Monday, August 15, 2011

Useful Employment

In an op-ed piece for the New York Times, Paul Krugman makes the case that current unemployment levels in the U.S. are a bigger concern than government debt, despite the recent focus on deficits. I’ve heard these arguments before, but I’ve always wanted to hear more discussion of the types of employment.

It makes sense to me that pulling out of economic problems requires having as many people work as possible. However, it must matter what kind of work they are doing. If we subsidize clothing it will create more jobs in the clothing industry and will allow compulsive shoppers to buy even more tops and shoes they’ll never wear, but I fail to see how this will help the economy in the long run.

It’s unlikely that we would all agree on what types of work benefit society and what doesn’t, but it seems to me that if the government plans to inject money to spark the economy, it makes sense to give some thought to the type of job growth that the stimulus will create.

I have no great answers here, but I’d like to know if quality of employment is even a consideration. By “quality” here, I mean the type of work that will benefit society in the long run rather than how the individual would define quality (e.g., pay level, security, benefits, etc.). Surely building windmills is better than selling cute shoes.


  1. I was watching Fareed Zakaria's show on Sunday morning and he interviewed Krugman and another economist. As I understand Krugman's position, the type of employment (and its usefulness) do not matter. The example given was "digging ditches and then filing them back in". This seems counter-intuitive to me, but I'm not an economist. (BTY - I believe Zakaria's shows are archived on his GPS website, so if you want to see the interview directly it should be available.)

  2. @MMorgan: That sounds counterintuitive to me as well. It's hard to see how it is better to pay someone to dig and fill in ditches than to just give him money. Perhaps the individual doing the (useless) work will be more inclined to do other more useful work later than if he had been given money to do nothing. But it seems to me that it is best overall to have people doing more useful work even if it is subsidized.

  3. The Krugman rationale was that the people employed digging and filling ditches will spend more feely and will help get the economy moving to some extent. However, Krugman seemed more focused on the overall unemployment level and the effect it has on companies in terms of investment. The larger thesis seemed to be that in a high unemployment evironment companies will be unwilling to spend (even if they are sitting on a lot of cash) because they don't believe there will be any demand. If the gross unemplyment number drops, even as a result of useless employment, then companies will spend more because they will believe there will be more demand and the employment generated by this follow-on corporate activity will generate actual demand. Therefore, if I understand the argument, the ditch digging and filling is entended to "prime the pump" to get other activity going and it is this other activity that actually cures the economy's problems. The opposing econmist's view was that if there were useful things to do (such as some needed infrastructure improvements), then it would be useful to make those investments, however, work for works sake was more likely to make things worse by increasing government debt. Intuitively, I preferred this latter view. It was pretty clear that Krugman was more troubled by high unemployment than the "theoretical" risk that additional spending on "useless" work would make then debt issue significantly worse. I would definitely recommend viewing the interview since they are better at making their points than I am.