I finally read Barbara Ehrenreich's Nickel and Dimed from cover to cover. The book is a staple of courses on poverty, inequality, and labor issues, but I don't think people are drawing the right inferences from the book. Ehrenreich draws attention to the dark side of modern life, but it would be a non sequitur to infer from the plight of the people in Ehrenreich's book that we could improve on their lot through more extensive government intervention.

Nickel and Dimed book is very well-written and I agree with Studs Terkel's back-cover endorsement: it's a hard book to put down. Ehrenreich's descriptions are colorful and vivid, and the picture of life among low-wage laborers is empathetic without being too dramatic. Anyone who has ever worked in the low-wage service sector will find much that is familiar in Ehrenreich's discussion.

Ehrenreich is openly critical of the market economy, and the book falls short first in its failure to articulate superior, plausible alternatives to the situations she describes and second in its lack of appreciation for the market as a process rather than an end unto itself. Wages in Ehrenreich's book are the product of grossly unequal bargaining strength. If she discusses the productivity theory of wage determination, I missed it (if this is an error, please kindly bring this to my attention). Ehrenreich openly advocates an increase in the minimum wage, contra years of theory and carefully collected evidence. She raises important points about industrial psychology and correctly points out that incomplete information impedes market functioning, but she does not adequately address the processes by which the market reduces these information costs.

I take several main points from Ehrenreich's book. First, and most obviously, it is very, very hard to be poor. Fortunately, the market processes that have been allowed to operate over the last several centuries have alleviated the crushing burden of poverty for many in the west. Second, Ehrenreich's experience in "unskilled" tasks is instructive. I've told my econ 101 students that I don't like the term "unskilled" because there are many "unskilled" tasks that in fact require skills. Finally, there is much headway to be made in the application of theory and careful data analysis to questions of living standards over the very long run a la Robert W. Fogel and Gregory Clark. While the cases discussed by Ehrenreich are fascinating and at times instructive, I don't think we can draw much in the way of policy implications from her study.