One of the reasons I moved to Washington DC was to be near many leading social scientists and policy makers. In fact, I recently saw some working research being produced by Steve Pedigo at the Greater Washington Initiative and I was blown away by DC’s location quotients in occupations such as economists (almost 16), sociologists (9), and political scientists (36).
This June I plugged into the deep, thick social science network of Washington DC through participation in a CATO Unbound monthly discussion — an online ‘intellectual marketplace,’ run by the DC based CATO Institute. I wrote the lead essay for a discussion about the Future of Work. Edward Leamer, Robin Hanson, and Frank Levy all provided response essays.
Here is my essay and here are the responses by Leamer, Hanson, and Levy.
The conversation that followed the essays can be found here.
August 11th, 2006 at 3:57 pm
You should really speak with the Department of Labor on this, especially the Employment and Training Administration and most especially the Division of Evaluation and Research in the Office of Policy Development and Research. You and the division director have a lot to talk about. The web page for the office is http://www.doleta.gov/etainfo/opder/
August 11th, 2006 at 4:22 pm
Paying service workers a middle class wage, as you write about, is mostly important so that they can grow middle class families. In order to do this, explicit payments for child rearing are needed as part of the tax code. To look less like welfare, these should come with the wage and be a credit to salary through the employer’s corporate income tax. This tax should be broadenned to tax rather than exclude wages and salaries – essentially turning it into a VAT, while individuals would be exempted from paying an income tax except at the highest income levels and then only as a surtax of at most 10 to 15 percent of income (as the first 25 percent would have been taxed already under the corporate income tax).
August 11th, 2006 at 4:29 pm
The effect of the tax payment scenario above may be to distribute income to firms with many parents with large families – but its effect will mainly be to redistribute income to lower wage employees as a higher minimum wage would likely be part of the VAT structure to ensure that employers aren’t offloading their entire salary base onto the tax credit for children. It would also lower wages for people whose kids are no longer dependents, thus making them more competitive in the labor market. Retention could come for these people through non-wage means. Also, other workers with high wages and no children would likely lose ground. The average worker with the average number of children at the averge company would likely see no change at all.
August 15th, 2006 at 12:23 am
I looked over your respondents. They had some interesting comments although they really don’t get it, do they.
That “gotcha” approach in our discourse is one of the big things holding back creativity. Robin Hanson makes an interesting point about smart machines of the future. He does not take it to its logical end. If machines are so smart – in other words if capital becomes independently productive, or is seen that way, rather than merely enhancing the productivity of existing workers (put another way, if the role of the worker is seen as enhancing the productivity of the machine), then how workers own this capacity, or society at large does, is a key question. In the literature, including the online Capital Ownership Group of which I am a member, there are three or four basic ideas: Social Credit, Two-factor Theory aka Binary Economics (Kelso and Alder’s Capitalist Manifesto and the later work of the Center for Economic and Social Justice), Georgism with land rents going to a social credit, and my little theory about using social insurance privatization to have employees buy the stock in their employers. Two factor theory has similar structures, but they reform the Federal Reserve and use money creation to fund capital improvements rather than the national debt. Now, I could see that some products may be totally automated, from ordering from a home PC to delivery through an automated transportation and delivery system. However, most enterprises are about more than just production. They involve some human element in marketing and distribution which is more difficult to design out – although not impossible to do so. Eventually, in a Marxian workers paradise no one will work, although I bet Hanson would not want to be seen agreeing with Marx and Engels. The other thing he ignores is the training and compensation of the creative class. Both the technical designers and the marketing professionals who make the product fashionable will need to be compensated, even if production and delivery were totally automated. They will also have to be trained. Now, I can even forsee in the distant future some customer being able to design a new product from home and have a factory build and deliver it using expert systems to make sure the design is buildable. However, we are nowhere near there yet.
I write about how to train everyone to their own creative potential on my web page. See http://www.geocities.com/bindner_space/careers.html for the details.
August 15th, 2006 at 12:33 am
Edward Leamer writes about inequality. It is something that must be dealt with. The “creative wage” and the base wage are currently combined in a differentiated salary structure which rewards conformity more than outside the box thinking. While Professor Hansen may see this as a good thing, some of us see this as holding back real innovation in favor of the safer variety.
There are many aspects of pay that can be separated to achieve some measure of equality. Incentive pay for actual innovation is one of these. Another is pay for dependents. Right now, it is correlated with age, which is why older programmers are laid off in the forties. If their base wage stayed constant and they were compensated separately for their kids (with a tax benefit underwriting this so that firms with a large number of large families do not take a hit they cannot afford) there would be more equality, since the janitor or the sales clerk would also get this benefit. Stock compensation for innovation and financial and mortgage services are also elements of compensation that might be separated out of a base wage, which would flatten. I talk more about this on my site in an essay on pay equity at http://www.geocities.com/iowaequity/PayEquity.html. I also apply these concepts to the most creative of people, the entertainment industry (including sports) at http://www.geocities.com/mikeybdc/sportsentertainment.html and to the problem of multinationals at http://www.geocities.com/iowaequity/multinationals.html
August 15th, 2006 at 12:41 am
Richard talks about the loss of low skill jobs not being important. He is right and wrong on this. I have a feeling that the Cato privatization plan has a subcurrent relying on this development, with the profit that these workers generate going to US share holders, who would be everyone under their privatization plan. The only fly in the ointment, as I see it, is that eventually these workers will refuse to be exploited and the shares held by retirees will become worthless – hence the problem. Note, that this is an equal opportunity problem for the parties, since the USA accounts Clinton proposed and which Brookings pushes would also be hampered by the empowerment of multinational workers. See http://www.geocities.com/iowaequity/SocialSecurityCrisis.html which also talks about how to increase equality and why we need to do it.
I bring in the most contentious social issue in this discussion – abortion. Linking abortion, a living wage, tax reform and social security actually makes historical sense, much the same way that voting rights for women was linked to prohibition of alcohol. I am not endorsing the latter, but I am pointing out that they seemed to be part of the same package. In order to get the liberal result of the franchise for women the conservative temperance movement had to be placated. If we ever want living wage legislation and greater pay equity it will need to be linked to the social issue that drives the other side.
August 15th, 2006 at 12:54 am
Frank Levy talks about improving education. I cannot agree more and I bet Richard holds the same position. I already posted the link to the 21st century career piece, which talks about education at the career level. Improving high school so that everyone is literate and separating tracks for votech and pre-college is also an innovation worth considering. Students who are not academicly inclined are discouraged by being mixed with those of us who wish to push paper for a living (as if laziness were a virtue to be rewarded with a higher salary). Likewise, true greasy grinds on the economic track are bored with mainstreamed and even AP education (which is often a way to racially segregate rather than separate out the top performers and give them extra attention). Thus, the academic track should combine the last two years of high school and the first two of college, with graduation determined by the requisite number of college level courses completed. Some kids would start right in on the college courses, others would work up to them slowly. There might also be a sound academic track for retail mangagement and general education for those who do not need a four year major cum masters degree (which would also be combined into a three year program paid for by an employer in exchange for a service commitment). The link again is http://www.geocities.com/bindner_space/careers.html
As important is unlocking the creativity of those who have been underserved by education in the past. To decrease inequality, we must make literacy a civil right, including for immigrants regardless of status. Welfare reform should be replaced with paid education (and I mean paying adult students) with all social welfare benefits also coming through the schools. More private and parochial schools should get into the field of remedial education. If they educate children better (regardless of economic class) maybe they can do a better job of educating the parents as well. For this essay, go to http://www.geocities.com/xianleft_michael/education.html.
August 15th, 2006 at 12:56 am
Richard,
I’ve made my comments. Do you have anything to say?
August 15th, 2006 at 1:07 am
Its amazing that when I address a comment to our host I am asked for verification.
July 22nd, 2008 at 1:19 pm
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