“All paid jobs absorb and degrade the mind.” Aristotle (384 BC – 322 BC)
“When a man tells you that he got rich through hard work, ask him: ‘Whose?'” Don Marquis
Most poor people work in the informal sector in precarious, low-paying jobs with no forms of social security. So key to improving the living standards of the poor seems to be to improve the quality of their jobs.
But what exactly constitutes a good job?
Thankfully, there is absolutely no consensus about that. Some people love being doctors and saving lives whereas others would surely faint in that job. Some people prefer outdoor jobs, whereas others seem perfectly happy in an office environment. Some people prefer jobs where they can express their creativity, whereas others prefer jobs where they don’t have to think. Some people prefer working with people, while others prefer to work with numbers or ideas. For many people the salary is more important than whether they like their job at all.
Most people seem to agree that higher salaries, more job-security and more benefits would be attractive, but they often forget that these attributes come at a cost. If higher salaries were the only thing we cared about, we would all be prostitutes or drug dealers (or whatever professions it is that pay best).
In Bolivia, higher salaries, health insurance and job-security is practically only available to people who agree to be locked up in an office all day. (There are a few exceptions – teachers and armed forces, for example – and those jobs are in high demand.) To many people that locking up is either extremely undesirable or outright impossible due to family obligations (5 kids and a sick grandfather to take care of, for example).
Also, in order to receive regular salaries and benefits you have to work for other people. This means that all your hard work benefits somebody else, whose values and objectives do not necessarily coincide with yours.
Not to forget the 12 or 17 years of very inefficient schooling you have to get through before you get access to this kind of jobs.
Self-employment has considerable advantages, especially in the informal sector where close to 100% of your earnings are for yourself and your family (not the government and not your bosses). Each person is free to put in as much or as little effort as he chooses whenever he chooses, and virtually no time is wasted on bureaucracy and meetings. The necessary training is often done on the job, thus avoiding many wasted years in an inefficient education system. Pensions are not withheld for several decades, so each person can make individual savings decisions depending on his particular needs, family structure and investment opportunities. The incentive structure seems ideal with no discouraging taxes or conflicts of interest.
Many people thrive in this completely liberal environment, as you would expect.
But most people in the informal sector can barely make a living out of it, which is worrying. If their productivity is so low in the optimal setting (100% returns on your effort and complete decision power and flexibility), it would surely be even lower in a formal job with substantial constraints and disincentives.
So key to improving the lives of the poor is to improve their productivity not to improve their jobs.
Know of any ways to improve productivity in the informal sector? Leave a reply below.
(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail: firstname.lastname@example.org.