{"id":12866,"date":"2010-12-23T16:42:08","date_gmt":"2010-12-23T05:42:08","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=12866"},"modified":"2010-12-23T16:42:08","modified_gmt":"2010-12-23T05:42:08","slug":"a-full-employment-bill-sort-of","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=12866","title":{"rendered":"A full employment bill – sort of!"},"content":{"rendered":"

\t\t\t\tYou know something is wrong when the unemployment rate in major holiday destinations persist at high levels. Typically, these areas have what economists refer to as seasonal unemployment – so that during the off-season (when the holiday makers are back home) there is very little labour market activity but once the vacation period begins there are many jobs and people. I have lived in various surf locations for many years and one such location had a steady-state population of 1000 or so residents and on Boxing Day this swelled to 25,000 and that new population endured for the ensuing holiday period (until the Australia Day weekend – January 26). Many of the surf crew and musicians would take jobs during this period and work very long hours (the surf was typically bad during the summer anyway) and use the savings to eke out an existence for the rest of the year – sometimes also accessing unemployment benefits sometimes not. The US Bureau of Labor Statistics published a bulletin (September 7, 2010) for the Cape Cod area<\/a> which is one such major holiday region in the US. The situation there is dire and requires an immediate policy response from the US government. Unfortunately, this issue appears to be off the policy agenda. Well, until this week at least. A Democrat from Ohio has introduced a “full employment bill” which aims to eliminate the US central bank (good) and restore the US government’s currency sovereignty for keeps. The problem is that it goes down some dead-ends and avoids facing up to the real issues. So it is a well-motivated full employment bill – sort of!
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\nThe US Bureau of Labor Statistics published a bulletin (September 7, 2010) for the Cape Cod area<\/a> which is one such major holiday region in the US. The BLS publication reported that:<\/p>\n

\nBarnstable, Dukes, and Nantucket Counties all had unemployment rates that were higher in July 2010 than one year earlier. Dukes County posted the largest over-the-year increase at 1.2 percentage points; Barnstable and Nantucket counties had increases of 1.0 and 0.8 percentage points, respectively. The national unemployment rate was unchanged over this same time period … Cape Cod and the Islands have experienced appreciable unemployment rate increases over the last three years … By July 2010, jobless rates had more than doubled in both Barnstable (up 4.0 percentage points) and Dukes (up 2.9 points) Counties, while almost quadrupling in Nantucket (up 3.5 points). Nationwide, the unemployment rate nearly doubled from July 2007 to July 2010, rising 4.8 percentage points.\n<\/p><\/blockquote>\n

The following graph described in the publication as “Chart 1. Unemployment rates for the United States and counties comprising Cape Cod and the Islands July 2007 and July 2010, not seasonally adjusted” presents a comparison between July 2007 and July 2010 for these Cape Code countries.<\/p>\n

The message is clear – if the seasonal spending associated with vacations is insufficient to stimulate the local labour market then something is seriously wrong with the economy.<\/p>\n

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According to US BLS data<\/a>, as at November 2010, there were 15.119 million US workers unemployed and 13.3 million so-called marginal and underemployed workers (that is, according to the BLS U6 category). These are the underemployed or hidden unemployed. They would take more hours or a job if it was offered.<\/p>\n

The reality is that in a functional sense – that is, in assessing the potential productive labour supply – the marginal workers are no different to the officially “unemployed” workers. If demand for labour increased both pools of idle labour could be drawn upon to take the jobs.<\/p>\n

The following graph shows the evolution of the official unemployment rate and the U6 BLS measure – Alternative measure of labor underutilization U-6 – which is defined as “Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers” since 1994 (when the U6 measure was first published).<\/p>\n

The gap between the two series varies little which means that the threshold between the labour force and marginal status is highly cyclical. The situation that is presented by this data is dire and should ring alarm bells in every politicians office in America. I get the impression, however, that the polity is more concerned with other issues – like status of minorities in the armed forces.<\/p>\n

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Before I get a torrent of hate mail accusing me of being anti-gay let it be known that I am not. That issue is very important but in my view is not of the same sense of priority as the unemployment disaster – just my value judgement. As an aside, if I was legislating about membership of the armed forces in the US I would make it illegal for a heterosexual to be in the forces. That should cut down a bit of destructive global activity!<\/p>\n

The historical record suggests (certainly during the Great Depression) that job relief programs that various governments have implemented to try to attenuate the massive rise in unemployment were very beneficial in terms of containing the costs associated with unemployment. <\/p>\n

Having workers locked out of the production process because there are not enough private jobs being generated is not only irrational in terms of lost income but also causes society additional problems, such as rising crime rates. Direct job creation has been a very effective way of attenuating these costs while the private sector regained its optimism. In fact, it took about 50 years or so after the Great Depression for governments to abandon this way of thinking.<\/p>\n

Now we tolerate high levels of unemployment without a clear understanding of the magnitude of costs that that policy position imposes on specific individuals and society in general. The neo-liberal publicity machine has been running full bore for a few decades now to convince us that unemployment is not a major issue that should be addressed. Rather, they say it is an optimal choice made by individuals about their time allocation. Students leave universities with this notion etched in their minds.<\/p>\n

Of-course, what the neo-liberals don’t admit is that they understand Marxian analysis in the sense that they know a reserve army of idle labour allows firms to suppress labour costs. The problem is that full employment is actually better for profits than having mass unemployment. That reality has seemingly escaped the ideological zealots in their feverish campaigns to tilt the playing ground firmly in favour of capital. They actually have got it wrong on both accounts!<\/p>\n

I invite you to read this blog – What causes mass unemployment?<\/a> – for more on this debate.<\/p>\n

The upshot is that the single most rational thing a government can do is to ensure that there are enough jobs to match the available labour force. Mostly, they fail badly to achieve this level of sophistication.<\/p>\n

In the growth period before the current crisis few countries had returned to the full employment states that they achieved in the Post World War 2 period up until the mid-1970s when the OPEC oil shocks led to a paradigm change in macroeconomic policy setting. The neo-liberal approach emphasised fiscal austerity to support an increasing reliance on monetary policy for counter-stabilisation.<\/p>\n

So already in this period of relatively better economic growth there were substantial losses being recorded both in terms of lost GDP (production and income foregone) and the additional personal and social costs that accompany persistent unemployment.<\/p>\n

It is well documented that sustained unemployment imposes significant economic, personal and social costs that include:<\/p>\n