Why Do People Love A Labor Market Scare Story?

by: Modeled Behavior

By Adam Ozimek

We've heard a lot over the last few years about how we're increasingly turning into a "gig economy," where everyone is an Uber (UBER) driver, selling stuff on Etsy (NASDAQ:ETSY), or something like that. I argued in 2015 that this is not supported by the data, and now newly released Census data has basically proven me correct. Believing that the gig economy was taking over required looking at the data wrong, for example calling contractors "gigs," or not looking at the data at all. This is a marginal labor market phenomenon so far, and the panic was always overblown. So why the scare stories?

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I would argue that the gig economy craze has proven me right in two directions. First, as I've already said I was right about the gig economy. But second, and probably more important, it is a prime example of how much people love a scary labor market story. This helps explain why a decade ago people thought 30% to 40% of our jobs were going to be offshored, and I would argue this is why people are arguing that we need a UBI to protect us from robots taking all our jobs today.

The truth is big changes to the labor market do happen throughout history. But they are often gradual, and often good, and in recent decades the fears outnumber the real changes. The fears also manifest before there is really good reason for them to. Like today, with productivity at very very low levels, we are concerned that industry is learning to produce output without workers. Maybe wait until it shows up in the form of at least historically normal strength productivity before we panic?

And yet the hype is there. My question is: why is it there? Some blame the top-down factors of media bias and self-serving tech hype. As someone who writes about the economy for a living, I can tell you that reader interest is absolutely pushing for this even in the absence of those factors. People are instinctively drawn to scary stories about how everything is going to change about the labor market.

I think Bryan Caplan's book The Myth of the Rational Voter is probably the best explanation. Bryan documents that people have two relevant systematic biases: pessimistic bias, and anti-market bias. Thinking that robots are going to take all the jobs or that they will all be offshored or turned into gigs reflects both a pessimism about the future (and present) and also an assumption that markets will fail to reallocate and innovate in ways that make us all better off.

I am not sure what to do about this bias, but I am a little sick of it. The lure of the dramatic change is, I believe, one reason why so many readers were so eager to blame videogames, opioids, laziness, and a lack of skills for the weak labor market after the recession. There is an instinctive desire to look for structural problems, because these are permanent and that is exciting, whereas recessionary scars simply don't scratch that itch for some reason. This bias is bad, and we need to talk about it and get over it. What those of us who write about the economy for a living can do is call this out. When we see stories that reflect scary story bias, we identify them as reflecting this and explain that this is a consistent problem.