Russ Roberts And Virginia Postrel On Jobs

Russ Roberts has a typically clear and lucid commentary on jobs and “outsourcing” in Business Week. Short of jumping into the fray on this issue, let me simply suggest that you read this, circulate it, and consider his conclusion:

The hardship that results from economic change always tempts politicians to limit individuals’ freedom to buy what they want and businesses to hire whom they desire. Such political restraints will make life more secure — but poorer and less dynamic. Ultimately, it will have no effect on the number of jobs in the U.S. but only make the ones that survive pay less.

Well said.

While we’re talking jobs, I have a couple of observations that are consistent with Virginial Postrel’s NY Times article from Sunday about new non-tech jobs. Her observations about the establishment of spa service jobs, and the number of women performing these jobs in a free-lance and more difficult to measure way, ring true in Chicago. In the past six months I’ve seen four new nail salons open, and that’s just within about a 20-square-block area in Lakeview. Virginia points to manicurists as one of the most overlooked professions in the Bureau of Labor Statistics surveys, and it is one that has been growing fast recently:

Similarly, the bureau has missed more than 300,000 manicurists. It puts the total at around 30,000, compared with the count of 372,000 — up from 189,000 a decade ago — by Nails magazine, using private survey and state licensing data. Even if not all licensed manicurists are practicing, the bureau number is off by an order of magnitude. There are 53,000 nail salons in the country, most of them with more than one manicurist. The industry supports two major trade magazines, each with about 60,000 subscribers.

Compared with stone crafters, gardeners or graphic designers, manicurists should be easy to track. ”This is not a gray market business,” says Cyndy Drummey, the editor of Nails. ”It is licensed and regulated.” Yet because this business is wildly decentralized and doesn’t fit traditional categories of what constitutes a job — most manicurists are independent contractors or shop owners — it can add tens of thousands of jobs without catching the government’s notice. And behind each manicurist are people making the tools of the trade.

And the esthetician who used to share the chiropractor’s office downstairs from us went out and got her own space, after having gone freelance from working at a spa about 3 years ago. I also see the same phenomenon happening with personal trainers, particularly given the current trend for exercises that don’t necessarily require lots of heavy and expensive gym equipment.

The nature of the economy, and the highest value uses of resources (including labor), is dynamic. What was valuable yesterday may be less so tomorrow. And as Russ’s piece suggests, protecting what was valuable yesterday may rob us of the ability to create what will be valuable tomorrow. Or worse, when inevitably someone does create what will be more valuable tomorrow, we won’t be the creators, and our status quo jobs won’t provide us with enough income to afford to buy into it. We will be made even worse off than if we had let the things go that weren’t our comparative advantage.

Thanks to Kevin Brancato for the pointer to the Russ Roberts article, and for his forceful conclusion to his own discussion of the matter:

So some of the lowest-skilled service industry workers today are making as much or more than the best technically-skilled assembly line workers of Henry Ford’s day. And that’s because of outsourcing.

6 thoughts on “Russ Roberts And Virginia Postrel On Jobs

  1. Is it really true that all these shop owners and other self-employed people are “missed by the government?” Clearly they seem to have been missed by BLS. But wage income and income from one’s own business are reported differently to IRS, so unless we have hundreds of thousands of people not filing, or filing falsely, it should be possible to get a more accurate picture of total employment. Is BLS simply looking in the wrong place?

  2. Good article, but the quote you pulled is not well said, in particular this: “Such political restraints will make life more secure — but poorer and less dynamic.”

    Restraints will only make life more secure for a few, and less secure for many, if for no other reason than that wealth can buy security, and as noted, restraints make us poorer.

    And this: “Ultimately, it will have no effect on the number of jobs in the U.S. but only make the ones that survive pay less.”

    No effect on the number of jobs? I suspect fewer and lower-paying jobs resulting from political restraints on arbitrage.

  3. Rhetoric aside, headbanging aside, what types of policies can be implemented in the real world to help Americans who lose their job to workers in poor countries.

    Discussion just began at

    I’d love to get your guys opinions

    Short list, so far…

    For the recently fired:
    – A strong safety net, with unemployment and health benefits
    – Strong re-education, training program so people get the latest skills
    – Support for helping find new jobs (although I’m skeptical about this because of, and that most good jobs are gotten through social networking)

    Education and research
    – Strong K to 12 education system
    – Continue American leadership in its university and community college system
    – Strong government support for both basic and applied research to keep America at the leading edge of the technology curve

    – Create government paid jobs in slumps

    Tax credits??-
    Don’t give tax credits to firms who outsource. OK… I’ll be honest, I’ve heard this about a million times, but never have seen the underlying facts, can anyone enlighten me here?

    Free marketeers
    Take no action, allow for lower cost of goods and services in US to create wealth and let the market take its course. (we’ve seen that, politically, this don’t fly)
    Recognize that more job loss has happened due to technology, then all the Indians and Chinese put together.

    I know there’s got to be more then this… this list just doesn’t seem to cut the mustard.

  4. Take a look at Friedman’s column in the Times today. If you want to defend free trade, this is how it needs to be done — with specific references to American products used and American jobs created as a result of the liberalization one result of which is outsourcing.

    You can disagree with Friedman’s argument (would all the American products used at this Indian call center he visited really only be used if the call center were in India instead of Illinois? How many of the products with American names were actually made in the United States?), but it is one that people who do not teach economics at a university are capable of grasping. This matters because these are the people who will decide whether we go down a protectionist path or not.

  5. The late Senator Daniel Patrick Moynihan famously remarked that “everyone is entitled to their own opinion but they’re not entitled to their own facts”. The fact is that real median income has been stagnant in the U. S. for more than a generation and except for a blip in the 1990’s would have actually fallen. The sectors of the economy in which this is not true, the same sectors in which there is job creation and real wage growth are those least susceptible to foreign competition and most highly subsidized: government and health care.

    I believe that real median incomes in the U. S. are likely to fall–it’s pretty much an inevitable consequence of a transition to a services economy and a global market for services. How could we expect incomes to keep rising at post-World War II levels? We were the only functioning economy in the world then. And all of this will be good for the beneficiaries of this transition in China, India, etc. And that’s probably a good thing for humanity. But it’s probably not a good thing for Americans and I don’t think we should whistle in the dark about it.

    What’s not inevitable is for the wages of government and health care workers to continue to rise while the wages for the rest of us fall. Neither area operates within a free market–they’re command economies.

    I sincerely believe in free trade. But why don’t more free traders expend their energies in attacking real barriers to free trade: licensing, patents, copyrights, banking regulations, and immigration restrictions rather than engaging in Panglossian bloviation?

  6. “…what types of policies can be implemented in the real world to help Americans who lose their job to workers in poor countries.”

    How about live below your means, save money for a rainy day, keep one eye on the future of your profession, and be willing to learn new skills in transition?

    It’s your life, shouldn’t you be responsible for it?

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