Getting to Zero Employment: The problem of unemployment is far worse than you imagine (or they admit)

by Jehu

Shown above is the labor force participation rate since World War II. The signs are not good. All the gains in labor force participation since the mid-1970 have been erased. Labor is going away. (St. Louis Federal Reserve Bank)

This is the second part of my post, “Getting to zero employment”, a critique of a 2013 book by Dean Baker and Jared Bernstein, Getting Back to Full Employment.

In the first part, I showed that neoclassical economic theory admits there is a very large mass of unemployed that fascist state economic policy tools cannot help using conventional Keynesian (broadly defined) state deficit spending. Baker and Bernstein dispute the size of this problem and the extent to which present unemployment is structural, but they do not dispute the neoclassical assumption that some measure of unemployment is immune to conventional policy. This means even under the most optimistic assumption a fairly large population of unemployment would remain.

Employment and wages

In my opinion this is a problem because in a society like our own, where access to the means of life is predicated on wage income, the limitations of fascist state economic policy leaves more than 100 million workers locked out of the labor market.

The question has to be asked, if 100 million workers cannot sell their labor power, how do they survive? The social welfare state in the United States is hardly known for its generosity as everyone knows; with millions living without any income. And not just income: they have no place to live, no access to medical care, and no opportunity to improve their education.

Allegedly well meaning progressive politicians and their supporters realize this is a problem, but imagine it can be addressed by a motley collection of programs that address each specific issue piecemeal. Some, more radical types, have gone a bit further by calling for a jobs guarantee and/or a universal basic income. The problem these various proposal seek to address is the limited effectiveness of conventional Keynesian policies in curbing unemployment at the NAIRU, the point where no additional employment adds to GDP.

As the Right (defined here not only in terms of the GOP, but also the mainstream of the Democrat Party) constantly insists, in a society founded on wage labor, the expectation must be that every able-bodied person has a job; no one should be dependent on open-ended state handouts simply because they are unable to find a job.

The problem I have with both parties to this debate, of course, is that the conventional economic policies on which the arguments of both the Left and the Right are premised have clearly been unable to eliminate unemployment for whatever reason so far.

Nevertheless, there is no reason why we should be proposing an alphabet soup of social welfare programs simply because conventional policy has failed. It is obvious that in a society founded on wage labor, where access to the means of life is dependent on the capacity of a worker to sell her labor power, any constraints on this capacity condemns a large number of people to poverty and depresses the wages of the employed workers.

We need to acknowledge the failure of conventional employment policy and replace it with an effective policy.

Unemployment is premised on wage labor

This is not just an argument against state economic policies that fail to address unemployment. In my opinion, it is an argument against wage labor itself, against making employment dependent on whether this employment adds to aggregate GDP.

People should be employed because they cannot eat unless they have a job, no matter the impact the additional employment has on GDP.

However, the objection can be made that ensuring every wage worker a job does nothing to end wage slavery and dependence of millions on wage labor. I agree with this objection: our approach to unemployment must not simply aim to end that social ill, it must also progressively eradicate its root cause, wage labor.

Even under the most optimistic assumptions, conventional fascist economic policy, as well as the more radical alternatives for a state jobs guarantee and basic income, do nothing to attack the ultimate condition of unemployment: wage slavery itself. Like food stamps and other palliatives, these alternatives seek only to compensate for the social consequences of wage labor, not abolish them.

The real criticism of conventional economic policy is not just that it fails to really address a massive portion of unemployment. It also fails to address the consequences of its own failure.

As Baker and Bernstein argue:

“[Slack] employment and its corollary – diminished bargaining power – get overlooked, in no small part because policymakers assume full employment is out of their control, though it is decidedly not. To give up on full employment is a mistake, because in an economy in which collective bargaining is minimal in the private sector and under siege in the public sector, full employment is the only route for working Americans can get ahead. Rising living standards for the majority require a labor market that is tight enough to force employers to raise compensation to the level where they can attract and keep the workers they need.”

The writers condemn themselves with their own words, since they do not actually propose a program to completely eliminate unemployment, but only to reduce it to the point where additional employment no longer adds to GDP.  While they disagree with mainstream economists that we are presently at or near that point today, Baker and Bernstein admit a limit on conventional policy exists at some level where tens of millions would be still unemployed.

If this is true, their proposals can attenuate slack but never eliminate it; allowing competition between workers to continue driving down their own wages.

The true extent of unemployment

Numbers matter.

Unemployment, however, is one of those sorts of numbers for which what matters most is how far it can be defined out of existence, how far it can be minimized. The reason why reducing the amount of people who are considered to be out of work is important is that it hides the extent of the ineffectiveness of present policy.

So, for simplicity, I am going to take all of my data from this table at the Bureau of Labor Statistics (BLS).

According to the latest data provided by the BLS, there are approximately 254 million persons of working age in the United States. Of this number, approximately 160 million persons are in the active civilian labor force; 152 million of these persons are actually employed; with 102 million outside employment for one reason or another.

All discussion of the problem of unemployment in our society centers on this last figure: the 102 million people who are not employed: a number perhaps ten times that admitted by even the pessimistic estimates of the scale of the problem.

This number is by no means fixed: it will rise or fall depending on economic conditions in the country. During periods of recession, the number of those employed increases relative to the total labor force. During periods of expansion, the number employed decreases relative to the total labor force. The total number of unemployed is also influenced at the margin by conventional fascist state economic policy, which can, through its various tools, forcibly raise the number of employed persons.

Moreover, the total labor force is constantly expanding as the population of the United States grows over time, which means the ratio of those employed to those who are unemployed also changes. For most of the decades since World War II, the percentage of the population employed steadily increased. However, as shown by the chart above, since 2000 or so, i.e., most of the last twenty years, the percentage of person employed relative to the total labor force has been falling.

No one knows why it is falling.

No one know how to reverse the fall.

No one really wants to talk about it.

Real communists love to talk about things no one else wants to talk about, which is why they aren’t invited to Washington cocktail parties.

Is there a real limit to employment?

The first question we need to ask is whether there is a limit to employment?

Of course there is.

The limit on total employment is the determined solely by the total population of a society that is to be employed. This limit is by no means predetermined. For instance, despite the argument by economists that employment had plateaued during the 1930s, in the period prior to World War II the fascists drew on the massive unemployed population of the industrialized countries to serve as additional labor power for rapid military expansion.

The state can, if it is so determined, easily extend employment beyond this point in times of national emergencies or to expand its military force to threaten others. To achieve an aggressive expansion of employment for a military buildup simply requires the state employ means other than conventional Keynesian economic policy tools.

This much has been acknowledged by bourgeois economists for centuries. It is so obvious, no less than Keynes himself remarked on it in 1933:

“Some cynics, who have followed the argument thus far, conclude that nothing except a war can bring a major slump to its conclusion. For hitherto war has been the only object of governmental loan-expenditure on a large scale which governments have considered respectable. In all the issues of peace they are timid, over-cautious, half-hearted, without perseverance or determination, thinking of a loan as a liability and not as a link in the transformation of the community’s surplus resources, which will otherwise be wasted, into useful capital assets.”

In both Hitler’s Germany and FDR’s United States, the alleged limit on employment that appears to play such a determining role in bourgeois policy options turns out to be nothing but an admission that conventional Keynesian policy tools are limited in effectiveness to the point where additional employment adds to civilian, i.e., non-military, aggregate output.

In peacetime, the argument goes, the state should do no more for employment that would increase aggregate GDP. The limit on employment implied by the NAIRU is totally self-imposed by the state on its own policy options. It has no more basis in reality than any other category of bourgeois political economy. It is a limitation that arises solely from the capitalist mode of production.

To summarize this post:

1. In our society, employment is the only means by which the vast majority of society (those who are not capitalists) can access the means of life.
2. Being unemployed, therefore, is no little problem; it amounts to being utterly cut off from all means to life. The limited effectiveness of conventional policy thus condemns a very large population of persons to living without the means to life.
3. Further the condition of the unemployed is acknowledged by Baker and Bernstein to seriously erode the wages of the employed and thus metastasizes throughout society, spreading poverty among the entire working class.
4. Government statistics suggest the true extent of unemployment is far larger than those who are officially designated as unemployed for purposes of state economic policy. The official definition of unemployment is a convenient facade to hide the gross ineffectiveness of Keynesian economic policies to spur employment below the limits imposed by the capitalist mode of production.
5. In previous periods, the United States has had no difficulty in greatly expanding employment beyond the limits of conventional economic policy during times of emergencies and wars. This expansion, however, required measures well beyond those presently employed by the state.

It might seem paradoxical, but given the dependence of the vast majority of society on the sale of its labor power to access the means of life any effort to get to zero employment has to assume zero unemployment as the only effective path to that goal. The opposite approach is unthinkable, since it assumes a declining portion of society able to sell their labor power and the massive expansion of the population utterly cut off not only from labor, but from any access to means of life. This, in turn, implies an ever increasing mass of unemployed person, without any means to life, depressing the wage at which they will sell their own labor power to get a job and thus depressing the subsistence of the working class as a whole.

I will turn to this next.