In any election, whether federal, state, or local, candidates will vie over who can create the most jobs. At the national level, the unemployment rate is the most important barometer to political success. Presidential candidates routinely promise moonshot employment figures that will be difficult to attain. Then-candidate Joe Biden promised “millions of new good-paying jobs.” Even more farfetched in 2016, then-candidate Donald Trump pledged to create 25 million jobs over a decade. “Jobs” as an issue unites both parties. Progressives argue that jobs should perhaps be guaranteed by the state whereas conservatives argue that cutting regulations and taxes will yield exponential growth from the private sector.
What goes oft-unstated, however, is what those millions of new jobs will be providing society. In an economy where close to 25% of Americans hold self-described “meaningless” jobs and nine out of ten employees desire more meaningful work, maybe our politics has it backwards — we need fewer jobs. Recent job creation in the knowledge class has resulted in flanks of sinecures in inefficient sectors rather than growth-inducing productivity strides. For genuine future growth, employment needs to return to its actual purpose: creating value.
A way too brief history of work
Yuval Noah Harari reasons that humans dominate the world due to their ability to “cooperate in extremely flexible ways.” Humanity’s capacity to organize and specialize has made humans uniquely potent.
The nature of work evolved over time. Prior to the industrial revolution, non-manual labor was a product of the excesses from imperial largesse. Most of the population resigned itself to tilling the fields, mending metal, and weaving baskets. Only in imperial centers of unprecedented prosperity could the masses participate in the forerunners of the knowledge economy. Athens’s golden age resulted from the city’s extortionary position in the Delian League which enabled half of its citizens to live on the public dole. Elsewhere in Greece, however, ideas were created as a hobby of the rich and powerful.
The agricultural and industrial revolutions created the knowledge class that dominates today’s economy. The nineteenth century economy revolved around doing more with less. Agricultural output scaled 270% despite needing a fraction more workers. Industrial innovations made one textile worker worth forty. The surpluses at the primary and secondary economic levels provided opportunities for tertiary and quaternary economic opportunity. The primordial productivity growth continued into today’s economy. The twentieth century marked drastic increases in agricultural output. America’s farmer workforce declined from one-third of the U.S. workforce to a mere 1.3% today. The laggard American manufacturing sector doubled output over the past twenty years at the same time as it was hemorrhaging one-third of its workforce.
Job creation since the 1980s
In the past 50 years, competitive industries have shed millions of jobs while producing more goods (Bureau of Labor Statistics). Advancements in biotechnology, digital technology, low code, and automation have facilitated doing more with less. These industries continue to find ways to boost margins. Fast-food has discovered new margins with new digital ordering systems and operational efficiencies. Distribution warehouses have nearly entirely automated their workforces with robots and artificial intelligence. Grocery stores have even hired robot floor cleaners.
The new jobs of the past two decades have not come from retail nor goods-producing industries. Rather, they have come from bloated uncompetitive industries and oligopoly markets. In industries from consumer products to software, a handful of companies control vast swaths of the market. With the lack of choice, the markets are not responsive to consumers nor innovation. Healthcare and education specifically are responsible for half of U.S. job growth over the past decade. Despite these sectors’ growth, their generated value has actually deteriorated over time.
Rather than invest in new technology or efficiencies, non-competitive industries have ushered in ranks of middle-management bureaucracy. 95% of job growth in healthcare has come from non-doctor administrators. In ever-pricier universities, administration staffing has doubled relative to the number of academic faculty. It is no surprise that the end-value has decreased over time. While professors and doctors do more with less, their surrounding organizations grow relentlessly. The wider the industry moat, the longer organizations can exist with this model.
Bloated sectors point to increased regulatory burdens, evolving complexities and digital needs. They reckon that with further consolidation and subsidies, they can achieve fair value again. Some argue that the existing model is even a discount. David Graeber counters their reasoning in his theory on the rise of meaningless work. He finds that many jobs exist rather to fulfill a kafkaesque hierarchy where makework thrives and managerial self-importance triumphs the customer. Without accountability or competition, organizations justify pointless work and stagnate internally (see Noam Bardin’s essay).
How can we create more jobs
The American administrative glut is counterintuitive. One might expect with the rise of digital technologies that middle management could be streamlined. Unlike commoditized industries, at least until the pandemic, however, the knowledge economy experienced a long lull in productivity growth. Firms resisted adopting new efficiencies that emerged in the internet economy. Until an industry is vulnerable, corporate structures provide little incentive to innovate.
Unforeseen events can challenge the staunchest moats. The Dow Jones Industrial Average’s oldest member, Proctor and Gamble (P&G), protected its CPG portfolio with a relentless 7.3 billion dollars in annual advertising spend and sticky relationships with retailers. Its consistent dominance allowed P&G operations to bloat. That bloat arguably caused P&G to react less agilely and miss a rising trend, direct-to-consumer e-commerce. Within a few years, upstart brands Harry’s and Dollar Shave Club stole 10% of market share from its prized jewel Gillette.
Once in a competitive position, P&G was forced to adapt. It cut 30% of their workforce, doubled down on R&D, and bolstered its acquisitions budget. The slimmer, resulting company is now valued at twice as much as its former high-headcount . Even in a largely monopolistic space, the barbarians ultimately arrived and forced P&G to improve productivity and do more with less.
A better economy means fewer jobs
The coronavirus pandemic has offered a limited window to penetrate the formidable moats of higher education and healthcare. Higher education has been an uncompetitive space for decades. The truism went that a college degree was the key to a middle-class living. Elites factored in college as the best way to preserve the mores of a liberal society. The fallacy went unchallenged as student debt rose to 1.6 trillion dollars. Meanwhile, colleges were free to continue investing in new sports stadiums, luxury lounges, and administrative waste. While the value of their degree continued to decline, students’ only alternative was to skip college and condemn themselves to a market that often required college degrees.
The pandemic changed the competitive landscape with colleges. Before, a college might compete with another college over a similar group of applicants. Now, a college needs to demonstrate its value over the University of Phoenix, Lambda School, or even YouTube. Certain colleges like Purdue have recognized the threat and focused on providing cost-effective education. Purdue’s model has provided more with less administration by adopting private-sector procurement practices, reducing administrative redundancies, and outsourcing non-critical university services. Organizational austerity is the immediate future of education.
The US spends double (17.7%) on healthcare than any other reasonable country. Despite the byzantine regulations and labyrinth of providers, healthcare’s competitive moat is slowly dissipating too. In the short term, digital health providers like Roman and Teladoc have made it possible to avoid costly (or lucrative) hospital visits. In the long run, serious competition is arising in the long-run. While even Haven, the joint-venture of Amazon, Berkshire Hathaway, and JP Morgan, failed, healthcare is bound to shrink. With high spending and pitiful results, American healthcare will need to resolve itself before it bankrupts its own customer-base.
The future is bleak for America’s top job-growth levers. For decades, politicians have applauded imitation job growth in education and healthcare. The industries’ dismal results and price-gouging were accepted. Bureaucrats and lobbyists erected barriers to entry. However, like the British Empire or Rome, collapse can only be staved off so long. While healthcare remains entrenched, its destiny (save further government intervention) is fewer jobs achieving greater consumer value.
Less means more
The bulwark of American job growth is threatened. The fantastic growth of education, traditional corporates, and healthcare is sunsetting. Where the next spurt of growth in jobs will come is unclear. Yet, it is sure that the call to produce more jobs in the post-pandemic world is not the right approach. The popular mode of subsidizing inefficiencies may prove impossible soon. Governments themselves are struggling to maintain their monopolies (see BTC price).
Some might point to Universal Basic Income (UBI) as a solution to meaningless work. Yet, the importance of jobs cannot be ignored either. In a secular society, work is the lone plank of meaning. A lack of work creates life dissatisfaction. Many currently useless jobs provide a similar sensation. Dinosaur industries have crowded out meaning in the economy. More jobs does not hold the key to prosperity. Rather the key is more value-creation for others. Unlocking this value exchange is the most the government can do to create economic meaning again.