The Little Book of Economics: How the Economy Works in the Real World, Revised and Updated

Chapter Four

Labor Pains

Employment, Unemployment, and Wages

Try to imagine a worse time to start a new career. The world is in the grip of its worst recession since the 1930s. The prime minister of Canada proclaims, “We are moving from crisis to catastrophe.” The U.S. unemployment rate is at its highest since the Great Depression.

That was what the world looked like in 1982 when Howard Schultz told his mother he was quitting his job as a well-paid salesman to join a five-store chain of coffee shops. No wonder she tried to change his mind. “You have a future,” she pleaded. “Don’t give it up for a small company nobody’s ever heard of.” Schultz ignored her, and millions of caffeine addicts are glad he did: He went on to turn Starbucks into a multinational franchise with more than 16,000 stores and well over 100,000 employees around the world while introducing a new job title into the American lexicon: barista.

Howard Schultz probably didn’t spend a lot of time in 1982 trying to figure out how he’d keep more than 100,000 people employed in 30 years’ time. That’s the beauty of the job machine. In the depths of recession it is almost impossible to conceive of where the jobs will come from. Yet the new jobs always come.

Say It Ain’t So

When people wonder “Where will the jobs come from?” they reflect a popular anxiety.

Two centuries ago, Jean-Baptiste Say, a French economist, elegantly argued that there can never be too little work to go around. If a waiter earns $25 by working two hours ...