This post is about two kinds of bad work, make work and sub-subsistence work, and also at the end I’ll present a solution to both. But first, some definitions:
- Sub-subsistence work: work that is worth doing, i.e the marginal utility is higher than the marginal cost, but due to automation the real wage is below subsistence, i.e it’s not really enough to live on.
- Make-work: the economy kinda messed up and made a job that shouldn’t exist. This is a job where the marginal utility is below marginal cost, by accident.
I’m going to start by illustrating examples of make-work since it’s the more interesting one:
- You feel like your job is unimportant or a “bullshit job”. You might be doing make-work.
- You feel like your colleagues mess up more than they contribute: they might be doing make-work.
- You’re a hiring manager and you have too many applicants, making it hard to pick someone good: there’s a high risk of you hiring the wrong person for the job and creating make-work.
- You’re a politician or a policy maker and you need to find some project to employ people: you might be contributing to make-work, rather than building something useful.
- At the low end of wages, people need work even though they could be volunteering, taking care of kids, meeting friends, which are all things that carry utility. Sadly though, those things don’t buy you food or shelter, so you seek work anyway. This distorts job creation and creates extremely hard to notice make work. (This is the most complex point, and perhaps the most important, and I have an illustration of it here, and a more rigorous analysis here)
Make work becomes more common with automation because the ability for us to be sure that marginal utility is above marginal cost gets worse. The margins get tighter (or utility is harder to read), we have more applicants, we need to fix unemployment real fast, etc.
Sub-subsistence work is more intuitive, you can probably guess the examples:
- You need to work more than 40 hours a week to make ends meet: that’s Sub-subsistence work.
- You need multiple part time jobs: that’s Sub-subsistence work
- A big part of what the gig economy is related to: Sub-subsistence work.
Both of these cases become more acute as automation increases. More labor supply means more applicants, lower minimum real wages, tighter margins between cost and utility. You end up with more sub-subsistence work and more accidental make-work. The former is a societal drag, it makes people unhappy and disenfranchised. The latter is an economic drag, it slows down innovation, missallocates capital, and hurts growth.
Automation itself isn’t a bad thing. It theoretically can and should be used to make us more stuff while needing us to work less. So, how do we make that happen without driving more of these two bad kinds of work?
The solution to both of these I have called the Consumption Stabilisation System, or CSS. It has three main components which you’ve heard of, but when all three are used carefully they operate as a extremely stable and effective economic tool, unlike any of them used alone. The three components are Land Value Tax (LVT), Value Added Tax (VAT), and Universal Basic Income (UBI). The short version of how it works is that it ensures sub subsistence work gets paid a bit more, making it feel livable, without deleting the job. It then also slowly, over many years, optimises the economy to diminish the risk of make-work by improving wage bargaining, decreasing political pressure to solve unemployment and low benefits, and decreasing applicants to jobs they are unfit for. A full economic analysis, along with more detailed evidence for the problem, is in this post.
Hope you liked the read! I really think this taxonomy, problem definition, and solution are really quite elegant and am looking forward to feedback, which you can read from others and write here.