Like anyone with a pulse, I’ve been following with interest the nationwide panic over so-called “labor shortages,” supposedly popping up everywhere from grocery stores to restaurants to the long-haul trucking industry. Needless to say, what I’ve seen so far hasn’t particularly impressed me. It’s become a cliche on the left to sniff in response, “try paying people more,” or “maybe treat your workers better,” and I’ve certainly indulged in that myself (and rightly so).
Nevertheless, we should be self-aware enough to realize there’s a shell game being played here, what obnoxious internet libertarians choose to obnoxiously call a “motte-and-bailey” fallacy. The real reason I don’t care about labor shortages in low-wage industries is not that I think those employers should pay their workers higher wages, give them predictable schedules, or defend them when customers misbehave. The real reason is that I don’t think most low-wage industries do anything of value.
This is not to say they’re “evil,” although of course some useless industries are, in fact, evil, but that’s something that has to be evaluated on a case-by-case basis. I merely mean that I’m indifferent to whether any particular retail space is used to sell tacos or hamburgers, furniture or glassware, wine or socks. This doesn’t make me a free-marketeer by any means, simply that “figuring out what to manufacture and where to sell it” is not a “political” question. If your bespoke vinegar store doesn’t make enough money to pay your employees or the interest on your loans, you don’t have a profitable business. The fact people might have to get their bespoke vinegar somewhere else, or not at all, is simply not a social or public problem in any meaningful sense.
Of course, the question looks different from the business owner’s point of view, for the simple reason that people like being business owners, and would prefer to remain so, in the same way that landlords like being landlords, farmers like being farmers, and gangsters like being gangsters, and business owners, with easy access to journalists and plenty of time on their hands, are eager to make the case that their problems are society’s problems. To say “your inability to hire at your old wages isn’t my problem,” or “your restaurant isn’t making as much money as it used to isn’t my problem” isn’t to say that it’s no one’s problem. It definitely is a problem — but one for the business owners (lower profits), their creditors (defaults), and their landlords (vacancies), not one for society.
Note that this attitude can lead the stupid and the evil to some wildly incorrect conclusions. When Maggie Thatcher said “who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first,” she was not saying she didn’t care whether a particular shop in Essex chose to sell jellied eels versus steak and kidney pies, she was saying that her government wasn’t responsible for the well-being of its citizens (and boy did she prove it!).
Hence the motte-and-bailey strategy: while it’s a cliche to say I don’t care whether an individual business survives or fails, in fact I support policies that guarantee some of them will fail, because what we actually need is a fairly dramatic reorientation of the economy away from useless industries and bullshit jobs and towards socially productive ones. A lot of people find the fact that no one knows in advance which specific businesses and industries will fail is useful as cover, which is fine in the realm of politics, but it’s also insulting to anyone with eyes to see and ears to hear.
Social democracies trade the socially useless for the socially good
There are many ways the above rhetoric is deployed, the two most common being that a bill is “fully paid for” (like the Affordable Care Act) or that a program will “save money over the long run” (like increases in IRS enforcement spending).
But this is absurd: the ACA was “fully paid for” by increased taxes, i.e., by reducing the disposable income of the very wealthy, presumably on some margin putting a dent in the beach house renovation, yacht construction, and luxury vacation industries. Construction workers, shipbuilders and sommeliers are human beings, and those marginal reductions in spending no doubt led to reduced hiring and even layoffs for some of them. The reason it was worth doing is that it replaced socially useless activity with socially valuable activity, especially in the case of Medicaid expansion, but elsewhere through community rating, the end of lifetime benefit limits, and subsidized premia on the insurance marketplaces.
Take the case of community rating: it legally forbade individual actuarial pricing, and “actuary” is a well-paid, skilled profession. It’s socially useless, but actuaries are real people with real feelings, and it’s insulting to pretend they weren’t going to lose their jobs underwriting health insurance policies. We nevertheless unemployed them not as a form of punishment, but because it was the right thing to do.
Likewise increased IRS enforcement “pays for itself” many times over, not simply because it easily recoups the cost of hiring enforcement agents, but because it drains money away from the socially useless tax-evasion industry. Besides reducing the wealth of the worst offenders, it also, at some margin, should drive attorneys and accountants into professions or specialties which offer social value, instead. But tax evasion is easy, lucrative work, and no one should pretend confusion or disbelief when tax evaders express their sincere preference to continue working in their current profession rather than retrain for other, more socially useful work.
Childcare is social infrastructure in miniature
Take the case of childcare. In the current dispensation, there are multiple stakeholders:
- The parents and guardians who are able to work, relax, or care for themselves or others while their children are supervised by professionals;
- The owners of childcare centers, who pay rent to landlords and wages to childcare service providers, as well as any necessary insurance and utility payments;
- Landlords, who rent space to the owners of childcare centers (or banks offering commercial mortgages for the purchase of space, which we can treat for now as economically identical);
- The employees of childcare centers, who earn wages and provide childcare, as well as performing other administrative functions;
- And children, who receive care and (ideally) some kind of development or enrichment.
I’ve tried to order these in a way that illustrates the “flow” of money through the system, although you may prefer a slightly different order. All the money in the system originates with the parent or guardian’s wage labor. It is paid out to the owners of childcare centers, who then split it between their various expenses (rent, bills, and wages), before arriving in the hands of the childcare providers, who ultimately provide the needed services.
I like this framework because it illustrates how few are the opportunities for cost “savings” in the sense people usually mean.
- Parents or guardians could stop working and provide their own in-home childcare, but then they’d forego their wages, “paying” for childcare through reduced income and disability or retirement Social Security benefits;
- Childcare centers could be nationalized, which would both capture the profits siphoned out of the system by owners and free up the owners of single-site or small networks of centers to do more productive work, but even a nationalized system of childcare would require administrators and bureaucrats, so I wouldn’t expect large efficiency gains;
- The physical sites centers are located on could be seized through eminent domain, but lengthy legal challenges and fair compensation would wipe out most or all of those savings;
- And finally, wages for the childcare providers themselves could be cut, which would mechanically reduce the supply of workers willing to take these exhausting jobs.
The problem, in other words, is not that childcare is too “expensive.” It’s that we don’t spend enough real resources on it.
McDonald’s (yes, the burger chain)
Long-time readers know about my unfortunate literal tendency, and how I like to run little experiments to illustrate my posts, so I hope you’ll indulge me in yet another one. You probably know, or could easily guess, that the McDonald’s fast food restaurant chain has the most locations of any chain in the United States, an astonishing 13,446 restaurants (more or less) in every state and territory. What might surprise you is that this is true in lots of countries, which is presumably one reason the Economist magazine uses them for their annual “Big Mac Index” review of undervalued and overvalued currencies.
McDonald’s is brilliant at adapting their menu to different tastes and cultures, as anyone who has tried the McSpicy Paneer or Gohan Teriyaki can tell you, so I chose to use them to run my simple experiment: how common are McDonald’s locations in Scandinavia versus the United States?
First let’s glance at the top-level data:
- Sweden, with 190 locations, has 18 per million residents;
- Denmark, with 89 locations, has 15 per million;
- Norway, with 71 locations, has 13 per million;
- Finland, with 66 locations, has 12 per million.
The United States has 41 locations per million residents, more than double the highest Scandinavian total.
I was so astonished by this result I decided to look at some potentially confounding variables. Perhaps this result arises from differences in population density? I was agnostic to which direction this factor would work: perhaps McDonald’s outposts are more concentrated in more dense cities, or perhaps they’re spread more thinly across greater distances. So first I looked at national population density:
- Sweden has 25 residents per square kilometer;
- Denmark has 137;
- Finland has 18;
- Norway has 15;
- and the United States has 36, “somewhat” denser than all but Denmark.
With no rhyme or reason found there, I thought perhaps the number of restaurant locations would be weighted by the density of each country’s principle city, and narrowed my search to those:
- Stockholm, Sweden, has 17 McDonald’s locations per million residents;
- Copenhagen, Denmark, has 10 per million;
- Helsinki, Finland, has 22 per million;
- Oslo, Norway, has 22 per million.
I hesitated deciding which city to use for the American comparison, so calculated the figures both for Washington, DC (by analogy to the Scandinavian capitals), and Manhattan, New York, the densest borough of the country’s densest city:
- Washington, DC, has 31 locations per million residents;
- Manhattan, New York, has 30 per million (this is based on the 49 locations I was able to find online; I’ve seen reports from the early 2000’s of as many as 74, but I am certain that number is no longer accurate).
The Scandinavian Model and its consequences
This exercise is supposed to be light-hearted, so you don’t need to lecture me that Scandinavians think McDonald’s is junk food, or they don’t treat their workers well, or that the bathrooms are dirty — Americans think those things too! It’s merely a way of framing my point: the Scandinavian welfare state is not “paid for” by higher taxes, it’s paid for by the actual distribution of real resources away from profitable but socially useless activities like selling hamburgers, and towards unprofitable but socially useful activities like paid parental leave, universal childcare, guaranteed healthcare, and high-quality education.
At no point did this process involve banning the consumption of hamburgers, or forbidding the sale of bespoke olive oils and vinegars. These are vibrant, rich, market economies, but nevertheless ones where opening a new McDonald’s location means competing in a free market for a well-trained, well-educated workforce against a state that is dedicated to providing a dignified life to all its citizens.
I think we should give it a try, but if we’re going to, we ought to be honest, at least to ourselves, about what that means for the McDonald’s franchisees whose lives we intend to make much, much more difficult.