Can Puerto Rico be a laboratory for the future of the rest of the U.S.?

“A World Without Work” is an Atlantic story about what the U.S. might look like after robots and smarter software take over a lot of jobs within the U.S. The author says that the declining labor force participation rate in the U.S. (from 66 percent to 63 percent since 2009) hasn’t been the boon to American happiness that we might have expected: “By and large, the jobless don’t spend their downtime socializing with friends or taking up new hobbies. Instead, they watch TV or sleep. … The unemployed theoretically have the most time to socialize, and yet studies have shown that they feel the most social isolation; it is surprisingly hard to replace the camaraderie of the water cooler.”

This Wall Street Journal article shows that Puerto Rico is about 20 years ahead of the rest of the U.S. The federal minimum wage of $7.25 per hour is 77% of the median wage (comparable to a $13 per hour minimum wage in May 2014 (BLS data showing median hourly wage of $17.09 nationwide)). In other words, it is illegal for companies to hire a large percentage of Puerto Ricans at what would be a market-clearing wage for their particular skills. The result is that labor force participation in Puerto Rico is 43 percent, which means a much higher percentage of the population needs to find something to do every day other than work.

There seems to be a political consensus in the U.S. around raising minimum wage to $12-15/hour. If we assume that Americans as a whole will respond to economic incentives in the same way as those who live in Puerto Rico, presumably the 50 states in 10 years will look like Puerto Rico today (or sooner if the technological revolution forecast by the futurists turns into reality). This makes Puerto Rico a potentially useful laboratory for figuring out how to build a society that is satisfying for citizens when the majority of able-bodied working-age citizens do not have jobs. On some measures, Puerto Rico has already solved the problem of how to build a good society without work. This Orlando Sentinel article notes that Puerto Rico topped a worldwide happiness survey back in 2005. A lot of the boost seems to come from extended family living nearby. The mainland U.S. could be naturally trending in the Puerto Rican direction. As traditional colleges become unaffordable fewer young people will move away from home in order to go to college. As a smaller percentage of Americans work, a smaller percentage will move away from their birthplace in order to work. We could spend more of our tax dollars on festivals and social gatherings (every town every three days) and less on health care (if we cut the percentage of GDP spent on health care to something more like what other developed nations spend we could easily fund all-day, every-day parties; see my health care reform piece for other alternatives). We have 50 million people getting food stamps. What if, for at least one meal per day, those 50 million people were invited to come to a social meal? The same deal with SSDI. We could offer enhanced SSDI benefits for those who move to an “SSDI party village” where at least half of the neighbors are also on SSDI. Then there would be more opportunity for socializing during the middle of the day when 43-63 percent of working-age Americans were at work.

What ideas do readers have? How should society be organized if only a minority of working-age Americans are working? What can we test out in Puerto Rico?

12 thoughts on “Can Puerto Rico be a laboratory for the future of the rest of the U.S.?

  1. We could also look back to times before large fractions of women were I the workforce, and see significant amounts of socializing outside of work. I agree that some effort could be made to encourage daytime non-work socializing would be an improvement. However, I think my fellow Americans have chosen consumerism over the social lifestyle.

  2. Peter: I agree with you in the past about consumerism. But I think things have shifted with Americans voting for higher minimum wages, more government-set prices, more welfare benefits. There seems to be a consensus forming around the idea that if an American can’t find a job that pays what people consider to be a “living wage” and has other desirable characteristics then the American should be supported at a moderate level by taxpayers (unemployment insurance for two years, e.g., followed by SSDI).

  3. Having moved there recently, I can report that understandably people generally have much less incentive to work. Result is unstable power, water and internet. Generally lower quality of fresh meat/produce/seafood and lower quality of everyday goods. Daily activities such as going to the bank and shopping takes three times as long due to lower productivity. Waiting in line is very common. Shopping malls are always packed regardless of day of the week.

    The upside is more time with the family, much lower cost of health insurance and housing. Weather is always beautiful. Is it better or worse than US mainland? US is better if you are rich or ambitious. I think PR is not so bad if you are lazy or poor.

  4. I think that jobs lost to technology, where the people loosing those jobs don’t have the capability to get higher-skill ones, is becoming one of the great problems of our time. Presently, it’s the rich who are primiarily benefitting from automation through return on capital, and those without the means to invest are kicked to the curb. Taxing automation to create a citizen’s dividend seems an interesting alternative to raising the minimum wage.

  5. Andreas: We already do have taxes on automation. If a robot is owned by a corporation and produces profits, the profits are taxed by federal and state corporate taxes. If any of the post-tax profits are eventually paid out as dividends, those dividends are taxed by federal and state income taxes and also by the special Obamacare tax depending on the income level of the recipient.

    I think that we also already spent enough tax money to have a “citizen’s dividend.” It just isn’t given directly to citizens and it isn’t universal. See http://www.budget.senate.gov/republican/public/index.cfm/2012/12/total-welfare-spending-equates-to-168-per-day-for-every-household-in-poverty for how over $60,000 per year is spent on each welfare family.

  6. The most enjoyable thing I did with my life was have children and then hang out with them. If I had more time and money, I would have had more kids. If a lot of people are like me, wouldn’t most of your ideas result in a population explosion?

  7. What about a Guaranteed Minimum Income? As long as the fed is just making up money and giving it to the banks in blocks of 20 billion dollars, let’s give it straight to the people.

  8. Terence: I’ve written a bunch of stuff here supporting the idea, which is a very old one. I don’t think it has any chance politically in the U.S. because the poverty industry is too large. Folks whose salaries depend on there not being a guaranteed minimum income aren’t going to give up those salaries voluntarily and they have a lot more political power than do those who are currently officially “poor.”

  9. I got my first job at Burger King when I was 16 with absolutely no work skills (had never mopped a floor, didn’t know how to get to work on time, etc.). I was paid $3.05 per hour ($11.12 / hour today). That job was profitable for the owners and would have still been profitable at $4.11 per hour (15.00 / hour today). The difference would have been under 4% of gross sales (less than the franchise fee). Granted, 4% of gross sales would have been a huge cut into profits and not necessarily a good idea. Nevertheless, my experience does not support the premise that a minimum wage of $12-$15 per hour would make it illegal for companies to hire a large percentage of Americans at what would be a market-clearing wage for their particular skills.

  10. Anonymous: it doesn’t? You can type and spell, for instance. You were probably far from the worst 16-year-old potential worker around. Were you violent on the job? Did you steal? Did you break things? Did you require constant supervision and prodding or did you learn how to mop the floor on your own?

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