Industries – and therefore investment strategists – look at labour as a cost factor, never as an investment, as a matter of course. Celebrated managers are those who ‘streamline’ their operations, as large-scale firing of workers is euphemistically called. They ‘outsource’, replacing domestic labour with cheaper hands in poorer countries. That is, until these countries prosper too much for corporate good and yet poorer places have to be found – countries lacking even the most basic protections for human vulnerability.
These processes have been curbed by public awareness and consumer choices over the past few years. Yet the ills of it are one of the possible root causes for Trump’s victory, Brexit dreams, hopes of regional independence and the rise of the ultra-right in many European countries like Austria, Germany and France.
As wages stagnate, consumption, and therefore growth, is yet again mostly driven by debt – in the aftermath of a crisis triggered by a collapse of indebtedness. Growth is further hampered by surprisingly low productivity, and trade and ever more complicated supply chains are threatened by protectionist action, which is a guarantor of mutual damage. And all of the above are the nucleus of the next crisis.
Yet labour could be treated as an investment class too. Corporations investing in the skills, loyalty and wellbeing of their work force, and in tools to leverage the output of their employees, can profit considerably, as can markets and societies burdened by ever growing health and social costs.
For small-scale investors like us, our own hands and brains are an important investment too, an investment which can survive financial crises, wars and inflationary corrosion, as wages can be raised in a way that coupons and dividends cannot.
The Great Depression and, more recently, the Great Recession have admittedly greatly harmed employment, leaving misery and abhorrent poverty in its wake. Yet the victims had the possibility of starting anew, by inventing new jobs or by emigrating to new jobs. No other investment class will offer such incredible flexibility: collapsing banks will wipe out savings and crashing enterprises will annihilate loans and share capital for ever.
Our parents’ and grandparents’ hands survived the war, their savings did not: hyper-inflation and asset destruction brought everyone in Europe back to square one until the workforce started to perform miracles.
How can we best invest in our own working capacity? What should we learn, what training is essential for the future? Our parents thought that academia was the surest route to success. Governments and families urged their offspring to study in the hope that a university education would grant unfailing prosperity. This was true to a certain extent, until we realised that our societies had only a limited use for armies of doctors and lawyers and that social prestige was an inadequate measure of economic wellbeing.
How can we best invest in our working capacity?
Greece has more solicitors today than nut-sellers in the port of Piraeus and many graduates have to find work stacking goods in supermarkets and accepting zero-hour contracts behind the till. Japan, a country full of employed ‘salary-men’, made multi-millionaires of the few artisans who could still roof the many thatched cottages in architecturally protected villages.
The list of sought-after skilled artisans is getting longer every year. Embroiderers find new jobs in the fashion industry, welders thrive in the oil business and restorers in a booming art market, to name but a few. This is not said to discourage university learning.
To broaden one’s general knowledge, to learn how to learn, to develop intellectual curiosity, to engage actively in research and theory is not only deeply satisfying, it also trains the essential skills of universal learning and creativity.
After all, to predict future successes in the labour market is as tricky as any investment. I say this to remind us as worrying parents and ‘investors’ in a future ‘labour dividend’ that economic success does not necessarily depend on diplomas. Many successful people are university drop-outs. Think of Bill Gates, or Sebastian Kurz, the soon-to-be prime minister of Austria, who never finished his law studies.
For corporations to successfully invest in human labour, this means that collaboration within the workforce should be encouraged, rather than all-out competition between peers. ‘The Apprentice’ is not the right field manual for productivity. Job satisfaction is the strongest incentive for mutual success, and so is fair compensation.
High salaries and technology are not mutually exclusive. Artificial intelligence and robotics can make work not only more productive, it can boost the creation of new jobs, new tasks and the making of new markets. And companies will have to acknowledge that employee loyalty is a source of immense strength.
Yet neither we nor companies can act outside the political framework. As free markets need to be controlled and well policed by independent institutions to function properly, so do labour markets.
Alas, fairness does not come naturally. Only the firm rule of law can guarantee individual advancement and well-distributed prosperity – in relation to our employer of course, but also in comparison to our co-citizens.
To make the right choices for our own education, to position us well for the future needs of the labour market, we need a level playing field. We have to expect that ethnicity, nationality, class and gender are not an obstacle. We have to be certain that labour is fairly taxed and that education is cheap and universally available.
We have to be confident that labour productivity is incentivised while rent seeking, corruption, nepotism and old-boys-networks are actively discouraged. We have to be sure big business and state employment are not prioritised over private labour and small enterprise.
We have to know that the institutions work for every citizen, that they apply their duties unbiased, and that they prioritise merit. We have to be sure that politicians do not act in self-interest but for the common good. Can we be sure?
Andreas Weitzer is an independent journalist based in Malta. He reports on the economy, politics and finance. The purpose of his column is to broaden readers’ general financial knowledge. It should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.
Please send in any suggestions for discussion in this column to: editor@timesofmalta.com – Subject: Sunday Times Personal Finance.