Recently, Bryan Caplan criticized the ZMP theory of unemployment on the following grounds:

Most economists aren't entrepreneurs. The fact that we can't think of a productive job for a low-skilled worker is weak evidence for ZMP. But if even ivory tower economists can think of productive jobs for low-skilled workers, that is strong evidence against ZMP. And thinking of such jobs is easy. My first stab: How about as personal servants for high-skilled workers? In Third World countries, the middle class routinely hires live-in housekeepers, drivers, and so on. In the worst-case scenario, we can learn from them.

I am an entrepreneur who recently started a businesswith an office in a third world country. I stayed in the home of my business partner, who's wife managed several servants. These included a cook, a maid, a guy who washes the car, and a guy who takes care of the plants. People with children often hire a nanny. In the US, neither my business partner nor myself have servants.

I left a comment on Bryan Caplan's blog which I think is worth expanding on.

In India, there are many conscientious low skill workers. If your maid didn't leave school when she was forcibly married off at age 16, she might have worked hard, graduated high school, learned English or Hindi and gotten a decent job.In short, your Indian maid is low skill mainly due to circumstances and she does what she needs to do to keep her family well fed.

And make no mistake, her job is not particularly pleasant. It requiresa submissive attitude, getting along with the boss, and probably doesn't provide much of an ego boost. When the boss adopts a stray dog, and keeps her on the porch because she hasn't learned to poo outside, guess who takes on the job of cleanup?

Lets now consider a typical poor, unskilled American and consider the question of whether they are suited to this job. As Bryan Caplan observes,

when leftist social scientists actually talk to and observe the poor, they confirm the stereotypes of the harshest Victorian. Poverty isn't about money; it's a state of mind. That state of mind is low conscientiousness.

He quotes the book book Promises I Can Keep, which suggests that

he [a poor, unskilled man] seems unwilling to keep at a job for any length of time, usually because of issues related to respect. Some of the jobs he can get don't pay enough to give him the self-respect he feels he needs, and others require him to get along with unpleasant customers and coworkers, and to maintain a submissive attitude toward the boss.

...[his] criminal behavior, the spells of incarceration that so often follow, a pattern of intimate violence, [...] and an inability to leave drugs and alcohol alone [also cause relationship problems, which is the primary focus of the book]

Does this unemployed, unskilled laborer sound like the sort of person who you would allow into your home at any price?

Certainly, not all unemployed people fit this profile. But many do, which makes the market for unskilled labor a lemon market. At this point, the cost of labor is now wages for the employee + time and effort from a skilled person. But no matter how low wages go, my time and effort is not becoming cheaper. I have a business to build, and I don't have time to hunt for a maid. So I wash my own dishes, and live in a house that isn't as clean as it could be.

Exploiting cheap labor isn't a simple matter. It can certainly be done (my business does it), but there are logistics involved. An additional difficulty of doing it in the US is that it needs to be done fast. Assuming the end of the recession causes worker's wages to rise, then your business might have to shut down as soon as the economy improves. This gives you a narrow window to recoup your investment, which further complicates the logistics and makes hiring cheap labor tricky.


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