The new Commanding Heights

That’s Arnold Kling’s phrase, here is the fact:

…close to 98 percent of the 27.3 million new jobs in the American economy in the last two decades were created in the nontradable sectors, led by government and health care in first and second place.

Elsewhere, I call these the “low accountability” sectors.

Comments

Why is health care less accountable than services like brokers, lawyers, bankers, insurance, etc?

A lot of those sectors are growing too...

That does not answer the question of why the lower accountability.

Is "growth" (proportionate consumption) the measure of accountability?

Perhaps the answer(s) lie(s) in the nature of the transactions, which conform less closely to the "market norms" than do those other forms of services, and to which services through governments do not conform at all.

The transactions have become less and less commutative.

Because as Kling wrote about in his book, there is a lot of insulation between health care consumers and prices. Something like 95% of payments are either from gov't or through employer-provided insurance.

Goods compete on factors other than price. Quality is a major factor too.

When price is eliminated as a point of competition you end up purchasing quality and quantity out of proportion with their cost -- that's the trend Kling identifies.

Where does "economist" rank on the accountability scale?

I could also see how they are low accountability in the fact that consumers tend to have lower information then sellers in these areas.

Depends on the type of economist, right? Seems pretty low, though.

Nontradeable = less pervasive competition = less accountability. Makes sense. And everyone wants a nontradeable job.

I want a real engineering job where I engineer real, tradeable goods. Preferably computer chips (as I am highly trained and skilled in the area). I may want a non-tradeable later in life, but right now that sounds less and less enjoyable or meaningful. Of course, I care. I've been told that's a problem, but I still care.

Unfortunately the US has followed the advice of people like Kling and Cowen and outsourced many of the real engineering jobs and now these guys turn around lament how all that's left are sectors like education and health care.

It's a misconception of accountability. Gov't sector and health care workers typically live for long periods in a community and their work often affects their friends and families. They are very unlikely to be ambitious and screw their organization completely.

All this Republican drivel is of course supremely unaccountable. This is a democracy. If you don't like how things are run, you have to come up with a better way AND convince people AND win an election. Government is more accountable than corporations where most voting stock is limited. Executives and management are essentially low accountability positions, that's the nature of corporations.

Corporate accountability is only a bit about their owners, but more about customers. Ask Borders.

The guy behind the counter at the DMV isn't up for election. A gov't employee is likely to screw the taxpayer as much as he can, that's why they have unions.

If you don't like a particular store, you can shop somewhere else. If you don't like a particular policy, you have to defeat the entire political apparatus protecting the incumbent.

If a particular DMV office or post office is a screwed up mess, you can always go to another one (OK, maybe not if you're in the back-of-beyond and the next nearest one is miles and miles distant, but that applies to other businesses in such places too).And where the head honcho of the DMV is an elective office, there's electoral gold to be found in reforming them to make them more user friendly. Candice Miller (R) in Michigan was one of the most easily reelected politician in the state after she really shook things up at the Secretary of State (Michigan's name for the DMV). Of course it doesn't help that grandstanding Federal policians have decided to burnish their Tough on Terror (or is it Tough On Immigrants?) creds by imposing complicated new regs on the process, like the RealID act, guaranteed to gum up the works of what really should be a simple process.

In many parts of the federal government <a href="http://www.theatlanticwire.com/national/2011/07/many-federal-employees-more-likely-die-be-fired/40149/. Accountability!

Surprised there was no reference made to Dani Rodrik's atypical perspective on subsidized development.

And of course when everyone gets fed up with our dysfunctional healthcare system and we move to a single payer system like the rest of the world, lots of administrative jobs vaporize overnight. You are already starting to see this in the legal profession as new law school graduates are finding the big payoff at a large firm a thing of the past. I'm not at all sanguine that we will see continued growth in some of these sectors. It is a real good time to be retired!

Just like single payer education, which has just surpassed the >1 administrator per teacher ratio.

We don't have single payer education. Last I checked at least private schools abound.

Moreover, the public school system is more like the education equivalent to the NHS: it's a completely socialized system that provides both the supply and payment for education. The single payer set-up Orange14 is talking about would be like a universal voucher system.

Elsewhere I call this blog the high propaganda sector.

Bitter much?

Propaganda for what? Since you don't explain, I think you can be safely ignored. But if you were to explain, well, that would be a different matter...

Perhaps you missed the joke. It's not as funny if you have to explain it...

Please forgive the ignorance: what is a low accountability sector?

The opposite of a high accountability sector like finance, where people who engineer a liquidity crisis that creates massive unemployment were just doing God's work.

I don't know what "God's work" has to do with it, but for individual workers, finance is a pretty damn high-accountability sector. Because of the bonus system, workers' pay varies highly from year to year depending on the profits that they or their group deliver to the firm. Firms don't hesitate to shed workers; many stack-rank workers and remove those at the bottom even in profitable years.

During the meltdown, a significant fraction of finance workers lost their jobs and the pay of most who remained dropped significantly. Can you say that about the individual workers in the regulatory agencies whoose failures, even accordingly to most left-wing commentary, were an important ingredient for the cirsis?

Barney and Chris, probably the two individauls most directly responsible for the crisis, got to rewrite finance law in their names.

Govt fails most in accountability by miles. QED.

Oh, and banks should have gone under, but GOVERNMENT intervened,

QED yet again, if one can say that twice.

Have you considered the fact that obviously those two gentleman's electorate see fit to return them to office? You may think they're nuts, but you're in the position as someone who eats at a restaurant when traveling, finds the place an overpriced dump, and complains that it should go out of business, and so why do the locals continue to patronize it?

A high-accountability job is one where success or failure is clearly measurable and pay (or continued employment) is directly linked to that measurement. If I pay you per working widget delivered, and fire you if you don't deliver at an agreed upon rate, that is a high-accountability job. Health care providers are rarely paid based on outcome and rarely fired. The public sector is famously hostile to individual performance metrics and it is famously difficult to fire a public sector worker.

There seem to be quite a few commenters here hostile to Tyler's pointing this out. There may well be some arguably good reasons why accountability is hard to institute in health care and government work, but that doesn't change the fact that they are, in fact, lower-accountability than your typical run-of-the-mill job.

If I pay you per working widget delivered, and fire you if you don’t deliver at an agreed upon rate, that is a high-accountability job.

In general, if you have a job today it is likely not to be a high-accountability job.

Because if you have a high-accountability job, chances are you don't look too good.

The easier it is to measure your output, the easier it is to see that less output is needed than you are capable of providing. Maybe you or your co-worker could go. Or maybe somebody could do your job part-time.

Thanks, David.

Healthcare providers who perform poorly will nonetheless lose customers (who wants a quack for a doctor?), and at the extreme are liable for severe tort actions. You seem to be assuming that accountability requires employment by some larger entity, but not direct accountability to one's market. By that standard small business owners are not accountable either since they are not employees.

That type of direct correlation between output and pay is non-existent in most jobs these days, and not because of them being public sector jobs with little ability to fire workers. In general, it's harder to measure productivity for service sector jobs.

In many jobs productivity is a group function, not easily imputable to any one individual. sometimes an exceptionally incompetent worker will stand out from the crownd, and he will be fired (I've seen it happen) but most of the time it;s impossible to decide who, specially, might be signifixantly better or else than the group synergy. Moreover management (and mismanagement) play a huge role in workplace productivity. A bad boss and stupid workplace policies can front-load failure for even the best workers (and I've seen that happen too).

By most measures the tradables sector has fallen as a share of GDP over the period 1990-2008. And it is at best 30% of GDP. So it is to be expected that most jobs would be created in the non-tradables sector just by size. One might expect the difference to be not so great, but even if the sectors grew at the same rate you would expect less than 20% of jobs to be created in the tradables sector.

I wonder what the breakdown would look like if pure manufacturing jobs were excluded. Without looking at the numbers, I would assume that losses in manufacturing obscure increases in other tradable sectors.

The patronage sector

See here for some of my initial thoughts on how to begin bringing some market conditions to education (based on New Orleans charter school work):

http://titleonederland.blogs.thompson.com/2011/07/22/get-up-scale-up/

The people wanted free trade and they got it. One aspect of tradable goods is that there is no reason they have to make them here if trade is free. Why would you when you can make them elsewhere for much cheaper? And if you can come up with an answer to that, you're not thinking enough like a CEO who has quarterly reports and shareholders to worry about.

Its good for shareholder, but bad for workers. Of course, there is no reason those two need be mutually exclusive. But these days...what is it...something like the richest 5% own 69% of the stock market? Its worked out well for those at the top of the income distribution. For those in the middle and bottom, it might've been preferable to have a job instead. Of course, the US doesn't exist in a vacuum, and if we didn't own the companies doing the off-shoring, someone else would. If we brought those tradable good workers back to US soil, we'd make products too expensive to compete in the world market because, well, trade is pretty "free" these days.

I think too many people here are condemning the fact that its "bad" that its the government providing so much of the job growth (because big government is bad), but to me, its not saying that so much as its saying, they're one of the few big employers left who can't get away with shipping all their jobs abroad.

"Its good for shareholder, but bad for workers." Workers are consumers too, whose pentions are invested into the market.

good for foreign workers, who are in fact human beings.

The first is frightening.

The second is funny.

The two decades Kling refers to are the ones where:
- Democrats and Republicans have claimed the end of Big Government
- No Congressional Republican has been willing to exercise their first enumerated power of Congress
- No Congressional Republican has honestly exercised their second enumerated power of Congress, but merely operated like the Continental Congress
- Republicans attack Democrats for cutting government health care spending, but not health care delivery
- Republicans attack Democrats for paying for entitlements they pass, which are based on Republican (and Heritage) ideas
- Republicans attack Democrats for unsustainable entitlements
- Republicans increase entitlements without paying for them
- Republicans vote to make the first and second enumerated powers of Congress unconstitutional, the most important powers the Continental Congress lacked, leading to the possibility of the failure of the Revolution, and being forced back under British rule.

But I'm sure Kling rejects these political matters as having any bearing on the lack of the kinds of job creation that characterized the economic history of the USA when Republicans and all members of Congress saw it as responsible to use the first enumerated power of Congress to pay debt in support of the second, and to pay for the general welfare as determined by the democratic process.

The number of government workers and the number of health care workers are determined by the democratic process, but in the past two decades, Republicans have funded government the same way the Continental Congress funded what it agreed needed to be done, with debt.

I do hope the thinking shown in the Economix blog and comments (and some of the comments here) are not representative of the view of most Americans - it would be scary for the world if that were true. Qote from the blog: "A problem for the United States, noted by the authors of the report, is that the so-called emerging market economies — notably China, Brazil and India — appear poised to climb the value chain into the higher value-added segments hitherto kept in the developed economies." . Really, I mean really, what kind of an a**h*** would regard some poor people getting richer through their own hard work a problem? Are Americans really that selfish? Do Americans really fear their prosperity was due to selling stuff to people too poor to make their own?

The reason "high accountability" jobs are not growing is because they are improving their productivity right? Remember improving productivity is a benefit, not a cost. Jobs are a cost not a benefit. Anyone can create meaningless jobs - go ahead and dig some holes and fill them in - problem solved.

The reason “high accountability” jobs are not growing is because they are improving their productivity right?

And the reason you *can* improve their productivity is that you can tell what's productive about them.

The less you can tell what's productive about the job, the less you can improve it.

The main issue with the stat is that it gives the impression that "tradeable" jobs have somehow disappeared. No, their net level has just stayed level, primarily due to increasing productivity in manufacturing. The decline in manufacturing jobs has been made up with IT and financial sector jobs, which has made total tradeable jobs level.

It's honestly pretty sad people see "net job growth is 98% nontradeable jobs" and then think "98% of all jobs are nontradeable." That's not the case at all. Nontradeable jobs have grown absolutely. It's just that nontradeable jobs have been by far the nearly all the net job growth.

Funny how Kling is trying to expropriate Nobel Laureate Michael Spence's terminology (tradable/non-tradable), but not Spence's recommendations, which would conflict with Kling's views.

You might want to read Spence's new book and compare it to Tylers.

Hard to see how the local private service demand - plumbers, electricians, builders, retail clerks, fast food outlets and staff - generated by 27.3 million jobs can be satisfied by only 54,000 additional jobs. Are we sure the numbers are all good?
lff

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