With the benefit of the information developed in Chapter VI, it would be possible to proceed directly to the formulation of a practical program that would lower the survival limit enough to eliminate unemployment. Obviously, however, it will be desirable to explore ways and means of minimizing the unemployment problem, and simplifying the task to be accomplished by the direct control measures, before we take up consideration of the possible control measures themselves. Even though there are no restrictions on the amount of employment that can be created by reducing the minimum productivity requirement it is clearly advisable to avoid lowering this requirement any farther than is actually necessary, inasmuch as any lowering of the requirement will inevitably result in a reduction in the actual productivity. At this time, therefore, we will examine various possible means of increasing employment without altering the survival limit.
One of the most obvious things that can be done to reduce unemployment is to provide a more adequate system for getting workers into available jobs, and doing this promptly. Even when the economy is operating on a maximum or near maximum basis there is a substantial loss in manpower due to the necessity for each worker to search for a new job when the old one terminates. If this were strictly a matter affecting the individual alone, there might be some argument for taking the stand that it is the responsibility of each worker to find employment for himself, although the complexity of modern economic life would still make such an attitude rather hard to justify. But unemployment is not only a personal problem. It involves a loss to the general economy as well, and since the individual is not in a position to do anything more than he is already doing—that is, get out and look for a job—the responsibility clearly lies with the community to provide a remedy and eliminate this loss of productive effort. It is a serious reflection on those charged with the administration of our national affairs that no active steps have been taken to reduce this source of national waste and individual hardship until very recent years, and then only under the spur of a necessity that could not be ignored.
Furthermore, the existing public employment agencies, even though they clearly represent a step in the right direction, are operating under a policy that is entirely inadequate to meet the requirements. The present employment services are primarily clearing houses, accepting labor that comes in and jobs that come in voluntarily, and attempting to equate the two. What is needed in order to attain our goal is to transform this passive policy into an active policy, so that we do not sit down and wait for jobs to come in; we go actively in search of jobs, just as we would go out and find sales outlets if we were marketing any of the products of our industries. And in order to sell its product, the agency must make its services more attractive to the prospective customers, the business enterprises that are the major job producers in our economy.
As matters now stand, many, if not most, of the employers regard the public employment agencies as a last resort. They keep their own lists of applicants for employment; they insert advertisements in the newspapers; they send out recruiters; they utilize private employment agencies, and so on; all of which would be wholly unnecessary if their needs were being met by the government agencies. The mere existence of long columns of “help wanted” ads in the daily papers is a clear indication that something is seriously wrong. What these employers are spending their money trying to get should be available more readily, in greater detail, and without cost, at the government employment agency.
But there is a basic conflict of interest between the employers and the agency. The employers want the best qualified men or women who are available. The agency, on the other hand, wants to place as many of the less qualified workers as possible, in order to minimize the number of persons who are without work for long periods of time, and the placement procedures are therefore set up in such a manner as to restrict the employers ability to pick and choose. Consequently, the employers resort to other sources from which they get better results, and tend to limit their use of the public agency to a minimum. This conflict of objectives is inevitable as long as there is a labor surplus, but it will be eliminated when we adopt a program that will make jobs available for all, and this will clear the way for a constructive cooperation between the agency and the employers.
The work of the agency should not be limited to placing those who are actively seeking employment. The loss to the nation by reason of idle labor is just as great whether the idleness is due to inability to find work, or to a lack of aggressiveness or initiative in looking for it. After having placed all those who apply for work, the employment agency should actively seek additional labor to fill more jobs.
When the employment program is first initiated it will, of course, be directed mainly toward achieving full primary employment, since this is the number one objective. As soon as the primary employment picture is in good shape, the agency should begin promoting secondary employment. In addition to looking for more full time workers, as suggested in the preceding paragraph, active programs should be undertaken to locate seasonal and other part time jobs and to locate workers to fill such jobs. Action should be taken, either through voluntary agreements or through governmental measures, to remove existing impediments to such part time work—union rules, industry employment restrictions, etc., the justification for which will no longer exist when full primary employment is guaranteed.
It is not sound public policy to force anyone to work, if he prefers the leisure to the products of effort, and has accumulations of wealth on which he can live, so that his idleness does not impose a burden on anyone else. Such compulsion would be contrary to the fundamental purpose for which we are attempting to improve the efficiency of economic processes, that of making life more pleasant and enjoyable. But it is a definite loss to the community, not just to the individual, if a worker remains idle when he would prefer to work. We cannot dismiss this as the worker’s own personal problem; it is also a concern of the community as a whole.
Subsidizing mobility of labor.
The placement of all available workers cannot be accomplished by a mere process of looking for existing employment opportunities; it also requires utilization of various expedients for creating additional opportunities. Heretofore the activities of the government employment agencies have been predicated mainly on the theory that employment is a private transaction between employer and employee, and the government only enters into the picture as a kind of benevolent and helpful outsider who cannot afford to make any appreciable expenditure in extending his assistance. But in reality the community has an interest in the matter that is at least coordinate with that of the other two participants. If anything, the public interest in the employment transaction is greater than that of the employer, for often the question as to whether the additional labor will be profitable or unprofitable is very much on the borderline so far as the employer is concerned, but additional employment of a normal character is always profitable to the community. The lack of logic in the present policy can be seen when we realize that after refusing to spend a small amount of money to place a worker in a job, the government turns around and spends a large amount to maintain him in idleness, in addition to sacrificing the contribution that the worker would make toward the community overhead expenses if he were regularly employed.
As brought out in Chapter VI, when all of the workers that can be given employment by the mere process of locating existing employment opportunities have been placed, it is profitable to the community to make such expenditure as is necessary to provide jobs for the remaining workers as long as the values created by this auxiliary employment are equal to the wages paid, or in an emergency, are sufficient to cover the difference between the wages paid and the amounts that would otherwise be allowed on welfare or unemployment compensation. On the basis of estimates cited in the previous discussion, this means that in order to place the unemployed on jobs in private industry the community would be justified in subsidizing the additional employment to the extent of at least fifty percent of the normal wages, if necessary. In certain special instances it is possible to create additional employment in competitive industry, where adequate production of values is guaranteed, at a cost far under this allowable figure of fifty percent. Opportunities of this kind obviously should not be neglected. One such profitable field that can be opened up by the adoption of a policy of spending a reasonable amount for employment expansion is contingent on increasing the mobility of labor.
Even under depression conditions there are jobs going begging in some locations, due primarily to the fact that neither the worker nor the employer can afford to finance the move from the worker’s home to the location of the job. This cost looms up like a mountain to the worker who has little or no reserve funds, particularly since the lack of any guarantee of a fixed term of employment makes the move a gamble on his part. It is also a major obstacle to the prospective employer, who has only a very small margin of profit expectancy at best, but it actually represents only a very minor percentage of the total expenditure for the labor involved, and to the community as a whole the cost of meeting the moving expense is insignificant compared to the gains that would be realized from the increased employment.
Some objection may be raised to the use of the term “creating employment” in a case of this kind where all that we are doing is making a potential job available by providing transportation to the job site, but in reality this is as much as we do by the use of any employment measure. Wherever there is work to be done, a potential job exists, and whatever employment action we may take, irrespective of its nature, simply converts that potentiality into a reality.
At any time when there are jobs available in one location and workers for whom no regular jobs can be found in another location, the employment agency should be authorized to transport the workers and their families to the location of the work, and back home again at the conclusion of the job, if necessary. In most cases it will not even be necessary to return the workers to their original homes. They can just be moved on from one location to another as the requirements develop, until they decide to settle down and take root somewhere. Because of the seasonal peaks in various industries and the concentrated labor demands of major construction projects it is decidedly advantageous to have a high degree of labor mobility, and there are enough workers who like to jump around from place to place and to enjoy the higher incomes that can be earned on this type of work so that the desired flexibility can be attained without inflicting a hardship on anyone.
One of the principal obstacles that stands in the way of adopting such policies, even when they are obviously beneficial to all concerned—public, employer, and employee—is the prevailing fear that someone will profit from the transactions. In this case the contention will no doubt be raised that we would be giving the worker something for nothing, enabling him to travel around the country at public expense, and that we would be favoring the employer of temporary labor, permitting him to make additional profits. Actually, however, all participants in this proposed program would earn what they receive, and no one would get any gratuity. The worker who is willing to move about from job to job and fill in where he is needed is performing a useful service that most workers would not want to undertake, and there is no injustice to anyone if he is given the assistance that is required to make the moves possible. Both the government and private employers customarily absorb part or all of the moving expenses of permanent employees who are transferred from one working location to another. What is now being proposed is simply an extension of this same principle, applying it in all cases where the worker’s move is made in response to a genuine labor need. There is no intention of suggesting payment of moving expenses incurred for the worker’s own purposes, or of assisting employers in luring men away from other jobs.
Here again it is necessary to point out that the driving force behind all economic transactions is the expectation of making a gain. No sales would be possible, for instance, unless the purchaser believes that the goods are worth more to him than the amount he has to pay for them. If he considered the money and the goods exactly equal in value, there would be no object in exchanging one for the other. No work is ever done voluntarily unless the worker values his wages or the satisfactions resulting from the work more than he values his leisure.
When we want to set up a program to accomplish a desired economic result, the only effective policy is to recognize this basic economic principle and to work out the details of the plan in such a way that those who participate and help to make the program a success will gain by so doing. There is nothing immoral or unethical about such gains, whether they be in the form of wages or “fringe benefits”, or in the form of interest, rent, or profits. Regardless of what name we apply to them, these gains constitute payment for services rendered. The fear that “someone will profit” from the expenditures that we make is absurd. What should rightfully concern us is not whether anyone makes a profit, but whether all earnings—wages, profits, or anything else—are commensurate with the value of the services rendered.
Any measure that profits the community as a whole without loss to any of its individual citizens is worthy of our approval, but from a purely logical standpoint, a measure that enriches the community collectively and at the same time confers additional benefits on individuals over and above the collective gain is still more desirable. The proposed subsidizing of labor mobility is in the latter category. The national economy makes the major gain, but both the worker and the employer also benefit from the additional employment that is made possible.
Retraining of displaced employees.
When we eliminate cyclical unemployment by countercyclical measures, the most important employment problem remaining will be the prompt placing of those released from their jobs by the inevitable fluctuations in the demand for labor on the part of the individual producing enterprises. In general, this will not involve any extensive redistribution of the kind of labor. Carpenters released from a completed construction project will be absorbed by a newly inaugurated project, and so on. Furthermore, the workers thus released will be mainly those whose employment is understood to be temporary, either by reason of the impermanence of the work itself, as in the case of construction, or because they are extra workers hired to meet temporary peaks. Hence these workers will have no particular “vested rights” in their specific jobs: All that we can undertake to do for each of them is to guarantee that he will be provided with some other job of an appropriate character. A much different situation will exist with reference to those employees of relatively long standing whose usefulness in their regular occupations comes to an end because of technological improvements: introduction of labor-saving devices, etc.
Almost everyone agrees that raising the general standard of living is a worth-while goal, and most of those who give serious thought to economic matters regard “growth” of the economy (which is the same thing seen from another direction) as a desirable objective, yet it does not seem to be generally appreciated that neither growth nor a higher standard of living can be attained unless a great many individuals are separated from their present jobs. A higher real income can only be achieved by means of increased productivity; that is, more production per worker. If each person were satisfied to receive the benefit of the greater income, a ten percent increase, for example, in the form of ten percent more of the same items—eat ten percent more food, wear ten percent more shoes, spend ten percent more time in the dentist’s chair, use ten percent more aspirin, and so on—there would be no dislocation of employment. But we do not eat more food as our income rises; the change, if any, is likely to be in the other direction. And so it is with a large part of our purchases. We hold to our existing level of consumption of these items, and allocate the added income to the purchase of different goods. This means that employment in the production of basic foods and other items in the “inelastic” category must drop as productivity rises.
Furthermore, consumer preferences are continually shifting as habits change and as new and improved products appear on the market. The automobile, for instance, destroyed a number of industries, but created a host of new ones. Every such change means that some workers lose their jobs. This technological unemployment due to increasing productivity and changing consumer demand is an important feature of the present-day economy, and it must be given special attention in any full employment program.
There is no question but that the increase in productive efficiency due to inventions and technological improvements is immensely profitable to society as a whole. The sum total of the improvements of this kind is the difference between our present scale of living and that of the Cave Dwellers. As a matter of general public policy, therefore, it is evident that such inventions and innovations should be encouraged and promoted. We find, nevertheless, that there is a substantial body of opposition to these technological advances, which has made itself known in the past primarily by stubborn and tenacious passive resistance on the part of the workers, but more recently has come out into the open and has produced various restrictive rules, either adopted unilaterally by the labor unions or made the subject of working agreements with the employers. In some foreign countries this movement has made even more headway, and has resulted in a great deal of unwise legislation designed to discourage labor displacement by mechanization, and to penalize employers who resort to labor saving equipment.
Here, then we have a direct conflict between the general public interest and the attitude of certain groups of workers, particularly industrial employees. How can we reconcile these opposite viewpoints? The first requisite is that we understand the fundamental basis on which the workers rest their case. Naturally they do not all go through the process of analyzing their own mental reactions and determining the underlying reason behind their opinions, but it is clear that in essence they are taking the stand that the individual should not be sacrificed for the sake of the general welfare. When we stop to consider this proposition carefully it is hard to avoid the conclusion that it represents a forward step in the development of sound social policy and as such it is destined for greater rather than less acceptance as time goes on. But it does not follow that preservation of individual economic security and technological progress are incompatible. If we put the right kind of policies into effect, we can have both.
The cost of protecting the displaced worker’s economic position is definitely a charge against the benefits accruing from the improvements, but satisfactory progress toward a solution of the existing problem is impossible until it is more clearly recognized just who it is that derives the major benefit from such improvements and should consequently stand the cost of protecting the interests of the displaced individual. Thus far, where any attempt has been made to protect the worker against deterioration of his economic position by reason of the introduction of labor saving devices it has been assumed that the benefits of these improvements accrue to the employer, and hence the costs involved in protecting the worker’s position have been assessed against him. The result has been a stifling of progress.
Productive efficiency in all countries where this policy has been followed is lagging well behind the mark set in the United States where restrictions on such innovations are as yet relatively limited. American engineers who examined conditions in the British coal mines during and after World War II were literally amazed at the failure to use modern equipment and methods, and the British government has officially admitted the validity of these criticisms. Other nations which have enacted legislation penalizing improvement and innovation, or have permitted extra-legal action toward the same ends, have similarly experienced enormous losses due to inefficient operation of their facilities. Results of this kind do not “just happen”. They indicate something radically wrong with the approach to the problem.
There is actually no mystery as to where the trouble lies. The employers do not gain appreciably from the introduction of labor saving devices, in the long run, and hence any action toward saddling them with the associated labor adjustment costs simply blocks these improvements out of industry. The originator of a labor saving innovation gains a temporary advantage by putting it into effect, but his competitors do no more than restore their original competitive position by following suit, and as soon as they do so the advantage to the originator disappears. The gain to the employers from this source is therefore so limited and so transient that any extraneous burden placed upon it simply kills all incentive for improvement.
The only positive and certain gain from the innovation goes to the consumer; that is, to the general public. If we accept the contention that the individual worker should not be made to suffer by reason of industrial progress, then the costs involved in making him whole should be borne by the general public, not by the employers. This is not a question of equity to the employer. He is not injured by actions which force him to retain antiquated and inefficient equipment and methods, as long as his competitors are in the same predicament. The real issue here is a matter of arriving at a policy which will not place impediments in the way of progress; one that will assess the relatively small cost against the beneficiaries of a large gain, so that further development of more efficient methods and equipment will be encouraged rather than discouraged.
There are those who see sinister implications in any suggestion that costs of this kind should be met from public funds. But where the benefits are received by the public as a whole, there is no other practical method of equitably apportioning these costs. The employment agency should be authorized to arrange for the retraining of workers displaced by technological improvements, so that they can be placed in jobs where they will earn equivalent wages, and the costs involved, including maintaining the workers’ normal standard of earnings during the training period, should be met from the general employment funds.
Fortunately, most of the skills that are involved in these technological changes are in demand elsewhere, and the workers with these qualifications can be fitted into new jobs without any serious difficulty. Whatever problems may develop are identical with those involved in handling frictional unemployment, and can be resolved in the same manner. Providing new employment for those technologically displaced individuals who have no skills that can be transferred to other productive operations is a more difficult problem, but there can hardly be much question as to the nature of the approach that will have to be utilized. So far as possible, the workers will have to be fitted to the available jobs. This is a big undertaking, to be sure, but one which presents no insurmountable obstacles. It is true that the trend toward a more complex technology is eliminating more and more of the unskilled jobs, and thereby increasing the dimensions of the training problem. Ultimately, this may bring us to a limit beyond which more training will not accomplish its purpose. At this point we would have to reverse our procedure and begin tailoring some of the jobs to fit the kind of labor that is available. For the present, however, the answer to the technological aspect of the unemployment problem is education and training.
Special education and training.
In addition to the training program for technologically displaced workers which is being recommended primarily as a means of assuring equitable treatment of these workers and thereby removing an obstacle in the way of technological progress, the employment agency should be authorized to carry on whatever additional educational or training activities are necessary in order to place surplus workers in available jobs. This is essentially the same kind of an action as moving the worker to the location of an existing job opportunity. In the one instance we assist the unemployed worker to meet the geographical requirements for employment; in the other we assist him to meet the requirements as to education and experience. The objective in both cases is the same. We take a worker who cannot be provided with a normal job in his present location, or with his present skills, and we qualify him for a job that would otherwise remain vacant.
It should be understood that what is here being recommended is a program of education and training directed specifically and solely toward channeling surplus labor into available jobs. This is the only kind of a training program thus far suggested that is economically self supporting. Our analysis shows that we can profitably create new jobs to utilize existing shills, or we can profitably upgrade skills as a means of filling existing jobs, either of which adds to total employment and produces enough benefits from the added production to more than cover the costs involved. But these benefits are not great enough to cover both the cost of training workers for specific jobs and the cost of creating such jobs when the training is complete. Nor can we justify training employed workers for better jobs under this employment program, as in this case there is no assurance of any direct production of additional values to make the training self-supporting.
Such training may be eminently desirable for social reasons, and in the long run it may prove beneficial economically as well as socially, but it is part of the general problem of public education; it has no place in the kind of an employment program that is here being proposed. It should be remembered that this program is based on a theoretical analysis which indicates that there is an immense reservoir of self supporting jobs in private industry that can be made available by appropriate measures. What we have set out to do is to design a practical plan for this purpose, so that we will be able to guarantee full employment. As pointed out in the earlier discussion, it is the self-supporting feature of this added employment that makes an absolute guarantee feasible, and in working out the details of the program we must therefore be careful to avoid including items which are not self supporting, however attractive they may seem when judged by some other criterion.
This caution is particularly necessary under present conditions because a substantial amount of job training is now being done under government auspices and it would be easy to jump to the conclusion that what is here being recommended is simply more of the same kind of thing. But this is not true. The objectives of the existing program are totally different; they are, in general, social objectives rather than economic objectives. They are not aimed primarily at providing employment but at upgrading the economic status of whole segments of the economy, and this puts them far out of the self-supporting class.
In order to be self-supporting, an employment program must limit its objectives. It must confine itself to providing workers with jobs of the kind which they are now qualified to handle, and training only the relatively small number, if any, that are currently required to take care of definite shortages of certain skills. Furthermore, this training, when and if it is necessary, must be limited to small steps so that the cost is minimized; that is, the need for highly skilled workers should be met from among those who are already skilled, the additional skilled workmen should be drawn from the ranks of the semi-skilled, and so on. Nothing more than this can be accomplished on a self supporting basis. Whether or not the large expenditures that are necessary for the more ambitious programs now under way are actually justified is beyond the scope of this work. In any event they are entirely separate and distinct from anything that is required of a program whose objective is simply to enable guaranteeing full employment.
Handling of “unemployables”
The increasing rigidity of the wage structure has contributed to unemployment in yet another way, by preventing the employment of those who by reason of age, physical disability, or other causes, are unable to meet the full standards of productivity set by the able-bodied labor force. In earlier times when the economic organization was simple enough that the desirability of achieving the maximum possible production was apparent to everyone, these handicapped persons were permitted to undertake such tasks as were within their capabilities, and they were compensated accordingly. The idea of maintaining them in idleness merely because they were unable to perform a full day’s work every day would have been greeted with derision if anyone had the temerity to suggest it. But today, with maximum production as desirable as ever, in spite of all of the smoke screens that have been thrown up to confuse the issue, we are rapidly approaching that very condition. In recent years it has been almost impossible for these people to secure employment in major commercial or industrial enterprises, except where temporary conditions such as a war emergency have necessitated waiving the usual employment policies. Smaller businesses are still carrying the load to a certain extent, but minimum wage standards established by law or enforced extra-legally by the labor unions are gradually driving the substandard workers from this field as well.
It must be conceded that both the labor unions and the legislators who are trying to put a “floor” under wages are aiming at objectives that are not open to criticism. They feel that a certain level of income is necessary to enable the worker to maintain a reasonable standard of living for himself and his family, and the minimum wage laws are designed to force the employer to pay at least enough to meet this minimum requirement. But the effects are far different from those which the sponsors are trying to achieve, as usually happens when economic actions are taken on the basis of sentiment without due regard for economic realities. Minimum wage laws do not force employers to pay the minimum scale of wages to those that are unable to earn them; they merely prevent the employment of such persons. If a minimum wage law were introduced under a truly descriptive title such as “An act to prohibit the employment of persons unable to meet normal standards of productive efficiency” quite a few eyes might be opened.
The same comments apply to the actions of the labor unions in this field. In their efforts to “protect” their wage structures by preventing the establishment of sub-normal wage scales for persons of sub-normal ability they are doing a rank injustice to these handicapped people. There is no question but that the net effect of the minimum wage laws and minimum union scales (so far as the latter are applied to sub-standard workers) has been harmful to the very class of workers they were intended to benefit. Some have received higher wages because of these minimums, it is true, but many more have been forced out of their jobs and on to welfare, and still more have been prevented from securing jobs that would have been available to them at a wage which they could earn. This was one of the major factors responsible for the heavy unemployment in the immediate pre-war years, and it is a large contributor to the present “hard core” of unemployed. The difficulty lies in the fact that minimum wage laws or minimum wage scales are negative only. They do not assure the workers these minimum wages; they merely prevent them from working for less. In order to reach the true objective at which the minimum wage laws are aiming it would be necessary to supplement these negative edicts which forbid employment at sub-minimum wages with positive action that would assure employment at the higher scales.
But the sub-standard workers cannot earn these minimum wages anywhere, and an employer cannot pay them more than they are able to earn, because if he does this, either voluntarily or under compulsion, he soon ceases to be an employer. The truth is that the worker is subject to a limit of the same nature as the survival limit of the business enterprise. If the enterprise is not able to produce enough values from the labor and capital that it utilizes, the income from its operations is not sufficient to keep the business alive, and its doors must close. If the worker is not able to produce enough values from his labor, the income accruing to the employer from the use of this labor is not sufficient to pay the minimum wage, and employment therefore terminates, or never materializes in the first place. One of the essentials of a complete employment program is a recognition of this fact, so that some provision can be made whereby the “unemployables” can be absorbed into productive work. This is another job for the government employment agency. Arrangements should be made by the agency to certify these sub-standard workers so that they can be exempted from the application of minimum wage scales of any kind.
This action, together with the present coverage of the Social Security system, which relieves the employer of any responsibility for the care of these workers after their productive days are over, will remove the obstacles that now stand in the way of employment of these individuals, and if the agency puts forth an effort to find appropriate jobs there is no doubt but that most of them could be suitably placed, especially after the floating labor supply has been eliminated by the full employment program that will be outlined in Chapter XIV. The production effort during World War II gave a practical demonstration of how the total national output can be stepped up well beyond ordinary limits by expanding the working force to include, among other additions, those normally classified as “unemployable”. There is no sound reason why the benefits of this policy should be limited to the increased production of instruments of warfare. We can make better use of it for constructive purposes.
Whether or not persons who are unable to earn standard wages should be subsidized by the community to bring their incomes up to the levels at which the minimum wage laws are aiming is a question beyond the scope of this work. Certainly forcing them out of employment and into idleness is not the answer. Measures to enable them to pay their own way so far as possible clearly constitute the first and most essential step in any sound program.