(Bloomberg View) -- In the aftermath of the 2016 presidential election, I’m starting to rethink one of my basic beliefs about the economy. For a long time, I’ve believed that what mattered most for economic well-being was money. Median income, consumption, wages -- all the things I cared about most were measured in dollars.
Because of this attitude, I’ve supported lots of policies aimed at boosting the amount of money in the average person’s pocket. I’ve called for Japan to liberalize its markets, and for the U.S. to encourage workers to move to places with better opportunities. And I’ve often assumed that a dollar of government redistribution is just as good as a dollar of wages.
I’m starting to think I was wrong. Maybe not completely wrong, but I did ignore a big, important source of economic well-being: jobs.
In most of economic theory, a job isn't treated as something inherently valuable -- it’s just a conduit through which money flows from employer to employee. But most people probably care not just about the amount of money they get, but how they get it. If they see themselves as having earned their daily bread, they feel better about themselves than if they got a handout. A job also probably has an important symbolic value -- it sends a message that society cares about you and has a place for you.
I say “probably” because this just isn’t something economists think about much, so it doesn’t appear in the research literature much. To most people, the idea that jobs give people dignity and a sense of self-worth seems laughably obvious. Sociologists have probably researched this too, which supports my contention that the U.S. needs more input from sociology and less from economics. But among economists, there remains a relentless unwillingness to consider the importance of dignity and social respect.
There are a few exceptions. David Blanchflower and Andrew Oswald have measured the impact of unemployment on happiness, and found that having a job is an important determinant of how satisfied people are, regardless of how much money they have. Meanwhile, some of the little sociology research I do know about shows that job status is important for keeping marriages together.
Meanwhile, out in the real world, Americans are hurting from a lack of jobs. A number of deep dives into the mindset of Donald Trump voters, both before and after the election, have focused on the loss of status and self-respect that less-educated men in decaying industrial regions have suffered as jobs have been lost and replaced by government benefits. One way to see this is in the decline in the percentage of men in the U.S. labor force:
The dramatic Democratic loss in the Midwest in the 2016 election should be a wake-up call. The Democrats have been the party of the social safety net, and have long wondered why so many working-class Americans don’t seem to appreciate those benefits.
Trump, meanwhile, sailed to victory in the Midwest, in part by railing against globalization. Economists David Autor, David Dorn and Kaveh Majlesi have found that regions that experienced more Chinese import competition were much more likely to vote for Trump. Other studies by Autor and Dorn have found that that same import competition was responsible for throwing lots of Americans out of work and that nothing else replaced those jobs. So it seems that many voters in the Midwest didn’t want checks in the mail -- they wanted work. And they voted for a candidate who promised them jobs, even if he was very vague on his plans for doing so.
What kind of concrete plans would address Americans’ hunger for jobs? An easy step is to promote demand-based policies that keep employment high, like fiscal stimulus. A more drastic measure would be a federal job guarantee. Although many such jobs would pay low wages and would contain some element of make-work, it’s probably better to have unemployed people doing something marginally useful. A third option is to focus on slashing regulations that make it more costly and difficult to hire employees.
Perhaps the deepest change would be to tweak U.S. corporate culture, restoring the value of long-term employment. Obviously, it’s easy to go too far in this direction -- witness Japan -- but it could be that U.S. labor arrangements are simply too short-term and insecure to provide the social benefits that workers in Japan, South Korea and much of Europe enjoy. Tax incentives for long-term labor contracts, or for labor hoarding during recessions, could put the government’s thumb on the scale in favor of employment over pure dollars.
Whatever policies are appropriate, it’s clear that economics pundits and policy wonks need to shift our thinking a bit. We shouldn’t be so quick to assume that every dollar of income is the same to people. We should read more sociology, talk to more workers and pay more attention to things like dignity, respect and a sense of community -- intangibles that aren’t sold in any market.
Maybe someday, academic economists could even put these things into their models, too.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.