Don’t Like the Economic Results, Revisit the Government Policy

Neil Irwin’s New York Times article comparing the condition of a janitor at Kodak during its prime with one at Apple today came before me by multiple routes yesterday:

Eastman Kodak was one of the technological giants of the 20th century, a dominant seller of film, cameras and other products. It made its founders unfathomably wealthy and created thousands of high-income jobs for executives, engineers and other white-collar professionals. The same is true of Apple today.

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But Kodak also created enough working-class jobs to help create two generations of middle-class wealth in Rochester. The Harvard economist Larry Summers has often pointed at this difference, arguing that it helps explain rising inequality and declining social mobility.

In contrast, Apple — like most big companies, these days — focuses on its core competencies and hires contractors to do the rest.  The unmistakable insinuation:  Greedy companies are motivated to make their executives and shareholders richer and lack the concern for employees and sense of community that industrial giants once had. Somehow, I don’t recall the culture’s glorification of those companies back when they were at the top.

All-in-all, this article is an interesting read, but it misses two things.  First, it’s easy to trace the successful person who managed to get into Kodak at the bottom.  The consequences of the inefficiencies of that management approach we can not so easily trace.

Second, progressive government policy does much to make the injustice possible.  The cleaning company gets away with lower, less-personal compensation because of a lack of competition and a high amount of low-skilled immigration.  Employees are easily replaced and have less negotiating power.

Additionally, regulations (notably health care mandates) and taxes make it much more difficult for an employee to start a competing service, which would not only keep prices low, but also give the employer incentive to keep employees happy.

Thus, the gains from these efficiencies are going to a smaller group of high-skilled workers and (of course) people who are able to live off of the government behemoth that acts as the central planner ushering favors back and forth.  It’s been a booming few decades for Washington, D.C., after all.

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