Why Full Employment Is Required to Sustain a Society That We're Proud to Live in
Stay up to date with the latest headlines via email.
This article is part of Back To Full Employment, a forum on the possibilities for full employment in today’s economy.
Robert Pollin makes a compelling case for the centrality of full employment to the creation of a decent society, to the ability of individuals and families to live with dignity rather than despair, and to the overall health of an economy in which consumer spending is key to sustained growth. His capsule history of economic thinking on the causes of unemployment and the tradeoff between employment and inflation -- from Marx to Milton Friedman to Gösta Rehn -- is informative, and his main policy recommendations are difficult to argue with: increase employment in the United States by shifting $330 billion in annual spending from the military and fossil-fuel sectors to public and private investments in education and clean energy for a net gain of 4.8 million jobs.
I do have one quarrel with the analysis. Pollin observes the low unemployment achieved by the U.S. economy in the late 1990s despite globalization and accepts this as evidence that the United States doesn’t have to address its trade deficit to achieve full employment. But this was possible only in a bubble scenario. With a high trade deficit, either the public or private sector (the latter, in the 1990s example) must incur debt in order to maintain high employment. Reducing the trade deficit is essential to sustaining full employment without a repeat of bubble boom and bust.
Pollin’s central argument, however, is sound, though it might benefit from further elaboration. I take as my starting point his definition of full employment -- with which I am in full agreement -- as not simply workers scratching out a living somehow but as an abundance of jobs with decent wages and working conditions. This definition of full employment raises two issues that need to be confronted: first, the implications of employers’ increased power over workers vis-à-vis wage setting, and second, the implicit willingness of policymakers to count as employment care-work jobs that pay poverty wages. Without this fiction, achieving full employment is a far more difficult proposition. If full employment means jobs for all at decent wages, then we need to be concerned about both re-employing the millions of men who lost jobs in manufacturing and construction and about wages and job quality in the rapidly expanding care-work sectors in which millions of women labor.
On the wage front, the decline in unionization means that older ideas of wages as the result of a grand bargain (or great struggle) over the division of productivity gains are no longer relevant. Unions are not the countervailing force they were in the quarter century from 1948 to 1973, able to compel employers -- through direct negotiations and the “union threat effect” at non-union companies -- to agree to a reasonable division of a growing economic pie.
From the point of view of today’s employers, the notion of wages as a means of securing a decent standard of living for Americans is so last century. At a meeting of the Philadelphia chapter of the National Association of Business Economists, I asked the owner of a medium-sized business whether his employees’ wages were rising along with increases in productivity. “I make it. I take it,” he answered. Like most employers -- and any manager who has taken a course in human-resource management -- he believed that the wage functions to provide workers with an incentive to show up for work and do what managers expect. His workers show up for work -- proof that he is paying them fairly.