Why Garbagemen Should Earn More Than Bankers – Evonomics

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Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.

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64 Responses

  1. Avatar Oscar Gordon says:

    Were they to suddenly stop working the world wouldn’t get any poorer, uglier, or in any way worse.

    Giving up the game so early.

    I get his overall point, and can even agree that certain jobs are probably underpaid when examined in the light he shines, but pretending that the world would just tick on by if white collar workers stayed home ignores so very much about a modern economy.Report

  2. Avatar Chip Daniels says:

    What I found interesting in this article was the idea that as we transition to an economy where we need to work less and less to produce the same amount of stuff, our jobs become more precarious, more insecure. So it becomes more important to craft the illusion of importance in order to justify our paycheck.

    I am slowly coming around to the idea of a guaranteed basic income. It is more and more apparent to me that our global economy is not capable of producing enough work to fill the 40 hours per week available by billions of workers.

    Yet we still have the mantra in our heads of “if you don’t work. you don’t eat”.Report

    • Avatar Will H. in reply to Chip Daniels says:

      I have a feeling this is going to turn into one big, long argument about what “basic” means in the term “guaranteed basic income.”Report

      • Avatar Chip Daniels in reply to Will H. says:

        Meh. I’m not rabid about a GBI, in fact have a bit of ambivalence.

        But I can’t escape the thought that we really are entering a world we have no frame of reference for, where there literally is not enough work to do.

        Our political and ethical frameworks don’t really have a grasp on that.Report

        • Avatar Francis in reply to Chip Daniels says:

          Back in the olden days of the early 80s when I took Macro Econ 101, I was taught that the ‘lump of labor’ theory was a fallacy, and that there was always some clearing price for labor. On week 2 of that unit, we talked about indentured servitude — that some people are so functionally incapable of adding marginal value to any organization that they would literally fall into slavery / indentured servitude if there were no government / charitable support.

          What appears to me to be very worrying about the near future is that automation is going to start rapidly growing that group.Report

          • Avatar Chip Daniels in reply to Francis says:

            At all skill levels, actually. There was a time when a person like me could be smug in the knowledge that I made the correct choices and learned a skill that put me far above automation.

            But that doesn’t exist anymore- Architect, engineer, software coder, hedge fund manager- all these tasks can either be automated, or deskilled to where the value of the human labor is greatly reduced.

            So wealth is less and less the old formula of adding labor to raw material, its more that wealth accrues by the possession of technology.

            Who owns the technology, and why would we accept their claim as legitimate?Report

  3. Avatar Oscar Gordon says:

    I also get his point about the harm the financial players can cause.

    Recently, Yahoo put up parts of itself for sale. Parts that were, as I understand it, turning a profit. But they weren’t turning enough of a profit to satisfy ‘Wall Street’. Now ‘Wall Street’ is not specified in greater detail, so I have no idea who exactly ‘Wall Street’ is, but if that is not a short hand for entities with a direct, significant financial stake in Yahoo, then I’m confused. The NPR piece I was listening to last week left me with the impression that ‘Wall Street’ was speculators or financial forecasters who just didn’t like how much money Yahoo was making (as opposed to Yahoo not making any money).

    I can see an investor with a sizeable stake in a company being concerned that the investment will not pay the promised dividend/return when expected, but if it was just forecasters, that strikes me as being hinky in a way.Report

    • Avatar Jesse Ewiak in reply to Oscar Gordon says:

      In most cases, from what I’ve read, it’s a combination of various hedge funds and investment banks that have pieces of various large companies and those forecasters that can cause runs on stock prices for companies.

      But, it’s also kind of a vicious cycle. Forecasters say Company X isn’t profitable enough -> Stocks go down, so higher ups with stock options are worth less -> They act to appease Wall Street -> Forecasters gain power and push up the minimum growth needed and so on and so forth.Report

      • Avatar Oscar Gordon in reply to Jesse Ewiak says:

        It’s that cycle that causes me concern.

        These kinds of financial issues are things I’ve not had time to fully grok, so I’m always more than a bit skeptical of claims of importance made by the players. In that sense, I understand the point the author is making, that the people who understand this kind of finance are also often people who benefit from it in a significant way, so their opinion regarding it’s necessity is biased heavily toward it’s existence (I can say the same thing about certain government & regulatory offices – a point the author completely misses when he is wondering why government seems to support bullshit jobs over impactful jobs).Report

        • All you need to know is summed up in Cain’s Law™: “Any situation in which it is easier to become fabulously wealthy by manipulating financial instruments, than by producing the underlying goods and services, will end badly.”Report

          • Avatar Oscar Gordon in reply to Michael Cain says:

            I’ve heard it phrased as “Too much money chasing too few opportunities.”

            Which strikes me as hard to accomplish, as there is always an opportunity to spend money. I think the better phrasing is “Too much money chasing too few opportunities that the people controlling the money can pretend to understand”Report

            • Avatar Saul Degraw in reply to Oscar Gordon says:

              @oscar-gordon

              In my experience, tech is really the only industry that is spending to expand and be more productive. This is partially because they are new or relatively new companies and partially because their investors have not or cannot reigned them in yet.

              Then you have companies where the bosses are willing to do anything to keep costs down and don’t want to make capital investments even if it would increase productivity.Report

            • Avatar Morat20 in reply to Oscar Gordon says:

              “Too much money chasing too few good opportunities”.

              Which is why Apple is, for instance, sitting on a giant pile of cash. It’s got nowhere to put it that it thinks is a good investment. Which makes that pretty useless money, admittedly. (I think someone worked out that they have enough cash to take the company private by 2030 and STILL be sitting on tens of billions).

              There’s always places to spend money. But at the root of every financial bubble in history has been a LOT more investment money than there are good investments. So the overflow ends up into the “scam” pile.

              And of course it’s all a lovely cycle. If a “good investment” is a fairly low-risk 5% return, and you run out of those and people start claimijng 6% returns just as low risk — that makes that “good” investment sub-par. Even if the 6% return is going to collapse as a Ponzi scheme in 18 months.

              My father-in-law spent his career in the energy sector. He was pretty high up when Enron took the stage, and he was part of the group trying to figure out how to compete with them. His group literally briefed their own board (about a year before Enron imploded) and told them “We don’t know how they’re making this money. The numbers don’t add up. If they’re not lying or cheating, then they’re such geniuses we can’t even reverse engineer it”.

              He wasn’t surprised when it exploded.Report

              • Avatar Michael Cain in reply to Morat20 says:

                Even Enron didn’t know how they were making all of that money. One of the anecdotes in the Smartest Guys in the Room book tells the story that HQ sent a team of auditors out to California to see how they were making so much money on electricity. Supposedly, the auditors came back screaming, “Do you know what they’re doing out there?!? Do you know how illegal that is?!?”Report

              • Avatar Kim in reply to Michael Cain says:

                Yeah, some auditor was complaining his life was too boring, so he got put on that team (Arthur Andersen was the company, I think?). Sometimes getting your problems solved is a very dangerous thing.

                Within about a week he was crying for his life to go back to being boring again.Report

              • And as much money as they were making from all the illegal crap they pulled, they managed to throw it all away even faster than that.Report

              • Avatar Oscar Gordon in reply to Morat20 says:

                Seems to me there are lots of good investments out there, but the actual rate of return and timeline are fuzzy. Assessing future profitability requires people who understand the tech and the challenges, and I’m pretty convinced most of our financial class are illiterate enough on that front to make it hard for them to asses.

                Take Theranos for example. Holmes may have a good idea (not my field, so I can’t offer an opinion on it’s validity), but how much of her troubles are because she over-reached, and how much is because her financial backers were ignorant of the challenges and practical timeline necessary, and were pressuring her to move faster.

                I wonder, if one were to look at the data, what the expected profitability horizon is on companies today that build things? One of the reasons app companies are doing well is because profitability can be assessed/achieved in months, rather than years. Same thing for gizmos and gadgets.

                But breaking new ground? That’s a tougher sell. Seems like these days, only bio-med can do the startup, and how much of that work is initially University supported before the startup is formed?Report

              • Avatar Kim in reply to Oscar Gordon says:

                Mentioned a project a friend of mine started — double your initial investment in less than two years. Had a hell of a time convincing investors to even put money down.

                Less than two years later, the investors pocketed their doubled money — and my friend walked away with about 14 times his initial investment… for believing in it.

                That company has contributed immensely to our current 3d printing technology, also some advanced telemetry.Report

              • Avatar Saul Degraw in reply to Oscar Gordon says:

                @oscar-gordon

                From what I understand, Theranos’ investors were not traditional venture capitalists but rather private individuals and family and friends. In short, the finance people seem to realize that something was questionable.Report

    • Avatar Francis in reply to Oscar Gordon says:

      Yahoo owns a big chunk of Ali Baba. Once you subtract out the value of the Ali Baba shares, the rest of Yahoo (to put it simply) has negative value. This makes investors cranky, and rightly so. The tax consequences of selling the shares would be enormous, so the smart thing to do is to sell off everything else (new Yahoo) and make the rest (old Yahoo) a venture fund that has invested only in Ali Baba.Report

  4. Avatar LeeEsq says:

    Before modern sewage, being s night soil man was one of the better paying jobs for working people.Report

  5. Avatar Kolohe says:

    Is thjs guy is made up by Chris as part of the #millenialfacts game?Report

  6. Avatar dexter says:

    This site is full of extremely intelligent, articulate and entertaining individuals, but in my Maslowian scale the most important person by far is Road Scholar.Report

  7. Avatar DensityDuck says:

    “The garbagemen should all go on strike! It would paralyze modern society because nobody would pick up the garbage!”

    Garbage Companies: https://www.youtube.com/watch?v=BNxjtQtZ4Cc

    “Well, shit.”Report

    • You know the SF stories from the 50s where some industry took over the world, like advertising in The Space Merchants, or insurance in Preferred Risk? In the industry (I have heard), they were called “Garbageman stories”, because that was the logical endpoint.Report

  8. DensityDuck: Garbage Companies: https://www.youtube.com/watch?v=BNxjtQtZ4Cc

    Look in the cab. If that fellow went on strike the binpicker wouldn’t be very useful.Report

  9. Avatar j r says:

    I really wanted to hate on this guy, and I still do. But he kind of gets it. My main beef with the contemporary far left is that they remain so fixated on the means of production even as the means of production are increasingly robots and foreign labor. What does revolution look like in the information age? The ramparts are virtual.

    My one contention with tbis piece is that he spends so much time focused on jobs and simply glosses over consumption. Probably because his job is still dependent on people consuming his articles and books and TED talks, etc.Report

  10. Avatar Damon says:

    I stopped reading after I got to the point of the illegal strike. Where’s the enforcement. Really, being a garbage man is a needed but relatively low skill task. Reagan fired all the striking air traffic controllers, a relatively high skill job, and no planes fell out of the sky. I’m sure the city could have hired replacements. And where was the prosecution of the union officials and members for committing an illegal act?Report

  11. Avatar Brandon Berg says:

    It bears repeating that wages, like most prices, are a function of supply and demand. It doesn’t matter how important a job is; if the number of people who can do it greatly exceeds the number of people needed to do it, it will not command a particularly high wage. And should not, because wages provide an incentive for people to do the kind of work where their marginal product will be highest.

    Also, the efficient allocation of capital is extremely important. It’s probably true that due to certain rent-seeking opportunities (e.g., executing a trade a few milliseconds faster than the competition), the financial sector is larger than is optimal. But on net, it really is essential to a modern economy and does produce a great deal of value.

    1970 Ireland is a bad example, because Ireland was a borderline third-world country back in those days, with just over a quarter of the US’s per-capita GDP. The system described is perfectly feasible for running a bunch of small businesses, but not for a modern, globalized economy.Report

    • Without the financial sector, how would we know which decades to have tech bubbles in?Report

    • Avatar Chip Daniels in reply to Brandon Berg says:

      wages, like most prices, are a function of supply and demand.

      That’s. Exactly. The. Point.

      The supply of labor is skyrocketing, in comparison to the amount of it that’s needed. If labor were cotton, we could just plow a few tens of millions of pairs of hands under the soil and balance the market.Report

      • Avatar James K in reply to Chip Daniels says:

        @chip-daniels

        Where are you getting that from? The unemplyoment rate in your country is 5%, that’s not much higher than it was pre-recession and the trend is still looking good at this point.

        As you point out, people are not commodities and that makes the labour market a little different from other markets. One of those ways is that while labour produces things, labour is attached to people, who consume things. More people increase the supply of labour, but it also increases the demand for goods and therefore the demand for labour. Also, you don’t resolve high supply in a market by destroying the commodity – that’s stupid.

        While there are scenarios whereby we get a large class of permanently unemployed people, they’re more complicated than labour supply permanently exceeding labour demand. They way it would happen is that increasingly capable machines make lower-productivity people more trouble than they are worth from an employment perspective.

        There is a baseline level of cost associated with hiring an employee, not just their wages, but the cost of their benefits package, the cost of hiring someone to supervise them, setting up a contingency for when they are sick, or they quit, or go on strike etc. If a machine can do a job well enough and cheap enough, a business won’t hire a person to do that job at any legal wage. And if a person can only do jobs that fall into this category their labour is effectively worthless.

        As machines get more capable, it is possible (not certain, but merely possible), that an increasing fraction of the population will find themselves without any marketable job skills. But there is no evidence that this has started to happen, and it may not happen at all.Report

        • Avatar Chip Daniels in reply to James K says:

          Well, yes, people are working certainly.

          But for lower wages, because of deskilling and automation.

          You don’t think automation is forcing the price of labor down?
          I wouldn’t think that is even debatable by now.Report

          • Avatar DensityDuck in reply to Chip Daniels says:

            “You don’t think automation is forcing the price of labor down?”

            You don’t think automation is forcing the price of goods down?

            It is important to declare what we prefer; expensive stuff and everyone has high-paying employment in factories, or cheap stuff and everyone does something else.

            It is also important to recognize that “it’s better if everyone has a job” is an expression of class morality, not a universal truth.Report

            • Avatar Marchmaine in reply to DensityDuck says:

              That’s a fair comment, but would you rather re-distribute the wealth as universal gifts, or pay it as a small tax on everything you buy?

              Either way works, but the scenario where fewer work and fewer collect all the wealth is unstable and ends poorly (for whom? It depends).Report

            • Avatar Chip Daniels in reply to DensityDuck says:

              Yes, automation is in fact forcing the price of goods down.

              But not by the same amount, or evenly across the spectrum.

              In other words- suppose we had 100 laborers who produced x amount of wealth; then automation made them 2x as productive.
              In theory we could produce twice as much, lowering both their wages and product cost, and everyone would come out the same.

              But of course it doesn’t work that way. A steelworker who got laid off doesn’t see prices of everything fall by the same amount as his income.

              Again, some of us, like me, still earn an income that is barely touched by automation, while I go shoping for goods (like tee shirts) that are virtually free thanks to automation.

              Other people are competing with slave laborers in Bangladesh, while shopping for goods (like the apartments I design) that are still handmade and non-automated, and very expensive.

              This is wildly unsustainable, and isn’t a direction that will lead to a good place.

              Also- I would argue that labor and work is so intrinsic to human nature that “it’s better if everyone has a job” is about as close to a universal truth as one can get.Report

              • Avatar DensityDuck in reply to Chip Daniels says:

                ” I would argue that labor and work is so intrinsic to human nature that “it’s better if everyone has a job” is about as close to a universal truth as one can get.”

                This is why single mothers have two jobs carefully-tailored to be just barely under the limit for full-time hours (and, therefore, neither job provides health insurance or retirement). They don’t have time to attend to their childrens’ education or mental development, and those children will have inherently lower intelligence and social potential as a result.

                Because people like you think that “it’s better if everyone has a job” is a universal truth.

                **********

                “the apartments I design…are still handmade and non-automated, and very expensive.”

                Ah-heh I can go buy a premanufactured roof truss for forty bucks. Any one of those things would be a couple hundred dollars in labor to assemble from a stack of boards and a bag of screws. Saying “buildings are expensive and handmade and that can’t change” is wrong.Report

        • Avatar Brandon Berg in reply to James K says:

          James K: Also, you don’t resolve high supply in a market by destroying the commodity – that’s stupid.

          So stupid, in fact, that FDR did it.Report

        • Also, you don’t resolve high supply in a market by destroying the commodity – that’s stupid.

          No, you lend money to people who can’t afford it so they’ll buy it while going into debt. That’s what the smartest people in the world would do.Report

  12. Avatar James K says:

    Oh dear, where to begin:

    1) The logic of “We can’t do without rubbish-collectors but we can do without bankers” is a restatement of the Paradox of Value. This was sorted out by the Marginal Revolution in the 19th Century – the demand-side of wages for bankers and rubbish-collectors are based on the value of hiring one more of each, not the aggregate value of each profession.

    2) While we’re talking about value, there is no such ting a a global “real value” of anything. So what matters is how much the people who are hiring each group value their marginal contributions.

    3) Then there’s supply to consider. How many people are willing and able to do each job at current prices?

    4) Bregman fatally misunderstands the primary function of banks. Taking deposits and facilitating small-scale transactions is only a sideshow. The primary function of banks (and the capital market in general) is to fund investments – everything from houses to large companies and projects. I’m going to go out on a limb and suggest the local pub won’t be able to cover a house loan, let along anything bigger. Not only does this cripple investment (with potentially disastrous implications for economic growth), it also makes upward economic mobility nearly impossible, as the only people who can afford to invest are the people who are already wealthy. This is not something that would necessarily become apparent after only 6 months though.

    5) Reputation-based systems are fine for small, insular communities. But what about newcomers? If you haven’t been able to establish a reputation yet, how will you get people to trust you? This only makes harder for immigrants to a community to develop themselves economically.

    6) I get being deeply unhappy with how the last 8 years have shaken out, but if we’re going to fix this problem we’re going to need to figure out exactly what network of bad incentives created this mess and carefully unpick them. Declaring “bankers are bad lol” doesn’t really advance that to any extent.Report

  13. 3) Then there’s supply to consider. How many people are willing and able to do each job at current prices?

    “Willing” is kind of the point. How many people are willing to be disrespected and do dirty, smelly, unpleasant labor compared to how many are willing to sit in an air-conditioned office and be told they’re the smartest people in the world no matter how blatantly they demonstrate the precise opposite. If labor markets worked, you’d expect to see some premium for the former.Report

    • Avatar Dave in reply to Mike Schilling says:

      @mike-schilling

      Have you ever worked on a banking floor? I have. Three years.

      When you mentioned people being disrespected and doing dirty, smelly, unpleasant labor, you just described junior bankers to a “T” (the dirty and smelly being figurative) of course.

      Yes, there is a premium pay for that job, especially given that many of them work well over 100 hours a week.Report

      • Avatar Mike Schilling in reply to Dave says:

        That’s like being a law associate, right? You work that hard because of the prospect of becoming a partner (or whatever the banking equivalent is) and making real money. No such thing for manual laborers,Report

        • Avatar Dave in reply to Mike Schilling says:

          @mike-schilling

          I’ve never worked at a law firm, but that’s probably right (seeing as people that washed out of the major law firms ended up where I was).

          It’s not just about working hard. It’s about surviving the most inhospitable work environments I’ve ever seen, and very few of them can do it. It’s no surprise that the analyst program is a two-year stint because most of them are pretty fried by the time they get to the end of that program.

          No such thing for manual laborers

          Starting their own businesses? I know several people that have done this after spending years working in the trades for others. Plumbers, electricians, landscapers, etc. The more business they generate, the less they themselves do the manual work and delegate to others.Report

          • Avatar Mike Schilling in reply to Dave says:

            Not quite the same thing. One is a well-defined and well-trodden pathway towards success within an organization, and the other has all the wide-open risks and opportunities of starting any other small business. I don’t see that putting in insane hours as a journeyman plumber or carpenter would make you more likely to success as a contractor, while in law (and from what you say, banking), those are the dues you’re expected to pay. Much like medical residents do 24-hour shifts, or frat pledges have to go to class wearing dresses.Report

            • Avatar DensityDuck in reply to Mike Schilling says:

              Imagine if the attitude were “let’s make it easier for small business owners to grow their business and transition from hands-on labor to a management role”, rather than “bankers are bad lol”.Report

      • Avatar Mike Schilling in reply to Dave says:

        By the way, are the 100-hour weeks actually more productive than saner hours would be, or is it a form of hazing? I know how badly I’d do anything that requires creativity on that schedule.Report

        • Avatar Francis in reply to Mike Schilling says:

          Pure hazing. Also, those hours are hugely padded. Yes, they’re at the office 100 hours per week, but a lot of it is BS work designed to keep people busy during the day. Then decisions get made towards the end of the day and the junior people work into the night analysing and writing up the impacts of those decisions.

          Oddly enough, it’s a system designed to drive out any creativity. No one is all that smart much past 60 hours per week.

          (To be fair, this was the practice back in the early 00s when I was looking at jumping from law to investment banking. The story may have changed a lot since then.)Report

          • Avatar Dave in reply to Francis says:

            @francis

            My time on an investment banking floor was from January 2005 through March 2008, and I was working on the real estate side of the business, which included my end (more pure play asset sales), traditional M&A and the large loan CMBS business. I don’t think the CMBS business has seen the volume of originations as it did during that time and I was a witness to (and involved in) several very high profile M&A deals that took a ton of work to get across the finish line.

            Sure, there was some BS work, as being the ones in charge of putting together pitchbooks can attest, but on the CMBS side, the mandate was to generate as many loans as possible as quickly as possible, meaning that the loan underwriters (analysts and associates specifically) were glued to their desks for hours on end. Does it matter if they’re smart past 60 hours a week? No. It doesn’t take a rocket scientist to underwrite a loan. It’s a process that needs no creativity (at least at their level), just enough knowledge to know how to put the thing together.

            Maybe you saw or knew of a lot of BS work, but I can tell you it wasn’t the case where I was. If it was, I may have considered switching from my then-current job into the actual Associate track, but after 18 months, I saw enough to know I wanted nothing to do with that. Not fun.Report

      • Avatar Kazzy in reply to Dave says:

        @dave

        But doesn’t it sort of matter that one job is LITERALLY dirty and smelly and the other is FIGURATIVELY dirty and smelly? Isn’t that precisely the difference @mike-schilling is getting at?Report

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