The Model T economy and the wealth-work economy

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At Yuval Levin’s suggestion, I read Boomers, by Helen Andrews. One of the accusations she makes is that Boomers are responsible for an economy based on servitude. She writes,

The fastest-growing jobs in America are in “wealth work,” that is, the servant class for the metropolitan elite. The only thing worse than spending your adult life as a yoga instructor or dog groomer is living in a city with no one to be yoga instructors and dog groomers for.

She refers to a piece by Marc Muro and Jacob Whitin in July of 2019.

many American cities are brimming with an explosion of low-end employment that has brought some three million workers into mostly low-paid, often-precarious service arrangements helping the well-off walk the dog, clean the house, cook dinner, manage money, and stay fit.

They have the statistics to back up these claims. They credit the term “wealth work” to economics journalist Cristopher Rugaber and MIT economist David Autor. Note that in 2020 the virus undermined the viability of many personal services (although not all–consider home delivery).

In 2011, I wrote,

In an economy where some folks are very rich and many folks are unemployed, why are there not more personal servants? Why don’t Sergey Brin and Bill Gates have hundreds of people on personal retainer?

It turns out that I was on the right track. When the economy finally returned to full employment, it was with a large number of personal service workers.

The workers who produced the Model T could afford to buy what they produced. In a wealth-work economy, the people who can afford the personal services and the people who provide them belong to different classes.

One of my intellectual influences was The Diamond Age, by Neal Stephenson. He depicts a future world in which there are “Vickies,” who work hard (at white-collar jobs) and consume custom products, and “Thetes,” who rarely work and consume cheap, generic goods and services. I have interpreted recent economic evolution through that lens. I could have titled this post “What I believe now: Vickies and Thetes.”

But wealth-work is an emergent phenomenon. The Boomers did not design our current economy. I will have more to say about the Andrews book in a subsequent post.

28 thoughts on “The Model T economy and the wealth-work economy”

  1. The workers who produced the Model T could afford to buy what they produced. In a wealth-work economy, the people who can afford the personal services and the people who provide them belong to different classes.

    Or they get them more fractionally. Maybe you can’t afford the personal trainer, but you can go to a class with 25 people. You take an uber only when it’s too late to take the train. You don’t hire a private tutor, but send your kid to a group learning center.

    • +1.

      Let alone the most desired item by both “classes” (if class is indeed a thing) is a smartphone, owned by virtually everyone who wants one.

    • One of the hard things about “everyone works for one another” is that every time you are doing something for someone else instead of yourself like 50% of the value is going to get taxed.

  2. This is as much about wealth as it is about wages. The ratio of wealth:gdp climbs ever higher which we know cannot go on forever as wealth is simply claims on future gdp. I’m not so sure it’s totally “emergent” as it is a lack of elites willing to think critically about how to manage an economy for the long-term (we almost solely rely on wealth trickle-down at this point).

  3. I’ve got a potential solution: as a pilot program, let’s bring in caravans of workers from Central America. That way, the wealth workers can afford to hire their own wealth workers.

    • Not if they raise that minimum wage for second-order “wealth-worker-workers” above what the first-order “wealth-workers” can afford.

  4. I have been conflicted for years on the subject of low-wage industrial employment as well as low-wage servile employment.

    Part of me finds it a repulsive and close-to-immoral relationship.

    But part of me realizes that these may be the only jobs in town. A poor community without low-wage jobs does not become a more pleasant place. It often becomes a more criminal place.

    I cannot cite the article right now, but about 15 years ago Paul Krugman wrote a piece defending child labor in Pakistan — as the best alternative for those people.

    Yes, Paul Krugman. We are in the realm of Parson Malthus on this issue.

    • There are alternatives. Right now, the internet has largely been used to organize “capital” but not “labor,” to use the outdated Marxist terms, ie Uber put all the taxi companies out of work while consolidating that function in software and atomized all the cab drivers, who are contractors and not even their employees. As a result, I’ve met drivers in a developing market who created their own digital alternative through informal networks on messaging apps like Whatsapp, cutting out the Uber middleman and their fees and lower pricing.

      However, the endgame is not a repeat of the corporate vs union titanic struggle of the past but atomizing the corporate side too. Just as the open-source linux kernel produced by a sea of random coders online has demolished the once-dominant corporate-produced Windows kernel (so much so that even Microsoft will sell you linux now, either in a device or as an addon to Windows, which was unthinkable just a decade or two prior), Big Tech and the other weaker corporates like GM or P&G will soon be demolished by such roving gangs of online producers. It has already been happening, which is why the remaining corporates have gone into a frenzy of mergers, Disney buying Fox and Marvel and LucasFilm and so on, to keep the online “barbarians” at bay. It won’t work.

  5. Arnold, sorry but I have to laugh at your reaction to Boomers. I haven’t read it but it has always been obvious that the “old and new rich people”‘s demand for “servitude” labor will increase pari passu with their incomes. Also, and due to many “fundamental” changes, the composition of that demand has been changing. Consumption of “servitude” services may have also increased because of large immigration which in some places may have lowered wages. Frankly, it’s hard to understand the noise.

    And regarding your old point about Bill Gates having hundreds of personal servants, I bet you that of each million dollars of Gates’s consumption spending at least half benefit suppliers of “servitude” labor through final and derived demands. You are ignoring how many people have no specialization at all and how willing they are to do simple tasks.

  6. Arnold, in the meantime, and after issuing a report promising the end of the virus, Americans are being told by Biden the following that there is nothing he can do to change the trajectory of the pandemic.

    https://pjmedia.com/news-and-politics/matt-margolis/2021/01/22/watch-biden-flip-flops-on-covid-theres-nothing-we-can-do-to-change-the-trajectory-of-the-pandemic-n1406631

    I assume that today, jointly with the press (including BBC), Biden is celebrating the first anniversary of the virus, the one that prompted him to the White House.

  8. Those who serve the rich today often partake of the wealthy lifestyle. They inhabit the homes of the rich, rub shoulders with their wealthy friends, and may often become wealthy people’s confidants and friends themselves.

    I’ve noticed that during the pre-pandemic day, the homes of the rich and famous in Beverly Hills and Bel Air were enjoyed mainly by the servants and gardeners, many of whom seemed to have ample time to relax in their employers’ kitchens and putter around outside (not to imply that they are lazy or poor servants, but that today’s servant and gardener class has fewer onerous duties than past counterparts). More than one pool boy has made contacts through his job that has led to greater career opportunities.

    In other words, today’s servant class, more than ever, partakes of the status of their employers. Reflected status is an unspoken part of their compensation package.

  9. my friend D quit his job selling real estate to become a full time dog walker servicing the Brentwood & Bel Air neighborhoods of Los Angeles. He does 3 one hour walks per day on the mountain trails in the area. He charges $100 per walk and takes up to 8 dogs at a time. When he wants to take a day off, his brother walks the dogs. For an additional charge, he will keep your dog(s) overnight and even house sit when you are on vacation. He makes $10K per week, sometimes much more. He is not in the same class as his high end clients, but he’s staying fit & building wealth. I don’t want to speak for him but I’d wager he’s fine with his place in the class divide.

  10. This discussion isn’t new, it has been going for nearly 50 years. Remember Daniel Bell’s book, “The Coming of the Post-Industrial Society”? There were discussions and hand-wringing about a service economy back then. A service economy meant we’d all work at McDonald’s or sell each other insurance. Yet like those that derided the industrial revolution because all wealth came from land, we were told that wealth came from making things.

    Our former president said that he’d bring the factory jobs back to the U.S., that we’d make things here again. Look at the FRED graphs of real industrial output, we were near, if not at, an all-time record high at the time. Yet looking at the graph for manufacturing employment, the slope is clearly downward. Less labor is needed to make things.

    When I was a kid, it was said the students in nearby Akron, Ohio derided their teachers for being dumb. One could drop out of school and get a job in a tire factory, making more money than the teacher made. Now, if one can find a job in a rubber factor, one usually needs at least an associates degree and be able to use computers.

    Besides stating that the old manufacturing jobs aren’t coming back, I’m wondering besides just griping about one’s parent’s generation, why blame this on the boomers?

    I’m not saying income disparity isn’t a problem. I’m saying the way it’s framed, us versus them, is old and tiresome.

    And I’m wondering, what’s wrong with being a yoga instructor?

  11. If a job can be done far away from the client or customer, it will be done remotely or outsourced, because there are plenty of capable people in the world who cost a lot less than the comparable worker residing in a rich country.

    If it can be automated at expected competitive cost, or if the labor component can be augmented with capital to be much more productive, it will be.

    Atoms and bits can now be moved fast and cheap to anywhere in the world, so transport isn’t nearly as much as a constraint as it used to be. One can imagine a not-too-distant future – probably in our lifetimes – where every step of the entire process of moving a finished object from a factory to a customer on the other side of the planet is completely automated, done at negligible cost, and never involves human labor.

    As technology improves, more types of marginally substitutable valuable tasks gets caught up in this moving dragnet: sent far away, or done by machines, or done by fewer people with better machines.

    That means that an increasing portion of the jobs which remain will have a particular character of needing to be done by humans in close proximity to other humans, whether client, supplier, or team member.

    So, what may appear to be “Boomers” consciously creating “wealth-worker” servants is really just another technologically-determined phenomenon that is the spontaneous market economy consequence of certain advances in modern capabilities.

    • “So, what may appear to be “Boomers” consciously creating “wealth-worker” servants is really just another technologically-determined phenomenon that is the spontaneous market economy consequence of certain advances in modern capabilities.”

      I would absolutely love to blame it on the boomers. Most overrated generation like ever with all of their moral grandstanding about so many issues, including Viet Nam. What a bunch of naive imbeciles.

      But, I cannot in good conscience blame the modern economy on them. Seems so silly to claim otherwise. So many external non-intended factors that are both benefits and detriments to us as a country.

      FWIW – latchkey kid generation here. We were the last ones to have the freedom to discover the world on our own vs. having to experience it with the helicopter parent.

  12. Stephenson’s fairy tale, to me, is social commentary, showing why a society where large numbers of people are left unemployed doesn’t work. Whether the idle are rich or poor, their pride is such that they will find something to do — in other words the devil finds work for idle hands. That is exactly how and why the Vickys get overthrown and their comforts destroyed. People become Drummers, or rebel soldiers, because it gives the seeming of meaning to their lives.

    The present shutdown of our economy, for which Covid-19 is not the real cause but the excuse, has similarly caused some people to become BLM/Antifa terrorists. Try to keep it shut down another two or three years and our civilization goes away. Which I’m sure is what their Chinese controllers intend to have happen to us.

  13. The word “servitude” is being deliberately used because of its negative connotation. My impression of yoga instructors, personal trainers, and golf instructors are that they are mainly college educated people that don’t want to take 9-to-5 corporate jobs. Instead, they get paid partially in consumption/recreation because they enjoy their jobs, not unlike people that work for non-profits. (Interesting that non-profits’ employees are rarely described as unable to find higher paying private sector jobs.)

    Also, since when is helping the well off “manage money” low paid? Family Offices, which are like endowment offices for wealthy families, are the new hedge funds or at least clients of hedge funds.

  15. A Song: “Men of England”

    by Perfect Bushes Shelley

    Men of England, wherefore plough
    For the lords who lay ye low?
    Wherefore weave with toil and care
    The rich robes your tyrants wear?

    Wherefore feed and clothe and save
    From the cradle to the grave
    Those ungrateful drones who would
    Drain your sweat—nay, drink your blood?

    Wherefore, Bees of England, forge
    Many a weapon, chain, and scourge,
    That these stingless drones may spoil
    The forced produce of your toil?

    Have ye leisure, comfort, calm,
    Shelter, food, love’s gentle balm?
    Or what is it ye buy so dear
    With your pain and with your fear?

    The seed ye sow, another reaps;
    The wealth ye find, another keeps;
    The robes ye weave, another wears;
    The arms ye forge, another bears.

    Sow seed—but let no tyrant reap:
    Find wealth—let no imposter heap:
    Weave robes—let not the idle wear:
    Forge arms—in your defence to bear.

    Shrink to your cellars, holes, and cells—
    In hall ye deck another dwells.
    Why shake the chains ye wrought? Ye see
    The steel ye tempered glance on ye.

    With plough and spade and hoe and loom
    Trace your grave and build your tomb
    And weave your winding-sheet—till fair
    England be your Sepulchre.

  16. Arnold, I hope that after reading the comments to your post, you realize how wrong it’s to worry about what a few fake intellectuals are talking about the economy. The barbarians are in your country to destroy it and you pay attention to that nonsense (anybody familiar with our history knows it’s nonsense; just review your Charles Kindleberger’s class notes). Focus on fighting back the barbarians: I hope your grandchildren are not being retrained to comply with their orders in schools and jobs (be careful, too many cowards are helping the barbarians as much as the little Greg-G puppets serve them for peanuts).

    • A first one, Arnold. This is the first time I link to a Tweet

      https://twitter.com/TCPigott/status/1352324817064751105

      to remind you that your new barbarians will dictate which jobs you and your family will have, like them or not. It’s not just what your grandchildren will study, or what you will do with your savings, they also want to tell you what jobs you should have. No more soup for you, Arnold.

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