Yesterday, Paul Craig Roberts had an article on the latest jobs report that said there were 192,000 new jobs last month. In the latter part of the article, he discusses how these figures are determined. I can’t really confirm or deny his comments there. If his claims are accurate, it almost makes you wonder why anyone would pay any attention to such a report.
The part of his article that I would like to discuss in more depth is at the beginning where he points out that most of the added jobs were service jobs. Paul Craig Roberts is a good writer and has been a great advocate for civil liberties. He has taken a principled anti-war position and has been very libertarian in these respects. Although he can provide interesting information when it comes to economics, this is the area where I disagree with him on a lot of issues. He does not understand the free market.
He says in his article, “How can Americans, who had no growth in their real incomes and who are foreclosed from their homes and maxed out on credit card debt, car payments, and student loans, spend more every month in bars and restaurants? How can a few service areas of the economy grow when nothing else is?”
This is representative of things he has written before. He has a lot in common with Pat Buchanan. Now, I agree with Roberts up to a certain point that, generally speaking, things are a mess right now. There are a lot of distortions in the economy and government interference is preventing the proper allocation of resources according to consumer demand. But who is he to say that there should be less jobs in the service area and more in some other area.
Back in January, I wrote a post on a classic article by Harry Browne dealing with economic fallacies. In Browne’s article, he addressed this exact point. For decades, people have been complaining that the U.S. does not manufacture enough.
What Paul Craig Roberts and others fail to realize is that there is nothing wrong with service jobs if that is what is being demanded. Last time I checked, there was no shortage of food and clothing in the United States. Now I understand that we don’t have a free market in the U.S., but it is still free enough that there is some natural aligning of resources with their proper use.
In an advanced civilization, more services mean more luxury. There is nothing wrong with this. It takes less people and less resources to make food, clothing, shelter, and other basic needs. This is due to a variety of factors within the free market. The high division of labor allows people to specialize. There is comparative advantage which means that an American might be better off allowing someone in South America or Asia to make food, clothing, and other goods. The CEO of McDonald’s might be the best cashier there is, but it doesn’t mean it is a good value of his and the company’s time to have him working the register.
In addition, technology gets better and there is more capital investment over time. This allows more and better goods to be produced at cheaper prices (if there wasn’t monetary inflation) and it frees up human capital to focus on other things. If consumers have all of their basic needs met, then they will demand other things. Those things might be restaurants, spas, hair dressers, massage parlors, etc.
Again, I’m not saying that the economy is great right now (it’s not) and I’m not saying that all resources are being properly allocated (they’re not). But if there really are service jobs being added, there is nothing wrong with this, especially when it seems that other industries (cars, construction) are being the most subsidized by government.