The lack of labour will kill our welfare

The very thing that brought us prosperity – our labour – has become the most undervalued resource of our economy. Even worse, it has become its most costly part and therefore the first button to hit when costs need to be driven down. This is not only bad for unemployment statistics, it will also kill our welfare and well-being.

Richard Branson might think that “the biggest threat to the world is high energy costs“, but that would only be a temporary struggle on the road to global welfare. Offering two observations, I argue that labour is and will remain the most important source of welfare. Or to put it the other way around: “The lack of labour is the biggest threat to humanity”.

First observation: Labour is not only a way to earn a living, it is also a way to express oneself

Not having anything meaningful to do is recognised as a source or catalyst of mental stress, potentially leading to illness of mind and body. Labour, or work in any form, is one of the most common forms of meaningful activity and therefore beneficial to mental health. Obviously, every reader might know someone who experienced stress from his or her work, but in this context, I pose that not having any work at all over a prolonged period is even worse than having stress-causing work. Social interactions, the ability to become better at something and also a good deal of self-esteem are mostly derived from a professional activity. Taking all of that away leads to increased levels of stress in individuals and eventually more risk of illness. This brings us to the first observation: The happier and healthier people are within a society, the higher their productivity and the lower societal healthcare costs. Consequently, happy and healthy people increase a society’s welfare.

Second observation: The economic rules currently in place discourage the use of labour

The enormous success of consumerism that dictates us to buy new products to replace old ones before these have lost their functionality lies at the root of the problem. Because this somehow goes against common sense, the idea of planned obsolescence, i.e. designing products to break down earlier than necessary, helped a good bit. (This idea got upgraded with perceived obsolescence later in the 20th century and has triggered people across the world to throw things away that are still completely fit for use.)  But in order to facilitate consumerism, the purchase value of products needs to be driven down continuously. Otherwise, people would not be able to buy them at such high rates. Although this cycle of buying and becoming obsolete is by itself not threatening to our welfare, one underlying rule of the game is particularly damaging: High taxes and costs of labour – compared to extraction, use and disposal of natural resources – make labour more expensive than materials in most cases. This implies that the costs of production can easiest be reduced through reducing labour. Automation, simplification and relocation to low-labour-cost countries are still the managerial remedies of today. That however increases unemployment and reduces purchasing power, making it even more important to reduce prices. Extrapolating this trend, businesses that consequently follow the rules of the game are instrumental in eradicating welfare.

Changing the rules of the game

In times like these, with Euro-crises, unemployment records, increasing social inequality and anti-poverty NGOs launching projects in theNetherlands instead of Africa, the question rises: When does it hurt enough to change the way we value labour versus materials?

What is called for – and advocated by an increasing number of organisations – is the renovation of tax structures, the introduction of external costs in material pricing and a political focus on creation of labour. Governments have an obligation to change the rules of the game if they intend to create stability. Despite corporations’ efforts to transform their businesses into socially responsible enterprises, their impact is limited by the current prerequisite of economic success to continuously reduce the costs of labour. As a result, more and more people are driven into un(der)employment and uncertainty. This, in the end, will kill our welfare.

By Tobias Stöcker

Tobias Stöcker is an SBE alumnus who graduated with a Master’s degree in International Business in 2004. He began his career in the German automotive industry, before moving to the Netherlands for his business study at MaastrichtUniversity. He has been working as sustainability manager and expert within the Dutch consultancy, engineering and food industry. He now focuses on the combination of sustainable development (impact) and personal development (learning) as a key to lasting change.