Discussion: What if there was no ‘cheap labour’?

This post is an open thread. My question is: what if there was no “cheap labour”? I’m asking because, depressingly, I have never heard this seriously discussed. And I’m putting it in quotation marks because it’s a term I hate. Is there a prevailing ideology among the nobs and bigwigs and mandarins and politicians? Have they discussed it at all? My gut feeling is that this is too utopian to make the discussion table.

Businesses like growth. They like to watch avidly as nice, populous countries slide over the income threshold to start buying whatever it is they’re selling. However, there is a fundamental tension here: they want economic growth, but they also want “cheap labour”.

In her book, No Logo, Naomi Klein explains how multinational outsourcing of clothes manufacturing was a race to the bottom. Once one company had upped sticks and moved its production to developing countries, everyone else simply had to follow suit to compete. Apparently.

Imagine if that wasn’t an option. Imagine if all of the countries in the world had the same wages as today’s rich countries. What would the implications be?

Most obviously, things would get more expensive. Salaries make up varying proportions of the costs for different items, so it might be more noticeable for some than others.

If Things were more expensive, we would buy fewer Things. Less retail therapy. Fewer impulse buys. Would we value quality manufacturing and durable goods again? It’s almost as if – whisper it quietly – we would stop commodifying things!

Food waste

Presumably we would start by cutting out the least necessary things, but it might also prompt us to be more sensible with essentials like food. We waste a vast amount of food nowadays. It inflates food prices and increases greenhouse gas emissions. The EU is looking into it and everything.

What I find more interesting are the implications for countries which don’t have first-world wealth. It’s beyond this post’s scope to even contemplate whether international wage equality would mean equal living standards. We don’t even have that within the wealthiest countries today.

It would be massively insulting to try to predict how cultures would change if they had the same opportunities as we do in more privileged climes. So if this post seems to lack human insight, to skimp on humanity in favour of the hard mechanics of it all, that is why. But I’m allowing myself this one example.

We’re very big on motivation in the UK. At school, we were told to aim high, work hard, and never give up on our dreams. In some places, it’s the polar opposite. Rigoberta Menchu, the Guatemalan Nobel Peace Prize laureate, has spoken of how her parents would explain to their growing children that they would never achieve their dreams. Dependent as they were on seasonal plantation work for starvation wages, they should be prepared for a life of the most extreme hardship. I bet the owners would have described them as “cheap labour”.

Beyond the bare basics

Billions of people are impoverished today. In this vision we’re contemplating, would their ability to buy things beyond the bare basics compensate for these retrenchments in the west, deprived of its present exorbitant privilege? It seems like we might return to local products: if everywhere makes things at the same cost, having the factories half way round the world is no longer an exploitative economy – just a pain in the arse.

Judging by past trends, people would become very keen on automation. Chinese companies are already starting to report problems with labour costs. The US Department of Agriculture is already saying that these companies will need to mechanise.

What would we all be doing for a living in that case? Working in a rich post-industrial knowledge economy in the way that the UK, I understand, views itself? What about hyper-technical manufacturing like Germany? Of course, those suggestions both presume that we continue in the vein of our current models. How about a six-hour working day and less stigma surrounding unemployment? I mean, we might find that we don’t actually need all of the people working all of the time.

Could modern business cope if everywhere was equally prosperous? Would we reach a fresh equilibrium, or would it mean the end of capitalism as we know it? My personal feeling is that businesses are dangerously dependent on other people living in abject poverty. In the kind of conditions that chief executives would give life and limb to save their own children from. Most don’t go as far as wishing for poverty, but they could certainly decry it louder. And that should worry us.

Dear readers, I’m interested to hear what you all think. Please comment. You probably have a better idea about these things than I do.

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14 thoughts on “Discussion: What if there was no ‘cheap labour’?”

  1. Have you seen this?

    The future appears to be trending to free labour, not cheap labour.

    Under the prevailing social Darwinist system, destitution and dependence on charity is regarded as the appropriate penalty for failing to support yourself. Therefore as the amount of free robotic labour goes up, the amount of desperate unemployed does too. Those desperate unemployed are cheap labour, or even tax-subsidised free labour under schemes such as the “workfare” schemes we have in the UK right now. Extrapolate this, and in the end state the only kind of labour is free or cheap. We’re left with two groups: the people who control means of production (who don’t “labour” as such), and surplus population whose only use to the first group – apart from occasional slave labour – is as a reservoir of genetic diversity.

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    1. I’m not convinced that expensive labour makes this less likely. If labour is expensive then starting any new business becomes expensive, and the power of the rentier class increases. Once that class owns all the capital, they capture all the economic growth, and people’s ability to demand a nominally high price for their labour makes no difference – they probably just end up mortgaging themselves to the rentiers.

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      1. Of course expensive labour doesn’t make this less likely. It’s the other way around; these trends look set to make “expensive labour” an impossible concept.

        I haven’t answered BabelFish’s original question, of course. I find it very difficult to even imagine what a world would look like in which there was “no cheap labour”. I doubt that such a thing has *ever* existed in settled human civilisation.

        Of course, wages and standards of living are currently rising in the “cheap labour” countries, just as they are falling in the consumer countries. If that trend were to stabilise in the long term, we would presumably wind up with even wages across the world (for all work which still couldn’t be done by robots, anyway). But I don’t see any reason why stabilisation of that system should be considered any more likely than oscillation – even divergent oscillation. We’re just as likely to get to a place where there are sweatshops in New York once again, shipping garments to China. And we’re even more likely to get to a place where half or more of the population can’t get anything in exchange for their labour at all, unless they can find a spare patch of earth in which to grow some vegetables.

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      2. I don’t think oscillation is possible; stabilization will happen due to simple market forces. It was possible to maintain price differentials when movement of goods was expensive; now that transport is cheap the economics are correcting.

        Agree that there’s not going to be enough work to go around though.

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  2. Universal Basic Income is a proposed solution to the problem of permanent underemployment, but it requires a certain level of socialism in order to be politically or economically viable. A social Darwinist might prefer that the “reservoir population” are kept as uncomfortable as possible whilst remaining viable, in order to encourage a competitive mindset amongst them.

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  3. Like any other resource, capitalism allocates labour to those willing to pay the most for it.

    If we’re assuming modern levels of technology, then automation would take up most of the slack. Everywhere starts to look like Japan – automated factories where a few humans supervise thousands of machines (and an underclass of 20somethings unable to find long-term work – but I’m getting ahead of myself). Prices would rise, but probably not by much – the cost of today’s food is what, 3% labour? I very much doubt this would reduce commodification or disposable consumer culture – in fact, with more of our goods being produced by automated labour, the opposite would probably occur. Today we might keep a chipped glass, feeling too guilty to throw it out, since it was produced by “the hard-working indigenous people of wherever”. Would we think that way if we knew it had been made by machine? Similarly, food production would probably become even less environmentally sensitive – machines need flat, square fields, and we’d sooner give up our qualms about demolishing habitats than our ability to eat what we like when we like.

    If this sounds a bit too business-as-usual, it’s because I think the relevant trends are already happening. The jobs that are being offshored – garment sewing, call centres, basic corporate programming – are the jobs that are on the way out. Cheap labour has delayed the transition to making clothes entirely by machine, but it won’t prevent it. CEOs don’t have feelings one way or the other – if and when option A becomes cheaper than option B, that’s what they’ll switch to.

    Rather than getting jobs that paid a western wage, most people currently on starvation wages would just move on to outright starvation. If you paid them benefits or some such we’d see rapid inflation – we’re only building enough cars for x% of the world population, increasing the number on everyone’s paycheck doesn’t change that, it just makes cars more expensive. Of course you would see some geographic redistribution of who was or wasn’t poor, and perhaps some raising of the lowest levels (at the expense of the levels just above them – raising the baseline makes very little difference to the super-rich). Equally, this is already happening, if slowly – workers in areas where companies outsource to become wealthier, until it no longer makes sense to outsource there – at which point the companies move elsewhere, but they’ll run out of countries sooner or later, and in the meantime the former second world becomes just another part of the first world.

    Even in the west we’re seeing rising unemployment as companies automate. Jobs will continue to be available, but will become more and more specialized, and requiring longer and longer training periods (like the UK and Germany in your example). At some point any human labour simply ceases to be worthwhile.

    So we have to find a way to deal with a world where most people are unemployed (and honestly I think looking at this through the lens of “cheap labour” is a distraction – the problem is important in its own right, and the geographic aspect doesn’t really change the issues). But so far it’s not looking good; even if we could remove any social stigmatization (and I’d expect that to happen naturally once a certain proportion of the population are unemployed), people find fulfillment in their jobs, and those with jobs live happier lives than those without. Whether your preferred stereotype is the guy on benefits who sits at home watching TV all day, or the trust-fund kid who spends his parents’ money experimenting with a bunch of different businesses / art collectives / etc. but never finding something he’s happy with, neither looks like a good way to live.

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    1. You seem to assume that a higher minimum wage would lead to substantial unemployment because machines would just do everything.
      There are a lot of things we can’t automate yet – it’s certainly true of the food industry. So perhaps we could expect a lot of jobs to open up in designing automated systems, at least for as long as it took to get those systems going?

      Perhaps we would see people turning away from things we can’t automate in favour of things we can. That is happening in the Californian horticulture sector: peaches can’t be harvested by machine, and labour law reforms mean farmers are concerned they won’t be able to find the workers to harvest their crops, so they are switching to nuts because nuts can be mechanically harvested.

      Anyhow, raising the minimum wage doesn’t necessarily lead to greater unemployment. It means the people receiving the wages have more disposable income to flow around the economy, as opposed to a few hyper-wealthy whose assets are tied up in things like gold and fancy cars, where they don’t really stimulate anything.

      I do take your point about reaching a stage where there aren’t enough jobs for everyone. What if we didn’t need to work 8-hour days? If there’s that much unemployment and a lot of goods being produced at rock-bottom prices, maybe we could choose to work fewer hours? I know plenty of people who would rather have less money and more time.

      Many corporations would be more than capable of paying their workers more. They pay their top management far more than necessary, even though higher pay doesn’t necessarily reflect better performance. It’s a case of greed outweighing common sense. A business would do better if it could get the cream of the crop in terms of talent by offering amazing wages, benefits and training. Everyone would want to work for them and would stick around. But top executives know that money would come out of their own pay packets, and since they’re the decision makers, all they have to do is say no, and so long as the business isn’t actually going under, they keep milking it.

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      1. > So perhaps we could expect a lot of jobs to open up in designing automated systems, at least for as long as it took to get those systems going?

        Maybe, but I don’t think enough to make a difference. One good automated system designer can put thousands of labourers out of a job.

        The nut thing is fascinating, thanks for sharing.

        > Anyhow, raising the minimum wage doesn’t necessarily lead to greater unemployment.

        Today’s markets are not perfectly efficient, but they’re close; profit margins in a lot of industries are pretty thin. I might accept that companies employing minimum-wage workers could afford to pay e.g. 10% more, but at some point it becomes a choice between employing fewer people and going out of business.

        > It means the people receiving the wages have more disposable income to flow around the economy, as opposed to a few hyper-wealthy whose assets are tied up in things like gold and fancy cars, where they don’t really stimulate anything.

        Now we’re getting into deeper and more controversial economics, but a lot of the time paper wealth doesn’t actually translate into consumed resources. I mean sure, there’s a certain amount of fancy cars made with skilled labour that could be allocated to something more useful, but ultimately there are only so many hours a day you can consume for. The idle rich keep most of their wealth as investments, which means it’s going back into the economy as funding for new and growing businesses.

        > What if we didn’t need to work 8-hour days? If there’s that much unemployment and a lot of goods being produced at rock-bottom prices, maybe we could choose to work fewer hours? I know plenty of people who would rather have less money and more time.

        Plenty of people think they’d like that, but do you know people who actually do it? Do they feel fulfilled? I’ve known several people who took a couple of months’ gap between changing jobs – and they’ve all said that they ended up doing nothing useful, they metaphorically or literally sat around and played videogames; friends noticed they seemed less themselves, and they felt less fulfilled. Heck, I’ve done the same thing myself.

        > Many corporations would be more than capable of paying their workers more. They pay their top management far more than necessary, even though higher pay doesn’t necessarily reflect better performance. It’s a case of greed outweighing common sense. A business would do better if it could get the cream of the crop in terms of talent by offering amazing wages, benefits and training. Everyone would want to work for them and would stick around. But top executives know that money would come out of their own pay packets, and since they’re the decision makers, all they have to do is say no, and so long as the business isn’t actually going under, they keep milking it.

        This is an all too common claim but I’m not buying it. The best way to make money as an exec is to give yourself a lot of stock options and then have your company perform well; if the company does well no-one will complain about you paying yourself highly (particularly since you “already had” the stock at this point). So if this kind of approach really did make companies more successful, we’d see execs doing it, out of nothing more than self-interest. And while some people do make decisions that are not in their company’s interest, companies do compete and boards do hold execs to account (witness all the current activist investing fuss) – maybe not as much as they should, but it does happen.

        (At a personal level, if you want to make a difference to this sort of thing, do you know who your pension is invested with and what their policies are? For most ordinary individuals, that’s often the biggest avenue of influence you have on these large companies).

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  4. > Plenty of people think they’d like that, but do you know people who actually do it? Do they feel fulfilled? I’ve known several people who took a couple of months’ gap between changing jobs – and they’ve all said that they ended up doing nothing useful, they metaphorically or literally sat around and played videogames; friends noticed they seemed less themselves, and they felt less fulfilled. Heck, I’ve done the same thing myself.

    I’ve done that myself once. In that time, I literally wrote a video game.

    People don’t need to be idle; they can instead be productive in non-commercial ways that otherwise wouldn’t get a look in because of the need to earn a crust. A hypothetical society where scarcity is on the retreat might come to regard self-expression as the only way to live a productive life.

    Recently, Gene Simmons threw a public tantrum about the supposed death of the old music industry business model. He claimed that rock ‘n roll is dead now because young bands can’t reliably earn a living from doing it, and therefore they won’t do it. Which is total bollocks, of course. Young bands are still enthusiastically doing rock ‘n roll for peanuts or even just the opportunity to express themselves. If they didn’t have to “earn a living” at all, would they then give up doing it…? Of course they wouldn’t. They’d just have more time and energy for it.

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    1. Here I’m getting much more speculative: I think we’re going to have as much oversupply of self-expression as of labour. A certain amount of creativity is valuable to society – but nowadays even someone who limited themselves to public domain works would have a lifetime’s supply of artistic expression to appreciate, if they wanted to. At some point adding to the huge number of works “out there” is costing more (in terms of the complexity it adds to indexing, fragmentation of culture and all that) than the value it provides. See e.g. http://www.gwern.net/Culture%20is%20not%20about%20Esthetics (and yes, it is me there as “lmm” posting an argument against the essay in the comments).

      So I don’t think that we will ever think of self-expression as a positive contribution to society the way we currently think of hard work. If it’s enough to make people happy then good for those people – and I’m sure there is such a proportion of society, and it sounds like you’re part of it. But going back to the trust fund kids – most people, on average, can’t find as much fulfillment that way as they do from jobs. Unless you’re going to change the makeup of society (which would probably take eugenics), we’re going to need to find a way to accommodate such people. And unappealing as the concept is, I think we need to take the idea of make-work jobs seriously until we can come up with something better.

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      1. In a scarcity-free society, I don’t see how there can be such a thing as an oversupply of self-expression. It doesn’t have to pay for itself if there’s no scarcity. Even if it causes indexing and fragmentation problems, that just creates meaningful work for the people who are looking for something constructive to do.

        Meanwhile, the way that “we currently think of hard work” is becoming an anachronism. Eventually, people notice anachronistic beliefs and discard them.

        As for the “fulfillment” that people get from jobs – seriously? Especially in the modern age of rampant shit jobs, are there really that many people who would keep turning up to work if they didn’t need to put food on the table and a roof over their head? The idea of “make-work jobs” is utterly ridiculous. With a lot of people in the Western world, you could just give them a games console and tell them that their “job” is to become good at some of the games, and they’ll be happy with that. I don’t think that these anecdotal trust fund kids are a representative example; they probably have all kinds of peer expectations messing with their outlook, not to mention the guilt factor.

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      2. > In a scarcity-free society, I don’t see how there can be such a thing as an oversupply of self-expression. It doesn’t have to pay for itself if there’s no scarcity. Even if it causes indexing and fragmentation problems, that just creates meaningful work for the people who are looking for something constructive to do.

        Isn’t that the broken window fallacy? Will we come to respect people who just destroy valuable things?

        I thought I had a citation on trust fund kids and happiness, but I can’t find it now, so meh. I maintain that we would expect more examples of happy and successful long-term-jobless folk if it were that easy though. A number of long-term benefit recipients do spend most of their time getting good at some videogame or other – but are nonetheless distinctly unhappy, and I don’t think this is about stigmatization.

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  5. “I don’t think oscillation is possible; stabilization will happen due to simple market forces.”

    “Simple market forces”? They might be “simple” in a game theory scenario, but this is the real world. I think you vastly overestimate the reach of the invisible hand.

    We had a pretty compelling demonstration in 2008 that market forces don’t necessarily create stability on any timescale which is meaningful to humans. Both before and after that, whole books were written on why it was foolish to think that they would do so.

    I see no reason why market forces are incompatible with oscillation.

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    1. > We had a pretty compelling demonstration in 2008 that market forces don’t necessarily create stability on any timescale which is meaningful to humans.

      Did we? We saw a crash, yes, but house prices didn’t even fall all the way to pre-bubble levels. We had a recession – for a couple of months. We had “high” inflation and unemployment, but nothing like the levels seen in the ’70s. We’ve had several years of slow growth and unemployment above historical averages – but that seems very much like stability rather than oscillation to me.

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