Full Employment?
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Full Employment? • Posted: Sep 25, 2010 13:39:36Comments WelcomeVote CoolPhotoblogsPurchase a PrintShare

Exactly what would "full employment" look like? Very likely it wouldn't exactly resemble the situation above, but it might not be very different. Imagine a life whose sole purpose would be getting in line to get paid. That's not too much different from life in a feedlot.

Maybe you remember seeing one of those reactionary paintings from the beginning of the Industrial Revolution. One I remember depicts an idyllic countryside dominated by a factory spewing smoke. And, if you look closely you can see exactly what each and every factory worker is doing. At the far right, they take raw materials from a hopper and feed them onto a conveyor headed into the factory where numerous other workers fabricate one part or another part, this wheel and that cog, until all parts are made. Then other workers paint the parts and put them all together into a product, perhaps furniture or farm equipment or a vehicle of some sort. And finally, when the finished product comes out at the end, still more workers pile all those shiny new products into carts and onto trucks and haul them back around to the beginning side of the factory to be dumped into the hopper of raw materials again. Within the painting, nobody buys the products or uses the products. They are just there to keep all the workers happily working away for their pay checks. In how many real world jobs are people toiling away at tasks equally absurd?

I suspect most young people imagine joining adulthood as workers of vital, meaningful purpose, perhaps teaching, or saving lives as doctors, nurses, or EMTs, or perhaps managing huge throngs of workers whose efforts are, in turn, highly valued and meaningful. But the fact is, many jobs of skill, meaning, and purpose no longer exist. True, some have been outsourced to developing countries where people work for less, but many many jobs have also been completely eliminated by the huge gains in efficiencies achieved during the last few decades. For instance, NPR's Planet Money Podcast recently did a segment comparing farm practices in Jamaica with those in the U.S. (#188 of 6/22/10). While their original research question was "Why are poor countries poor?", what they discovered may go a long way toward explaining why the ranks of the unemployed are growing in rich countries.

In their example, a Jamaican farmer compared working both on his own farm in Jamaica and on a similar but larger farm in the U.S. as a migrant worker. He described how on his farm preparing 25 acres for planting, getting the seeds in, watering, and applying fertilizer could take 15 to 25 people most of a week to accomplish. In contrast, on the U.S. farm, he and two other workers could do all those same tasks in a single afternoon. The U.S. farm was 10 to 100 times more efficient and productive with far fewer workers. Consequently, prices for U.S. produce are cheap. But, what are all those displaced and unemployed workers suppose to be doing for a pay check?

That issue has been hanging around for a great many years. It's been a concern for labor leaders and for workers. And it's now becoming a big concern for today's politicians. Interestingly, back in 1968 several economists including Tobin, Samuelson, and Galbraith proposed replacing Welfare with a guaranteed minimum income. President Nixon even liked the idea. The proposal intended that government tax profits resulting from increased efficiencies and redistribute that money to displaced and unemployed workers, guaranteeing a market for those more efficiently produced products. Remind you of that feedlot above? Or of recent economic stimulus packages? Or of that old painting I described? The underlying expectation, of course, was that fewer and fewer workers would be needed because eventually machines would replace them all. All everyone need do would be live off the labor of all those machines, an absurdly idyllic vision to be sure, reminiscent of that old movie from the 1950's with Robby the Robot: Forbidden Planet.

In my humble opinion, the fact of the matter is that economies work by redistributing desired or useful things throughout a social system that is not homogenous. In other words, economies churn with activity because distribution is unequal. As soon as everyone has or can no longer afford all they need or desire, most economic activity will stop. What's peculiar is why we come to believe things above and beyond survival needs are desirable in the first place.

Many would say innovation reinvigorates economic activity by creating something totally new or by putting a fresh face on something old. But, that isn't the whole story. Meaning seems to be equally important. If people don't understand how something new could possibly be desirable, they won't want it. And if they don't want what they don't already have, no renewed economic activity will result.

The bottom line is that economic activity will be slow and unemployment high as long as old ideas and old desires have become homogeneously distributed throughout our society, or because what we need or desire now costs more than we can afford to pay. Economic activity will increase and unemployment decline when fresh interesting exciting ideas inspire us toward renewed efforts in pursuit of what we now think we need.

But that is perhaps an absurdity of a another kind, because things hardly ever turn out to be quite as wonderful as we hoped.

It's interesting to note that not being able to afford what we need or desire is functionally equivalent to a relatively few people holding all the money. Innovation to the rescue: It has recently been reported that a few communities in Europe have succeeded in reinvigorated their local economies by issuing local currencies that can only be traded locally. Hence, it now becomes clear that while money isn't everything, once you have all of it, it may not be worth anything at all.

Sunday, August 2nd, 2009