NEW YORK – Decades of plodding growth together with the 2008 financial crisis have prompted a seismic shift in economic thinking in much of the world. There is talk of moving resources from investment to consumption, from heavy industry to “services,” and from private sector to public sector. But what strikes me is that these arguments focus only on improving the mix of outputs within an economy, with no attention paid to labor.
This is obvious in the case of China, now the world’s biggest economy by some measures. No doubt, China must reject further investment in hulking steel mills and empty apartment buildings. At the same time, however, it must focus on workers and elevating the experience of their work, which economists from Adam Smith to Karl Marx and Alfred Marshall placed at the center of their concerns.
Not everyone agrees. When it comes to the experience of work, many – especially in continental Europe – believe that optimal allocation (entailing well-functioning institutions), if accompanied by investment in education, is all that is needed. After all, the Italians, Germans, and French work hard and well over a relatively small number of hours, resulting in high hourly productivity and wages – higher than in the United States and the United Kingdom.
Yet continental Europeans do not seem particularly happy with their work. Circumstantial evidence is their preference for record-setting vacations – and relatively low labor-force participation. And data on job satisfaction provide direct evidence: among large Western countries, workers in continental Europe report the lowest levels.