Blade Runner with Food Stamps and Benefits Street

I realise that many of my readers may not have the stamina for my longer posts, so wish to repackage some ideas raised within the extended pieces as mini-posts all to themselves. First up is Walter Russell Mead‘s alternative visions for a world in which computers replace work. One of these is the faintly dystopian Blade Runner with food stamps explained within a lovely essay in The American Interest titled “Jobs Jobs Jobs”. Russell Mead sets out his stall thus:

There are really two choices before us as we think about the future of jobs in an age of information. Either most human beings are about to become economically obsolete, or the information economy can find a use for their talent and hard work. Much depends on which of these two pictures turns out to be the best description of the future.

If we believe in the first alternative, we are going to start planning for the mother of all welfare states. There will be a period of transition, but something like 80 percent or more of the population is going become superfluous to the economy. There will be no jobs where the work of this group could command a living wage; the state must somehow make provision for them or wait for them to fall into poverty and risk the social explosion that will probably follow.

It’s likely that an information age welfare state would consist of two components: straight out welfare and “social inclusion” payments for some, subsidized make-work jobs (like Postal Service employment in an age of email) for others. The money to fund these programs will have to come from corporate profits and from the incomes of those who still manage to surf on the waves of digital change.  That suggests rising tax burdens and a constant class struggle between the economically connected citizens who want to keep what they have earned and the clients of the welfare and make-work state.

He that goes on to describe a world that is not a million miles away from what we see today in the U.K., at least in the extraordinary bifurcation of the country into greater London and the rest of the country.

If the information economy works like this, the whole country would start looking more like California and New York City: unbridgeable class divides, huge inequality, fountains of innovation, and tiny islands of great wealth and privilege surrounded by proles on the dole. Inside the glittering bubble, the digirati and their courtiers would live lives of intense purpose and excitement. Outside the bubble, meaning would be the good in scarcest supply. To have a life where your work means something and your hands help steer the world would be the exclusive privilege of a tiny handful of enlightened, intelligent, and energetic people.

However, “the mother of all welfare states”, as he describes it, is a working class (or shall we call it non-working class) dystopia:

This is Blade Runner softened by food stamps, but as in the public housing projects and other warehouses where we store “surplus” people today, the most acute form of poverty and deprivation will not be the lack of food, clothing or even shelter. It will be a lack of social connection, of independence founded on achievement, on the human dignity that comes from doing work. Bellies will be full, but lives will be empty, and with that emptiness will come ills of every kind: addiction, brutality, ugly, and stunted sexual and emotional lives for many, neglect of the young and the old.

The images tap into voter angst on both sides of the Atlantic, through which those precariously in work, but suffering from declining livings standards and a risk-filled future, may be inclined to kick out at the welfare-supported underclass rather than the elites. In Britain, the Channel 4 documentary “Benefits Street“, which tracks the lives of welfare claimants on a Birmingham residential road, has caused a firestorm across the political spectrum through playing on the same theme . Many see the lives depicted on “Benefits Street” as ’empty’ and ‘stunted’, yet still lives of deliberate choice. Nonetheless, the right-of-centre Spectator has a slightly different take on this underclass (here):

The biggest scandal of Benefits Street, which Channel 4 is unlikely to reveal, is that White Dee is behaving rationally in deciding not to work. This is not something ministers like to divulge, but Policy in Practice, a welfare and employment consultancy, has run the figures for The Spectator. Dee is a single mother with two young children.  Were she to earn, say, £90 a week as a cleaner, then the system would reduce her benefits by £70 — an effective tax rate of 78 per cent on that £90 she’s earned. She’d thus be slaving away all week for £20 — far less than the minimum wage.

It doesn’t get too much better higher up the scale. If she landed a £23,000-a-year job, her effective tax rate would still be 74 per cent – so she’d end up just £5,975 a year better-off than if she’d spent the year sitting on the sofa watching daytime TV and chatting to her pals on the street. If she then worked extra hours, or earned a pay rise, she’d keep a pitiful 9p in every extra pound paid. This is nothing to do with indolence. Which of us would work at a 91 per cent tax rate?

The mother of all welfare states, or Blade Runner with food stamps, is also referred to by Russell Mead as the ‘blue model’. The American colour coding for political allegiance is alien to most Europeans. Red is the natural colour of socialists and blue conservatives in the U.K and on the continent. In the following  15-minute video, however, Russell Mead attaches ‘blue’ to Democrats and ‘red’ to Republicans as he critiques the ‘blue model’.

This analysis of the problem is correct in one respect: if technology gradually replaces ever more workers, then the state may face a choice of letting them fall into poverty or provide them a living stipend. Yet Russell Mead doesn’t quite leave it there. He attaches a moral imperative to work, much as many critics of the unemployed in Benefits Street have done as well.

Nonetheless, I think even the left needs to think carefully about Russell Mead’s three-pronged solution: 1) make hiring easier and cheaper, 2) promote the service economy and entrepreneurship and 3) feed the state to the people.

The last concept is the most interesting and perhaps the most open to misinterpretation. Feeding the state to the people doesn’t have to mean a Tea Party call for small government (which frequently is a smokescreen for the promotion of financial and corporate interests). Rather, the state could provide the financial, physical and legal capital to establish community-centred markets that help distribute community-centred goods and services.

This may not be as efficient as the production of goods and services by the global economy, but we seem to be suffering from diminishing welfare returns to production efficiency anyway. If so called efficiency leads to a vibrant elite but a dysfunctional mass—albeit one with plenty of toys—then this is unlikely to produce a happy and healthy society. Nor for that matter will it produce a stable climate. Time for some fresh thinking.

3 responses to “Blade Runner with Food Stamps and Benefits Street

  1. Certainly there’s reason to consider the broad strokes of the three-pronged solution, but I don’t see a lot of reason for the Left to go at it in the way Mead suggests — especially the first goal of making hiring “easier and cheaper.”

    Let’s take a class of small enterprises that are and have been a classic for entry-level entrepreneurship for working-class and immigrant persons, and which likely will remain so in the future: light construction, landscaping, and remodeling.

    This is a class of industry that has a higher accident rate than large contractors; it has high turnover and high seasonal / periodic unemployment.

    There’s good (!) reasons for these employers’ UI and workers’ comp insurance rates to be determined actuarially at basal and experience rates and assigned to the employer. If these things are cumbersome, paperwork-heavy, and expensive for new, small employers to manage — why on earth is it going to be easier or more efficient for it to be “a matter for individual workers … handled by [their bank of deposit]”? UI and workers comp are difficult, therefore we will expect a laborer to determine and assess his or her likelihood of injury or layoff working for a specific company in a given job description that week, and have him or her take that to the freakin’ bank for a withholding consult with the benefits officer? Garbage. Not to mention the strong incentive that workers comp rates form for avoiding lost time injury.

    With the second suggestion Mead offers, a review of pertinent regulations — streamline the rules. Sure OK. But broadly speaking there’s compellng argument for this class of businesses to have to be licensed as contractors in their field, for them to conform strongly to OSHA, environmental, and permitting requirements, and so on. What’s needed here is not a legal and regulatory environment more friendly in an abstract sense to small business (we have a whole government department for this!) but the concrete, expanded education of employers and capital support to enable small contractors to understand the reasons for and how to comply with the relevant laws and industry best practices.

    Third suggestion … “feed the state to the people” and get improved, locally oriented services … uh. His first example was clearly one of the USA’s massive blunders that resulted in literal comedy levels of waste, fraud, corruption, and environmental devastation. It was not wiser. JW Powell was right.

    OK improving locally oriented services. We have already existing-democratic institutions for doing this at the municipal and county level! Their weakness is they need more resources! There is no reason to spin off their functions through charter school type choice or a voucher system. And lastly, where there’s an argument for a complementary system for benefits … in the case of small contractors and laborers an effective, democratically run, stakeholder-controlled nongovernmental benefits, education and employment office exists. Its LIUNA and I doubt Mead would like to see that model expanded to cover the new economy.

    In summary there is every reason to pursue a “flexi-cure” model of social services, employment, career development, and small business growth but Mead is not proposing practical policy changes that support such an outcome for employees or small / new employers.

    • Red Vienna. I would agree that Mead’s analysis appears rather muddled, but it contains a kernel of truth. As technology substitutes for labour, the marginal product of routine cognitive, routine manual and -non-routine manual labour falls. The market will, other things begin equal, reach equilibrium when marginal cost equals marginal product. So as technology progresses, the market will only stay in equilibrium if the marginal cost of labour continuously falls. This is a recipe for mass destitution.

      Government can do three things to address the situation: 1) improve the marginal product of labour through education and training, 2) reduce marginal cost by reducing non-wage costs of the employer or 3) let the market keep clearing at a lower and lower level, but then redistribute income from rich to poor.

      The Danish flexicure labour market system partly addresses this truth by changing the focus of the benefit system from job to worker. That does, at least, do something to reduce the marginal cost of labour (something that a minimum wage definitely doesn’t do). The NHS in the U.K. does something similar in the U.K. because it completely detaches healthcare coverage from work. Employers in the U.K. do, of course, have to make employer social security contributions for their workers, but this is basically just an employment tax in disguise. Whether your employer pays social security contributions or not, your access to NHS care is identical.

      Personally, I would scrap any and all employer contributions related to the workforce, implement a minimum income (not minimum wage) and then square the circle of revenue through taxing cognitive workers and the holders of technological capital.

      Given that capital is now knowledge-based and not physical capital-based (the great difference from Marx’s time), this strategy is very difficult in a globalised world with free movement of both people and money. But nation states still have a few cards to play. When Starbucks, Apple and Amazon threaten to move their operations abroad after being accused of aggressive tax avoidance (the situation in the U.K.), the government still has control over the jurisdiction of the revenue spend. I would look at introducing a variable value added tax, which introduces an escalating tax add-on for firms that pay little of no tax. Starbucks may pass this on to the consumer, but through doing so would lose competitiveness to local providers who actually pay corporation tax.

      As technology continues to progress, we are still left with the problem of an expanding workless rump of population, perhaps leading, as the right would characterise it, pointless, stunted lives. And this raises that old question of what degree of state paternalism we are prepared to accommodate, a nettle the old Soviet Union was never afraid to grasp but one which makes all those living in a post-modernist world rather queasy in addressing.

      Here, however, we have a few upsides from technology: the ability to almost freely disseminate information and the fact that the cost of ‘stuff’ continues to come down. The state can provide the tools, capital and land for communities to self-organise. Communities can go on to improve their own self-reliance in energy, food, shelter and so on, thus reducing their needs from the state and also their ecological footprint. This is libertarianism meets the Transition Town movement, but with the state acting as the catalyst.

  2. A few comments here. I fully agree healthcare and pensions should be decoupled from employment. But there’s a specific reason — and this important from the point of view that class of enterprises I mentioned — to maintain actuarially determined employer contributions to unemployment and industrial accident insurance. Namely that it provides a platform for the employer to take an active role in abating hazards and pursuing a culture of workplace safety. It is possible to wind up with perversities (incentive programs can wind up encouraging nonreporting via intimidation; OSHA had to circulate an enforcement memo on this a few years back) but its a matter of implementation rather than principle.

    What that works out to be in construction and light industrial environments is you need employees who have the expertise and authority to identify hazardous conditions, communicate those conditions up the chain, and who possess the power to slow or stop work in order to mitigate them. Routine manual labor (ditchdigging!) is cognitively active work … if you value a labor force sufficiently cross-trained, educated, and experienced to guarantee its own well-being.

    As I’m sure you know, there’s an extensive sociological literature on the division of labor & distribution of workplace tasks to specific job titles (physician/nurse/tech; project supe/engineer/foreman/operator/laborer) that precedes the Autor et. al paper you mention in other posts. Some of that distribution is driven technologically or in pursuit of efficiency; other aspects of that distribution are guided by power dynamics and de/professionalization. Or by some combination thereof.

    Your points 1. and 3. encompass a further intervention that can be undertaken, which is the redistribution of creative and management tasks within the workplace: training employees to undertake or be knowledgeable about planning, budgeting, creative, management, and supervisory tasks.

    To do 1. “education and training” effectively, this requires cooperation between government, business, and labor. It is a poor idea to attempt to attempt this via degree or vocational certificate alone. That requires business to reverse an attitude that Rob Goldfarb touches on in his recent Op-Ed. (“Rather than waiting for educational institutions or the government to bridge this generation gap, employers should consider accepting some responsibility for introducing young people into the work force”). In short, to achieve effective education business needs to be willing to invest in its new employees and engage in power- and information-sharing (down to line employees!) within its own organizational makeup.

    Further, as far as education goes, you note that there are difficulties considering these issues given the given the free movement of professionals with large amounts of knowledge-based capital. Doubtless the lessons from developing-world brain drain and rural physician retention in the USA spring to mind. One thing to be considered is that in the upper Midwest, medical schools have found it to be a successful strategy to train and credential those men and women who are both from and specifically state an interest in working with an underserved community. In short, the state has an additional advantage in carefully considering the commitment level of the recipients of its investments.

    Basically the outcome you propose — communities prepared to self-organize and achieve resilience in food, energy, and shelter at a local level using capital investments plus tools, knowlege, and land provided by the state — requires that the state encourage a employment and economic framework in which persons are capable of and expected to perform work across the spectrum of work tasks, and to analyze the process of so-doing. This is how you foster an environment in which persons can put that capital to work in new and beneficial ways.

    There is also an invisible point 4. namely, if the lump of labor hypothesis is beginning to verify — note also the expectation of long hours & total availability that has emerged in professional jobs — the state can not only encourage the redistribution of tasks within job categories, it can (at least in the USA!) redistribute cognitive work by mandating & enforcing PTO, leave, and hour/shift guidelines.

    There is an little-mentioned point 5. as well: the right critique considers idleness a pointless and stunted life; the left critique observes most people, in fact, want to do socially useful work that is considered worthy of respect. Through the community investment and capital provision you propose, the state can become an effective employer of last resort.

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