Recently, I wrote in praise of Eli Dourado’s distinction between technologies of control and technologies of resistance. To recap, Eli posits that we can differentiate between innovations that encourage the brute maximization of production through centralization, e.g., the assembly line factory, and perhaps cloud computing. Cloud computing allows all of us to store data on hyper-efficient servers, allowing consumers to stream their data to a wide variety of “thin clients” rather than relatively powerful, and relatively expensive, desktop PCs. For all its virtues, cloud computing introduces “points of control,” i.e., the institution that owns the hyper-efficient servers has more access to this data than it would if it were parceled out across disconnected nodes.
Another kind of innovation doesn’t actually increase production far beyond existing technologies; rather, it offers other benefits, like the ability to evade centralized control. Eli cites 3D printing, which reduces the need to purchase manufactured goods produced in centralized fashion, and solar power, which reduces the need to rely on, say, centralized coal-fired plants, as good examples. For now, at least, 3D printing is not as efficient as traditional manufacturing. But beating manufacturing at its own game is not really the point of 3D printing, at least not yet.
Centralized technologies of the first kind are more susceptible to regulation. Decentralized technologies, like peer-to-peer file-sharing, for example, are much harder to combat than the sale of counterfeit goods on busy street corners in large American cities.
One implication of this, Eli argues, is that we’re seeing a shift towards decentralized technologies, even at some cost to efficiency, as part of a broader effort to evade regulation and control, including in the context of the labor market:
The key point is that labor is extremely regulated; firms that use labor are subject to intense government control. In part this is because policies that give labor a “bigger piece of the pie” are popular with voters, and in part it is because labor can complain and enforce its rights in a way that machines cannot. If you own a business and you are subject to intense government control, you are going to invest resources in circumventing the points of control. In our economy, that means getting rid of lots of labor as cheaply as possible, which means skill-biased technical change. As Arnold Kling has said, “if a job can be defined, it can be automated or outsourced.” But it’s because there is so much control exercised in the labor market that the incentive to automate and outsource is so high.
On the other side of the labor market, I wonder if post-materialism is not also part of an attempt to evade control. A lot of talented people are scaling back their labor efforts, and while surely not all of this is due to taxes and regulations, some of it may be. And other innovations which seem truly new, such as the development of autonomous vehicles, are the result of control of which we may not even be aware; for instance, how profitable would it be to develop autonomous vehicles if Pareto-improving trade with immigrant drivers were not made impossible by immigration and labor restrictions?
So consider a recent regulatory measure from the Obama administration in this light. Colorlines magazine, a left-of-center periodical that covers a wide range of issues relating to civil rights and social justice concerns, has a brief post by Jorge Rivas on new Labor Department rules concerning home health workers:
On Thursday, President Obama and Secretary of Labor Solis announced that the U.S. Department of Labor will move forward to amend regulations under the Fair Labor Standards Act to include the nearly 2 million homecare workers who are currently excluded from federal overtime and minimum wage protections.
“They work hard and play by the rules,” Obama said about the homecare workers that often bathe, feed and administer medical care for patients—sometimes, days, nights and weeks at a time. “Today’s action will ensure that these men and women get paid fairly for a service that a growing number of older Americans couldn’t live without,” Obama said in a statement.
Of the 1.79 million home care workers, 1.59 million are employed by staffing agencies of which over 92% are women, nearly 30% are African American, 12% are Latino and close to 40% rely on public benefits such as Medicaid and food stamps, according to the White House.
“The vast majority of these workers are women, many of whom serve as the primary breadwinner for their families. This proposed regulation would ensure that their work is properly classified so they receive appropriate compensation and that employers who have been treating these workers fairly are no longer at a competitive disadvantage,” said Secretary of Labor Hilda L. Solis.
Rivas (quite understandably) describes this as unambiguously good news, and references a moving story of a woman who worked 70 hours a week yet who was not entitled to overtime pay under existing regulations.
A few quick thoughts:
(1) Solis astutely frames the goal of the proposed regulation: “employers who have been treating these workers fairly” should no longer be at a competitive disadvantage relative to those who are not. There are many differences between employers who pursue what we’ll call (arguendo) high-road and low-road strategies. Low-road employers might have fewer resources, smaller profit margins, etc. High-road employers might have more resources, higher profit margins, etc. The new regulations might gradually price potential low-road employers out of the market. Some will welcome this outcome, obviously. But it is not clear that this scenario will encourage a net increase in the number of homecare workers relative to the counterfactual scenario in which these regulations were not put in place. (It is a safe bet that the number of homecare workers will increase as the U.S. population continues to age.)
(2) To use Eli’s formulation, the new regulation leverages formal labor market contracts as a point of control. This might prompt two responses:
(a) The kind of employers who don’t want to or who can’t treat their employees fairly by Solis’s lights might simply do an end-run around the existing rules. In return for the heightened risk, employees might demand, and receive, payment in cash, thus reducing the burden of paperwork and of taxes. Let’s call this the Greek scenario. (“Meanwhile, 7 out of 10 self-employed workers, including doctors, dentists, engineers, accountants, taxi drivers and small business owners, indicated on their tax forms that they had made less than $16,000 a year, a figure that most experts find laughable.”)
(b) Efforts to substitute technology for labor in homecare work might intensify.
(3) The case for seeing the proposed Labor Department regulation through the lens of racial justice is, on historical grounds, quite compelling. Organized labor, which was predominantly white at midcentury, was able to secure protections that workers in sectors dominated by non-white workers were not. It is possible, however, that the mistake made earlier on was in creating labor market regulations mandating overtime pay, etc., in the first place, not the failure to extend such protections to all workers. It should go without saying that many if not most of our interlocutors would reject this proposition. But it is worth remembering that a freedom of contract regime could coexist with a safety net and other measures designed to protect individuals and households against destitution. That is, redistribution might be a better strategy than regulation, or that an often self-defeating mix of both.
(4) One of the strongest arguments for permitting a large amount of less-skilled immigration is that in a world defined by skill-biased technical change and wage dispersion, there is much to be gained when highly productive workers outsource household labor to less productive workers. But when happens when we regulate the household production sector, thus making alternatives to hiring workers relatively more attractive, yet the population of less-skilled workers, some of whom are immigrants and some of whom are native-born individuals who haven’t completed high school, etc., remains quite large?