Unemployment, well-being and capitalism

The call for “joined up government” is an old one. It should apply - but doesn’t - to the coalition’s attitude to the unemployed.

Cameron has said: “I do believe government has the power to improve wellbeing.” If this is so, then you’d expect a big part of public policy to focus upon how to improve the well-being of the unemployed. This is because these are, on average, significantly unhappier than other people - even the divorced - and it is probably easier to make the unhappy averagely content than it is to make the happy ecstatic.

But the coalition is not obviously solicitous towards the well-being of the unemployed. It prioritizes placating ratings agencies over creating jobs; its lackeys insult those who have suffered unemployment; it harasses the unemployed into workfare even though such schemes are of questionable efficacy; and it does little to combat a mindset that sees the poor, rather than poverty, as disgusting.

This inconsistency between a concern for well-being and a lack of concern for the unemployed is not, however, simply an intellectual failing. It reflects the fact that capitalism* requires that there be not just unemployment but that the unemployed be unhappy. I say so for three reasons:

1. Capitalism requires an excess supply of labour in order to bid down wage growth and industrial militancy. When Norman Lamont said unemployment was a “price well worth paying” to get wage inflation down, he was just blurting out the truth seen by Kalecki 50 years earlier - that “unemployment is an integral part of the 'normal' capitalist system.”

2. Capitalism needs the unemployed to look for work - to be an effective supply of labour. This requires that they be “incentivized” to seek jobs by meagre unemployment benefits and by being stigmatized. In other words, the unemployed must be made unhappy.

3. Blaming the unemployed for their plight serves a two-fold function in legitimating capitalism. It distracts attention from the fact that unemployment is caused by structural failings in capitalism, sometimes magnified by policy error. And in promoting the cognitive bias which says that individuals are the makers of their own fate, it invites the inference that, just as the poor deserve their poverty, so the rich deserve their wealth.

In short, in terms of attitudes and policies towards the unemployed, there is an ineliminable tension between capitalism and the promotion of well-being.

 * Note to right-libertarians. By “capitalism” I do NOT mean “free market economy” but rather a system in which large companies are run for profit by hierarchical structures for the benefit of a minority of people (which only sometimes includes shareholders). 

Comments

[Adam Bell]

Hmm. The alternative to always having a degree of unemployment (not counting job 'churn') is some form of mandate for full employment as a requirement on Government. I'm not aware of any research on the happiness differential between the employed and the unemployed that wasn't undertaken under a broadly capitalist system, meaning I'm unclear whether a job given to you regardless of qualifications or effort would have the same happiness-enhancing value as a job gained under capitalism.

To me, therefore, it's unclear whether the diggers of Keynes' holes would've preferred a life on benefit. Without clarity on this issue, you're rather supposing that the alternative would be preferable on happiness grounds. Cameron is well able to claim that capitalism is better for individual well being on average than the alternative in the absence of data on the alternative.

[Account Deleted]

Just because Cameron believes government can improve wellbeing does not mean that you should "expect a big part of public policy to focus upon ... the unemployed".

The PM may just be acting in the interests of his class, e.g. improving tax breaks for Norland nannies and ensuring that all TV and film scripts are quality-controlled by Julian Fellowes. His speech, which you link to, talks of the "good life", which implies a set of ethical and economic assumptions, not to mention a 70s sitcom.

Even if you think he meant wellbeing to apply to all, this may just be cover for the usual conservative social agenda. I'm sure Nadine Dorries believes she is advancing wellbeing among women. Again, Cameron's speech quoted immigration, sexualisation and booze as areas where wellbeing could be improved by government.

Your point about Capitalism's love/hate relationship with the good ol' reserve army is spot on. I'd add a fourth point to your list. The unemployed are a moral examplar for the rest of society: cause trouble and you will lose your job and be sucked down into the underclass.

Most of the successful business people I have known (excluding the psychos) admitted they were primarily driven by fear of failure. Capitalism depends on this anxiety to drive self-regulation and conformance. A visible "failed" class is necessary propaganda.

[just some guy]

Cameron has said: “I do believe government has the power to improve wellbeing.”

Perhaps he meant "of those who are already well-off."

[Luis Enrique]

This is another one of those posts that sounds like it is arguing that capitalism is a bad thing and we ought to desire something else, without giving any clue as to how anything else would be better.

All forms of economic organisation need to provide people with a reason to work, and need the unemployed to seek employment. How would alternative forms of economic organisation go about that?

Perhaps we could make working more fun than not working?

I think it's true that mass unemployment allows bosses and owners to secure a larger portion of the surplus, so I agree these parties may enjoy a certain level of unemployment. I'm not sure capitalism requires it.

Can we agree that all non-totalitarian forms of economic organisation will have some frictional unemployment as a consequence of creative destruction, even if those so unemployed are well looked after, so in that sense "require" some unemployment. The question is, does capitalism require unemployment in excess of that level. I don't immediately see why.

[Bialik]

If I was prime minister...
Job centres would be run by the state, private companies, co-operatives, local community bodies and trade unions, and the unemployed would have a choice of where to go. The ones that offered extras - say, coffee and career books from the private contractor and 'advisors' who actually have certificates in something; the local group might have advance knowledge of jobs, closures, voluntary opportunities etc, and require volunteers to run the centre itself; the union-backed centre would offer sector expertise and a 6 months' free membership. A council-run centre could offer a mobile library presence every day for a few hours...and so on.

The group with the most claimants expressed as a proportion of the unemployed in any area in a 12 month period would get a bonus, not the group that offloaded its claimants as quickly as possible to mickey mouse jobs.
The centres would have some statutory duties imposed on them by the state (until there's a citizens wage, unemployment benefit should go to the unemployed) but would be encouraged to offer extras. Other basics could be a bookable office for interviews, workshops for people who want to see if they have marketable craft skills, and a notice board in which claimants with business ideas can advertise for partners, freelancers etc.

Claimants would be free to leave one centre and join another.

Secondly, jobcentres would provide services for the employed as well as the unemployed. Because the best way to get a job is to meet and mix with people who are employed. Workers would be offered legal advice, careers advice and so on so that jobcentres are no longer a losers' waiting room but a shared space for people who want good jobs and conditions.

Thirdly, there would be a commission for employment, like the low pay commission, that would lobby the treasury, give statutory guidance on the effect of government policies on employment. With its international partners, it could be a third member of the European social partnership with trade unions and employers. (If that means anything.)

(And boatowners would come under the Leasehold Reform Act so we could challenge ridiculous service charges and buy out mooring licences.)

[chris]

@ Adam, Luis - I didn't intend this to be a "smash capitalism and replace it with something nicer" post. I rather merely intended to point out that some apparently desireable policies are ruled out by capitalism. This claim is consistent with the possibility that capitalism is the least worst economic system available to us.

[Luis Enrique]

Well okay, but you could have written that some apparently desirable policies, like making unemployment benefits so generous that the unemployed have no incentive to seek work, are ruled out in any system that does not force people to work by other means. If you write that "capitalism" needs people to look for work hence unemployment benefits must be sufficiently less attractive than wages, that very much sounds like grist to the anti-capitalist mill.

[Ralph Musgrave]

The above post goes a bit too far in some ways.

Re 1, it’s not just capitalism that requires an “excess supply of labour”. They had people unemployed / looking for work under the Russian communist system. It’s just that they didn’t admit the existence of unemployment.

Re 2, much the same: it’s not just capitalism that “needs the unemployed to look for work - to be an effective supply of labour”. Any economic system you can dream up will need to have people trying to fill vacancies – if vacancies are going to be filled.

[Account Deleted]

The idea that "generous" unemployment benefits are a disincentive to work is tendentious. What is clear is that the unemployed will not take low-paid jobs if that results in a reduction in their income, even if that income is limited to ungenerous benefits.

The limited experiments with basic income schemes (unconditional benefits) in the US and Canada in the 60s/70s appear to show a negligible impact on the work ethic, with some changes in behaviour being socially responsible, e.g. working mums and students reducing their hours marginally.

Interestingly, basic income schemes have been advocated by both the left and right (Hayek and Friedman, no less), though the latter usually yoke it to a flat tax, claiming the basic income makes a regressive tax scheme progressive.

The chief reason for basic income schemes failing to gain traction appears to be concern over free-riders. The issue is not that all recipients will give up work and laze about, but that some (maybe only one) will. In other words, this is an emotional, essentially misanthropic response.

We need scapegoats in society. During times of growth, we tend to define these people culturally through their race or class (chavs). When jobs are scarce, the unemployed provide a ready target.

[LSA Recruitment]

This one is very interesting.

[Bialik]

The idea of some people lazing around is interesting but there are lots of assumptions behind it. For example, it isn't a problem if the people are rich, for some reason. There are no schemes to incentivise rich people to work (or play by the rules, as politicians also call it.) Poets, conceptual artists and chief executives who sit on their arses all day are also exempt. One could say that people who have children are free-riding on the child-free, but that's not visible to us either. Or people without children free-riding on those who spend 18 years and masses of money on children who go on to become doctors providing free medical services to the child-free. And those of us who vote are doing a service for non-voters. Basically, nobody does or can be expected to contribute exactly the same amount as tax, time or civic spirit. We can either have a baseline, which should apply to all, or live with the situation as it is - a situation that arises from the freedom we possess. Freedom or coercion, is the question.

[investment in farmland]

Totally agree with your note to the libertarians. One major problem with capitalism today is the extremely short-term timeframe of CEOs. They worry about each quarterly's earnings, but not how their companies will be doing next year or five years from now. This leads them to make stupid decisions by, for example, cutting R&D whilst wasting money on buying back shares to help shareholders. Or, by responding to any crisis by firing people, instead of doing what Germany did with their "Kurzarbeit" strategy of reducing work weeks but still keeping their staff onboard.

[Liberal Bias]

Great share friend. I have read all your post here and found it interesting to read. In fact i was able to take note all of the valuable information i was gathered. Thanks

[Sanjana]

Keep pressing them, peploe, because there are plenty of members of the government who feel genuine guilt over their treatment of the unemployed . For all I know, this poster may be right in that many members of the government feel genuine guilt over this. But when it comes to get votes, these government members know perfectly well that to increase the dole does not pay.Maybe I am watching too much TV, but one can see that pensioners, for instance, receive a much more favorable coverage than the unemployed. Similar observation applies to single parents, for instance. And there are other groups who can only be described as losers .Ever since the French Revolution and increasingly after the Industrial Revolution society has embraced the belief that ideal human societal organization is a meritocracy . In other words, you get what you deserve. This might be quite flattering for those who get a lot. But can be rather unpleasant for those who don't.The philosopher Alain de Botton has written an interesting book (Status Anxiety) and TV documentary series (by the same name), where he argues this point very convincingly. It is a non-academic book, though.Thanks for your time,Marco

[Surma]

MMT posits that the novernmegt can maintain employment through spending when the private sector is unable to provide sufficient opportunities, and that this spending is not inflationary provided that real resources are available for the population. One way to do accomplish this employment is through a job guarantee.A job guarantee at a livable wage (with health care benefits) places a floor on wages while providing maintenance of skills (not just technical skills, but also reinforcing work habits and keeping workers engaged in the labor marketplace. This addresses income inequality in a number of ways: 1) reduces household asset loss through spend down after losing a job, 2) by sustaining aggregate demand, the probability of private employment growth is increased, 3) improves inter-generational income growth by reducing childhood trauma/dislocation thereby increasing education effectiveness, 4) and so on and so forth.The benefits are so numerous, and given the costs of unemployment benefits (a majority of which would be shifted to the job guarantee) that the incremental cost is not what you might expect, especially after seeing the impact of financial institution bailouts.The funny thing is, if there was a job guarantee then it would be much easier to just go ahead and let financial institutions fail and have them work out their deleveraging problems on their own schedule households would still have to share in the loss of higher income private sector jobs, but the impact would be lessened significantly. Letting the banks fail (or taking them over temporarily) would also reduce the incomes of those most responsible for the crisis which would have additional income equalization benefits.

[Vaishali]

the hockey stick htroey about man-made global warming was true, buddy.Peruse past the surface, Larry.Like the CNN article I linked @#1.Title: “Jobless rate plummets!”But down in the article was this: Economists surveyed by CNNMoney had expected an additional 110,000 jobs in the month, and the unemployment rate to remain unchanged.So, 10,000 more jobs and the rate falls .4%?And how about CBS?Scan down, find:At first glance the fall in the unemployment rate seems like good news, but a closer look at the numbers reveals some weakness in the report.First .Second .Third .Forth .The has this:From the Democrats’ standpoint any job number that shows a decline in the unemployment rate is good news. And certainly 8.6 percent unemployment is better than 9 percent. But not really, when you look closely at how we got there.Two more things:Yesterday I read that Government Motors (I mean GM) is going to buy back every single Chevy Volt that any owner doesn't want to keep (because they can catch fire unexpectedly).I wonder if GM had to do any new hiring for that?And Last month Obama signed the VOWS Act.This paid employers to hire veterans.An employer can get up to $9,600 just for hiring the right veteran.I bet we taxpayers are paying for a goodly portion of this 8.6% unemployment drop as veterans get jobs.Reply