SMART KEYNESIANISM: SUBSIDIZING THE COMMON GOOD

In 2018, a very different approach based on subsidizing work is gaining ground in the US Democratic party. In 2019, presidential candidates Cory Booker, Kamala Harris, Bernie Sanders, and Elizabeth Warren have all proposed some kind of federal guarantee, whereby any American who wanted to work would be entitled to a good job ($15 an hour with retirement and health benefits on par with other federal employees, childcare assistance, and twelve weeks of paid family leave) in community service, home care, park maintenance, etc.

Such a program is not easy to run well if the experience in India is any guide. Creating and organizing enough jobs would probably be even harder in the United States, given that very few people want to dig ditches or build roads, which is what they are asked to do in India. Also, the jobs would need to be useful. If they were transparently some form of make-work, they would not boost the employees’ self-esteem. Between pretending to work and going on disability, they might still choose the latter. Finally, given the required scale of the program, it would have to be implemented by private companies bidding on government contracts, known for delivering low quality at a high price.

A more realistic strategy may be for the government to increase the demand for labor-intensive public services by increasing the budget for those services without necessarily providing them directly. An important consideration, especially in the developing world, is to not create jobs where people are underworked and overpaid. As we already saw, the presence of such jobs freezes up the labor market, because everyone queues up to get them.

Another reason why humans will be very hard to replace in schools and preschools is that if robots take over all the jobs requiring narrow technical skills (from screwing in bolts to accounting), people will be increasingly valued for flexibility and natural empathy. Indeed, research shows social skills have become more valued in the labor market in the last decade compared to cognitive skills.⁶² There is very little research on how social skills can be taught, but it seems common sense that human beings will retain some comparative advantage over software in teaching social skills. Indeed, an experiment conducted in Peru shows boarding-school students who were randomly assigned beds near highly sociable students gained social skills themselves. In contrast, being assigned a neighboring student with good test scores did not help them get better grades.⁶³

The comparative advantage of humans in care and teaching means the relative productivity of these sectors will increasingly lag behind as machines gain hold elsewhere, and they may also attract less private investment than sectors where more rapid productivity gains can be achieved. At the same time, the care of the elderly is definitely a worthwhile social goal that is currently underserved, and there are enormous potential gains for society from investing in better education and early-childhood care. This will cost money; these two sectors alone could probably absorb as much money as a government would be willing to spend. But if this is money spent paying people well for stable, well-respected jobs, it will achieve two important goals: producing something useful for society and providing a large number of meaningful occupations.