Who Needs Jobs? Spreading poverty or increasing welfare, by Pierre Lemieux

Palgrave Macmillan, 2014, viii + 201 pp, pbk, 1 137 35505 8, £19

This book puts together some very simple connected ideas: that the economy’s task is to produce what consumers demand; that it is efficient to automate production if that is the cheapest production method; that this destroys jobs, but creates jobs elsewhere; and that individual welfare is the priority, and not jobs. ‘When people complain about the lack of jobs, what they really complain about is the lack of income to buy consumption goods’ (p.15). It might be true that many people derive utility from their jobs, but on the whole people are employed or self-employed in order to earn sufficient money to purchase the goods and services that they wish to consume. ‘It is consumer goods obtained by work, not work by itself, that produce utility. Work is what has to be done in order to consume’ (p.28). The author’s aim is to maximise individual welfare by increasing the number of efficient jobs, and to provide the context for this by maximising free exchange in a context of moral rules and the kinds of social institutions that foster beneficial co-operation.

‘A job is efficient when it embodies a series of exchanges that benefit all parties’ (p.113), including those who consume the products produced. We can agree with this suggestion without agreeing with the author’s position that statutory minimum wages destroy efficient jobs. Evidence from the UK suggests that in industries in which genuine competition does not exist, and in a society that subsidises wages in various ways, the wage does not in fact reflect the marginal productivity of labour, and that statutorily raising the wage rate can bring the wage closer to the marginal product of labour. But we can still agree that efficient jobs can be better than inefficient ones both for the economy and for society.

The book is replete with comprehensible discussions of relevant economic theory: for instance, a digression into wants, needs and utility; discussions of substitution and income effects, and of Pareto optimality; an exploration of exchange, competition and the division of labour as the heart of any economy; and a traditional demolition of the ‘lump of labour’ fallacy ( – someone taking a job is paid the value of their labour and then spends that money on goods and services thus creating jobs, so it is not true that someone taking a job deprives someone else of a job).

There are really two books here. One is an argument for free market capitalism. The author is firmly at the non-Keynesian end of the economics spectrum, and on the side of unregulated markets, of individual rather than social welfare, and of private sector jobs rather than public sector ones, rather than seeing these distinctions as constituting spectra of context-dependent options. The other is an argument for prioritising individual welfare over jobs. Readers will need to separate these two different books in their minds. The argument for efficient jobs, and for the priority of welfare over jobs, would work just as well at points on the above spectra somewhat further from the more extreme ends occupied by the author. But whatever the reader’s preferred ideological position, the book will provoke thought on the relationships of economics to society, of the individual to society, of ethics to economics, of consumption to production, and of GDP to happiness. About these relationships the reader might come to conclusions different from those reached in the book: but it is still difficult to disagree with the author’s main point that it is not jobs that matter, but rather our ability to satisfy our needs.

Unfortunately there is in this book no suggestion that we don’t need jobs ( – and to that extent the title of the book is somewhat misleading). What is suggested is that

First, public policy should abolish labor-market regulations. Second, the disincentives to work that unemployment insurance and other such government programs generate should be abolished or, at least, substantially reduced, as they distort the incentive to work of both the subsidized individuals and taxpayers who have to finance these transfers. Third, regulations on what consumers can purchase should be broadly abolished, for the goal is that consumers get what they want. (pp. 168-9)

This prescription will deliver ‘a flexible labor market [that] will become even more crucial to absorbing technologically displaced people’ (p.166). This might be true, but this still leaves those affected by ‘short term disruptions’ (p.166), by wage reductions, by illness, and by major industries closing down, without the support that they need as they learn new skills and then seek the jobs created by technological change. The author is right that a United States welfare system characterised by farm subsidies and food stamps (p.137) is not the answer, but he does not explore what the answer might be. He might wish to consider a Citizen’s Income as a candidate. This would remove disincentives from the labour market, and it would also have the great virtue that Lemieux would wish to see: Because it would be unconditional and nonwithdrawable, it would promote a free market in labour.