A Third Way: Jobs-First Capitalism
“Every underemployed American represents a failure of entrepreneurial imagination. Joblessness is not foreordained, because entrepreneurs can always dream up new ways of making labor productive.” - Edward Glaeser
Populism’s rise in America is well documented—and sadly its momentum is only building. It seemed to hit a peak with President Trump’s ugly declarations against immigrants and globalization. But, it is now emerging strongly on the left with Alexandria Ocasio-Cortez’s assessment of capitalism as “irredeemable.”
Americans are anxious and insecure. They feel the country is on the wrong track. They have low savings. Working class wages are just now rising for the first time in decades. They are turning to drugs and alcohol more than ever. Suicide is at all time highs.
The fear and angst is raw meat for ambitious politicians. People want someone to blame and the parties are ready to oblige. For the GOP the target is the age-old bugaboo—foreigners—immigrants who take jobs and foreign countries that compete with our companies. For the Democrats, the enemy is the rich who are taking too much of the pie, leaving the average American behind.
The general philosophy of each is divisive and laced with defeatism. One says: we can’t compete with the world, so let’s keep them out. The other says: there is no hope for most, so let’s equalize their position with new programs. And neither is sustainable. We can’t keep out competition forever and we can’t spend our way out of problems.
These zero-sum perspectives are exactly what lead Europe to destruction in the 20th century with the rise of fascism and communism. In fact, what helped America transcend these hard times was unifying to defeat totalitarianism. The war effort came at a great cost, but it unified the nation and reignited economic growth. Let’s hope war is not the answer this time as well. So, what possible rallying cry could help unify the country and bring back hope?
We need a better path to unify us and bring hope to everyday people. I propose it is about engaging all Americans in building the future of the country through jobs.
Yes, we live in a competitive world. But, America has the best, most creative talent, the freest system, and the biggest market. We have been a beacon of innovation and freedom for more than a century and our best days are still ahead. And it starts by putting our people to work. Stable jobs with a path for upward mobility. Jobs that allow people to contribute and provide. Jobs that create self-worth and social connections and capital.
Oren Cass’ book, The Once and Future Worker, makes the case that lack of secure and promising work is a key driver of our social discord—depression, suicide, addiction, and polarization. While unemployment is low in the wake of the financial crisis, much of it is temporary work not providing the powerful benefits of collaborative, full-time work. Many are also just opting not to work. For example, in 1967, 5% of prime age men did not work—today it is 15%. In some places, like Kentucky, more than 70% of non-college-educated men are working. Happiness studies show that unemployment is 10x more damaging than a substantial loss of income alone. And the unemployed have 50% higher divorce rates than the employed. Jobs give self-worth and a foundation for the social capital needed to build a life.
A rising stock market built on protectionist corporatism does not provide these benefits. Nor do more handouts. But, jobs-first capitalism would demand solutions. If our goal became rising employment for all, we could give more Americans the opportunity for a better life. And, if we want to compete in the emerging global economy we will need everyone to contribute. Our nation and our communities will get stronger.
Capitalism must remain the heart of our system. But, making employment (not just the rate, but total employment and median earnings) the core goal would drive real policy changes. It would challenge the orthodoxies of both parties and drive the emergence of new, creative programs.
Some ideas in this vein:
Higher Minimum wage via Earned Income Tax Credits (EITC) A mandated wage raises labor costs, discouraging hiring and encouraging labor-saving automation (think McDonalds’ ordering kiosks). Subsidizing low wages via tax credits would result in the same bump in pay but encourage hiring. Making these programs more generous and paid out like a paycheck would have large impacts—and they could be targeted to high impact industries.
Means-tested payroll taxes Let’s give a break for the entry-level earner (for both employee and employer) and raise the cut-off for higher earners. Again, this income boost at the low end will increase incentives to create jobs and for those on the sidelines to take them.
Massive R&D investments America needs its next major platform for growth (cars, telephony, television, internet are a few from our past). Expand NIH, DARPA, and other effective basic research investments to increase the chance of a new platform and employ the best minds here in America to pursue it. Create strong tax incentives for private R&D to do the same.
Revamp of Antitrust law More competition drives more jobs. We need to update our view of market power beyond pricing harm to the consumer.
A massive review of crony regulation Regulation is highly misunderstood. Most of it is not about keeping factories from dumping sludge in rivers. It is about protecting winners through high-cost barriers to entry (see Tesla trying to sell—or service—their cars against entrenched car dealers). These rules protect incumbents and large companies. This is the swamp that actually needs draining.
Legal limits to non-competes and job clubs Let people switch jobs easily and enter professions. This one includes a big review of licensing and accreditations which keep people out of work.
Massive infrastructure investments including YIMBY provisions A big stimulus will clear a backload of projects and create jobs. But we also must allow new private projects to move forward quickly through layers of approvals. Not just rail, highways and tunnels but also new building and development. Housing costs are eating into anyone’s ability to earn a living.
Drive opportunity and hope without college The push for college for all has failed. It has resulted in too much debt and removed a pipeline of skilled technicians. Let’s create other paths. The government funds traditional college 100x the rate it does skills-based education. Let’s go back to tracking willing kids into technical work focused on actual trades. These are good jobs and still create a path to a career with real upside.
This is only a small sample of jobs-first ideas. But, it shows the kinds of programs that emerge when jobs are the north star. We have to apply the same filter to bigger problems, like immigration and healthcare. We will get different, better answers with job creation as the frame.
Many of these ideas will distress both the GOP and Democrats. Taxes will need to be raised to fund these efforts. But some social programs will need to be cut as well—not just for funds, but to ensure the right incentives to take the jobs created. Jobs-first capitalism combines the self-reliance of traditional conservatism with the helping hand of liberal government activism. It seeks economic growth via a boost to those on the sidelines. In the end, it is about giving more people an opportunity for a better life - and growing the pie together. That is the original American Dream. We need it back.
Good Reads - Late March 2019
Daniel Kahneman lays out why we don’t want to be happy, we want to be satisfied—and helps explain why social media makes us miserable.
Democratic California Gavin Newsom can’t get environmentalists on his side for controlling fires. Yes, it involves doing what nature used to do—controlled burning.
Saudi Arabia’s “reformer” (and murderous) Crown Prince has a real problem—a terrible economy and little way out.
Scott Sumner on the sins of the modern left and right in America. A good lead in to my piece this week.