Aggregate demand and the industrial revolution
The concept taken from economics is aggregate demand. Rising aggregate demand allows the economy to grow in the long-term, furnishing the reason economists had believed automation would create jobs. By creating wealth more efficiently, automation permits the employment of more workers, whose increased buying power supports their employment.
This logic can collapse if workers doing the new jobs are paid less than the workers replaced in the labor force. Profits will then rise, and while profits contribute to aggregate demand, they do so less than wages because the profit-takers are wealthier than workers and spend less of the increase than workers would spend. Investments in machinery increase aggregate demand, but the profitability of these investments depends on unreliable technological opportunities. Every modern society that has been economically expansive long-term has raised the standard of living of the masses of people.
The fundamental reason the industrial revolution allowed vast expansion of the economy is that expansion of the labor force occurred primarily by turning peasants and farm workers into manufacturing workers. Workers were paid low wages and worked as much as 14 hours a day before they organized into unions, but still, at least in long historical perspective, their income was better than that of the peasants they had replaced. Even today, agricultural workers throughout the world get much lower wages than do manufacturing or personal-service-sector workers. The creation of an urban working class meant an expanding economy with expanding employment. The process is observed today in fast-motion in China, where an expanding economy is powered by converting very poor peasants into better-off workers, creating rising aggregate demand. This isn’t the only tendency in the early and middle industrial revolution. In a countervailing tendency, much emphasized in the popular imagination, skilled workers are replaced by unskilled workers. The first tendency is stronger.
During the past hundred years, another trend came to dominate: the growth of the personal-service sector. “Personal-service sector” (from which I exclude the “producer services,” which aren’t “personal”) is an amorphous term including well-paid occupations, such as physicians, but most advanced-country workers not employed in manufacturing goods are employed in distributing goods (wholesale and retail sales), restaurants and hotels, and the nonprofessional health-care sector, and these workers are everywhere paid more poorly than those employed in manufacturing. Hence the worry about the “disappearing manufacturing jobs.” Replacing manufacturing jobs with service-sector jobs entails slower growth in aggregate demand.
Social-status theory from evolutionary psychology
The question seldom addressed is why service-sector workers, such as retail clerks, food preparers, and nursing aides, are so poorly paid. Lower skill requirements may be part of the reason, but the fact that service-sector jobs remain unskilled may itself be best explained by their inherently lower status, which is the answer I propose. Socially stratified societies allocate social status to the various occupations based on criteria rooted in instinct. The personal-service occupations are accorded lower status because these occupations carry indicia of servitude and servility.
Modern social-status theory derives from evolutionary psychology, which emphasizes our continuity with chimpanzees, whose social life is characterized by dominance hierarchies. But evolutionary psychology also recognizes that bands of hunter-gatherers were usually egalitarian: “primitive communist” societies resisting any attempts by strongmen to dominate them or establish material or other status-based inequalities. With the agricultural revolution, the accrual of social surpluses and the need for large-scale social coordination both intensified and unfettered the striving for social dominance—power, prestige, wealth—from the group control that held them in harness throughout 90% of humankind’s span of existence, producing societies divided into social classes.
Allocation of status depends on instinctual triggers, including the marks of servitude: all else being equal, one who serves has less status than the one served.
Indicia of servitude aren’t the exclusive basis for awarding status to occupations, as demonstrated by the vast range of incomes among occupations in the personal-service sector. Anything associated with power increases status. Status theory can explain the higher incomes of manufacturing workers compared to peasants and farm workers by the prestige of cities, associated with urban power. The link between status and power might also explain why economists of the early industrial revolution, such as Ricardo and Marx, underestimated the ability of manufacturing workers to sustain wages higher than the price of bare necessities: the economists could not foresee the consequences of the comparatively high social status of workers in manufacturing, or perhaps, the relative status of manufacturing workers wasn’t evident to them. Even today, farm workers have far lower incomes than either manufacturing or personal-service workers. Physicians have high status because they command medical technologies that afford power over life or death. Consequently, the large incomes of physicians are a new development: 19th century physicians weren’t affluent and highly respected, since they didn’t command the powers of modern chemistry. Occupations that require considerable skill and demonstrate intelligence are high status. But the trend is proliferation of personal-service jobs in retail sales, hotels and restaurants, and health-care, where workers have low status based on bearing indicia of servitude.
Status inheres in making useful goods that does not inhere in providing useful services. Dwell, for a moment, on the concept “the dignity of labor.” Even unskilled work has a dignity that is absent in personal service; think of the fake smile a sales agent or nurses’ aide must present. Insincerely agreeable affect is demeaning, compared even to unskilled manual labor, which may be boring but isn’t humiliating. This is only an example—and not the most obvious example.
The whole of society may conspire to bring about the low wages of service-sector workers. Laws protecting full-time workers often don’t extend to part-time workers, who are more common in the personal-service sector. But since wages are set primarily by market pricing, the assertiveness of the workers, especially their collective assertiveness, is probably the main proximal mechanism by which status influences income. High status produces confidence and sense of entitlement, a collective refusal to accept conditions below their due, because of their station in life.
These trends paint a bleak picture: rising inequality, growing unemployment, and social-status deflation. Not only are the macro-economic trends unfavorable, but the means to resist them politically diminishes as the assertiveness of the downtrodden declines with their loss of self-confidence and sense of class entitlement. The analysis does point to a public policy that might slow or reverse these trends. Although no great cause for optimism in the absence of any practical means of effecting change, I’ll end on that note of relative optimism: we must ask how the social status of personal-service workers might be raised.
If the triggers for low status are inevitably the signals of servitude inherent in these occupations, upgrading their status entails adding high-status signals. Statizing personal-service industries would accomplish this. Government, being powerful, is high status, and all else being equal, workers employed by government will enjoy higher status than those working in the private sector. The evidence includes the strength of unions in the public sector despite their obliteration elsewhere. Statization of personal services, regretably, isn’t today’s trend.