IN THE POPULAR imagination the past four decades were wonderful for the owners of capital and miserable for labour. The rich world’s workers endured competition from trade, relentless technological change, more unequal wages and tepid recoveries from recessions. Investors and companies enjoyed expanding global markets, liberalised finance and low corporate taxes. Even before covid-19, this caricature of broken labour markets was mistaken. Today, as the economy emerges from the pandemic, a reversal of the primacy of capital over labour beckons—and it will come sooner than you think.
It might seem premature to predict a wonderful world of work only a year on from a labour-market catastrophe. But America is showing how rapidly jobs can come back as the virus recedes. In the spring of 2020 the country’s unemployment rate was nearly 15%. Now it is already just 6% after a year containing five of the ten best months for hiring in history. Public perceptions of how easy it is to find a job have already recovered to levels that it took nearly a decade to reach after the global financial crisis. And even in Europe, which is suffering a third wave of infections, the labour market is beating forecasts as economies adapt to virus-containment measures.
As the labour market recovers, two deeper shifts are unfolding, in politics and in technology. Start with the political environment, which is becoming friendlier to workers than it has been for decades. An early sign of change was the surge in minimum wages during the previous economic cycle. Relative to average wages, they rose by more than a quarter in the OECD, a club of mostly rich countries, weighted by population. Now governments and institutions are falling over themselves to chum up to workers. President Joe Biden hopes to use his planned infrastructure splurge to promote unionisation and to pay generous wages. Central banks are worrying ever more about jobs and less about inflation. It was not a prank when on April 1st the IMF, once famed for its austerity, floated the idea of one-off solidarity taxes on the rich and on companies. In his letter to shareholders this week, Jamie Dimon, the boss of JPMorgan Chase, Wall Street’s biggest firm, called for higher wages—and he wasn’t talking about CEOs.
The second big shift in the labour market is technological. In the pandemic doomsayers have doubled down on predictions of long-term labour-market woes. Robots will create armies of the idle, precarious jobs are displacing stable ones and even prosperous workers chained to emails and screens know in their hearts that their “bullshit jobs” are pointless. But as our special report this week explains, these ideas were never supported by evidence and do not look as if they are about to be now. In 2019 nearly two-thirds of Americans said they were completely satisfied with their job security, up from less than half in 1999; a lower share of German workers felt insecure than in the mid-2000s. Countries with the most automation, like Japan, enjoy some of the lowest unemployment.
The long-term future of work has changed for the better this year because it has become more digitised. Remote working is easing the bottleneck of expensive housing in thriving cities. Home-workers report higher levels of happiness and productivity. At the end of 2020 American firms spent 25% more on computers, in real terms, than a year earlier. Even pessimists like Robert Gordon, an economist, expect this burst of technological investment to bring about faster productivity growth, which means higher wages.
A golden age for workers is welcome. It is right to judge economic progress by the purchasing power of median wages, not profits or share prices. Jobs booms like those in most rich countries in 2019 bring huge benefits, by incentivising the training and good treatment of workers, as well as by reducing racial and gender inequalities. Yet governments can help determine the extent of these gains. Their goal should be to raise workers’ living standards through higher productivity, rather than focusing on dividing the spoils through regulation and protection.
One task is to redefine workers’ rights for an era of flexibility and service work. The size and novelty of the gig economy is often overstated; taxis and food deliveries existed before Uber and DoorDash. But service-sector employment, especially caregiving, will grow as populations age. There is no place for the snobbish idea that such jobs cannot be fulfilling, nor the related instinct that experimental models of work should be regulated out of existence. Instead governments should modernise the guardrails provided by employment law, offer a universal safety-net and ensure that the economy is strong. If they do, workers will have the confidence and bargaining power to experiment and negotiate for themselves.
Productivity can also be unleashed by broadening access to opportunities. Many rich-world labour markets are divided between the high- and low-skilled. That is tolerable so long as anyone can climb the ladder. Governments have a responsibility to ensure meritocratic access to education and sufficient opportunities for retraining. They should tear down barriers to entry such as needless occupational licensing rules—the legal and medical professions, for example, should not be allowed to pull up the drawbridge to outsiders. It should be easy to experiment with new digital and cross-border business models.
But helping workers by boosting productivity must not be confused with self-defeating attempts to protect them—as happened the last time they had the upper hand, in the 1970s. Repatriating supply chains, as Mr Biden would, will inhibit competition and grind down living standards. Cranking up corporate taxes too far will reduce the incentive for firms to invest. For central banks to lose their inflation-fighting credibility would be a disaster. Just ask the workers who bore the brunt of efforts to tame prices in the 1980s.
The wonderful world of work
People tend to be sentimental about how wonderful work used to be, grumpy about how it is and fearful of what it will become. In fact, working life has improved over the ages—and the promise today is as bright as it ever was. Time to get on the ride. ■
Full contents of our special report on the future of work
A bright future for the world of work
Labour markets are working, but also changing
The biggest losers from covid-19
The rise of working from home
Robots threaten jobs less than fearmongers claim
Changing central banks—and governments
The case for Danish welfare
Pessimism about the labour market is overdone
This article appeared in the Leaders section of the print edition under the headline “Riding high”