Jobs!

Apr 24, 2022

It’s time for a federal election in Australia in just over a month. I love these times, and I suspect I get an enjoyment out of it that’s similar to what others get watching sport.

On Q&A last night, Chris Bowen reminded us how investments in renewables will create jobs. Of course, the rallying cry of Jobs! is something both major parties shout. But thinking about jobs, not all jobs are equal. The goal isn’t just to create jobs, but rather to create jobs that contribute something positive.

If the goal were just to create jobs, then we could simply ban farming machinary. Ban the right things and we’d create a whole lot of jobs! This could happen in any industry, but the government is in a particularly powerful position to create jobs. They could introduce new regulatory burdens, and suddenly we have new jobs involving compliance with those new burdens. The burdens don’t have to be adding any value – they exist just to create jobs.

Of course, doing so would be absurd. The net wealth of our nation can be greater when we have machines to do the work of humans. Advancements in agricultural technology have allowed us to produce the same or greater output with fewer people, and that is highly desirable.

So what we want is to create enough jobs that increase our net wealth. This is a rough generalisation, and we might want to flesh out what we mean by ‘wealth’. For example, some labour is directed towards once off events, consumed in that moment. We might pay for a massage, but once we walk out we have nothing to show for it other than the feelings that accompany it, the improvement in mental health. These things are good to have in a society, so we should include the availablility of these things in our measure of ‘wealth’.

Banning farming machinary has the opposite effect – it creates new jobs, but reduces our net wealth. Are new jobs in the renewables sectors good? It is hard to evaluate the claim that x new jobs will be created without first understanding what the net change in wealth will be. I suspect strongly that renewables have a bright future, and Australia will benefit massively from the world’s move to renewables, so I’m not concerned about this specific example. But when we hear about how many jobs something will create, that doesn’t tell us much unless we understand also the value that’s created, and what’s lost relative to another option. Jobs in renewables ideally leads to jobs lost from more polluting industries. It may also lead to a net loss in wealth in the short term. Long term, I believe it’s good, but telling us that x new jobs will be created is not a useful metric on its own to make any kind of judgement.