Jobs are Terrible Wealth Redistribution Mechanisms
American leaders’ obsession with “job creation” causes income inequality. Income inequality gets worse because jobs are lousy wealthy redistribution mechanisms.
Jobs have many benefits; including increasing self-esteem, education, teaching values, and giving people something to do with their time. Unfortunately, jobs fail as engines of wealth redistribution.
The poster child for jobs’ failure to redistribute wealth is Amazon (NASDAQ: AMZN) where CEO Jeff Bezos is reputedly worth $150 billion. The average salary for an Amazon fulfillment or warehouse “job” is $26,000; a year or $13 an hour, Glassdoor estimated. If he or she is lucky that associate can receive $980 in cash bonuses, a stock bonus of $1,111 and profit sharing of $1,016.
Are Amazon Jobs a Drain on Society?
Therefore, the average Amazon fulfillment or warehouse worker is making $33,039 less than the average US household income of $59,039 a year. Two married Amazon fulfillment workers would make around $52,000 a year, still less than the average US household income.
Disturbingly, the average Amazon fulfillment worker is making $25,939 less than the average American salary of $51,939 a year. If Glassdoor is correct most Amazon jobs pay around half what the average job in America does.
These numbers call the “benefits” of the 113,500 jobs Amazon supposedly created in 2017–2018 into serious question. Moreover, these numbers indicate that Amazon’s job creation might be a drain on society.
The jobs might cost taxpayers money, because Amazon workers undoubtedly require more government benefits than other employees. For example Amazon employees will be more likely to use government benefits such as Medicaid.
How Amazon Traps People in the Lower Working Class
There are certainly benefits from all the jobs Amazon creates, but wealth redistribution is obviously not one. Many people learn job skills and good habits from jobs for example.
A few very hardworking, clever, lucky, or highly-disciplined individuals might save enough or position themselves to advance into the middle class working at Amazon. Meanwhile, most Amazon workers will find themselves and their children trapped in I call what the lower working class.
Those individuals will make enough to pay for basic housing, food, clothing, and possibly a used car and little else. They can never buy a home, purchase a new car, send their kids to college, or take a vacation other than a camping trip to the local National Forest — while working at Amazon.
Many Amazon workers will have a hard time eating out at some place other than McDonald’s and have to buy all their clothing from thrift stores. If Glassdoor’s figures are correct, quite a few Amazon workers cannot afford an Amazon Prime subscription.
Will a $15-an-Hour Minimum Wage really help the Working Class?
Raising the minimum wage to $15 an hour, as Democrats propose will not help. A person working 40 hours a week for $15 an hour will make $28,800 a year.
That figure is far below the median household income of $59,039 a year. The minimum wage would have to be $30.75 an hour to enable one person to earn the median household income.
Therefore, the $15 an hour minimum wage is a questionable solution. Equally suspect is the Democrats’ one size solution for workers’ problems: unionization.
America had lots of unions back in the 1970s. Those unions did not even slow the hollowing out of American industry, or the decline of the working class. The events of the last 30 years prove unions, are incapable of a maintaining a strong working class.
Jobs are Not the Answer to Poverty
Even if Amazon paid a $30 an hour wage to most of its workers, that would benefit a tiny percentage of Americans.
Only those who live near an Amazon fulfillment center and pass the qualifications would get the money. Most of America’s poor would have no chance at the wage. The elderly, rural poor, inner-city residents, most African Americans, people under 18, the disabled, and many others will have no chance of getting an Amazon Job.
A more fair solution would be a basic income; or increased government benefits, financed by higher taxes on companies like Amazon. Government can direct that money at those regions and people that need it most.
Strangely, such a solution will be fairer to Amazon. Companies are not responsible for solving social problems like poverty. That is government’s role, which is as it should be.
The Troubles with Wealth Distribution by Jobs
A problem with relying on jobs for wealth redistribution is that there will be strong political pressure to create needless or meaningless jobs to buy votes. Another is that there will be pressure to block technological progress and more efficient business models to protect jobs.
This has not happened yet, although U.S. Senators Corey Booker (D-New Jersey) and Bernie Sanders (I-Vermont) are pushing the notion of a jobs guarantee. The guarantee would provide all Americans with a no-brain, no-work $15 an hour government “job.”
Taken to its logical extent, Trumpism; which discourages free trade to create jobs, will next discourage technological progress. President Donald J. Trump (R-New York) has not gone that far yet, but his administration is promoting government subsidies for the coal industry.
Natural gas is a far cheaper, less polluting, and more efficient energy source but it creates few jobs. Coal, for all its faults, generates lots of high-paying working-class jobs. Therefore Trump promotes coal. The Donald is not trying to throttle natural gas yet, but that is the next logical step.
Jobs Do Not Guarantee Wealth
Government-mandated jobs creation raises serious ethical problems. For example, to what extent will government interfere in business to create jobs? What will happen to the people that do not want the government jobs?
Will the government force them to accept jobs? Those who think this is far-fetched should remember the draft.
The greatest drawback to wealth redistribution by jobs is that jobs do not guarantee wealth. The Soviet Union was probably the greatest jobs creation machine in history; it provided a job for every Russian citizen. Those jobs did not create wealth, or help the USSR win the Cold War. Indeed, by the 1980s Soviet industry was probably less efficient than Russian industry had been in Czarist times.
A US government obsessed with jobs creation will end up like the Soviet Union. Vast numbers of jobs; many of them meaningless, will be created, but it will generate little wealth.
America has already partially reached that situation with full employment and rising income inequality. Things are likely to get far worse if technological unemployment kills large numbers of jobs in the years ahead.
Our political leaders need to look beyond jobs if they want to equitably redistribute the nation’s wealth. Creating a hierarchy where a few people benefit from “high-paying jobs,” while they trap everybody else in poverty will generate civil unrest. Unfortunately, that is where American society headed as long as jobs are the only means of wealth redistribution.
This commentary first appeared at Market Mad House your ringside seat for Income Inequality.