Jobs Play A Significant Role In Our Paths Of Economic Development

Aims of output growth and equity both require a jobs-centred approach and services hold potential for gains on this score

- DANI RODRIK

Conventional economics has always had a blind spot when it comes to jobs. The problem goes back to Adam Smith, who placed consumers, rather than workers, on the throne of economic life. What matters for well-being, he argued, is not how or what we produce, but whether we can consume our preferred bundle of goods and services. Modern economics has since codified this approach by capturing individual well-being in the form of a preference function defined over our consumption bundle. We maximize ‘utility’ by selecting the goods and services that offer us the most satisfaction. Though each consumer is also a worker of some kind, jobs enter the equation only implicitly through the income they provide, by determining how much money we have available to spend on consumption.

Yet, the nature of one’s job has implications far beyond one’s budget. Jobs are a source of personal dignity and social recognition. They help define who we are, how we contribute to society and the esteem that society bestows on us. We know that jobs matter because people who lose them tend to experience large and persistent reductions in life satisfaction. The monetary equivalent of such drops is typically a multiple of a person’s income, rendering compensation through government transfers (such as unemployment insurance) mostly infeasible for all practical purposes.

More broadly, jobs are the cement of social life. When decent, middle-class jobs disappear (owing to automation, trade or austerity policies), there are not just direct economic effects, but also far-reaching social and political ones. Crime rises, families break apart, addiction and suicide rates soar, and support for authoritarianism increases.