Amazon, Corporate Welfare & The Illusion Of Jobs

New York City saved $1.5 billion in handouts it was going to give Amazon to set up a second headquarters in the city. In exchange, Amazon promised to bring to give Amazon for bringing 25,000 jobs to the city.

Now the handouts are gone and those jobs are off the table. Right? Not according to LinkedIn. In the six months after New York pulled out of the deal, Amazon has hired more than 1,500 people in the greater New York City area:

In other words, they are on pace to meet their target in less than eight years (as opposed to the 15 years they had to do it).

How is it that we are operating in a world in which so many people are unable to find work that matters to them and at the same time, the richest man in the world is getting cities and states to write checks for $1.5 billion for bringing jobs he intended to bring anyway?

This is corporate welfare.

Corporate welfare may have been impactful at some point, but it is no longer serving us now.

In today’s world, corporate welfare often serves the people that need it least, in-demand knowledge workers. The kind of workers Amazon hires are already geographically mobile and actively making the job market work for them.

Why We Glorify The Full-Time Job

In the US, where less than a third of people actually work in full-time jobs, the idea of building economies around large companies and the jobs they offer is an idea from a time when General Motors employ nearly a million people, mostly in a small geographic region. At one point GM employed half of the population of Flint, Michigan.

If you could get GM to relocate to your town, you’d be pretty smart to give them a tax break.

However, over the past 25 years as supply chains and companies have globalized and much of work has become digitized, the kinds of massive companies that operate in one area are a dream of economies past. Now, we have a much more dynamic labor market, which has been great for certain types of geographically mobile and highly-skilled people, but terrible for others.

As the mythical era of steadily increasing salaries, loyalty and pensions is disappearing, we have yet to replace it with a new narrative of how we should think about work.

Many are unemployed or underemployed or even just at jobs where they are resentful and feel trapped. These people don’t just want another “job,” what they want is a shot to reinvent their lives and try something new, without the risk of shame and failure.

Mounds of research shows the health benefits of being employed and show that when people lose their job it is incredibly harmful on their health and mental state.

Have we ever stopped to think a bit deeper here and reflect that there’s something messed up about that?

One one hand almost everyone accepts that companies will lay people off in a second, but on the other hand almost everyone says that staying employed is the more important thing you can do to prove your worth to society.

We need a bit more nuance.

Basic Income As Diagnosis

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Andrew Yang is the only current US politician who is speaking honestly about this confusion in the United States. His presidential campaign is founded on a Universal Basic Income of $1,000 a month for every American. When many come across this idea, their gut reaction is something like this:

WE CAN’T JUST GIVE PEOPLE MONEY FOR NOTHING!

Once people work through this outrage, they tend to find the arguments behind Yang’s proposal compelling. He is speaking honestly about jobs disappearing, economic growth stagnating and the fact that modern tech firms don’t need as many people to extract enormous wealth from the world and certainly aren’t hiring any people outside of a few elite cities.

Many people don’t realize this, but when President Obama backed off a single-payer plan for his healthcare overhaul in 2009 one of the biggest drivers was because of jobs:

I don’t think in ideological terms. I never have,” Obama said, continuing on the health care theme. “Everybody who supports single-payer health care says, ‘Look at all this money we would be saving from insurance and paperwork.’ That represents one million, two million, three million jobs [filled by] people who are working at Blue Cross Blue Shield or Kaiser or other places. What are we doing with them? Where are we employing them?

This is a shocking statement and not because of the political maneuvering. It’s shocking because Obama was indirectly accepting that many of these jobs are not even needed…but he wanted to keep them anyway.

The foundation of our economy and our work beliefs depends on there being enough good jobs for people that want them.

This is what makes Yang’s policy radical. He is not proposing to give people something for nothing. He is urging us to update our assumptions and map of reality based on how the labor economy actually works.

Human Capital 2.0

We have a model for thinking about investing in people, but we need to decouple it from the circumstances of its time.

The idea of “human capital” was born in the 1950s and popularized in 1964 by Gary Becker’s book of the same name. His argument was that similar to financial capital, we need to see people as something we can invest in and that we should do much more of it.

When he put forth this idea, his measured success in wages. If $10 is put towards one’s education and that person is able to increase their earnings by $11, that’s a worthwhile investment.

The problem is that humans are not financial instruments. They are influenced by their family situation, existing resources, mental makeup and their environment. Many can also increase their salaries and earning potential by pursuing credentials detached from any underlying learning.

Becker reflected on this years later:

This sharp fall in the return to investments in human capital put the concept of human capital itself into some disrepute. Among other things it caused doubt about whether education and training really do raise productivity or simply provide signals (“credentials”) about talents and abilities.

Becker’s “human capital” took off in a time when there was enormous faith in higher education and large corporations as the model for learning and working.

During periods of rapid growth like the 50’s and 60’s incomes were increasing and people were progressing. Someone born in the 1940’s or 50’s had a 90% chance of doing “better” than their parents. This economic engine made investments in public education a no-brainer.

That era is over.

We’re operating in a much less optimistic and much more expensive time. Although many acknowledge that education is a good thing, its hard to figure out how to translate money into actual outcomes. Even worse, people like Bryan Caplan argue that the whole system is waste of time.

In his book The Case Against Education, he says:

The heralded social dividends of education are largely illusory: rising education’s main fruit is not broad-based prosperity, but credential inflation

We need an updated model of “human capital” — one that doesn’t think about humans as something that goes through a factory of learning, but instead people who have fears, hopes, aspirations, creative energy and even desires to be a contributing member of society outside of paid employment.

A Thought Experiment

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Let’s imagine that you have worked full-time for five years after college. At that time, you are feeling like you need a break and you decide you will take a couple years off from the working world.

For the next 24 months, you are going to focus on learning, reflecting on life and figuring out what you want to do next. During that time you also plan to meet people from different cultures, travel around the world, volunteer on different projects that interest you and also take time to spend with your family and loved ones.

Instead of people giving you a hard time, they praise you. They say you are incredibly smart and what you are doing is very impressive. Many people even suggest to you that you may may a much higher income when you return to the working world.

Sound too good to be true?

What I just described was the full-time MBA. Every year tens of thousands of people leave their jobs around the world and begin a full-time MBA program.

Everyone in their community praises them for this decision despite the fact that many go into upwards of $200,000 of debt and give up multiple years of salary.

Yet when I quit my job and decided to start my own business, I was criticized by many people. Why would I take such a risky path and give up my guaranteed salary?

This response has puzzled me. When did the myth of the pull yourself up by the bootstraps American entrepreneur turn into the ideal of the American office worker with a stable salary?

This glorification of the safe full-time job has been great for the kind of high-wage tech workers who skillfully jump from good job to good job and it does wonders for the successful firms like Amazon who are able to make governments beg for them to take free money.

Our system has left behind the average worker. It pretends that there are plentiful good jobs available when there are not.

An example of an alternative approach is Alex Hillman’s 10k independents project, which aims to help 10,000 people build small independent businesses. He believes that by empowering creative individuals, you will inevitably build larger, more successful businesses and also create networks of individuals in local communities that can leverage each other’s skills.

In other words, Alex wants to create jobs, but he wants to do it by investing in people.

Because healthy economies, healthy cities, and healthy business ecosystems are interdependent, fueled by entities who are individually resilient and networked, depending on each other.

Creating 10,000 jobs makes for good PR, but rarely ever leads to the kinds of activities that help dynamic ecosystems emerge. It’s top-down PR politics. These corporate welfare programs help the most successful companies offer 20% pay bumps to the knowledge workers who already have the most opportunities and leverage.

People like Alex want to invest in people and enable them to build the lives they want while also developing new and unexpected skills.

He wants to build the foundations of a new economy. This is the hard, but meaningful work that we need.