Home / Opinion / Views /  Dedicated policy attention could help services generate good jobs

Good jobs are a top priority worldwide. Policymakers in advanced and developing economies alike are stressing the need for well-paying employment with job security and career paths, even as globalization and technological change make it clear that this task can’t be left wholly to markets.

Policymakers typically focus on things like minimum wages, collective bargaining and investments in skills. But as important as these are, they are not enough. Productivity is key. The supply of good jobs can increase only if the jobs created for the bottom and middle of the skill distribution become more productive, enabling higher pay, more autonomy and brighter career prospects. Else, mandating higher wages and better work conditions can leave less-educated workers priced out of job opportunities. France, with its high youth unemployment, presents a cautionary tale.

Another problem, however, is that even when policymakers do talk about policies that specifically target productivity gains and new technologies, good jobs are treated as a side issue. In the US, the latest crop of such policies targets advanced manufacturing such as semiconductors (through the CHIPS Act) and green technologies (through the Inflation Reduction Act); and in Europe, the focus is on ‘digitalization’ alongside the green transition. In both, it is simply assumed that good jobs will emerge as a byproduct of these programmes, even though that’s not their primary purpose.

Green tech and high-end chip-making are unlikely to be a major source of net job creation for the kinds of workers who are ill-served by today’s labour markets. After all, manufacturing employs fewer than one in 10 workers in the US, and the experience of other countries where manufacturing has done much better suggests that reversing de-industrialized employment is extremely difficult. Since the bulk of future jobs will come from services, that’s where we must focus our efforts to create productive jobs for less advantaged workers.

In a study for the Hamilton Project, I describe what an industrial policy for services might look like for the US. My proposal’s local component builds on existing development and business assistance schemes that take the form of collaborative partnerships between development agencies, firms and other stakeholders aiming to create good jobs. The national initiative features an Advanced Research Projects Agency (ARPA) focused on the promotion of a particular type of innovation: employment-friendly technologies.

Consider what is perhaps the toughest test case for these ideas: long-term care. This is a sector where jobs will increase rapidly as the US population ages and as demand for assisted-living increases. But because most long-term care work is done in homes (through caregivers) or in weakly regulated assisted-living communities, remuneration and work conditions have been poor. Employees are mostly women, and because their work is typically regarded as low-skill, they are not viewed as real professionals.

How might jobs in long-term care by improved? MIT economist Paul Osterman suggests three overall strategies. First, the government can impose standards (for minimum wages, say). Second, policymakers can increase the Medicaid and Medicare reimbursement rates for care services to help boost wages. And third, direct-care workers’ productivity can be raised, which would make for better service, lower costs and higher pay. While the first two strategies might be useful, productivity enhancements ultimately are the most reliable source of better jobs. For that, Osterman suggests an approach that is analogous to Japanese automakers’ method of deploying new innovations in manufacturing. This entails a combination of investing in workers’ skills, granting them greater discretion and giving them more responsibility for the quality of service.

Care workers who have more autonomy and decision-making authority can use their knowledge of residents and patients to customize their services and provide more flexibility (such as in schedules, food and treatment). This strategy would also permit the introduction of new technologies that complement caregivers’ skills, such as digital tools with which caregivers can collect real-time information and respond faster and more efficiently to residents’ needs.

These changes would require a willingness to experiment with novel work practices and a continuum of efforts, moving from research and development and the introduction of new technologies for long-term care to their local adoption, adaptation and contextualization in specific communities. If long-term care is managed better in such ways, productivity benefits would show up in lower turnover among care workers, reduced hospitalization rates, better management of chronic conditions, and quicker and smoother transitions out of acute-care facilities.

None of this will be easy. Enhancing productivity in services is notoriously difficult and it is often impeded by myriad well-meaning licensing, safety and other regulations.

But if we cannot find ways to increase productivity in the occupations for which most of our workers are destined, we will end up with an even worse-performing, less inclusive economy full of ‘bad jobs’. ©2022/Project Syndicate

Dani Rodrik is a professor of international political economy at Harvard University’s John F. Kennedy School of Government, and the author of ‘Straight Talk on Trade: Ideas for a Sane World Economy’.

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