Gavin Kelly, writing in the Guardian, echoes the clarion call for full employment which readers around here have heard with some regularity (Gavin is the executive director of the excellent UK think tank: the Resolution Foundation).
His core argument is familiar and resonant, and generally maps well onto our own debate, though our big banks are no longer zombies. [A better analogy in the US case (I’m thinking of the current regulatory and tax debates) is that the banks are like a dog that we found severely injured at the side of the road, took home and nursed back to health. Then he attacked us.]
High unemployment, as well as ruining individual lives, destroys our fiscal health. High employment restores it. To recover from our current crisis and then meet the costs of an ageing society – without eviscerating support for the young and those of working age – is going to require major increases in the numbers working.
By way of contrast, those of a fatalistic mindset believe that the UK is afflicted with such intractable problems that to cast ahead to the possibility of full employment is to indulge in fantasy economics. Those drinking at the well of economic pessimism see an economy hobbled by zombie banks, debt-drenched households, fiscal austerity, and a somnolent export sector. It hardly looks poised for a jobs boom.
Getting back on the path towards full employment, even if it’s a painfully long one, will require…deft…policy choices that avoid the pitfalls of complacency and fatalism. Some of the elements are likely to involve an expansionary macro-policy tempered by measures that puncture potential asset bubbles; a revamped childcare system that makes it worthwhile for both parents to work; and tax reform that makes hiring labour more attractive and sitting on cash piles less so.
As Kelly points out, and as I stressed here, the goal of full employment was a much more conspicuous part of post-war US and the UK policy agendas than it is today. Why is that?
Here’s what I wrote a few weeks ago:
[Full employment] was a central goal of the Democratic Party, labor unions and advocates of social and racial justice.
And it usually worked. While conservatives and businesses pushed back — tight labor markets meant more worker bargaining power, higher wages and less profitability — between 1949 and 1979 the market was at full employment over two-thirds of the time. Since then, it has been at that level just a third of the time.
How did this happen? Both the politics and economics are implicated.
Politically, as union power declined, the concerns of Democratic policy makers shifted from working-class issues like jobs and toward the concerns of upper-income constituents, like inflation, taxes and budget balancing.
Add in large and persistent trade deficits, high inequality, misallocation of too much capital to the finance sector, along with the fundamental point that high unemployment hurts the working class more than the asset class (and it’s the opposite with inflation), and you’ve got the core of an explanation as to why we don’t hear about full employment so much anymore. (The tradeoff between unemployment and inflation is the connective tissue in that argument, though for years many economists pegged the unemployment rate consistent with stable inflation too high.)
Kelly argues that the “politics of full employment” could elevate politicians seeking an optimistic answer to austerity politics. In the US case, which do you think sounds better?: “we can’t afford retirement security or investment in our schools!” or “we must ensure that all job seekers have the opportunity to contribute to our economic growth and their economic well-being!”
If you answered, “the second,” I agree. But here’s the thing: it’s also the one that’s true.