Arnold Kling  

Where are the Servants?

Business Reality vs. Wonk Theo... Joseph Stiglitz on Recalculati...

In an economy where some folks are very rich and many folks are unemployed, why are there not more personal servants? Why don't Sergey Brin and Bill Gates have hundreds of people on personal retainer?

I pose this question as a way to think about labor markets and macroeconomics. Some possible answers:

1. It's a supply problem. Nobody wants to be a personal servant. They think that their human capital will depreciate less if they remain unemployed.

2. It's a demand problem. The marginal product of personal servants is very, very low. As Don Boudreaux points out, the impersonal servant of the market delivers us much higher quality goods and services than kings were able to obtain from all of their personal servants.

3. It's a recalculation problem. Gates and Brin cannot figure out what they would do with hundreds of personal retainers. They cannot even find a personal retainer who can figure out what they would do with hundreds of personal retainers.

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    California is about to pass a new piece of legislation, which regulates the use of babysitters. [Tracked on October 10, 2011 4:38 PM]
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Vinnie writes:

Similarly, why aren't personal assistant and virtual personal assistant services more common and/or utilized? I tried posing this questions to friends recently but didn't get much serious feedback. I think stigma not only holds people back from taking certain jobs but also from spending on certain services.

Dan Hill writes:

As Don Bordreaux points out that they probably buy many of these services in the marketplace, rather than employing people to provide those services as rich people used to do.

That's a function of two things; how efficient and liquid markets now are at providing these services and the significant fixed costs (and legal risks) in being an employer in a modern regulatory environment.

Bottom line, I'm pretty sure one way or another these guys do not mow their own lawns, wash their own cars or clean their own toilets!

Zippy writes:

I think Vinnie is on to something. Bill Gates and other rich people are actually quite sensitive to social norms. It would look bad if Bill Gates hired unemployed people to scratch his back.

At one time, people got status from having a lot of personal servants working for them. Having an army of servants is antithetical to the egalitarian spirit of the age.

OneEyedMan writes:

I've been told that the Gates family has a staff of five, but I don't think that counts security or transportation staff.

Two strikes me as the likely reason. When really rich people decide they want something that the market doesn't provide (like a huge health and development charity or a rocket that takes people into low earth orbit) they find it easy to hire a large number of people to do it.

drobviousso writes:

For some tasks, we've replaced servants with more efficient services.
We don't have nannies, we have day care.
We don't have personal cooks, we have restaurants.

This isn't true for every servant type task. Maid services still exist (hard to drop your home off at the strip mall, I guess). I have no idea how common their use is.

JoeFromSidney writes:

When I was stationed in Thailand back in the 1960s my wife and I had several household servants: driver, wash girl, nanny, etc. They were necessary because we couldn't otherwise navigate the local society (I would absolutely NEVER drive in Bangkok traffic; I needed a native driver). We swore that even if we ever got rich (we didn't), we would not have servants in the house. They were too much trouble. The wife of my of my Army officer friends used to line her servants up regularly and say to each, "In the States, I didn't need you!" Not that it did her much good. She did need them there.

Peter H. writes:

What's to say they don't have servants? I imagine each one of them has an extraordinarily competent secretary, and probably house cleaners. If they have/had small children, they probably had a nanny or babysitter. Both probably have pilots on call for their private aircraft, as well as drivers, catering services, etc. They don't need an army of hundreds of servants, because technology has made their servants more efficient, but they seem to be comfortable enough with what they've got.

Tracy W writes:

I'm a bit puzzled by your terminology. The labour market is as much a market as the appliance market. Perhaps the main difference is standardisation - if I buy a dishwasher I can get a pretty good idea of the quality by recommendations and reviews of dishwashers, if I own a good dishwasher and I suddenly lose it (say to a home fire), I can buy another of the same brand with reasonable confidence that I'll get another good quality one. But people differ more, my neighbour might employ a great maid, but her sister might be hopeless, and if I employ a fantastic maid and she quits for whatever reason, I can't just go out and hire another version of her. (Not that I employ servants, but I have for example noticed far more quality differences between different waiters than between different dishwashers of the same brand.)

I doubt the supply problem - my cousin and her then-boyfriend worked as servants in the UK for a few months with no career consequences, and wound up with some great anecdotes about their employer, although I think it was a case of being more funny after the fact.

Nathan Smith writes:

Oh, I think this is entirely stigma. Social mores are especially important here because it's a lifestyle issue. We're Americans, we're not supposed to have servants. This is a classless society.

If Obama pleaded with rich people to hire personal servants in order to create jobs, he might be able to change this. He seems to love speechifying. Maybe if he paid eloquent tributes to the proper role of a beneficent aristocracy, and how the enjoyment of wealth ought to be humanized by taking the form of the loyalty and love of personal servants, he could create some jobs. While he's at it, could add that it's especially virtuous to hire illegal immigrants, who don't have access to the same social safety net that natives do.

steve writes:

I think Peter H. is correct. I expect the billionaires of the world still do have a lot of servants. From cooks, to maids, to drivers. What I expect has changed is the servants quarters. They simply go to their own homes at night now. So, I guess that would imply they are better paid then before.

mark writes:

It's a definitional issue - what is a "servant" vs "employee" vs "contractor". Think of administrative assistants, personal trainers, personal chefs, cleaning services, car services, handymen, private plane pilots, personal book keeper, family wealth manager (the "family office") and so on. Would you call them "servants"? I suspect not. But all they do is provide personal services to higher income people who have specialized their labor towards a lot of income. You can call them "small business owners", "contractors or "employees". The differences are modest. Maybe "servant" connotes livery, a small room in one person's mansion etc. But in the old days "servant" was just another word for employee - "master - servant" relations was another phrase for the employment relationship.

To the extent I take the question at face value, I would say that it illustrates that there are many non-monetary qualifications that impact the smooth functioning of the labor market to match supply and demand and that it would be a good idea for people to start focusing on them and building models around them.

GIVCO writes:

Peter is correct and its not just billionaires. Take a look at the McCourt divorce disclosures to see what it looks like. Private cooks, personal assistants, daily hair dressers drivers, nannies, house keepers, gift shoppers, designers, consiglieri, publicists, etc. No chamber maids, thankfully.

Steve Sailer writes:

Life is better for rich people than ever before. They get all the advantages of being rich, including all the personal services they want when and where they want them, without the old-fashioned disadvantages like having to dress for dinner to set a good example and discussing things "not in front of the servants."

Bryan Willman writes:

"mark" has it right.

I'm no billionare, though I have known a few.

But there is a squad of people who maintain my lawn - I don't call them servants, or retainers, I call them the landscaping company, and I hire them for that specialized task like all the rest of their clients. The "manage the staff" bit that a butler (I think) would have done is dealt with by me hiring the company - that company's management deals with everybody else.

Likewise the house cleaners (again, a company that specializes in that.)

No so different, the garage I take my cars to for maintence (they give me a ride to my office), my Doctor (who is no retainer but certainly provides personal medical services better than any King of England got until fairly recently.)

I do, in a sense, have "retainers" - but we tend to call them lawyers....

I have an accountant, whom I share with his other clients, but is very much paid to tend to a particular part of my affairs.

Bill Gates has private planes, whose pilots are most likely provided by a service like netjets even if the plane isn't leased out. So there's a "family transportation staff" even if none of them see a check signed directly by Bill.

I know people (men) who have, um, relationships with women of a, uh, less than equal (though voluntary on all sides), nature. Would that count?

Bryan Willman writes:


There's a thread of thought (which Arnold is pursuing again here) along the lines of "if the cost of labor is cheap, it will be consumed, and unemployment will go down."


That line of thinking (which applies to "cheap household staff") misses the following.

"Help" is NEVER CHEAP, unless the help ALREADY KNOWS WHAT TO DO.

It's not just minimum wage, or government regulations and burdens.

It's that for very many tasks, I can do it faster than I can explain it. That's not true of landscaping or house cleaning, but it is of many many other tasks. No matter how I value my time, paying somebody else to listen to me explain it and then do it, all more slowly than I could do it, is a loss. Worse when they have to ask me questions about it.

Now add management of people, the risks and hazards of having people around (being sued for something, having stuff stolen, people quarreling with one another, people forgetting their keys, etc.)

Note that most of these issues apply even if the wage rate is 0. That is, I would refuse to have people come "help me" for free.

The person who had a staff in Thailand (which was a pain) only had to put up with that due to lack of appliances and weirdness of the transport system. Who today would hire a dish washer for their household? Somebody to manually do what the clothes washer does?

OK, how about a very skilled personal assistant/secretary? Executive assistant sort. Those positions are hard to fill in large companies, you still have to explain what you want to that person, a large part of what they used to do is now done via the web. (Travel, calendar.)

In short, I *could* hire a "personal assistant" -but it would be a huge hassle, and what return do I get?

stephen stanton writes:

It's a transaction cost problem.

Taxation / withholding, labor laws, paperwork, healthcare, etc... It's all too onerous.

In economies where friction is lower, servants are common. Hong Kong, Middle East, etc.

Steve Sailer writes:

Also, you need an old-fashioned aristocratic upbringing to know how to manage your servants. George H.W. Bush got along superbly with the White House servants because he was used to having servants. The White House staff hated the Clintons, who were yuppies.

There's a great episode of the Larry Sanders Show in which Garry Shandling decides he wants to be involved in his writing staff's personal problems instead of delegating everything to producer Rip Torn. He quickly discovers that if he tries to be sensitively involved with his employees problems, he'll never have time to be funny on TV. So, he goes back to delegating everything to his ex-Marine producer, who knows how hierarchy has to work.

Hugh writes:

I'm with Mike on this one.

There is also a risk management issue: servants of old were directly employed by the family for which they worked. Nowadays that would leave the family open to all sorts of potential liabilities that could be expensive even for millionaires.

It is much safer to go the contractor route and to avoid the direct employer/employee relationship wherever possible.

Mr. Econotarian writes:

Here is a great regulation they are working on in California, the "Babysitter Bill", that will require that paying babysitters minimum wage, overtime and workers compensation benefits while they maintain timecards, issue paychecks and deal with payroll taxes. And babysitters must be given a break every two hours plus a meal break.

Michael E Sullivan writes:

Bryan W: You can get a huge return by hiring a personal assistant if your time is very valuable, but in order to achieve this, your personal assistant must be a highly competent professional administrator, who is able to just know many common sense things, is smart enough to get your explanations very quickly, and to pick up your general needs and desires over time. I know of no truly rich person that is still seriously pursuing a career that does not have such a person working for them.

You don't even have to be especially rich for it to make sense. One of my local racquetball partners hired someone to do this for him. She works for his company, but also acts as a personal assistant. He's certainly well off, lives in a nice house, owns a successful small internet business and worked on wall street for a few years before that, but if he's uber-rich, he doesn't show it.

The trick is that you can't hire such a person for minimum wage or even close. A person with the skills to do this, already can command a very good wage in the marketplace in various kinds of high-end customer service, sales or administrative positions.

Peter answers this question correctly. The rich do have these services done, but now, the butler is not necessarily male, and has some title like personal representative, office administrator, executive secretary, or some such. Much of the work is outsourced to various firms who supply the labor, under the direction of said "butler", rather than a butler directly supervising a giant household staff.

What's changed is that the middle class happened. Back in the day, you had gentry and nobility (the 1%), and the working class (everybody else). The rich could afford to hire many servants, because most of those servants were living not far above subsistence.

In rich countries today, most of the population lives well above subsistence. Pretty much everyone we don't call poor is doing better than 98% of people did in the early 1800s by any absolute measure, and something like 1/2 of us are doing very well indeed, surpassing even the richest of the rich in 1800s in our economic resources to do nearly everything *except* holding large estates or hiring servants.

So naturally, some of that 50% demand many of the services previously enjoyed only by the rich, but in small quantities. I don't want and can't afford a personal housekeeper, but I'm certainly willing to pay $100/week for someone to come by for a few hours and clean my house. Well, in the market economy, where there's a money demand that somebody somewhere can figure out how to make a profit from, there's a supply. So we have housekeeping services, we have lawn services, tree services, personal shoppers, personal trainers, massage therapists, cosmetic consultants, barbers/hairdressers who travel. You name it, there's a high end service, and it's being used not just by rich people, but also by upper middle class people.

So the point is, you don't need to hire a particular person and train them anymore to do things that you only need 1-2 hours a week. And, people with the kind of skill you want as a rich person, aren't available for the kind of deadweight loss involved in hiring someone full time for a few hours work -- there is lots of demand for their services.

EUnity writes:

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Bryan Willman writes:

M. Sullivan - I in fact hire out basically all of the outsourced services you mention, except personal shopping, because as an eccentric nerd rich guy, I only buy clothes once every two or three years, and am picky about it in weird ways. See #2.

Two more items to add to the thread.

1. My accoutants and lawyers give me a body of advice which can be summed up as "NO EMPLOYEES EVER". There is a minimum cost associated with having an employee - a minimum (long) list of things one must do and do right to avoid fines, surprize costs, meddling, and sometimes jail. Hiring all services out to companies side steps all of that.

People who already have companies with employees have a much easier time adding a personal assistant using that same infrastructure.

2. A fair part of the current "rich" are folks who are geeks like me, often from modest backgrounds, who made fortunes in the PC revolution (and to a lesser extent the .com bubble.)

There's a whole host of "fancy services" some of these new rich just don't care about. Another set that involve human interactions they are uncomfortable with. (Remember, we're talking programmer geeks here. We can be way stranger than most people realize.)

In short, hiring somebody directly is legally and financially scary, requires out-of-the-ordinary personal interactions, and may have low perceived effective returns.

And the sorts of people one would hire in spite of all of that are expensive (more like $60K+ than $35K in my market.)

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