We Don't Really Need More Jobs

What people are really after is not jobs, but the incomes that come with them.


MTAPhotos / Foter

The employment report released by the Bureau of Labor Statistics last week reminded us that, after five years of recovery, the unemployment problem is not solved. The unemployment rate remains over 6 percent, and one third of the unemployed have been out of a job for more than six months. Counting discouraged people who have dropped out of the labor force, and those who would like to work full-time but only have a part-time job, some 11 percent of Americans are unemployed.

Everybody is talking about jobs, but do we really need them? Do people really want to work?

Most people, if offered the alternative between their current job on one hand and, on the other hand, the same salary but no job would choose the latter. Many do make this sort of choice. Casey Mulligan, a University of Chicago economist, calculates that half the depression of the labor market during the recent recession lies in the incentives created by the expansion of the safety net.

And note that anybody who gets bored without a job or needs the sentiment of being useful can do charity work. So why do most of us want to work at paid jobs?

The answer is simple. What people are really after is not jobs, but the incomes that come with them. And people want incomes because they want to consume during their leisure time. Life is not about making useless efforts, but about enjoying things, many of which, alas, only come with some effort. Jobs are the cost; consumption is the benefit.

These are rather banal economic ideas, although economists sometimes forget them. As for politicians, they don't get paid for promoting the truth.

According to a Gallup survey, 70 percent of American employees don't feel "engaged" in their jobs, which basically means that they are there only for the money. And the remaining 30 percent, who are "engaged," would likely drop their jobs if a salary did not come with them.

Some people do love their jobs, but what they love is more the self-reliance, and thus the dignity, that comes with the income. Some people also find a leisure component in their jobs, such as its social dimension (gossiping, meeting people) or the intellectual pleasure or challenge of certain forms of work. In some cases, there is something a person likes so much in his job that he would do that part even if he were not paid. This partly explains why, over the past few decades, individuals with more education have have tended to reduce their leisure time in favor of more work, while less educated ones have done the contrary, as shown by recent research by economists Mark Aguiar and Erik Hurst.

Still, even people who love some conditions of their jobs would not stay if they were asked to work for free.

People don't love their jobs for the effort, the schedule, the commuting, the obnoxious bosses or co-workers, etc. Most workers would likely drop the nine-to-five job and concentrate only on what they really like to do, if only their incomes continued flowing.

The implications for public policy of this simple fact that jobs are a cost, not a benefit, are momentous. The goal of public policy should not be to create jobs, but to allow people to earn as much as possible, which amounts to increasing general economic efficiency. Paying people to dig up holes and fill them up again—the extreme case of government make-work programs—would create jobs and incomes for the lucky diggers. But the incomes coming with such inefficient jobs are simply transfers from taxpayers. Moreover, inefficient jobs carry a net economic cost imposed on consumers, who do not benefit from the production of the goods and service they value most.

As paradoxical as the statement may look at first, the goal of public policy should not be to destroy efficient jobs either. For this is what labor market restrictions actually do, as confirmed by much econometric research. American labor markets are less restricted than European markets, but many regulations do hamper them, from minimum wages to the deeds of bureaucracies like the National Labor Relations Board.

What is needed, then, are not jobs per se, but jobs that are efficient, that is, jobs that produce goods what consumers want. If governments were only to stop destroying efficient jobs through labor market regulations, most of the job-cum-income problem would be solved.