So why not convert to supporting the growing population of workers for whom exit has become a viable and desirable option? The job of those new ‘exit unions’ would be to make employers feel the pain of their employees leaving instead of bargaining. They would support workers in their transition from one job to another, ideally at the pan-industrial level. They would organize the draining of entire industries that treat workers badly: good luck with retaining workers in low-quality jobs (e.g. coal[496]) when powerful unions orchestrate their switching to a more attractive, faster-growing industry (e.g. solar[497]).
More generally these new unions will invest heavily in professional training to attract and convert individuals willing to enter the profession. As explained in Chapter 10, they will become instrumental in attracting amateurs and growing the pool of future members willing to defend their collective interests. They will also complement these activities with insurance mechanisms designed for their members: mutual insurance against critical risks such as illness, platforms to make it easier for hunting workers to afford housing in the dense urban areas where most jobs and opportunities are now concentrated, services facilitating childcare and elder care.
Indeed ‘exit unions’ would carry a great deal of weight in the endless debate on affordable housing[498]. With strong, innovative unions joining the fight, my guess is that many obstacles to building more housing lots, loosening zoning rules, and maintaining rents at a sustainable level will disappear.
This new form of union will also be able to bargain directly with consumers—the most powerful party—to better establish the terms of the Great Safety Net 2.0. Recent victories on the minimum wage front[499] in the US, however limited, were obtained through an unprecedented alliance between workers and consumers, all connected individuals pursuing a common agenda rather than a corporatist group seeking to advance its own interests. Indeed for the first time in over three decades—admittedly before the advent of the Trump administration—, workers seemed to be regaining some of their long-lost influence thanks to the new alliances enabled by ubiquitous computing and networks[500].
This new approach to organizing workers need not serve only the interests of one kind of worker. As proven in the retail and food industries, you need motivated and caring employees at every level of the income ladder[501]. This is especially true in an economy dominated by proximity services (food, retail, hospitality, healthcare, personal care, last-mile logistics), where the majority of jobs will be about caring for people rather than making things[502].
Relying on networked organizations to implement the Great Safety Net 2.0 would not be unprecedented. Individuals trying to solve their own problems on the ground happened many times before, even in the recent past. One well-documented episode came when those who were dying of AIDS in the 1980s and ‘90s hacked a system that ignored and rejected them[503]. They eventually forced healthcare professionals to make the patient an active player in their own treatment, imposing a paradigm shift that had an impact far beyond that particular disease. A less well-known story is that of the Black Panthers and how they took charge of providing affordable healthcare to African-American families in Oakland, California, and many other places instead of waiting for the government to overcome its racial and social prejudices[504].
It is true that it is generally difficult to grow larger communities without weakening the bonds that tie everyone together. Public choice theorists have long demonstrated why special interests, when conflicting with the interests of a larger group (such as the entire middle class), tend to win in the end—namely, because it’s easier to organize a small group of determined people with an acute realization of their common self-interest. Conversely, it is much more difficult to organize a larger group, as coordination and management becomes a practical challenge and the number of people involved increases the chance of marginal divergences that eventually affect morale.
There are various reasons why things could change in the Entrepreneurial Age. The first is lower barriers to entry. Harnessing the power of ubiquitous computing and networks makes it easier to cover many kinds of risks. This was an argument made in 2003 by Robert J. Shiller, a winner of the Nobel Prize in Economics, in The New Financial Order, a book dedicated to explaining how a “an electronically integrated risk management culture” could be “designed to work in tandem with the already existing economic institutions of capitalism to promote wealth”[505]. Shiller’s proposal was somewhat obscured by the financial crisis that followed. But now various factors—increased processing power, regular and systematic monitoring of user activity, the strength of peer-to-peer networks—suggest that pooling resources at the scale of the multitude has become easier and less costly than in the past.
What’s more, communities that were impossible to organize due to geographic distance have become viable as the basis of a new system thanks to today’s technology. In the old days, people needed to live close to one another to form the bonds of a solid socio-institutional framework. Today they can connect with one another via the Internet and form a network that is as tight and resilient as a community of fellow villagers. This has practical consequences on the process of building the Great Safety Net 2.0. Suddenly, collectively organized networks can rapidly form around issues and interests for which it was previously impossible to advocate due to the distance between potential members. Distance and geographic frictions are no longer standing in the way of organizing.
A third factor is, once again, increasing returns to scale. As the multitude organizes to pool risks or offer shared services, individuals can be far away from each other while being very similar in terms of profiles and interests. As compared to self-organized communities in the past, “cloud communities”[506] have a major advantage due to their networked structure: the power of networks tends to increase instead of diminishing as the underlying community grows. In the past state intervention was needed to deploy institutions beyond a certain scale; in the future increasing returns to scale could be enough for technology-based initiatives to reach a universal scope. When it comes to discovering and imposing new institutions as part of the Great Safety Net 2.0, there could be cases in which technology-driven network effects replace and even surpass the authority of governments.
I’m convinced unions played the most critical part in building the middle class in the past age of the automobile and mass production. Now we have to reinvent unions so that workers gain leverage in the current age of ubiquitous computing and networks. Designing policy to do so will be one of the most critical political challenges of the coming decades—and just like collective bargaining was critical during the post-war boom, it is absolutely necessary to creating the Great Safety Net 2.0.
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The equation for creating good jobs
Today’s inertia can be explained by one simple fact: most people who genuinely care about promoting economic security and prosperity are looking backward instead of forward. Their dream is to ‘make the safety net great again’, as it was during the post-war boom, rather than imagining a new kind of safety net. Alas their pining for the Great Safety Net of the past cannot be converted into beneficial action. We’re in a new paradigm now.
Today’s challenge is not about securing the old working class of the age of the automobile and mass production. Rather it is to create more, better jobs for the new working class in urban proximity services. It consists in making those jobs more attractive while making those services more affordable for a larger number of customers. The solution will not come from the government simply subsidizing supply or demand. Rather it will be in designing a macro mechanism that helps the market find a new balance, with institutions that better fit the needs of today’s workers and a new breed of unions as the dynamic force to make it all grow. It’s about constructing a virtuous circle like once existed with the post-war boom.
What Zeynep Ton and Roger L. Martin call the “good jobs solution”[507] concerns the entire economy. But if it is to have a
significant impact on the job market, including for less educated workers, it should start with creating more value in proximity services and reinvesting that value to create those good jobs. Conversely, if there is no additional value created in proximity services, then no surplus can ever be shared with proximity workers so as to turn them into the new middle class.
Creating additional value rarely happens by letting the private sector off the hook. Rather, businesses need to be pushed into using technology. In many cases, pressure comes from an increased level of competition. This is why a sound antitrust policy, one that aims to counter rent-seeking, is so important. Pressure can also be imposed by making inputs more expensive. This is one reason why the Great Safety Net 1.0 contributed so much to increasing productivity. Because it made labor more expensive, it eventually became an incentive for business leaders to try and produce more with fewer workers, thus creating additional value that helped pay for the whole mechanism!
This worked especially well in one particular part of the economy: large corporations ruled by scientific management. Meanwhile, the proximity service industry has resisted efforts to embrace such practices. In sectors taken over by the government, such as education, proximity workers secured middle class status because wages were decoupled from productivity, with the difference paid for using taxpayer dollars. But in other sectors such as hospitality and personal care, the preferred option has always been to exert pressure on workers so that they work longer hours and consent to lower wages.
And so in a typical feature of William Baumol’s “cost disease”, most proximity services have been made into a zero-sum game that hasn’t translated into either higher wages for workers or better services for customers. On the contrary, the absence of additional value in proximity services has been a self-reinforcing phenomenon. Business owners don’t pursue higher quality at scale. In turn, consumers don’t expect improvement in terms of the quality or the positioning of the service rendered. As they themselves are subject to the ‘Greater Wal-Mart Effect’, they only seek one thing: ever lower prices.
Absent high quality at scale, workers in proximity services are not expected to get better at what they do. Instead, they are dispensable, replaced in the blink of an eye while management keeps the business afloat . This explains the high employee turnover in most proximity services (think about restaurants, for instance). These sectors have always functioned without counting on more qualified and productive workers. And if anyone can be inserted to do the job at what is considered to be an adequate level, it becomes difficult for those already working to bargain for a higher share of the value added.
Fortunately, a radical change is happening. As we go further into the Entrepreneurial Age, technology is finally providing us with levers to create more value in all proximity services. The corollary is that it makes it possible to improve the quality of jobs in proximity services, even if they’re not operated (and paid for) by the government. Clearly this is where entrepreneurs can make a difference by harnessing the power of technology and forging a bond with the multitude.
It takes time. Tech companies with an entrepreneurial approach don’t serve large markets yet. As explained by economist James Bessen[508], productivity always slows down at the beginning of a technological revolution: entrepreneurs must experiment with the technology of the day and discover the new markets that it contributes to opening. Then those markets grow larger, triggering a virtuous circle as higher demand leads to a higher level of investment, which increases labor productivity, brings down prices, and sustains an even higher demand.
One early step to enter that virtuous circle is using technology to augment workers[509]. It makes it possible to generate higher productivity and quality while requiring less training for the job. If you increase output while relying on less qualified workers, you can employ more of them and pay them more as compared to what they earned in previous jobs, all while serving more consumers at a cheaper price[510].
This “downward augmentation” doesn’t mean that everybody, however unskilled, will be good at their job. Rather, it means that more workers will be able to execute the routine tasks required for many jobs in proximity services (for instance when real-time geolocation spares a driver from having to know the map of the city by heart). As for qualitative differences, they will be found in non-routine, human capabilities such as punctuality, attention, memory, kindness, empathy, literacy, energy, and warmth[511].
Beyond this “downward augmentation”, entrepreneurs can radically improve resource allocation by harnessing the power of the multitude. In a way, it’s what Ikea has long done by putting customers in charge of assembling furniture[512], thus generating a surplus that could then be redistributed. Only now harnessing such power can be done at a much larger scale, powered by network effects and vast amounts of user-generated data. That’s because in the Entrepreneurial Age the multitude contributes to creating value through three complementary channels: auxiliary amateur workers (as discussed in Chapter 10), free peer-to-peer contributions (as when people submit reviews on TripAdvisor), and casual user-generated data collection (performed by all tech companies, as explained in Chapter 5). All contribute to increasing and diversifying the output in proximity services. This creates an economic surplus to be redistributed according to the socio-institutional framework of the day.
This is why institutions must be designed to bring together the Great Safety Net 2.0. The stake is to shape the corporate contract in proximity services in a more favorable manner for workers. This can’t be done by going against the mighty multitude. Rather it consists in harnessing its power to change the equation and align the interests of workers with those of the multitude. If the socio-institutional framework is favorable to the development of proximity services, then the multitude-driven surplus will be allocated to expanding the business by lowering prices and/or improving the quality. It will make it possible to address a larger market thanks to a classical supply-side multiplier effect. In turn, greater, more diverse demand will require hiring more workers. And because of the augmentation facilitated by technology, those workers’ higher productivity will make it possible to pay them more.
Creating more, better-paid jobs will also trigger a typical Keynesian demand-side multiplier effect as those numerous, better-paid workers consume more proximity services themselves. The city of Seattle is a case in point. Its fifteen-dollars-an-hour minimum wage has made proximity service jobs more appealing and revitalized the city’s economy[513]. With higher pay, proximity service workers become consumers of other proximity services, triggering a positive feedback loop and leading the economy towards prosperity and increased economic security.
The goal of using technology in proximity services is not to standardize tasks, repress workers’ initiative, or ignore their individuality. On the contrary, in proximity services, technology should make it easier for workers to take charge, make their own data-driven choices, and add value in their preferred approach, creating a partnership with customers that much resembles the spirit of craftsmanship. We must remember that such services are all about frequent and direct interactions with customers[514]. Connecting workers with customers makes a difference because it is then possible for businesses to be even more sensitive and responsive to the demand-side. With empowered proximity service workers, customer relationship management can be converted into a constant, data-driven dialogue. Demand can be managed and oriented based on the collected data and available resources, and high quality services can be supplied at scale by harnessing the additional power of the multitude.
For example, how do you provide affordable 24/7 service in personal care? By doing two things: having well-equipped workers come to the customer’s home every working day while also complementing those workers with a call center, instant messaging, amateur workers as backup, and a social network of other customers. The stake is to have all those involved rely on an information system that shares knowledge, improves resource allocation, and pr
ovides customers with a seamless, customized experience. In this more favorable context, proximity workers can get better at what they do, manage their activity in a sound manner, and enjoy higher wages and better working conditions.
All in all, technology doesn’t make jobs irrelevant—far from it, as suggested by the uninterrupted growth of proximity services in expanding urban areas. But with the Entrepreneurial Age comes the new working class that we discussed earlier, and this new working class calls for a Great Safety Net 2.0. Two things are at stake: hedging networked individuals against the critical risks of the day and providing businesses with the steady, growing demand they need to invest. Will we be up to that challenge?
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Key takeaways
● The Great Safety Net 1.0 used to be built for and around the corporate world. But now our economy revolves around the networked individual: this is a Copernican revolution.
● With individuals harnessing the power of networks, it’s time to reinvent trade unions. As workers convert to the hunting way of life, bargaining becomes less about voice and more about exit.
● The institutional stakes are clear: we need to create more jobs in proximity services and make them more attractive and rewarding. This is what the Greater Safety Net is all about.
Conclusion
Basic Income
Isn’t Enough
“I came to believe that Monsieur Teste had managed to discover laws of the mind we know nothing of. Certainly he must have devoted years to this research; even more certainly, other years and many more years had been set aside for maturing his inventions, making them his instincts. Finding is nothing. The difficulty is in acquiring what has been found.”
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