This used to be considered nice work.

Photographer: Martin Leissl/Bloomberg

Maybe There's a Way to Create Good Jobs Again

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Academic economists don’t spend a lot of time thinking about how to restructure society in order to provide a good life for the majority of people. They usually restrict themselves to quantifiable data, mostly ignoring non-monetary payoffs such as self-respect, freedom and community. Perhaps that’s because they want to avoid the appearance of politicization, or perhaps it’s because these intangible qualities are difficult to shoehorn into the mathematical models that economists use to demonstrate their intelligence to each other. Either way, the task of figuring out how to create a good economic life for the average person falls mostly to non-economists -- writers, politicians and the occasional sociologist. 

The average American worker is confronting a number of problems right now -- stagnant income,  an overhang of debt from the housing bubble, the high cost of college and the replacement of pension plans with high-fee, low-return 401(k) plans. But few would deny that one huge challenge is economic insecurity. Political scientist Jacob Hacker’s 2006 book, "The Great Risk Shift," discusses how many risks that were once borne by companies are now shouldered by individuals. That is probably an inevitable result of the transition from corporatism to neoliberal shareholder capitalism that occurred in the 1970s and 1980s. Basically, the era of "good jobs” is a memory for most workers. Private-sector unionization is disappearing, average job tenure has plunged and benefits have been cut. 

Now people are beginning to worry that a new wave of technological change will erode job security even more. Information technology facilitates outsourcing, so that much more work can be divided among armies of independent contractors instead of done within large companies. Many believe that this will kill off what little security corporate jobs still provide, leaving us as permanent temps in a “gig economy.” Noam Scheiber reported on this for the New York Times in July: 

Though the broader phenomenon of shifting work to nonemployees is difficult to quantify, data on contingent workers suggests rapid growth in the last decade.

The number for the category of jobs mostly performed by part-time freelancers or part-time independent contractors, according to Economic Modeling Specialists Intl., a labor market analytics firm, grew to 32 million from just over 20 million between 2001 and 2014, rising to almost 18 percent of all jobs. Surveys, including one by the advisory firm Staffing Industry Analysts of nearly 200 large companies, point to similar changes.

The poster child for the “gig economy,” of course, is Uber, which provides taxi-like services and has fought vigorously against treating its drivers as employees. But technology-driven outsourcing started long before Uber, and covers a much wider array of occupations than driving -- everything from human-resource management to sales to accounting. 

So what should the U.S. do about outsourcing and the gig economy? As Allison Schrager writes in Quartz, existing laws are set up to favor corporate jobs. There is, for instance, a tax deduction for employer-provided health insurance. If that deduction were removed, the money could be used to provide bigger health-care subsidies for all Americans, including independent contractors and entrepreneurs. Unemployment insurance could even be supplemented or replaced with a system of government-subsidized wage insurance, for when large recessions force down the wages of independent workers. 

But turning the gig economy into a good deal for workers doesn’t just require government policies, it demands a cultural shift. That’s the kind of thing that economists have trouble wrapping their heads around. Technology is taking away one big benefit of the old corporatist economy -- security -- but in its place it’s giving us something we had almost forgotten how to value. It’s giving us independence. 

In the pre-industrial U.S. economy of the 1700s and early 1800s, much of the work (other than farming) was done by skilled artisans who sold their own products -- basically, they were independent contractors. In "Battle Cry of Freedom," historian James McPherson describes how, in the very early days of the U.S.’s Industrial Revolution, wage labor was widely seen as a threat to freedom -- a form of slavery lite. 

That will resonate with anyone who has ever had a boss they didn’t like. Corporate hierarchies are power structures, and bosses can be unpleasant or even despotic. The high cost of switching jobs makes it prohibitively difficult for many workers to quit in response to abuse by people above them in the chain of command. 

The outsourcing economy might change all that for the better. When you’re an independent contractor, or an entrepreneur, you’re selling your labor in much more of a free market. You don’t have bosses -- you have customers. If you don’t like one of your customers, you can usually “fire” that customer without losing all of your income streams. 

In a way, this will make our society a more equal one as well, since it will replace vertical management hierarchies with horizontal webs of contracts among equals. The gig economy probably won’t create greater income equality, but it will almost certainly increase status equality. 

So I think we should tweak our culture to embrace the gig economy. Security is nice, but freedom, independence and status equality are also nice. In a way, it’s a return to the classic American notion of what a good economy should be.   

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net