Dirty Laundry and High Productivity
Not too long ago, on a visit to Copenhagen, I took several shirts to a laundry. The proprietor greeted me brusquely with the words, “I can’t do express.” He wanted four days to wash and press my shirts, longer than my remaining time in the city.
That evening, on my way to dinner, I walked down the same street and saw the owner still at work, surrounded by piles of clothes. Suddenly, his disinterest in my patronage made sense. Denmark’s economy is strong, unemployment is negligible, and there aren’t many workers willing to accept low-paying, low-productivity jobs in laundries.
I’ve replayed this incident lately as the I’ve heard complaint after complaint about the purported shortage of labor in the U.S. economy. Trucking companies, manufacturers, fast-food restaurants, and retailers all say they can’t hire enough help. The truth, though, is that the supply side of the labor market–prospective employees–responds pretty quickly to economic signals. The reason firms can’t hire enough help is that the compensation they offer is too low. The reason for that, simply enough, is that the way the firms plan to use those workers won’t result in sufficient productivity to justify higher wages.
As an economic matter, it’s good if those low-productivity jobs disappear. On another trip to Denmark, many years ago, a labor union leader told me, “We want to be a wealthy economy, and we can’t be a wealthy economy if we have low-productivity jobs.” It was that union leader’s view that Danish businesses should move low-paying jobs abroad and focus on providing high-wage, high-productivity jobs in Denmark.
You won’t find many union leaders suggesting that in the United States–nor business leaders or politicians. We pay far more attention to the number of jobs in our economy than to the quality of those jobs, and we’re reluctant to let low-productivity jobs vanish. Thus, debate over raising the minimum wage revolves around whether this would cause unemployment among hamburger flippers rather than whether higher labor costs would lead fast-food chains to develop new equipment that would raise productivity. Debate over immigration is colored by the assertion that we need immigrants to come and do low-wage jobs U.S. citizens don’t want, an assertion that allows us to avoid discussing why employers aren’t investing in capital equipment that might render those jobs more attractive and better-paid.
Some companies, of course, see profit in employing low-wage workers and don’t want to change that business model. But if we look deeper, tens of millions of us have selfish reasons for cherishing low-productivity work. While we give lip service to higher productivity, we also want an economy in which it’s cheap and easy to find someone to clean the house, babysit the kids, and mow the lawn. We like going out for an inexpensive dinner and paying a few bucks for an Uber ride across town, treats that would be far less affordable if there were fewer workers who have no better alternatives than taking low-productivity jobs with low pay.
If we want to raise living standards for all Americans, we can’t do it with sluggish productivity growth. That means that we may have to make some sacrifices. That’s how I solved my laundry problem in Copenhagen. I tossed my shirts in the washing machine, let them drip dry, and ironed them myself. Admittedly, my ironing skills were a bit rusty. But if having a high-productivity economy means I’ll need to keep them honed, I suppose I can manage.Tags: unemployment, wages