what is to all intents “work” for well over 40 hours a week. My “career” for the last 20-odd years has consisted of short, full-time contracts interspersed with periods of full-time “leisure” when I cycle tour, take photos, build bikes, garden, work on the house, commit activism and so on.

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  • rainman

    Y’know (or have probably figured out by now), I’m not an economist. So I try to compensate for the view that, normally, you guys think kinda… odd. (From my perspective, that is). Sort of hyper-rational on one level and completely loopy on another… 🙂 But I think this post is even more “counter-intuitive” than usual.

    “Now, the primary argument against this is that the “displaced workers” aren’t solely displaced. The immigrants are doing a job making things, and therefore this will “create work” for other people.”

    So, if the immigrants work really, really hard they will create jobs for the displaced workers? (Even if the customers aren’t buying as much product). Who’s paying for the stuff they are making? Or the raw materials? And weren’t there more people working in the business before they laid off all the Kiwis, so they would have been “creating work” for more people?

    AKA: You can the out-of-work welder that he isn’t “solely displaced”, and others’ efforts are “CREATING JOBS my friend”. I’ll stand over here with the camera.

    As to your other argument, if we imported migrants to work at minimum wage (“Workers”), taxed the company profit and redistributed this via a benefit scheme to “Locals”… (Loopy!)
    Consider two scenarios:
    1. The benefit paid is less than minimum wage. Most Locals would then logically prefer to be Workers. Besides, over time we’d lose practical productive skills and become a leisure class… so nett reduction in benefit to the Locals in both the short and long term. Well done!
    2. The benefit is more than minimum wage. Most Workers would want to be Locals, and you would have to have strict criteria to exclude the Workers – which argues against your earlier comments against nationalism (quoted below). This might work in a steady state or permagrowth economy, but in a downturn the benefit paid would have to reduce, and my point about leisure classes and productive skills would apply.

    And I’m not even going to get into who would distribute this benefit, and how equitably….

    See what I mean? Half the time I wonder what planet you guys are on, ‘cos it often doesn’t seem to be Earth.

    From the other thread: “I don’t care about New Zealander’s anymore than I care about other people”. So, why have national governments then?

    A further consequence of this is that wages for semi-skilled work will be driven down towards minimum wage, which is bad for the Locals (Although you may argue this is equivalent to the factory closing down and relocating to Thailand).

  • @moz

    Leisure is a technical economics term to mean what you described about non-work time 😀

    BTW, I’m Matt not Mark – although Mark is still a good name. However, I would prefer it if you call me John if you aren’t going to call me Matt 😉

  • @rainman

    Hi Rainman,

    Indeed, economists think in a special sorta way – but I think once the underlying assumptions are a bit clearer you might find is sexy rather than weird 😉

    “So, if the immigrants work really, really hard they will create jobs for the displaced workers?”

    If migrants come into the country and start making productive things that are sold overseas then there will be jobs servicing the migrants. If NZer’s are making things to sell overseas, migrants could come in and create services for the NZer’s. That is a bit oversimplified – but that is a basic sorta way it could work.

    More intuitively the important thing is prices, and the fact that inputs make production. If we get more migrants, then we have more inputs to make things with. If they start making stuff, then there is stuff. Given that they are making stuff prices will change and other people will move into things that provide them with a return – the migrants coming into the economy changes prices, but once prices adjust people are back in work.

    Economists believe (with good empirical evidence) that there is a range where unemployment can lie – and even if migrants flooded in, in the medium term prices would adjust such that unemployment falls to that level.

    The problem is that prices don’t always move straight away (and capital can’t be put up immediately) – so in the short term, if demand is weak, we don’t want to let heaps of migrants in. But letting in people with skills, who really add to the production of the nation, is still often a good thing – it is like discovering oil, or finding a whole bunch of new land!

    I will carry on in a new comment – one sec

  • “Who’s paying for the stuff they are making? Or the raw materials?”

    That is true – there are limited resources. But if the staff coming in are more productive then we can have more stuff with the same number of initial resources. Furthermore, there is no indication that a migrant won’t increase production by more than they consume in a society – in fact, if they are skilled they will do just that.

    It isn’t a question of “who is paying” it is a question of “how much is being produced” – payment is an arbitrary function of what the country actually makes.

    “AKA: You can the out-of-work welder that he isn’t “solely displaced”, and others’ efforts are “CREATING JOBS my friend”. I’ll stand over here with the camera.”

    I would ask them why they think they deserve the job more than someone who their boss said was more productive than them.

    Now for my argument about “importing workers” – I never said do it at the minimum wage mate, you have open borders and you pay the “market wage”. If only migrants are willing to work and New Zealander’s decide they don’t want to we end up in a situation where the government could tax the people actually doing work and give a benefit. In theory New Zealander’s could be earning just as much (if people overseas would work for less and were more productive) and wouldn’t have to do anything.

    It isn’t up to the government to “set up our skill set” – it is up to the INDIVIDUAL. If the individual wants to invest in skills, and gain the reward from it, then they can. If the individual WANTS TO WORK they can do so at the market wage – if they don’t want to they don’t have to.

    “See what I mean? Half the time I wonder what planet you guys are on, ‘cos it often doesn’t seem to be Earth.”

    This is what is called a “hypothetical situation” which I was using to illustrate the disjoint between work and actual real income. Work is the cost of getting income – income is what we value.

    (Main passage here) If migrants increase the income of everyone else it seems self defeating to kick them out of the country – even if “there is less work”.

    “From the other thread: “I don’t care about New Zealander’s anymore than I care about other people”. So, why have national governments then?”

    Indeed – wouldn’t it be nice if we had a society where people weren’t placed into arbitrary nations and we had free borders.

    Do you know why we don’t have this – because countries like New Zealand don’t want to take the associated pay cut that this would lead to, even though it would improve the lives of the very poor overseas BY HEAPS.

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  • Matt Nolan :
    Because the marginal utility of leisure is diminishing.

    I see this now, cheers.

    moz :

    I thought it might be something like this. It suggests there’s still a lot of inflexibility in the labour market.

  • @goonix

    Inflexibility is the problem stemming from it indeed – it is one of the main issues in the labour market for me.

    There are just so many things that screw up the adjustment of labour – which is a pain when that input is also tied directly to the welfare of almost everyone in society. That is what makes a proper understanding of the labour market SO important.

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  • moz

    Part of the inflexibility is IMO an overestimation of the overhead costs. There’s the hardware costs – each geek needs a desk and a computer in an air-conditioned office plus payroll support and so on. That’s got to equal at least 20% of the full time salary and it doesn’t change much as hours reduce. The there are the training and team interaction costs. Those can kill, and there are geeks who do negative work – the cost of explaining what you want them to do, supervising their attempts then fixing the f*ckups is greater than the benefit you get from the work. So even for a good geek, there’s a cost to not having them around all the time – scheduling meetings when they’re in, waiting until they can fix things that only they can fix, bitching about their reluctance to join death marches and so on.

    But that still doesn’t get down to the zero value that most employers assign to part time geeks.

  • @moz

    High Moz. Even with the fixed costs I suspect there are strategic and incentive reasons that justify their behaviour:

    1) Labour generally complements other labour – so having people work “flexible” hours means that they don’t just lose an hour or two of work – they lose the value from the “interaction” of staff.

    2) Giving one person flexible hours may hurt the incentives of other staff members.

    However, to some degree I think this is a rule of thumb firms follow – which is not always the best way to make policy. Over time, as the benefits of flexibility rise, firms will adapt methinks.

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