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26 August 2020

The economic argument against insecure, low-paid work

In his new book, Gene Sperling shows how paying living wages and giving people agency over their lives can create a more dynamic economy.

By David Muir

For too long progressive politicians have struggled to manage the trade-off between the politics of production and distribution. Their sterile intra-party battles have centred around the mistaken belief that you must choose between productivity and equity: that more of one leads to less of the other.

The US economist Gene Sperling started out in the 1990s as a New Democrat, a movement in which this relationship between distribution and production was taken as a given, and had to be managed by triangulation. Unlike some from that era, Sperling has consistently shown the ability to adapt his views as the evidence changes, and it was probably that intelligence that allowed him to transition seamlessly from serving Bill Clinton to Barack Obama.

In his new book, Economic Dignity, Sperling rejects the trade-off between production and distribution that centre-left parties imposed upon themselves. Instead, he shows clearly how policies focused on creating economic dignity – paying living wages and giving people agency over their lives – can create a more dynamic economy. He argues that there is no longer a choice between dignity and dynamism; instead there is a flywheel where more of one begets the other.

Sperling argues that economic dignity should be “the economic North Star” for policymakers, and that it is underpinned by three pillars. The first is the “ability to care for family without economic deprivation or desperation denying us the most meaningful moments and joys in our most important loving relationships”. Second, “the capacity to pursue potential and a sense of purpose and meaning”. Third, “the ability to contribute and participate in the economy with respect, free from domination and humiliation”.

Leaning more on Martin Luther King than John Maynard Keynes, Sperling draws heavily from King’s last days in Memphis supporting striking sanitation workers, where he argued eloquently that “it is a crime for people to live in the rich nation and receive starvation wages”. Sperling makes an impassioned case for raising the US federal minimum wage from $7.25 to $15 and also shows how this would not impede economic dynamism, and could in fact accelerate it, as employers benefit from a better motivated, more productive workforce.

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He shows too how workers are forced to stifle their entrepreneurial desires, by remaining in jobs only because of their employer’s healthcare provision. He cites research from Georgetown University’s Urban Institute which estimated that 1.5 million Americans would become self-employed thanks to the Obama administration’s Affordable Care Act.

Sperling underlines his point about the false choice between dignity and dynamism by looking at the impact of student loan debt: he outlines how every $10,000 increase in a student’s debt leads to a 7 per cent decline in the likelihood of them starting a business. As student debt has swelled in the US, so has the unproductive financial activity (or “rent-seeking”) needed to pay for that debt, at the cost of long-term growth.

Perhaps the best of the book comes towards the end as the author pulls apart the case for universal basic income (UBI) – a policy beloved by the Davos set and techtopians – while showcasing the persistence of Dickensian employment conditions in some of the dark recesses of the gig economy.

UBI’s cost is the first strike against it. Sperling claims that a UBI of $12,000 per adult would result in an annual cost of $3trn, whereas expansion of tax credits, childcare allowances and other components of his Universal Basic Economic Dignity programme would be $1trn-$2trn over a ten-year period. The second strike against UBI is the question of motive. He argues that libertarians and some conservatives such as the political thinker Charles Murray view UBI as a means to remove and replace existing straps of the social safety net.

Like a receding tide, coronavirus has laid bare some of the ugly employment practices that were concealed below the surface. Although the book was written before the crisis, Sperling is on excoriating form when he reveals the actions of unscrupulous employers, especially in the meat processing industry. In the US four poultry processors account for 60 per cent of the market, and their power may help explain their employment practices. Sperling tells the story of Dolores, who works at one of those firms: she is frequently denied toilet breaks by her supervisor and ends up having to wear an adult nappy in order to meet her quota. Unsurprisingly, she felt that she had, “no worth, no right to repeal or to speak up… It made me feel ashamed.”

Workers like Dolores in the US and UK have been failed by progressive parties of late. Too often such parties have composed platforms and manifestos with dreary laundry lists of policies cloaked in clichés that speak little of fundamental human values such as decency and dignity. Sperling shows that the question of modern politics is not growth or equity, but growth and equity. Not only that, he shows that with a focus on economic dignity, town can be united with city; rural with urban; young with old; and North with South, as these values transcend both place and identity. It is for that reason that this book will become required reading this year on both sides of the Atlantic.

David Muir was director of strategy to the former prime minister Gordon Brown

Economic Dignity
Gene Sperling
Penguin Press, 224pp, £23.99

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