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Governance for Good Jobs: The Need for Pro-Productivity Reforms

The writing is on the wall—or, rather, the doors. Following the failed passage of $2,000 stimulus checks in early January 2021, the two most powerful members of Congress found their homes vandalized. “Were’s [sic] my money” was spray-painted on Senate majority leader Mitch McConnell’s front door in Kentucky. In San Francisco, Nancy Pelosi’s garage door bore the message “we want everything.”1 The implicit bargain at the beginning of the pandemic—when the government essentially paid citizens to stay at home—sparked understandable anger when benefits ran out but quarantines dragged on. Yet the graffi­tied demand for “everything,” painted be­neath “$2k” with a line drawn through it, suggests a larger discontent.

Businessman Andrew Yang made an impressive run in the Demo­cratic primaries as a presidential candidate (and later the New York mayoral race) with a single-issue campaign promising a universal basic income (UBI) of $1,000 monthly to every adult citizen.2 UBI is both radical and logical, unprecedented at large scale in human histo­ry, yet the implicit culmination of the expansionary welfare state. It promises our managerial elite a peaceful revolution and a powerful reduction of discontent, which helps explain its endorsement by economists and bil­lionaires alike. And it seems necessary because of the growing prevalence of low-wage, dead-end jobs, with 53 million or so Americans stuck there thanks in large part to globalization and automation.3

But there is another path possible for our country. Instead of separating work from remuneration, we could make a substantial effort to increase productivity throughout our workforce and thereby increase earnings. Those who want to strengthen the working class and rebuild the American dream have yet to address the biggest eco­nomic problem: blue-collar wages are stagnant because productivity is stalled—and productivity is more important than any other factor. Those currently drafting a post-Covid economic policy agenda must realize that reforms which fail to improve productivity will fail to make the entire working class self-sufficient. If we want to oppose the slide towards a UBI and reclaim the profound American tradition of self-reliant workers sup­porting strong families and communities, we must launch a major attempt to revolutionize our workers’ productivity.

Reformers typically identify market power, regulatory capture, and crony capitalism as the main obstacles to widely shared economic ad­vance. These are real problems, and corporations that pursue them cause real harms. Yet the work of redressing them, while necessary, is insuffi­cient to address the deepest causes of our shortage of good jobs. The fundamental reason why a living wage is out of reach for so many is not the decline of unions or the rise of superstar firms, but the stagnation of productivity coupled with a sharp increase in the costs of non-commodity necessities such as housing, health care, and education. As Oren Cass4 and Fred Block5 have recently highlighted the problem of the rising “cost of thriving,” we will focus on the former issue of stagnant productivity. “Low productivity” is not a satisfying villain for those who want to point fingers—it is popularly seen as an excuse to fatten profits rather than a problem in its own right—yet the hopes of reformers will go unfulfilled unless it is ad­dressed.

Our situation has some notable parallels with the time of the first president Roosevelt, who sought a middle way between socialism and laissez-faire. In word and deed he was a proponent of the strenuous life of personal responsibility, holding that “the chief factor in any man’s success or failure must be his own character—that is, the sum of his common sense, his courage, his virile energy and capacity.”6 Yet it was precisely Roosevelt’s appreciation for individual action that allowed him to see clearly its limits and the need for both government and civil society. His experience as a rancher and soldier, as well as his visits to the tenements with Jacob Riis and his lifelong Dutch Re­formed faith, taught him that the individual’s success cannot be sus­tained without a thriving community. In the long run,

I saw that it was the affair of all our people to see that justice obtained between the big corporation and its employees, and between the big corporation and its smaller rivals, as well as its customers and the general public. I saw that it was the affair of all of us, and not only of the employer, if dividends went up and wages went down; that it was to the interest of all of us that a full share of the benefit of improved machinery should go to the workman who used the machinery; and also that it was to the interest of all of us that each man, whether brain worker or hand worker, should do the best work of which he was capable, and that there should be some correspondence between the value of the work and the value of the reward.7

Our economy has certainly changed over the past century. We have proportionately fewer commodities, more services, and far more firms seeking insulation from competition through advertising, switch­ing costs, and network effects. Yet this passage from Teddy Roosevelt still sums up the fundamental factors involved in wage justice today: Firms making economic profits and offering dividends should not be reducing wages; capital investment which raises productivity should proportionately raise wages; laborers should do their jobs well and should have a corresponding reward for the value they create by doing so. If we want a renewed Rooseveltian “square deal,” then workers, employers, govern­ment, and civil society each will need to chip in by increasing productivity and rewarding it fairly.

Increasing Self-Sufficiency through Improving Productivity

Political liberty and economic freedom have been linked in the Amer­ican imagination since the Boston Tea Party. The goal of our nation’s political economy should be for a “living” or “self-sufficiency” wage to be normative and commonplace, the rule rather than the exception. With some rounding, this is a measurable goal. Researchers at the University of Washington and MIT have made county-by-county calculations of what it would take for variously sized households to attain a decent standard of living without needing government or private aid. For example, looking at the requirements for a dual-income couple with two school-age children in Saint Joseph, Indiana (the county where we live), the UW team estimates that $58,540 in pretax income is needed, while researchers at MIT suggest that $63,792 is necessary.8 These numbers may seem high, especially if we note that the median household income in our county is $53,881.9 We are more accustomed to thinking of hardship as afflicting a smaller number of unfor­tunate people—some­thing like the estimated 15.7 percent of our county’s residents who live below the federal poverty guideline (which is $26,500 for a family of four).10 The official federal poverty measure—which is still based on the cost of food in 1963, adjusted for family size and annual inflation—is widely acknowledged to be crude. By contrast, the measures by UW and MIT are indexed to the local cost of living for housing, childcare, food, trans­portation, and other basic necessities. Whether one or both parents are assumed to be working, a typical low-wage household in our county would fall well short of attaining self-sufficiency. For exam­ple, among the ten most common jobs in our county are sales, food prep and service, and cleaning and maintenance—which respectively pay on aver­age $26,286, $20,198, and $25,707. Among leading low-wage occupations in our county, only construction workers ($47,399) and transportation and material movers ($32,507) made more than half of the self-sufficiency wage in 2019. Readers ought to look at the statis­tics for their hometown.

How far are we from the self-sufficiency wage being the norm for American workers? Of the 122 million people making up the bulk of our workforce, the Brookings Institution found that 53 million are low-wage earners. Of these 53 million, their median earnings were $10.22 hourly and $17,950 annually. Tellingly, nearly half of low-wage workers were employed in ten occupations, with retail salespersons, clerks, cooks, cleaners, movers, servers, and construction work­ers at the top of the list.11 While there are 38 million working Americans aged 25–54 without college degrees, there are only 11 million jobs offering a living wage which do not require higher education, and an additional 9 million “promising” jobs which offer a ladder toward a good job.12 Worse yet, we are on a downward trajectory: the Bureau of Labor Statistics projects that the three fast­est‑growing jobs by 2029 will all have median wages below $30,000, while only two of the top thirty growth industries offered more than $45,000 without requiring a four-year degree.13

The prevalence of low-paying jobs, especially for workers with less education, has created in many cases not so much a gap as a chasm between what it would take for a family to be self-sufficient and what they earn. How much of this problem is due to wages being too low, and how much from costs being too high? Oren Cass’s “cost of thriving index” illustrates how typical estimates of inflation under­state the actual increase in the cost of the major “basket of goods” which social norms dictate for a middle-class family of four: college, transportation, health care, and housing. While the median male worker in 1985 would have had to pay roughly thirty weeks’ salary to cover a standard amount of consumption of these goods, their equiva­lents in 2020 would have required over fifty-three weeks’ salary—in other words, the median worker is no longer even close to a family sufficiency wage. We can employ the cost of thriving index to consid­er the relative weight of low pay and of high costs. Both are serious problems, but which is worse? An estimate can be made by noticing that, of the four goods Cass examines, the rate of their growth has been very uneven14:

Over that same period, the median male American worker’s salary increased from $693 per week to $1,026—an improvement of 148 percent. There has thus been a wide discrepancy between the two goods with relatively clear market structures and the two goods with distorting subsidies and costs that are not as clear at the point of use. For the median worker, transportation and housing are roughly as affordable as they were in 2000,15 but college and health care cost well more than twice as much as they did at the turn of the millennium.

What if the costs of college and health care had instead risen in tandem with the cost of transportation? Would the median worker—or, more important, the lower-wage, less-educated worker—still have seen their standard of living decline? Asking this question can help us see whether the bigger problem has been stagnant wages or rising prices for important non-commodity goods. An increase of 120 percent over that eighteen-year period would have brought the cost of college to $4,964 and health care to $7,723, making the 2018 “bas­ket cost” $37,460. We have used those numbers for our hypothetical, adjusted cost of thriving index (below), as well as adding in BLS data for a wider range of workers.

A few important points can be seen in this data. First, wages have been rising for median and first-quartile workers as well as those in the third quartile; every group would have seen their standard of liv­ing increase rather than decrease between 2000 and 2018, had the cost of health care and education grown at a restrained rate.16 Targeted reforms to bring down the costs of health care and higher education, then, are necessary to help American families to thrive. Yet even if such reforms had been enacted decades ago, the families of most workers without a college education—and 25 percent or more of the workers who did graduate college—would still be struggling. Recall that the median male American worker’s COTI in 1985 was about 30. In 2018, even if health care and college had since 2000 only increased their costs in tandem with transportation, fewer than 75 percent of men with high school diplomas but without college educations would meet that standard. Even the first quartile of college graduates, with a COTI in our hypothetical of 37.8, would be significantly worse off than the median male earner of 1985 (when roughly a quarter of the male workforce had a BA or higher). Such findings suggest that while wages have risen across this time period, they have not risen enough to cover even a reasonable increase in the cost of social necessities, let alone the actual costs which households face. Reducing the cost of health care and education is thus necessary; so too is increasing the wages of most American workers.

Given how high the cost of thriving is—how high the self-suf­ficiency wage needs to be—it is unsurprising that few households rely on a single breadwinner and nothing else. Public and private assistance, along with families pooling their members’ incomes, make up a substantial percent­age of the distance between individual salaries and family needs, and thus not all of the fifty-three million American low-wage workers are living in poverty. Yet the existence of safety nets does not solve the problem. The American ideal is built not upon sufficient handouts but upon the meaningful opportunity for self-sufficiency. And the best way to increase working-class self-sufficien­cy is through improving work­ing‑class productivity.

One might object: what if workers just need more and better unions so that they are paid what they already deserve, rather than needing to be more productive so that they can deserve more in the future? The decoupling of productivity and pay since the 1970s has been well-documented. While the middle of the twentieth century saw average wages rise in tandem with productivity increases, for the past fifty years overall productivity growth has outpaced average wages. Yet when we look at particular industries instead of the econo­my as a whole, the picture looks more fair. Industry-specific data collect­ed by the Bureau of Labor Statistics shows annual increases in com­pensation to be strongly correlated with increases in value produced, although raises do lag a few percentage points behind productivity gains.17 Moreover, in a number of blue-collar jobs, from motor vehi­cle manufacturing to ware­housing and storage, compensation gains have outpaced improvements in productive value.18

Economic theory has been caricatured as holding that “the exact amount that a particular employer will pay just happens to be exactly what an individual employee is ‘worth’ (in objectively-measured con­tribution to the enterprise).”19 The considered view of economists, however, is that not the only, but the main, determinant of workers’ pay is the value of their marginal product. John Bates Clark, who developed the economic theory linking marginal product and pay in response to socialist condemnations of capitalism as extortion, held that unions play an essential role in equalizing the bargaining power of workers and employers, and were necessary in order for workers to be paid what they deserved. Empirical economic studies make no claim for a perfect equality between pay and productivity; one nota­ble study concluded that “workers are on average paid no more than 85 percent of their marginal product.”20 What matters for our argu­ment is simply that the gap between productivity and pay, averaging roughly 15 percent, is far smaller than the chasm between self-suf­ficiency and pay—which as we saw above is over 100 percent for many low-wage industries. While there is some room to play catchup by increasing wages toward 100 percent of marginal product, we also need productive value to increase significantly.

To reiterate: it’s true that human resources departments set “salary bands” where, “within broad ranges[,] wages are indeterminate and set by bargaining.”21 There is a range of possible wages, and the exact rate paid is determined by the relative bargaining power of employers and workers. Collective bargaining matters, and it’s true and pernicious that our political economy has been arranged for decades to undermine its possibility and efficacy. Yet this misses the point that the HR-approved range of wages comes not from “upper limits at which they would bankrupt the enterprise and lower limits at which no workers would accept them,” but rather a rough estimate of the range of values a marginal worker could add to the firm. Individual employees are able to bargain for a better spot in the given range precisely insofar as they are able to indicate that they are likely to be more productive than the average worker filling their role.

Commentators on the left and the reformist right focus almost exclusively on closing the gap between productivity and pay, decry­ing not only the decline of unions but also issues like market power, noncompete clauses, and exclusionary contracting. More centrist eco­nomists will focus on issues like task-biased technological change and trade shocks. Each of these factors is significant. But even if these were all addressed, they could not span the chasm between low‑wage jobs and what is required for self-sufficiency.

Relative bargaining power is arguably the second most important factor affecting pay, after productivity. If a general strike by essential workers during the pandemic was a feasible political threat, then we could be confident that hazard pay at national retailers would have been much more generous than the pittance which was offered. Or, if there were formalized sectoral bargaining (as exists in Germany and as some call for in America), then the salaries negotiated would fall closer to the upper end of the salary bands. Again, all these issues matter; but they do not get to the heart of the problem. When it comes to the typical low-wage jobs that trap millions of Americans in dependency wages—such as retail sales, food prep, transportation, and material movers—collective bargaining would narrow but could not close the gap between wages and the cost of living.

Emphasizing that better productivity is the key to improvements in working-class jobs raises the specter of the “speedup,” where assembly lines are cranked up, tracking devices monitor warehouse workers’ steps per minute, etc., yet wages remain stagnant. A recent example of what we are not calling for can be seen in the automation of Coles warehouses in Australia: The grocery chain is reportedly22 building “smart” ware­houses in part to destroy its workers’ union—refusing to allow members with seniority to apply for the new ware­house jobs and locking out from their current warehouses those workers who attempted a strike. For productivity increases to lead to better pay as well as higher profits, there must be trust within a company that workers will be rewarded for their improvements in efficiency. This once was normal in the United States, as witnessed in 1890 by Alfred Marshall in his magisterial Principles of Economics: “[T]he employer would often find the total cost of his goods lowered if he could get twenty men to turn out for a wages-bill of £50 as much work as he had previously got done by thirty men for a wages-bill of £40. In all matters of this kind the leadership of the world lies with America, and it is not an uncommon saying there, that he is the best business man who contrives to pay the highest wages.”

In the age of ruthless cost cutting, seeking to reclaim this high-productivity-and-high-pay approach may seem quixotic, yet there are still many firms where it is a normal part of the culture. MIT business professor Zeynep Ton has richly documented the “good jobs strate­gy” whereby firms that invest in worker productivity and career development find increased long-run profitability even in a competitive environment.23 The distinctive feel of Southwest Airlines flights and Trader Joe’s stores is not an accident, but the result of a carefully pursued virtuous cycle, where relatively high labor budgets lead to a good quality and quantity of labor, which yields good operational execution, generating higher-than-average sales and profits, in turn allowing the cycle to repeat.

While typical retail industries will pare staff to a bare minimum, harry them into exhaustion, and suffer long-term lost profits from dissatisfied customers, good jobs employers operate with slack and then cross-train their employees so that (as at Trader Joe’s) stockers might swap recipe ideas with customers, and managers will take a turn scrub­bing the toilets. Having more people on the job, standardizing many tasks into simple routines, and then empowering workers to employ their human creativity to figure out what else should be done is a path toward major productivity increases. For example, QuikTrip pays its store managers between $60,000 and $80,000—a strong self-sufficiency wage that is both possible and deserved thanks to excellent management. The result: “QuikTrip’s profit per store is more than double the indus­try average for convenience stores and 89 percent higher than the top quartile in the industry.”24

Zeynep Ton’s MIT colleague Paul Osterman has done related work on good jobs providers and what he calls the “high road” approach. He finds particular room for improvement in productivity and quality within manufacturing and the long-term care sector, through the adoption of high-performance work systems which offer “broader jobs, enhanced training, employee involvement, and smarter operational and production strategies.”25 Other economists, studying the effects of raises for particular warehouse workers and customer service representatives, have found not only that individual workers increased their productivity such that the firms gained more in profits than they paid out in excess wages, but also that competing firms were pushed to raise their own wages. This suggests that it’s not simply the case that relatively high-paying firms are attracting the best workers, but also that the average low-wage worker can and will perform better, given sufficient reason to do so.26

Although firms may intend to maximize profits, they rarely know how to maximize the efficiency of their internal operations, which helps to explain why firms do not always improve productivity and pay. Economist Roger Frantz estimates that the average firm operates at only 80 percent of its X-efficiency, meaning that 20 percent more productive work could be gained through better management and organization of the same resources and employees.27 Of course, the room for productivity increases—and thus more frequent self-suffi­ciency wages—will vary by sector. Services that are both produced and consumed locally often have little capacity for productivity increases. Plumbers have all the tools that will fit on their belts, and string quartets are not going to increase their tempo by 25 percent as though they were an uninteresting podcast. Yet some local services can be improved upon, such as checkout-counter work, while others are tradable outside the community, inviting further productivity increases with improved communication and transportation. And again, adoption of a “good jobs” or “high road” strategy in manufacturing can yield substantial results; the classic example here is the Toyota Production System.

If this is true, then why are so many firms leaving money on the table by failing to increase productivity (and thus wages along with profits)? There are at least two reasons. First, taking the “high road” is easier said than done. It requires a commitment to excellence and a detailed operational strategy that PR teams may promote but manag­ers have difficulty implementing. Second, the low road is also a path to profitability. For firms to switch from treating employees as a cost to minimize to treating them as an investment to maximize, they often face a “worse-before-better dynamic,” where long-run gains can only be attained after short-run sacrifice and extra effort.28

An external impetus is thus necessary in many cases to encourage a firm to attempt the climb from the low to the high road. The legal and regulatory context for business, with its powerful impact upon corpo­rate decision-making, can provide this impetus. Public policy can and must work to encourage greater productivity through greater invest­ment in workers. Such an approach would in turn yield more jobs that provide a self-sufficiency wage.

Governance for Self-Sufficiency Wages

What kind of policy reforms are needed to improve working-class productivity and pay? We can distinguish among three levels of pro­posals and three scales for change: piecemeal, meta-interventional, or systemic. The most straightforward types of suggestions, readily found in reports from think tanks like the Brookings Institution or the Aspen Institute, offer useful incremental reforms—an apprenticeship here, a retraining program there. One plan has two catchphrases right in the URL: “tax wealth not work, and provide scholarships for service.” At the opposite extreme are wholesale revisions that go beyond industrial policy to require a new political economy—a fun­damentally different arrangement of relations between workers, man­agers, and owners. Each of these approaches has its virtues, but our focus will be on a proposal made for the middle ground—a novel approach that, in our view, has the right balance of feasibility and comprehensiveness.

This middle way is the “meta-intervention regime” proposed by economist Dani Rodrik and law professor Charles Sabel. They de­scribe our current system as “a problem of gross economic inefficiency.”29 Rather than making the best use of our people and facilities, as a nation we are “operating deep inside the production possibility frontier.” This implies that rather than facing a trade-off between increasing wages or employment, we could simultaneously raise both employment and wages. The fact that such a large proportion of our population is work­ing low-wage, low-skill jobs produces negative externalities. The social costs of bad jobs are ignored by firms but destructive of families and communities.

The most straightforward policy tool to address a negative externality is a Pigouvian tax—for example, a tax on digital ads to protect local businesses, or a progressive tax on corporate size to prevent market-share-grabbing mergers.30 Simply taxing bad jobs (or subsidizing good jobs), however, is too blunt of an instrument because of the ambiguity in their definitions. As Rodrik and Sabel put it, “[w]hat is a good job, how many can be reasonably created, how [do] technological and other firm-level choices influence job creation, what are the complementary policy levers that are available, how can that set of instruments be expanded—these are necessarily local, con­textual questions. They can be answered, and periodically revised, only through a customized, iterative process of strategic interaction between public agencies and private firms.” This ongoing collaboration with “open-ended goals, planning obligations,” and also “poten­tially draconian penalties” would constitute a meta-regime of inter­ventions and regulations. In short, Rodrik and Sabel point to an urgent need for an institutional framework which would choose from the particular good ideas put forward by the Brookings crowd and systematically implement, evaluate, and revise based on their effec­tiveness.

Such a meta-regime would have three mutually reinforcing com­ponents: upping skills and productivity in existing jobs, creating new good jobs, and shaping active labor market policies to prepare workers for both. The key to its success would be an embrace of the fundamentally uncertain and exploratory nature of innovation for productivity and workplace improvements, along with an emphasis on subsidiarity with local adjustments for particular applications of general principles. Rodrik and Sabel find an illuminative parallel in Ireland’s regulatory regime for sustainable dairy on family farms. Variance in soil conditions makes one-size-fits-all pollution regulations counterproductive, and the need for local modifications to high­er-order rules has led to a rethinking of the very nature of regulation. Instead of simple dictates and punishments, “contex­tualization induc­es collaboration between regulators, other public officials and regulat­ed entities in the development of novel forms of capacity building and public participation in regulatory deci­sion making.”

Similarly, a national good-jobs mandate could be legislated, but it would have to be implemented in stages, with periodic reviews and voluntary public-private collaborations to define and spread best prac­tices. Subsidies as well as penalties might be needed to induce innovation and “help firms bridge the gap between their current low-productivity/low-skill position and participation in the advanced sector.” Examples of well-directed subsidies range from funding for local faith-based initiatives such as Project quest in San Antonio—which offers comprehensive job training and support to a majority-minority population—to the partnerships which educational institutions like Columbus State Community College are forming with firms to cover tuition and provide a career ladder for graduates to go from unskilled work into management.

The key is not any specific policy or program but rather the meta-regime, the recognition that we need systematic experimentation and iteration of many local approaches to improving productivity and creat­ing good jobs. While ideally this would have federal funding, it could also begin at the state or regional level and expand as trust and coalitions grew over time.31 As a related proposal sums it up, a “‘mis­sion‑oriented’ approach to industrial policy is not about ‘top down’ planning by an overbearing state; it is about providing a direction . . . and catalyzing activity that otherwise would not hap­pen.”32

Conclusion

While we think that Rodrik and Sabel’s framework holds great promise, any attempt at deeply reforming our political economy to prioritize productivity growth will, by definition, include unknowns. Nevertheless, some attempt must be made. We are on a troubling trajectory with “superstar firms” and “frontier knowledge workers” reaping ever-increasing rewards while growing numbers of workers are reduced to low-wage jobs serving the privileged few.33 The dearth of meaningful work amounts to what anthropologist David Graeber insightfully termed “spiritual violence.” Since we are social animals who develop our capacities and hence our personhood through suc­cessful agency in the world, a political economy that systematically denies such possibilities for a substantial minority of the population is actively harming them. As Teddy Roosevelt famously noted, “far and away the best prize that life has to offer is the chance to work hard at work worth doing.”34

If conservatives, in particular, do not work hard to offer that prize to all, as a real possibility and not a mirage, then they are accepting decadence and stagnation, and ultimately courting rebellion. As re­cently as 1972, the Republican Party in its platform upheld “the right of American workers and their families to enjoy and to retain to the greatest possi­ble extent the rewards of their own labor” and affirmed “collective bargaining as the cornerstone of the Nation’s labor rela­tions policy.” The 1972 GOP platform even described the government’s role as being “to develop procedures whereby the imagination, ingenuity and knowledge of labor and management can more effec­tively seek solu­tions for such problems as structural adjustment and productivity.” Yet the last forty years of center-right policy have re­sulted in a class war. We now stand accused by the timeless questions of Sirach—“What does a wolf have in common with a lamb? And what peace between the rich and the poor?”—and that of Saint Augustine—“Without justice, what are kingdoms but great dens of thieves?”

Those who are not content with stagnation and decadence, yet do not seek a socialist revolution, must acknowledge that productivity is the main determinant of pay. It has long been hard to appreciate the full weight of this truth. More than a century ago, John Bates Clark noted that of “all conditions of human happiness, the one which is most underestimated is progress in power to produce . . . it is the sine qua non of any hopeful outlook for the future of mankind.”35 Popular reform proposals on the right could at best reduce the cost of living and bring pay up to productivity. But even if health care and higher education were reduced in price, many jobs’ productive value would still be far below the wage needed for self-sufficiency, and so we cannot hope to see the working class become self-reliant without increasing its productivity. Those who would write this hope off as quixotic and instead consign the less-educated to a life of government dependency will quickly find their country in ruins. Instead of ac­cept­ing that a growing share of citizens will need a steady stream of handouts to support themselves and their families, we need to experi­ment with and scale up policies which will offer them the opportunity for better jobs.

This article originally appeared in American Affairs Volume V, Number 3 (Fall 2021): 18–31.

Notes
1 Jenni Fink, “‘Where’s My Money?’: Mitch McConnell Home Vandalized After $2,000 Stimulus Check Vote Blocked,” Newsweek, January 21, 2021.

2 Stephen Eide, “Not Transformative—Just Expensive,” City Journal, January 22, 2021.

3 Nicole Bateman and Martha Ross, “Meet the Low-Wage Workforce,” Brookings Institution, November 7, 2019.

4 Oren Cass, “The Cost of Thriving,” American Affairs 4, no. 1 (Spring 2020).

5 Fred Block, “Beyond the Commodity: Toward a New Understanding of Political Economy,” American Affairs 4, no. 3 (Fall 2020). This is not necessarily to endorse in full Block’s claims concerning the extent to which neoclassical models still describe our economy.

6 Theodore Roosevelt, “National Duties,” Sept. 2, 1901.

7 Theodore Roosevelt, An Autobiography (New York: Charles Scribner’s Sons, 1913), 114.

8 Data for 2020 at http://www.selfsufficiencystandard.org/node/53 and https://livingwage.mit.edu/counties/18141. A low but realistic standard of living is assumed: Cell phones are deemed necessary, but restaurants are not; some toys for the kids and personal care products are accounted for, but vacations are not. Childcare and housing are typically the two most expensive categories, with housing pegged at the fortieth percentile of the local market; if only one parent is assumed to be working, elimination of childcare costs reduces the necessary income by approximately $10,000. See https://livingwage.mit.edu/resources/Living-Wage-Users-Guide-Technical-Documentation-2021-02-03.pdf.

9 Data at https://fred.stlouisfed.org/series/MHIIN18141A052NCEN. State data is more detailed, letting us note that Indiana’s median income is $57,603, with 15.7 percent of households making below $25,000 and an additional 23.6 percent earning $25,000–50,000.

10 Data at https://fred.stlouisfed.org/series/S1701ACS018141 and https://aspe.hhs.gov/2021-poverty-guidelines#guidelines.

11 Low wages were defined as making less than two-thirds of the median hourly wage for full-time male workers in that region. Nicole Bateman and Martha Ross, “Meet the Low-Wage Workforce.”

12 Chad Shearer and Isah Shah, “Opportunity Industries,” Brookings Institution, 2018.

13 The two jobs are industrial machinery mechanics and licensed practical nurses. Bureau of Labor Statistics, “Occupations with the Most Job Growth.”

14 Cass’s original analysis extends back to 1985. The Bureau of Labor Statistics does not report for income quartiles before 2000, however, so we will use a smaller data set.

15 Cass’s measure uses the cost of renting a three-bedroom house in Raleigh, N.C., as his reference point. This is a reasonable midpoint for the country as a whole, but of course there is tremendous variance in housing cost by county. The “burdened households” measure—showing the percentage of households which pay 30 percent or more of their income on housing—is a useful way to gain a sense of the problem; see https://fred.stlouisfed.org/release?rid=413.

16 Workers who did in fact see their standard of living rise during this period are typically those whose compensation package included healthcare coverage, as benefits are not taken into account by the wage data reported by the BLS. As Cass notes, however, “among full-time workers with income up to 250% of the federal poverty line ($62,000 for a family of four), fewer than half have employer coverage.” For the fortunate minority who do have coverage through work, contributions to premiums are still a major expense. Cass, “The Cost of Thriving,” 26.

17 The two largest outliers were manufacturing, where pressures from globalization were likely responsible for suppressing wage increases, and mining, where growth in wages actually outpaced growth in productive value. Michael Brill, et al., “Understanding the Labor Productivity and Compensation Gap,” U.S. Bureau of Labor Statistics, Beyond the Numbers 6, no. 6 (June 2017).

18 See the Industry Productivity viewer from the Bureau of Labor Statistics at https://beta.bls.gov/api-charts/home.htm.

19 Michael Lind, “Salary Bands and the Truth About Wages,” American Compass, December 11, 2020.

20 Adam Isen, “Essays on Labor and Public Economics: Dissertation Summary,” W. E. Upjohn Institute for Employment Research, January 1, 2013.

21 Lind, “Salary Bands.”

22 Lauren Kelly, “The Coles Warehouse Lockout Is a Front-Line Struggle in the Battle over Automation,” Jacobin, December 19, 2020.

23 Zeynep Ton, The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits (Boston: New Harvest, 2014). In Ton’s terminology, a good job pays or offers a path to a self-sufficiency wage, as well as offering dignity, satisfaction, and stability in the workplace.

24 Ton, Good Jobs Strategy, 9, 63.

25 Paul Osterman, ed., Creating Good Jobs: An Industry-Based Strategy (Cambridge: MIT Press, 2019), 11. Osterman finds the good jobs strategy to be less promising in other sectors, which is partly why the policy interventions discussed below are necessary rather than supplementary.

26 Natalia Emanuel and Emma Harrington, “The Payoffs of Higher Pay: Elasticities of Productivity and Labor Supply with Respect to Wages” (unpublished manuscript), December 28, 2020.

27 Roger Frantz, “Harvey Leibenstein, and an Anomaly Called X-Efficiency,” Journal of Behavioral Econonomics for Policy 2, no. 1 (2018): 25–31.

28 Zeynep Ton and Hazhir Rahmandad, “If Higher Pay Is Profitable, Why Is It So Rare? Modeling Competing Strategies in Mass Market Services” (un­published manuscript, September 24, 2019).

29 Dani Rodrik and Charles F. Sabel, “Building a Good Jobs Economy,” Har­vard Kennedy School Faculty Research Working Paper RWP20-001, 2019.

30 Jana Kasperkevic, “Paul Romer: ‘If You Think Moderation Is Censorship, You’ve Got a Competition Problem,’” Promarket, January 15, 2021.

31 While our argument focuses on long-run growth in productivity and wages, we do not mean to neglect or disparage those seeking to offer immediate help. Extending “universal basic economic dignity”—instead of universal basic income—should be a goal to be accomplished as soon as possible rather than in the vague future. On this, see Gene Sperling, “A Dignity Net for All,” chap. 12 in Economic Dignity (New York: Penguin, 2020).

32 Mariana Mazzucato, Rainer Kattel, and Josh Ryan-Collins, “Challenge-Driven Innovation Policy: Towards a New Policy Toolkit,” Journal of Industry, Competition and Trade 20 (2020): 421–37.

33 David Autor, Anran Li, and Matthew Notowidigdo, “Preparing for the Work of the Future,” Poverty Action Lab Research Agenda (2019).

34 Theodore Roosevelt, “Labor Day Address to the New York State Fair,” September 7, 1903.

35 John Bates Clark, Social Justice without Socialism (New York: Houghton Mifflin, 1914), 7.


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