Producing Incentives

I don’t know why so few jobs are being created. But here’s one idea:

In a normal market, you have three main economic actors: owners, workers, and customers. Customers want the most good at the lowest price. Workers want the most pay for the least work. And owners want the most return for the lowest risk. These conflicting objectives come together and you get reasonable goods at a reasonable cost delivered by reasonably paid workers and a reasonable return to the owners.

The marketplace is designed to reconcile these conflicts among self-interested actors and provide goods and services in an efficient manner. A case in point is McDonald’s. Around the world, you can walk in and get decent food at a fair price.

Now look at the jobs that have been created in the US over the past 20 years. Almost all of them have been in health care, education, and government. Who are the owners and who are the customers? The usual roles are turned on their heads.

The normal economy has been highly innovative, creating high-paying knowledge jobs that compete with the best in the world. But the service economy has generated jobs in compliance, accounting, and customer service.

If we want lots of jobs, fast, it may come at the price of efficiency and global competitiveness. Given how stagnant wages have been, I don’t think we can afford that. The only other way is to encourage quality and innovation, and work through the current unemployment slump.
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[display_podcast] Producing Incentives

By | 2011-07-27T06:03:02+00:00 July 27th, 2011|Global Market Update, Investing|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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