Are we looking here at A Future of Lousy Jobs? The current recession its effect on employment has economists looking harder at this question. In a previous post, Raghu Rajan speculated that labor reallocation would not be easy. The future of jobs has also been in recent blog posts due to an essay by Andy Grove and is also discussed by Rajiv Sethi.
I am mainly reacting Economists View and welcome Tim Duy to the heretics club:
... very right minded economist and policymaker knows unequivocally that free trade is good, and to even question that assumption makes one an ignorant heretic who has never heard of Smoot-Hawley. ...I grow increasingly convinced that the disappointing economic outcomes of the last decade are the culmination of decades of industrial neglect. That economists have dismissed industrial decline with a story of high value knowledge-based workers, a story with specific relevance to the tech boom of the 1990s but that is now defunct. And I am increasingly convinced that these trends have been largely dismissed by the economics community because acknowledging them would cast doubt on value of free trade, failing to recognize that currency manipulation was turning free trade into a zero-sum game. In short, I have become a heretic.
I would point out only that the size effect of Smoot-Hawley on the Great Depression is not a settled question. (MR doesn't share Andy Grove's concerns however.)
But how can we take a bad job and make it better? What we are really concerned about is the possibility that the hollowing out of blue-collar manufacturing jobs and the stagnant wages associated with these jobs and in the service sector are leading to a future where workers are trapped in the lower rungs with little mobility. As the previous link mentions:
... the blue-collar jobs we pine for were not always good jobs: we made them good jobs. ... Some of this was due to the power of unions. Most of it was because of the enormous improvements in productivity wrought by improved technologies and management techniques.
However, as Tim Duy points out, the growth in wages has lagged behind the growth in productivity:
... productivity growth is supposed to yield improved economic outcomes via higher real wages. Yet ... labor's share of output has been steadily decreasing since the early 1980s. This downward trend was interrupted by gains evident during the tech bubble of the mid-1990s. Apparently, only during that brief, shining moment of generational technological change did the productivity story work as we believe it should, at least since the early 1980's.
Here are some more heretical views:
1. Turn the government into the union by raising the minumum wage and or making health benefits mandatory. (I realize that this is indeed HERETICAL! that should drive most economists into a hair tearing frenzy!)
2. Mandate that "low-wage jobs" e.g. hamburger flippers, cashiers, grocery baggers, etc. be reserved solely for part-timers i.e. those who are looking to supplement their income such as students, retirees or home-makers with some time on their hands. These jobs will be exempt from the minimum wage. (I also realize the incentives that are inherent in the regulation of job categories, i.e. the pressure to make one job category exempt will also lead to pressures to make other jobs exempt).
In the best possible world, the invisible hand works best but we don't often know very well how long it takes to work and how it distributes the gains and losses as it goes to its phase of creative destruction.