Dr. King and Full Employment…Again

January 20th, 2014 at 1:18 pm

Last August, on the 50th anniversary of the “March on Washington for JOBS and Freedom,” I wrote this post in remembrance of Martin Luther King, Jr. and in particular, his advancing of full employment to the top of his civil right agenda.  Given the importance of the theme of full employment to this blog, birthday salutations to the great man, along with a graph, are warranted.

Dr. King, toward the end of his life, clearly recognized the role that full employment played in providing economic opportunity for African-Americans.  The Selma boycott in which he was instrumental tapped the economic clout of the black community.  Yes, a large part of his life’s work was to convince racists of their spiritual corruption, but he was not about to wait for their enlightenment to make progress.

Essentially, full employment conditions raise the cost of discrimination.  It’s “cheap” and easy to discriminate when there are a lot more workers than jobs.  But when labor demand outpaces labor supply, racist employers risk leaving profits on the table if they indulge their racism to avoid hiring minorities when they need them to meet demand.

The figure plots the ratio of white to black employment rates against the overall unemployment rate.  That ratio has never been ‘1’ but a) it’s clearly cyclical, moving up and down with the jobless rate, and b) it hits its low-points when unemployment is very low.  Both in the early 1970s and in the latter 1990s, the jobless rate was at or even below the full-employment-unemployment rate (NAIRU), and the white/black employment ratio was at its lowest.

Those of us pulling for full employment may not always remember that we’re carrying on in the tradition of Dr. King, but today seems like a good day to remind us.

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Source: BLS

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8 comments in reply to "Dr. King and Full Employment…Again"

  1. urban legend says:

    I’m 100% behind your emphasis on full employment, but wonder if acknowledging the NAIRU as an important concept isn’t at cross-purposes with the objective. There was no accelerating inflation in the late 1990s, so by definition we had not hit a NAIRU even when unemployment dipped as low as 3.7% — and despite continuing deep poverty and illiteracy in some regions, the employee-to-population ratio almost reached 65%, over 6 percentage points higher than it is now. (Neither was there accelerating inflation in the early 1950s, when the unemployment rate dipped into the 2 percents range.) For a NAIRU to be activated, labor has to be strong and demanding — and it must be doing more than achieving catch-up wage rates after more than a decade’s worth of stagnation. Labor is not strong, and it will be many, many years before unions puff themselves up enough confidence become demanding of more than the catch-up increases we need to see.

    Everyone should stop wringing hands about the NAIRU. It should be of less-than-zero concern in times like these.


    • Jared Bernstein says:

      It’s a fair point, Urb, but telling an economist, even a moderately enlightened one, not to worry about the NAIRU is like telling an aging toddler not to worry about the monster under the bed. You’re old enough to know it doesn’t exist, maybe even a little embarrassed by the fact that you still worry about it. But still, you can’t help being nagged by the fear: “what if it’s real!?”


      • urban legend says:

        Good one! Thanks, I’m thrilled to get such a personalized response.

        I just say, compare the strength of labor when the concept was codified vs. today. Unions will be so thrilled just to see the wage rate and membership curves “bend” upwards that it will take years upon years for accelerating demands to kick in. Public sector unions have their own special constraints. Just the private sector membership rates should be enough for a major revision in how the NAIRU is imagined to operate.


    • Robert Buttons says:

      Price discovery is impossible in our fed-planned economy, therefore terms like “catch up wage rates”, “inflation” and especially theoretical constructs like NAIRU become meaningless.


  2. Perplexed says:

    -“Essentially, full employment conditions raise the cost of discrimination. It’s “cheap” and easy to discriminate when there are a lot more workers than jobs. But when labor demand outpaces labor supply, racist employers risk leaving profits on the table if they indulge their racism to avoid hiring minorities when they need them to meet demand.”

    This is just another form the coercion enabled by the 1914 Clayton Act preventions of those providing their product (the 95%, who’s product is labor) from having access to equal protection under the law. Without this provision in this Act, no employer, racist or ortherwise, would be empowered to coerce their employees with threats of unemployment. They would be forced to spread the available work across all qualified “producers” of that product or risk treble damages by excluding workers and imposing these damages on them. By removing the option to spread the risk of unemployment across all the producers, and instead allowing it to be concentrated on the few “unlucky victims, this Act enables the tyranny of majority and coercion that Dr. King fought so hard against. Economists who continue to support this coercion and not acting to speak out against the Constitutionality of this provision are working against everything King fought for, not in favor of it. King’s birthday and the 100th year anniversary of this coercive law might be the perfect time to begin the campaign to finally put an end to this tyranny. The damage continues to accrue, and economists, probably more than other group, have tremendous power to bring an end to this damage, just by speaking out against it. Loser Liberalism is an empty solution to this tyranny; Constitutional protection is what’s called for. No new legislation is needed, only enforcement of our existing Constitution. If we all got behind Dr. King’s leadership, this could be brought to an end quite quickly. There’s really no excuse for it, certainly not a “scientific” one.


  3. Tom in MN says:

    Unfortunately, this plot also shows that no progress has been made in the last 40 years.


  4. Robert Buttons says:

    “Those of us pulling for full employment”

    Nobody is against full employment—we just differ on the means to that end. FDR was prescient:

    “not that the system of free private enterprise for profit has failed in this generation, but that it has not yet been tried”


  5. jeff says:

    I agree with Tom, actually it shows that racial economic inequality is worse. Though I think this has to do more with the economic collapse of the working class than racism per se.


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