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Friday, December 5, 2008

Case for a Full Employment Policy

The Case for a Full Employment Policy

We are a very wealthy nation, and we can well afford to employ all unemployed and willing workers through public employment. The social benefits would be revolutionary.

This short article traces the historical government remedies to combat high unemployment, and outlines full employment proposals that would completely eliminate joblessness.

On December 1, 2008, the National Bureau of Economic Research announced to the public that the U.S. economy has been in economic recession since a year ago, December, 2007. We face a possible social breakdown similar to 1932. In October of 2008 6.5% of the workers are unemployed (10,100,000 workers), 7.1% are underemployed or discouraged from looking for work (11,700,000 workers), and still another 16.2% are working full-time for wages that pay less than the poverty rate for a family of four (17,600,000 workers). The combined total is 29.8 % of the workforce, or 39,400,000 workers. Many economists expect additional workers to fall into these categories in the coming months.(1) For every job opening listed there are six unemployed, according to the Bureau of Labor Statistics.

The Conflict
When there are more workers than jobs, or fewer jobs than workers, what should society do? Should society let joblessness skyrocket with all the negative social hardships, or provide jobs through public expenditures? Private business owners downsize their operations during economic downturns. The surplus labor force --- the unemployed --- demand the right to earn a living. The practical interests and property rights of affluent business owners conflict with the human rights of workers and non-owners. Owners cannot be forced to hire unneeded workers. Citizens cannot be left to starve. Public adjustments must be made. A social choice has to be managed.

The History
The Great Depression, 1930 to 1941, brought this conflict to the fore. Approximately 17.1% of all workers were unemployed over the 12 year period.
Half the economic capacity of the nation lay idled over 12 years.(2) “Thus, because of the planlessness of the twenties --- because of the lack of courageous action immediately following the collapse --- the nation lost 105,000,000
man-years of production in the thirties,” concludes the testimony to the Full Employment act of 1945. (3) The American Depression was not caused by a lack of resources or skills, it was a breakdown of social organization.

Franklin Roosevelt’s Second Bill of Rights, 1944
Franklin Roosevelt foresaw this problem in a speech delivered in 1932, and later his State of the Union Speech of 1944 addressed the dilemma.
“We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made.

In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race, or creed.

Among these are:
The right to a useful and remunerative job in the industries or shops or farms or
mines of the Nation;
The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will give
him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of
freedom from unfair competition and domination by monopolies at home or
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy good
The right to adequate protection from the economic fears of old age, sickness,
accident, and unemployment;
The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.” (4)

United Nations Charter, 1945
The United Nations Charter, drafted in 1945 after a severe worldwide depression in the 30s and a worldwide war in the 40s, dealt with the right to work vs. the need of private ownership to layoff workers. Article 23 stated that,
“1. Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment. . . .
3. Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.” (5)

In effect, when economic conditions demand it, nations must care for citizens just as families care for children. Abandonment, neglect, negligence is not part of the civilizing standard of the U.N. member states.

The Full Employment Bill of 1946
While debating this bill, Congress backed away from a mandate of full employment and substituted “maximum employment.” All of the quantitative markers from the final incarnation of the law were removed. The act instructs the executive branch to "promote maximum employment, production, and purchasing power." (6) Reassuring his Republican colleagues, Senator Robert Taft (R-Ohio) stated, “I do not think any Republican need fear voting for the bill because of any apprehension that there is a victory in the passage of the full employment bill, because there is no full employment bill anymore.” (7)

CETA --- Comprehensive Employment and Training Act, 1973 - 1983
CETA was a federal program administered locally. It was the first jobs creation program since the 1930s. “At its height, CETA had more than 700,000 people in public sector jobs and provided training and assistance to 1.3 million disadvantaged. . . . Almost by accident CETA was becoming a broad program serving both the poor and nonpoor. It could have been a model for what the War on Poverty should have been --- a permanent job-and-training program serving all Americans. But scandals and opposition to the idea of serving the nonpoor led to such severe restrictions that, by 1980, more than 90% of new enrollees were poor. However humane this seemed, it eroded support and opened the door to the elimination of CETA in the first years of the Reagan administration.” (8)

Humphrey-Hawkins Full Employment Act, 1978
In 1978 the Congress passed the Full Employment and Balanced Growth Act. The binding commitment of a job to all job seekers was deleted from the original proposal of 1976, just as in 1948. As such it stands as a lifeless statue to an unrealized goal. (9)

In 2009 Two Stimulus Plans to Restore Economic Growth
Many economists have addressed the need for a federal jobs creation plan. But their advocacy does not go so far as to promote full employment, just restoration of positive growth.

For instance, economist William Grieder proposes a five point plan in The Nation magazine, October 20, 2008. Point three suggests that we
“Get serious about economic stimulus. We need a recovery program five or six times larger than the pitiful $60 billion proposal by Democratic leaders. These billions should go for the familiar list of neglected priorities --- fixing bridges and schools --- but should also jump-start the green agenda for alternative fuels and restoration of ruined ecosystems. The government should subsidize the new industries of our age, just as New Deal spending financed the modern development of aircraft, petrochemicals, steelmaking and other key industries in the 1930s.”

Economist Robert Pollin, in The Nation, November 24, 2008, states,
“This is no time to be timid. The stimulus program last April totaled $150 billion, including $100 billion in household rebates and the rest in business tax breaks. This initiative did encourage some job growth, though as we have seen, the impact would have been larger had the same money been channeled toward a green public-investment stimulus. But any job benefits were negated by the countervailing forces of the collapsed housing bubble, the financial crisis and the spike in oil prices. The resulting recession is now before us. This argues for a significantly larger stimulus than the one enacted in April. But how much larger?” (For the elaboration of his proposal, see the end of this essay.) (10)

Full Employment Plans
The proposals for full employment seek to provide every last potential worker with work. The aforementioned expensive government jobs programs will not eliminate unemployment. Two scholars, Philip Harvey and L. Randall Wray, have elaborated detailed plans for a full employment project.

In his chapbook “Human Rights and Economic Policy Discourse: Taking Economic and Social Rights Seriously” Harvey presents five rationales for a full employment program:
One, “it attacks poverty and other social problems not only by reducing joblessness, but also by increasing the provision of public goods and services.”
Two, “direct job creation programs actually increase national wealth.”
Three, “a large-scale direct job creation program could serve as a powerful automatic stabilizer, flattening the business cycle.”
Four, it is likely to increase “the effectiveness of structuralist and behavioralist policies for combating joblessness.” (The structuralist approach is increased education, training and relief measures, the behavioralist approach is the cultural, moralistic disapproval of free-loaders sponging off public charity.)
Five, the “funds allocated to support the [jobs creation] program otherwise would have been used to pay income transfer [unemployment insurance] benefits to the persons targeted by the program. . . In fact, there is good reason to believe that even a very generous job creation program could be funded from this and other sources, and would not displace any job sustaining expenditures.”

In an argument reminiscent of Roosevelt’s 1944 Inauguration speech, Harvey further emphasizes that the “conflict between majoritarian public preferences for policies that use unemployment to combat inflation and government obligations to strive to secure the right to work constitutes a real-world example of a widely recognized theoretical problem in social choice theory. That problem arises from the possibility that utility-maximization and human rights protection may conflict with one another as public policy goals.” Harvey concludes, “Applying these principles to assess the relative deference owed to right to work claims compared to public preferences for inflation control and other utilitarian policy goals, I conclude that the right to work is entitled to far more deference than it normally receives.” “I argue that unemployed workers constitute just such a minority in need of special protection, particularly in periods of relative prosperity when their interests are likely to conflict with the policy preferences of a majority of the population.” (11)

Government Sponsored Jobs
A national public full employment program is proposed by Professor L. Randall Wray in his book Understanding Modern Money. He calls for the federal government to be the “Employer of Last Resort” and the jobs it creates would pay workers a “Basic Public Service Wage.” The following are job positions that could be created:

1. Companions to the elderly, orphans, physically disabled and mental health patients. Each companion would attend classes or seminars in caregiving, and perhaps also attend group discussions with other ELR companions. This position would serve as a preparation for private sector jobs.

2. Public school classroom assistants who tutor in reading, writing and math. Field trip aides for classes on out-of-school excursions. After-school assistants in academic support and/or art and recreation programs.

3. Child care assistants, and Head Start and preschool assistants.

4. Safety monitors and facilitators assigned to public schools, playgrounds, transit hubs, downtown areas.

5. Neighborhood clean-up crews for abandoned properties, and highway clean-up crews.

6. Auxiliary assistants in low-income housing restoration projects such as home insulation projects.

7. Public library assistants.

8. Environmental safety monitors testing for lead paint contamination, water quality, beach contamination. Aides for restoration of ‘super fund’ clean-up sites and other environmental clean-up projects.

9. National and state park improvement teams.

10. Artists, musicians and performers in community beautification projects, and performing in schools.

11. Community and cultural historians.

12. Public assistants collecting information and monitoring compliance with government regulations.

13. Prison education assistants, and liaisons to juvenile detention facilities.

This list is drawn mostly from L. Randall Wray’s book Understanding Modern Money. Wray concludes that,
“The federal government would simply provide as much funding as necessary to let every state and local government hire as many new employees as they desired, with only two constraints: these jobs could not replace current employment, and the could only pay BPSW[basic public service wages] (or at least the federal government could reimburse wages at BPSW rate). Finally a similar offer could be made to qualifying non-governmental non-profit organizations, such as AmeriCorps, VISTA, the Student Community Service Program, the National Senior Service Corps, the Peace Corps, the National Health Service Corps, school districts, and Meals on Wheels.” (12)

Strong popular support exists for a traditional jobs program. In the fall of 2008 Yes! Magazine published a poll indicating that 67% of Americans favor public works projects to create jobs. (13) While the promulgation of a full, universal employment program may have to wait for a swelling of popular support, the groundwork has been done over the years with full employment Congressional legislation, and through scholarly examination. As Harvey points out, such a program would increase national wealth while combating the sources of poverty and increasing social services to the non-affluent.

1. See, taken from
2. The American People in the Great Depression, David M. Kennedy, Oxford University Press, 1999, page 166
3. 105,000,000 man-years lost, quote from Full Employment Act of 1945, Hearings, page 1104, as cited in The Employment Act of 1946: Some History Notes, G.J. Santoni, U.S. Federal Reserve report., November, 1986
4. Franklin Roosevelt,
=463; and cited in FDR’s Unfinished Revolution, Cass Sunstein
5. United Nations Charter, cited in “Human Rights and Economic Policy Discourse; Taking Economic and Social Rights Seriously), Columbia Human Rights Law Review, Volume 33, Number 2, Spring 2002, Philip Harvey, page 376
6. Full Employment Bill of 1946
7. Senator Robert Taft, cited in Harvey, ibid, page 374
8. Stricker, Frank, Why America Lost the War on Poverty --- And How to Win It,
University of North Carolina Press, 2007, page 134, 135
9. Ibid, Stricker, page 135, Humphrey-Hawkins Bill of 1978
10. William Grieder, The Nation magazine, October 4, 2008 and Robert Pollin, The Nation, November 24, 2008
11. Philip Harvey, ibid, pages 466 to 471.
12. L. Randall Wray, Understanding Modern Money, Edward Elgar Publishing Limited, 1999, page 141
13. Poll, Fortune Magazine poll conducted by Abt SRBI. Jan. 14-16, 2008. N=1,000 adults nationwide. MoE ± 3. ----

Robert Pollin’s jobs program (continuation)
Pollin in his article, The Nation, November 24, 2008, elaborates his proposal, and brings a historical perspective to today’s proposals. This continues the quoted section:

“One way to approach the question is to consider the last time the economy faced a recession of similar severity, which was in 1980-82, during Ronald Reagan’s first term as president. In 1982 gross domestic product contracted by 1.9 percent, the most severe one-year drop in GDP since World War II. Unemployment rose to 9.7 percent that year, which was, again, the highest figure since the ‘30s.

The Reagan administration responded with a massive stimulus program, even though its alleged free-market devotees never acknowledged as much. They preferred calling their program of military expansion and tax cuts for the rich “supply-side economics.” Whatever the label, this combination generated an increase in the federal deficit of about two percentage points relative to the size of the economy at that time. In 1983 GDP rose sharply by 4.5 percent. In 1984 GDP growth accelerated to 7.2 percent, with Reagan declaring the return to “morning in America.” Unemployment fell back to 7.5 percent.

In today’s economy, an economic stimulus equivalent to the 1983 Reagan program would amount to about $300 billion in spending --- roughly double the size of April’s stimulus program, though in line with the high-end figures being proposed in Congress. A stimulus of this size could create nearly 6 million jobs, offsetting the job-shedding forces of the recession.

Of course, the green public-investment stimulus will be much more effective as a jobs program than the Reagan agenda of militarism and upper-income tax cuts. This suggests that an initiative costing somewhat less than $300 billion could be adequate to fight the job losses. But because the long-term benefits to the economy, there is little danger that we would spend too much. Since all these investments are needed,to fight global warming and improve overall productivity, the sooner we move forward, the better. Moreover, under today’s weak job market conditions, we will not run short of qualified workers.”

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