Saturday, August 6, 2011

There are jobs and then there are JOBS.

One issue that seems to be completely overlooked in the current debate about jobs is that all jobs are not alike.  In particular, there are jobs that add wealth to the economy and jobs that don't add wealth to the economy. Both kinds of jobs give people wages, and therefor increase demand, which is healthy for the economy in the short term. But only some kinds of jobs actually add wealth to the economy.

In particular, jobs which actually produce something tangible or produce innovations that in the end produce something tangible add wealth to the economy. This includes farmers, production line workers, designers, writers, scientists and engineers, innovators, entrepreneurs, etc. These are people who actually produce something tangible that can be sold and/or exported at a profit. And their activities often produce yet more jobs in the economy.

Then there is a second tier of people who support these primary producers.  They may not produce anything themselves, but their activities enable the primary producers to produce. This includes medical staff, educators at all levels, people who handle logistics, car mechanics, people who run restaurants or or supermarkets or other essential services, utility workers, truck drivers, etc.

Finally there is a third tier of people whose activities may be essential to the operation of the system, but who actually represent a cost (even if a necessary cost) rather than a source of wealth to the economy. This includes managers at all levels, lawyers, accountants, bankers, politicians and government bureaucrats.  None of these people produce anything that actually increases the economy's wealth (though their activities may enrich themselves).  The economy actually needs the services of these people (for the most part), but one wants as few of them as possible, because they represent a cost of production rather than a source of revenue.

Finally there is a fourth tier who contribution to the economy (as opposed to their own pockets) is highly questionable.  This includes overpaid CEOs and senior managers, financial traders and bankers who deal only in paper wealth, and of course the Berny Mardoffs of the world.

Now what the economy badly needs is far more of the first tier, some more of the second tier, as few as possible of the third tier, and none of the four tier.  Unfortunately, we seem to have just the reverse -- fewer people actually producing something tangible and salable and lots of people spending their lives making fortunes for themselves trading intangibles like default swaps among themselves, or sitting in a government office somewhere shuffling paper.

Now the question is, just what kind of jobs can government "stimulus" produce?  My guess is that, at least under current political approaches, it produces far too few of the first tier jobs, and far too many of the third and fourth tier jobs.