Friday, 14 October 2011
Last week Ezra Klein wrote this. His main point, the way I read it, is that the Obama stimulus was insufficient. But he makes a few other claims, one of which is that the government should have stopped firing people and it should have even hired more, even in totally bogus make-work jobs -- one assistant to every park ranger, three trainees to every firefighter, etc. He reasons that in drawn-out recessions the labor market is not quick enough to reassign people to productive jobs. Instead, people stay unemployed until their skills erode, which makes them even less employable, which depresses demand further.
Skill erosion is a legitimate worry, but I don't think Ezra Klein gets it right. Drawing a paycheck is not the only kind of productive work. Whether employed or not, as long as we are in the workforce we always do a combination of learning and paid work. We change the mix as we go along according to the going price of our time at the moment. When we are out of a job, our time is cheap. This ensures the best possible return on learning. Basically, when we're not busy drawing a paycheck, we're busy growing our stock of human capital.
A make-work job increases the going rate of the beneficiary's time, which makes learning more expensive. The rational response is to learn less. If most beneficiaries of make-work jobs respond rationally, these jobs will cause skill erosion, not cure it.
That may not be all. Your stock of human capital isn't only good for making you ready to make a living when employers start hiring again. That is only its more obvious use. The less obvious one is this: the more you know, the more you know what makes you happy. That improves your odds of living a good life. It may be one of comfort, adventure, contemplation or service. Whatever it is, I would not be surprised if getting there took at least some learning: think of it as serendipity with a little help from you.
So it seems to me that make-work jobs only reduce the growth rate of human knowledge both about things that we can do for profit and about things that make us happy. This makes them a good way to keep us in the doldrums -- both in our heads and in our wallets.