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Matt Yglesias, pivoting off a report showing a rapid collapse of labor’s share of national income, rhapsodizes about how great full employment was back in the 90s:
Look at that huge increase in the labor share from 1996 to 2000 and you’ll see what you really need to know. That’s not a time when Americans grabbed their pitchforks and burned down the mansions of the rich. Indeed, as I recall it the rich were actually doing quite well at the time and the stock market was soaring. But the average wage earner was also enjoying a great run because unemployment was super-low.
It was a crazy time. The way it worked was that if you weren’t happy with your job, you could just quit and find a new one. Which meant that if your boss was earning fat profit margins, you could credibly threaten to quit and get a raise. That was great for people who got raises, but it also had awesome knock-on effects all across American society. Some people, for example, were in industries that were genuinely low margin and couldn’t afford to hand out raises. So experienced workers would quit those jobs, and low wage employers had to invest time and energy in pulling whole new people into the labor market. It was raises for the previously employed, and new labor market opportunities for folks (high school dropouts, ex cons) who’d be considered “unemployable” today.
And it got even better!
In the face of persistent labor shortages and needy demanding workers suddenly it was clear that productivity improvements rather than hard-ass bargaining was the only viable path to higher profitability. And so productivity rose! Rather than endless rounds of givebacks and lockouts, managers were accepting the need to pay people or lose staff and focusing on finding ways to get more output. It was awesome.
All very nice. But this illustrates something that only became clear reading Doug Henwood’s Wall Street; namely that the owner class does not particularly like full employment. Every one of those positive effects Yglesias notes above are a pain in the neck for the bosses, and more importantly, undermines their social position. Bosses don’t like gigantic financial crises a lot more, which is why many of them were shouting quite loudly that we needed stimulus back in 2008-9, but when the crisis was over, the resulting mass unemployment bothered them only a little, or not at all. To quote the best essay I’ve read on this topic, by Michal Kalecki:
Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure.’ The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.
I do agree that full employment, especially sustained for years, can work wonders. But getting there will be over the sullen opposition of owners and creditors.
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Paul Dirks on September 27, 2012 3:53 PM:
http://phd9.blogspot.com/2012/02/while-everyone-goes-back-and-forth.html
paul on September 27, 2012 3:58 PM:
Remember the "jobless recovery" of the early 00's, when the market was going up but no one was getting rehired and real wages actually fell? Employers liked that a lot too.
Unfortunately, the only way to keep people buying stuff when they were earning less was to inflate the housing market, with results a few folks might recall.
jrosen on September 27, 2012 4:19 PM:
Karl Marx noted that a long time ago. "The reserve army of the unemployed" serves several purposes: enabling employers to bargain down wages, provide a quick crew of strike-breakers (i. e. scabs), cannon fodder for the military (at least three meals a day with the occasional risk of losing a limb, or your life). The down side is that they unemployed also depress the purchasing power of the market, and, relieved of the creaking Hegelian machinery, isn't this what Marx really saw as the inherent "contradiction" of capitalism? His major work was "Das kapital", not "Das Socialismus". He was not wrong about everything...far from it!
Ron Byers on September 27, 2012 4:35 PM:
Ryan, neither of your quotes ring true to me, and I lived through those times. Wages were relatively better then but they weren't keeping pace in the 1990s. A lot of people had to borrow money (the housing bubble was the greatest manifestation of that borrowing) to keep up with their middle class dreams in the barest hope their wages would catch up, but they never would or could because the bosses were pocketing the profits that flowed from the technological gains that marked the 1990s and early 2000s.
Businesses need demand to survive. The real estate bubble provided the cash needed to drive demand. Once the real estate bubble burst, demand dried up, businesses failed and jobs disappeared. We have never learned how to share productivity gains with consumers. Until we do we are never going to have the kind of economy we used to enjoy.
By the way one of the arguments behind converting from defined benefit (pensions) to defined contribution retirement plans (401K plans) was the employees would share in the profits of their of their employers via continuingly rising stock prices. That didn't happen because most stocks were flat in the 1990s with a few star stocks dragging the rest upward. With no incentive to declare dividends corporations hoarded money and paid out giant bonuses to their managers.
Here is an idea, make dividends tax deductable at the corporate level. Remove the excuse corporate managers have for not paying dividends. At the same time treat dividends as ordinary income. Together those simple changes might just change the game.
POed Lib on September 27, 2012 4:35 PM:
What is needed is a restructuring of the tax code to highly tax corporate reserves, to get the money being horded out and creating jobs. Plus the other thing is the end of the H-1b, J-1, L-1, F-1, O-1, and all the other job theft visa programs.
Mitch on September 27, 2012 4:45 PM:
I have often wondered and worried about this sort of thing, due to a number of modern issues that must be considered when speaking about full employment.
Before the modern era, there was a surplus of potential workers, and with it the lowered quality of life for those who were not leaders and owners. Many (if not most) historians consider that the plagues of the late Middle Ages gave birth to the modern era by killing a third of the population of Europe, thus making workers more valuable than mere serfs. Full employment (and a healthy workforce with good morale) was necessary in a way that it had never been. This, in turn, gave birth to centuries of increasing civil rights and a much more educated populace.
We see this more recently during the Post-War Era. Much of the world was devastated by WWII, but American manufacturing was untouched. We went from being a medium-powered nation to being the Big Boys on the Block, in part because we had the work force and infrastructure to supply the world.
But now, there is a surplus of cheap workers available thanks to outsourcing. And technology is also decreasing the need for workers. Even without outsourced labor devaluing workers, the rise of advanced tech will simply eliminate many possible jobs for those who need them.
An obvious example is that less farmers are required to supply foodstuffs for everyone—this has been going on for decades. Machines used in production lines have also been having the same effect for many years.
California just legalized self-driving cars. Automobile manufacturers consider this to be the way of the future; safer and more efficient traffic and no limits on who can own a car due to no need for a license. Expect self-driving cars to be common by mid-century, and the norm within a few decades after that.
Well, there were 239,900 taxicab and chauffers according to the 2010 Census* and every single one of them will be utterly useless before we know it. That's almost a quarter of a million people whose postion will be eliminated by advanced technology. And this is an industry that is fairly easy to get into for anyone—all you need is a license.
So all of this does raise some interesting questions about the future. A surplus of workers generally results in bad news for the working classes and civil rights—and a rise in the "sins of the plutocracy", as they battle to continually maximize their bank accounts and profits.
And, I hate to say it, but a "service based" economy is not a recipse for full-employment either. There will never be as many "white collar" jobs as there are people available, nor is everyone capable of persuing advanced education due to multiple factors. That's just a fact, whether we like it or not.
So it is not just the "sullen opposition of owners and creditors" that causes lowered employment. There are social and technological factors that must be taken into account. The sad truth is that full employment may never happen again; society will have to change to account for this.
*Source: http://www.bls.gov/ooh/transportation-and-material-moving/taxi-drivers-and-chauffeurs.htm
boatboy_srq on September 27, 2012 4:49 PM:
"Full employment" is at once a misnomer and a control mechanism.
The misnomer comes from the fact that in economics, "full employment" still by definition leaves some small percentage of unemployment in the marketplace, and by the definitions of the US labor marketplace, "unemployment" doesn't count those who have "left" the labor pool (99ers spring to mind, as do the under-the-table labor common to households [nannies/housekeepers/gardeners] and also the self-employed who are underemployed, and more than a little farm labor).
Control mechanism, for the reasons that have been stated (the "jobless recovery," the downward pressure on compensation, etc). And also for one other: control of the populace. Maintaining at least some measurable percentage of the population in an un- or under- employed condition at once keeps the labor pool on edge ("that could be you on the dole") and reinforces the Xtian bias against the wickedness of indolence ("there are X% of the people who do no work whatsoever!"). It helps keep workers in line, and helps keep the Xtians focused on a) not being in that X% of the "lazy shiftless bums" and b) still being better than that same X% simply for being productive. Yet, "full employment" is held up as some fantastical idea: at once a measure that could never be reached while the capitalists control the machinery of industry, and an excuse to beat up those less fortunate/productive/Blessed™ for not being worthy simply because they don't have employment.
This is how Capital uses unemployment to keep Labor in line: through faith - and shame and the elitism of the Prosperity Gospel.
T2 on September 27, 2012 5:11 PM:
one of the offshoots of the Great Recession is that it ushered in a new era in the workplace. As jobs were lost, technology was put in their place and business' discovered that times had changed - the internet and general connectivity due to the digital age basically allowed lots of jobs to be eliminated. Permanently. Along with the GOP plotted state government job-cuts designed to make Obama look bad, this is a factor leading to very slow job growth. 3-4% unemployment may be a thing of the past.
Doug on September 27, 2012 5:23 PM:
Ron Byers, there's no need to redefine dividends PAID OUT by corporations as another tax-deductible business expense. Besides being illogical, and there's already too much of THAT in the tax code, it doesn't address the overall incompetence of too many corporate chiefs as expressed in their the-end-of-quarter-is-all-that-matters view. Would YOU plan your personal finances solely using the next three months as the end-all and be-all?
One argument often heard in favor of NOT taxing corporate dividends at the source is because that's "double taxation"; first on the dividends as part of the corporation's profit before they're distributed and again as income on the part of the receiver. Part of that is already in place; it's why dividends are taxed at a lower rate than other income; cf, Romney's tax returns (such as they are).
The argument in favor of taxing dividends as both profit on the corporation's part and income on the shareholder's part is that, should we NOT tax that money on both levels, how can we justify taxing money I spend AFTER I've spent it? Why should a corporation be allowed to dispense tax-free funds and not the average citizen?
In my opinion, maximizing profits should ALWAYS be second to maximizing the viability and sustainability of the company and THAT, it seems to me, is where today's CEOs and COOs fail. There is no "long view" taken as that might decrease profits for even a short period. OTOH, high marginal income tax rates force corporations, whether privately held or public, to minimize any profit made by the corporation by focusing as much income as possible on the operations of the corporation itself. Whether that's done via R&D, facility expansion, modernization, or increased wages is immaterial; what IS material is that those profits are utilized and spread throughout the economy, rather than being concentrated in the portfolio/s of one or two people.
After all, there's a limited market for solid-gold faucets, even in this country...
RepublicanPointOfView on September 27, 2012 5:25 PM:
Cooper, you are an idiot!
We business people have known for ages that a quality, competent employee who is living paycheck to paycheck and fearful for his/her job is the best employee to have!
We also know that high unemployment is best because it is helpful in depressing wages.
esaud on September 27, 2012 5:39 PM:
Ditto RPOV above: 8 to 9 percent unemployment is a real sweet spot to big money interests.
It keeps the riffraff in line, afraid to ask for a trip to the restroom, let alone ask for a fair share of corporate profits.
But not so high that the pitchforks come out.
Republicans (and some Dems) have no interest at this point in "curing" unemployment.
George on September 27, 2012 6:07 PM:
The government wants full employment and the military hates full employment. The military spent 100s of millions of dollars training people and then having to dish out bonuses to keep them in during the late 90s/ early 00s. It cost the government a lot of money. It changed the military in some sense as well, as they had to go to the bottom of the barrel to find people to come in. Now? The recruiters sit in their offices...
She did well on September 27, 2012 7:47 PM:
It takes college education, who-you-know, and ability to choose a unique setting for a career--as some have, for example, in psychiatric care and treatment. I almost think it takes a discerning look at the future, as artisans for the common good.
Not so sure about corporations --always mercenary by nature. People let go without just case...corporations appear to be rather careless entities, seemingly without rules?
Stick by a good career and work overtime if you are able.
Deliver up, prevail upon.
Rick B on September 27, 2012 9:35 PM:
@paul
Exactly right. But it goes further back than that. Raises in real terms ended when Reagan was elected and broke the Air Traffic Controller strike. There have been no raises for workers since 1980.
To keep the economy growing the banks became much more liberal about providing consumer loans. The middle class was suckered into credit card debt. The dual income family had already started, but it took off after the Reagan administration. It took two incomes to support a family with "normal" expenses (meaning increasing expenses.) Then the second income ceased to be enough for to pay the bills, so the banks allowed second mortgages to take advantage of the "increasing" value of homes.
This worked until the late 90's when the only way to keep the total consumer demand growing was to lower interest rates and inflate the values of homes. This worked until after the 2004 election, when Greenspan started increasing the interest rate 1/4% per month until the housing bubble crashed.
The Wall Street banks have run the entire process, to include eliminating Glass-Stegall in 1999.
v98max on September 28, 2012 12:56 AM:
Remember the later years of the Clinton Administration? News outlets were running human interest stories about how difficult it was to attract and keep decent help, but what one creative employer is doing to change all that.
Steve LaBonne on September 28, 2012 8:59 AM:
I think some heads on pikes would be a very effective way to focus their attention on the problem.
paul on September 28, 2012 9:20 AM:
From the 40s to the 70s in the US we did a pretty good job of sharing productivity gains with consumers, aka workers. Then the deliberate recessions and the union-busting and the rest of the rightwing arsenal. In other countries, wages are still tracking productivity.
Vicente Fox on September 28, 2012 12:02 PM:
jrosen hits the nail on the head. Karl Marx got it right a long time ago. But TPTB have succeeded in painting his analysis as a failure because of the fate of the USSR.
Marry White on September 29, 2012 8:24 AM:
Everyone is happy to litigate. Bills Gates once said, don't share anything with me you don't want me to use later. Business need to focus more on customers and less on competition.
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