Why not full employment?

In a thought-provoking piece, Jeremy Gilbert writes:

Hardly anyone looks back to the epoch of full employment as one which seems remotely culturally attractive. We might entertain time-travel fantasies of visiting Harlem in the 20s, Haight-Ashbury in 1967, or Paris at various points in the 19th or 20th centuries – but who wishes they could spend a week in Surbiton, 1955?

This is also the question asked in a recent paper by Jon Wisman and Michael Cauvel: why do workers not demand guaranteed employment?

Three facts give the question force. One is that technocrats now know, more than they did in the 70s and 80s, that unemployment not only has an economic cost in terms of lost output, but a massive psychological cost because the unemployed are significantly unhappier than those in work. For example, the ONS estimate that whereas only 2.9 per cent of those in work have low life-satisfaction (0-4 on a 0-10 scale) 12.9 per cent of the unemployed do.

Secondly, there is a huge amount of unemployment and under-employment now even though the proportion of working age people in work is at a post-1971 high. On top of the 1.7m officially unemployed there are 2.2m people out of the labour force who’d like a job and 3.5m people in work who’d like more hours. This adds up to 7.4 million people, or 18.1% of the working age population.

Thirdly, we can’t blame the optimism bias. There’s massive support for a well-funded NHS, which poses the paradox that everybody seems to want insurance against physical ill-health, but not against economic ill-health.

So, why is there so little demand for full employment?

One reason is that many older workers already enjoy some job security. Two-fifths of over-35s have been with their present employer for over ten years - although among men this proportion has fallen since the early 90s.

Also, though, it’s like the old joke about the man with the leaky roof: on sunny days he doesn't need to fix it and on rainy days he can’t get on the roof to do so. The assumption that good times will last means that policies for full employment aren’t put in place then but say Wisman and Cauvel:

Government debt rises in times of crises, providing the excuse of inadequate fiscal means….Gaining additional rights and protections is likely to seem like an implausible political goal for workers struggling to maintain what they already have.

And, they say – channeling Kalecki:

Guaranteed employment does not conform to the dominant ideology of capitalist societies which is generally internalized by practically everyone in the society, including workers.

This ideology, they say, manifests itself in several ways hostile to full employment policies. For example, the unemployed are blamed for their plight; governments are deemed to incompetent to implement proper macro policies or a jobs guarantee; and there’s a fear that union militancy will price workers out of jobs. In this sense, the lack of demand for full employment policies is another manifestation of the political dominance of the 1%. As Steven Lukes wrote:

Is it not the supreme and most insidious use of power to prevent people, to whatever degree, from having grievances by shaping their perceptions, cognitions and preferences in such a way that they accept their role in the existing order of things, either because they can see or imagine no alternative to it, or because they see it as natural and unchangeable? (Power: a radical view)

All this raises a thought. Could it be that the main obstacle to full employment policies is not so much one of technical economics so much as ideology and politics?

Comments

[Igor Belanov]

Wasn't 1967 in San Francisco during the epoch of full employment?

[Theophrastus]

Inevitably, in a dynamic economy, many people will be unemployed, because innovation destroys their jobs (while creating others) and regional over-specialisation makes large numbers of people vulnerable to technological change (with the new jobs being created elsewhere). So, yes, you can have full employment - in a largely static siege economy with little innovation. I'd prefer to live in a dynamic economy, where the effects of unemployment are mitigated by benefits and re-training schemes.

[smoth]

Theo, I think the idea is you'd be guaranteed a not great job and the rest of the economy would work as is, and most people would try to have not guranteed job, so you hopefully you'd still have your dynamism

[Jim]

The main reason full employment is impossible is that vast swathes of the population are unemployable, in any practical sense. You could give them a good job tomorrow and they couldn't keep it, they'd fail to turn up to work, or steal from the employer, or just be totally unproductive.

The reason there could be full employment 40-50 years ago was that the population then was still almost entirely of the old school 'stand on your own two feet' type, and would rather take a job, any job, than be on the dole, which had negative social connotations (and wasn't as generous). Benefits (of whatever sort) are now the preferred option over employment for many, and socially totally acceptable. Indeed in some areas its the norm over employment. If you told those sort of people they'd have to work 37 hours a week to get their money, there would most likely be riots.

[Luis Enrique]

I wonder what jobs the state would create to fully employ 7 million people and what sort of net fiscal cost would result. I also wonder if we'd get complaints from left about workhouses and pressure from right to cut support for those who don't take up or hold down a job.

Those are just questions BTW not reasons against. IMO state should try something like this, maybe just for long term unemployed first see how it goes.

[Bob]

"So, yes, you can have full employment - in a largely static siege economy with little innovation. I'd prefer to live in a dynamic economy, where the effects of unemployment are mitigated by benefits and re-training schemes."

"The reason there could be full employment 40-50 years ago was that the population then was still almost entirely of the old school 'stand on your own two feet' type, and would rather take a job, any job"

The simple solution is for the government to offer a living wage job to all fitted to the person. This also sets a wage floor whilst giving the private sector an incentive to automate away jobs. Full employment provided *by the private sector* is impossible.

Here's how you get full employment:

http://www.3spoken.co.uk/2015/11/job-guarantee-jobs-for-people.html

[Bob]

"If you told those sort of people"

Not all unemployed people are the same. That is why you have to separate the 'workers' from the 'shirkers' with my proposal above.

[Jim]

"That is why you have to separate the 'workers' from the 'shirkers' with my proposal above."

Fair enough. But isn't a 'job guarantee' just workfare by another name? If you offer a job to anyone who wants it, do the ones who don't, or won't do a job get nothing? What standards are to apply - having a job is two way thing, the employee needs to want to work as much as the employer wants to pay for the labour. So if you have a lot of people who don't really want a job, but have to go to get any money, what disciplinary standards would apply to them? The same as everyone else - ie you get sacked for not working/inappropriate behaviour/criminal activity? If you do get sacked do you get offered another job? Or is it just glorified baby sitting - they turn up, do bugger all, get paid at end of the week?

Which leads me to my suggestion for how to ensure everyone has a sort of basic income without causing massive disruption to incentives. Which is to not make benefits conditional on doing something, make them conditional on doing nothing, but doing nothing in a very boring way.

Basically every town would have a large secure building. Turn up on any day at that building, spend say 6 hours there doing absolutely nothing, then collect your pay. Thats it. No work, just attendance. Its totally flexible, its purely on a day to day basis. It solves the working while on dole problem - you can't be in two places at once. If you got a job for few days, don't go. Lose your job, go for as long as needed til you get a new one. Job search and assistance with CVs/interviewing skills etc could all be provided on site. Employment agencies would undoubtedly want to set up close by. The whole area would be a hub for employment seekers and employers.

This is a far better solution than workfare, or jobs guarantees, or Basic Income schemes. It targets the money at the people who need it most, and gives it to them with minimal fuss (no complicated forms to fill in, no 'computer says no' scenarios). Anyone from a pauper to a millionaire can turn up and sit in a room for 6 hours and collect their daily rate (whatever society decides is the suitable rate). It means those with jobs, or the real desire to get one are very unlikely to ever use the service other than in crisis for a very short period, but it also allows the unemployable class to get an income while also allowing the working taxpayer to know that he or she isn't being taken for a free ride by people on welfare - they too are having to get up at 7am to go to 'work' just like the rest of the country. No-one need go without money because everyone is capable of sitting still for 6 hours.

And if thats too boring, go and get a real job......................

[Tom Streithorst]

Kalecki nailed it in 1943. Full employment, by creating demand would increase profits but would also diminish the power of management. Full employment means "the sack" is no longer an effective way of controlling workers. That, Kalecki says, explains the appeal of fascism (and for that matter military Keynesianism): full emmployment, increased profits, without worker militancy. http://economie.politique.free.fr/liens/Kalecki_1943.pdf

[Bob]

"But isn't a 'job guarantee' just workfare by another name?"

You have to be seen to be doing something useful *as defined by others* if you want to earn a wage.

That's what a society is - a group of others. There are no natural laws and no natural rights. Just what are granted by other people.

If the citizens elect a gun-toting right wing nut job into power then you will be required to break rocks for a living if you're surplus to requirements (assuming they don't go as far as the gas chamber). If the citizens are more enlightened and elect a left wing government then you will be able to create music and art for living, or simply look after your own children.

But the key point is that it is defined by others as a group decision, not by you on your own - as the liberal individualism fantasy from people like Chris like to portray.

"Turn up on any day at that building, spend say 6 hours there doing absolutely nothing, then collect your pay."

Sure, that can be for the libertarian types who refuse any job even one specifically made for them, but other people might want to do something more productive :)

[Bob]

"It means those with jobs, or the real desire to get one are very unlikely to ever use the service other than in crisis for a very short period, but it also allows the unemployable class to get an income"

People are cheaper and easier to hire when working. That eliminates a current risk cost completely from the economy (the 'long term unemployed' issue).

Additionally I (you may not) want to compete away crap jobs by providing a floor. Replacing jobs with better machines is what we want the private sector to do. People need to be expensive to use, and jobs in the normal business jobs market must not be sacrosanct. Business models that fail, must be allowed to fail without any sentimentality.

[An Alien Visitor]

Workers may not have "low life-satisfaction" (though who would admit they did anyway?), but workers do hate work. Hence the, thank god its Friday mentality!

If workers enjoyed work then they wouldn't get so upset with those on benefits. The reason people get upset with those on benefits is because people in work wonder why they have to suffer when those on benefits don't!

So to answer the question, why do workers not demand guaranteed employment, I would say because who would actively campaign for something one hates!

Personally I would prefer a decent basic living wage, good unemployment benefits and a hire and fire culture. Being is the same job for over ten years is a tragedy that befalls too many!

My holiday can't come soon enough!

[An Alien Visitor]

“You have to be seen to be doing something useful *as defined by others* if you want to earn a wage.”

Crucially you still get the wage is a vast majority think what you are doing is a waste of good oxygen. So for example, imagine we have 100 people and one person’s job is to fiddle the taxes for another person. Then imagine the 98 other people think what person one is doing is not useful.

So to simply say you have to be seen to be doing something useful *as defined by others* if you want to earn a wage, is not only hopelessly neutral in a world where power and wealth inequality is so vast, but also misses so much out as to be bordering on the moronic.

[Dave Timoney]

@Jim,

You say, back in the day "the dole ... had negative social connotations and wasn't as generous". Unemployment Benefit in 1979 was 21% of average wages while JSA today is 11%. In terms of stigma, I think you'll find that the relentless propaganda of tabloids and TV since the 80s has made benefits less "socially acceptable", not more.

@Bob,

You say, "a living wage job ... sets a wage floor whilst giving the private sector an incentive to automate away jobs". Nope. The private sector is actually incentivised to maintain shit jobs, paid for by the state, whose labour product they can take a cut of, even if only in the form of a management fee - see A4e.

[Egmont Kakarot-Handtke]

Why do workers not tar and feather economists?
Comment on ‘Why not full employment?’

Economists nowadays wonder “... unemployment not only has an economic cost in terms of lost output, but a massive psychological cost because the unemployed are significantly unhappier than those in work.” Does anybody remember that economics always claimed that the market system produces full employment?

“From the time of Say and Ricardo the classical economists have taught that supply creates its own demand; — meaning by this in some significant, but not clearly defined, sense that the whole of the costs of production must necessarily be spent in the aggregate, directly or indirectly, on purchasing the product. .... Evidently this amounts to the same thing as full employment.“ (Keynes, quoted in Baumol, 1999, p. 200)

It seems that employment theory urgently needs rectification. To cut the meticulous formal derivation short (2015; 2014; 2012), the most elementary version of the CORRECT employment equation for the economy as whole is given here:
https://commons.wikimedia.org/wiki/File:AXEC62.png

From this equation follows:
(i) An increase of the expenditure ratio rhoE leads to higher employment L (the letter rho stands for ratio). An expenditure ratio rhoE>1 indicates credit expansion, a ratio rhoEhttp://www.jstor.org/stable/2647144.
Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous Phillips Curve Desaster. SSRN Working Paper Series, 2130421: 1–19. URL
http://ssrn.com/abstract=2130421.
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL http://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2624350.
Tobin, J. (1997). An Overview of the General Theory. In G. C. Harcourt, and P. A. Riach (Eds.), The ’Second Edition’ of The General Theory, volume 2, pages 3–27. Oxon: Routledge.

[Egmont Kakarot-Handtke]

Copy/paste somehow did not work. For the complete text see here
http://axecorg.blogspot.de/2016/04/why-do-workers-not-tar-and-feather.html

[Bob]

"The private sector is actually incentivised to maintain shit jobs, paid for by the state, whose labour product they can take a cut of, even if only in the form of a management fee - see A4e."

They are now. The private sector are excluded from every JG scheme I have seen.

[Egmont Kakarot-Handtke]

Why do workers not tar and feather economists?
Comment on ‘Why not full employment?’

Economists nowadays wonder “... unemployment not only has an economic cost in terms of lost output, but a massive psychological cost because the unemployed are significantly unhappier than those in work.” Does anybody remember that economics always claimed that the market system produces full employment?

“From the time of Say and Ricardo the classical economists have taught that supply creates its own demand; — meaning by this in some significant, but not clearly defined, sense that the whole of the costs of production must necessarily be spent in the aggregate, directly or indirectly, on purchasing the product. .... Evidently this amounts to the same thing as full employment.“ (Keynes, quoted in Baumol, 1999, p. 200)

It seems that employment theory urgently needs rectification. To cut the meticulous formal derivation short (2015; 2014; 2012), the most elementary version of the CORRECT employment equation for the economy as whole is given here:
https://commons.wikimedia.org/wiki/File:AXEC62.png

From this equation follows:
(i) An increase of the expenditure ratio rhoE leads to higher employment L (the letter rho stands for ratio). An expenditure ratio rhoE greater than 1 indicates credit expansion, a ratio rhoE less than 1 indicates credit contraction of the household sector.
(ii) Increasing investment expenditures I exert a positive influence on employment, a slowdown of growth does the opposite.
(iii) An increase of the factor cost ratio rhoF=W/PR leads to higher employment.

The complete employment equation is a bit longer and contains in addition profit distribution, public deficit spending, and import/export.

Item (i) and (ii) is familiar since Keynes. What is missing in the Keynesian employment multiplier, though, is the ratio rhoF as defined in (iii). This variable embodies the price mechanism. It works such that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R.

This is the very OPPOSITE of what standard economics teaches. “We economists have all learned, and many of us teach, that the remedy for excess supply in any market is a reduction in price. If this is prevented by combinations in restraint of trade or by government regulations, then those impediments to competition should be removed. Applied to economy-wide unemployment, this doctrine places the blame on trade unions and governments, not on any failure of competitive markets.” (Tobin, 1997, p. 11)

The explanation of unemployment is given by the fact that the price mechanism does NOT work as the representative economist hallucinates. Ultimately, unemployment is caused by the scientific incompetence of economists, therefore the economic and psychological costs of unemployment can be directly attributed to them.

Egmont Kakarot-Handtke

References
Baumol,W. J. (1999). Retrospectives: Say’s Law. Journal of Economic Perspectives, 13(1): 195–204. URL http://www.jstor.org/stable/2647144.
Kakarot-Handtke, E. (2012). Keynes’s Employment Function and the Gratuitous Phillips Curve Desaster. SSRN Working Paper Series, 2130421: 1–19. URL
http://ssrn.com/abstract=2130421.
Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.
Kakarot-Handtke, E. (2015). Major Defects of the Market Economy. SSRN Working Paper Series, 2624350: 1–40. URL http://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2624350.
Tobin, J. (1997). An Overview of the General Theory. In G. C. Harcourt, and P. A. Riach (Eds.), The ’Second Edition’ of The General Theory, volume 2, pages 3–27. Oxon: Routledge.

[Jim]

"Sure, that can be for the libertarian types who refuse any job even one specifically made for them, but other people might want to do something more productive :)"

Thats the whole point - it creates an incentive to go and find a job doing something more productive/enjoyable/satisfying. But it does that in a way that does not mean anyone ever goes without money on a day to day basis. Most normal people would be bored out of their skulls sitting around for 6 hours of the day and would do what it took to get something better. But if you are the sort of person who (for whatever reason) is not really suited to employment then this system means you don't starve, and (crucially) the rest of society is prepared to pay for you precisely because they wouldn't want to have to sit in a room doing nothing for 6 hours to 'earn' their income.

This goes to the crux of the welfare issue - its the 'would I swap' mental calculation. If the welfare system is generous enough that working people can look at those on benefits and say 'Hey, I'm working 40 hrs a week and I'm not much better off than them, plus I've less free time' then people will begrudge paying the taxes to pay for the system. If on the other hand they look at those on welfare and say 'I wouldn't want to have to live like that' then they won't begrudge the taxes necessary to pay for the welfare. My system works by not making welfare less financially rewarding, it works by making welfare less psychologically attractive. The daily payments could be made relatively financially attractive, precisely because getting them would be a pain in the arse.

[Dave Timoney]

@Jim, "My system works ... by making welfare less psychologically attractive. The daily payments could be made relatively financially attractive, precisely because getting them would be a pain in the arse."

You're essentially reviving the less eligibility principle and the workhouse. In other words, you are advocating real discomfort (not figurative "pain") as a quid pro quo for benefits.

But why should someone who has worked solidly for 10 years, and paid their taxes in full, be obliged to suffer this discomfort, even temporarily, due to the decision of an employer to make a job redundant?

[Igor Belanov]

Yes, Jim has managed to find a proposal more sadistic than anything else I've seen on the subject. Be placed in temporary custody every day as punishment for being unemployed, without many of the conditions that prisoners 'enjoy'.

[Antoni Jaume]

Most comments seem to me to fit to that part of the text:

This ideology, they say, manifests itself in several ways hostile to full employment policies. For example, the unemployed are blamed for their plight; governments are deemed to incompetent to implement proper macro policies or a jobs guarantee; and there’s a fear that union militancy will price workers out of jobs. In this sense, the lack of demand for full employment policies is another manifestation of the political dominance of the 1%. As Steven Lukes wrote:

Is it not the supreme and most insidious use of power to prevent people, to whatever degree, from having grievances by shaping their perceptions, cognitions and preferences in such a way that they accept their role in the existing order of things, either because they can see or imagine no alternative to it, or because they see it as natural and unchangeable? (Power: a radical view)

All this raises a thought. Could it be that the main obstacle to full employment policies is not so much one of technical economics so much as ideology and politics?

[Ssscrudddy]

It seems to me a lot of peeps on here still see the unemployed as the enemy, as you have been conditioned to think so by the government (tory or labour makes no difference).
Many people on the dole work just 1 day per week less than you do, but instead of being being paid £10.5kpa at minimum wage for the hours worked by the employer, they are in fact paid £3.5kpa by the tax payer & the employer is paying nothing at all (& no guarantee you even get that, did you know you can be sanctioned for going to a job interview). Yet the guy on the dole is called the scrounger even though he's effectively contributing £7k pa to that company.
Mass unemployment is good for capitalism & the employers, full employment is bad for them, because it gives the people too much power. Yes you could get sacked for being incompetant, crap, whatever, & walk into a job the next day (at least until you screwed that up too).
In the mid 80s my first full time job paid £3.4kpa, by the start of the 90s I was earning £20kpa, by the end of the 90s I was on £40kpa, in the early 2000s this dropped back to £20kpa, back up to £40kpa just before the 2008 crash which put me out of work. Some time later after using all my savings I found myself on the dole, couldnt get a job for love nor money (partly bad luck an RTA put me in hospital for almost a year, & a few years travelling didnt help). Hey presto I got sent out on workfare to my old job that should have paid £40kpa but for only £3.5k paid by the tax payer instead of the company that got it completely for free. Whilst there, 3 full timers were laid off & replaced by 4 free people from the dole.
For the employer mass unemployment is a good thing. Why should they pay someone £40k (or perhaps even more by getting into a bidding war with the other company that also wants them) when instead they can have them for nothing. & the guy doing the job has to accept the paltry £3.5k because if he objects he gets nothing at all, no access to food water shelter healthcare courts.
The fact is people do want full employment but the peoples voice is never heard, & those not at the bottom of the pile are only too happy to join in screaming take away their rights blame those at the bottom, whilst at the same time wanting their own rights fully protected.
We need guaranteed basic income now. There is going to be huge problems in just a few short years with massive civil unrest, not because the people will finally rise up & fight for their rights, but because there is about to be mass unemployment on an unprecedented scale. We have driverless cars being tested, & now some driverless lorries too, soon enough commercially it will be the lorries that go fully driverless way before the cars do, & when that happens huge numbers of lorry drivers will be out of work with no other jobs to go to, & with the knock on effect it will have on those around them.
Lets hope you guys are not too near the bottom of the pile, because it looks like within the next year this government will be hassling those of you not working full time, you'll get to jump through the same hoops as those on the dole. Pray you dont get ill, the sick & disabled are already dying in their thousands right now, with with nary a whimper from the mass media.

[djb]

"Could it be that the main obstacle to full employment policies is not so much one of technical economics so much as ideology and politics?"

yes but keep bringing up

[Jim]

" Be placed in temporary custody every day as punishment for being unemployed, without many of the conditions that prisoners 'enjoy'."

B*ll*cks. Do you think my mate wants to get up at 5am to go to work in the warehouse he works in? Does he f*ck. He'd rather stay in bed, and still get paid. But he won't unless he shows up, so he goes, every day. No-one forces him, he can quit any time he likes, but would lose his wages, so he doesn't.

The same applies to my system. No-one would force any one into it. If you didn't want to go, you wouldn't have to, but you wouldn't get paid either. So its just like a working a job you dislike in order to pay the bills.

The employed and the unemployed would be on exactly the same level.

[Kaleberg]

Yes, 1967 San Francisco was at full employment. The Vietnam War was in full force along with LBJ's guns and butter policies. Hunter Thompson noted that the economy was so overheated that even a Hell's Angel motorcycle gangbanger could get day work whenever he needed a few bucks. The economy was pretty dynamic in the 1960s if you followed technology and the business pages. It was all about plastics, computers, jets, conglomerates and catering to the needs of the baby boom. If you were a billionaire, the 90% marginal tax bracket was a pain, but everyone was doing quite a bit better than today.

We could go for full employment now, but we need to start thinking in terms of demand side economics. The big problem is that work pays too little and there is too little of it available. The government could raise taxes hire more people. The ratio of teachers and aides to pupils is not set in stone. Home health aides could take their time. NHS junior doctors could get better shifts.

The government could raise wages by fiat, an experiment underway in the US with the minimum wage and possibly changing the income line for exempt and non-exempt employees. Usually raising the minimum wage leads to higher employment and business growth, so it is a no-brainer.

We still need to do more for demand. Infrastructure spending would be nice. Seattle, for example, has a 50 year transit plan that could be built in maybe 10-20 years save for taxing, borrowing and spending constraints. The city is bursting at the seams, so more transit, rebuilding freeways, improving parks and the like would help.

In the 1960s US business magazines published personal income figures broken down by state and region. Back then businesses followed consumer money. They don't publish those numbers anymore. They're too embarrassing. Our weak demand picture is a matter of choice.

There other prosperous times I might want to visit. For example, 1920s New York or 1960s London. Actually, I did visit 1960s London with my parents. It was pretty cool. Everyone in England had a dry sense of humor. I collected Matchbox cars which were amazingly cheap in England, and I almost bought a Dalek at Woolworth's because it was something weird I couldn't buy at home. Hey, I was a kid. I'd go back, but without my parents.

[RalphMus]

So what was wrong with Surbiton in 1955 - referred to by Jeremy Gilbert in his non “thought provoking” piece? Of course there’s the point (referred to a long time ago by George Orwell) that many lefties cannot do much more than trash their own country and culture. That’s one motive for the above “anti-Surbiton” drivel. Second, if Surbiton was indeed boring in 1955, that was partially or largely explained by the poverty brought by WWII.

[Igor Belanov]

Ah, Jim has shown his humanity. You don't have to go into temporary custody. You're free to starve to death instead.

[David]

Although this blog is striving, it, and our economistensia, have not made the leap....
Unemployable, scroungers, full employment, reward, work?
The world is no longer in the 19th or 20th century and desperately needs a new model.

[joe]

Unemployment is not working so why should it have anything to do with the world of work. Someone who is employed is not concerned with being unemployed unless redundancies are rumoured. Unemployment is a social issue, not a work issue, by definition.

For the disabled, say, then schemes to provide employment, worthy though they may be for the disabled person, have failed and been abandoned. Providing schemes for those not fitted at all to work will fail even quicker.

Employers do not want to employ a single human they do not have to. The ideal is to have an array of self maintaining machines working 24/7 with automated orders, electronic banking, and tracked delivery. Employment is not just a human issue it is an investment issue of man and machines. One costs a lot and is a nuisance, the other is cheap and will work without complaint or pay as long as the power is on.
A country with full human employment is a backward, inefficient country that is heading to fail.

[Egmont Kakarot-Handtke]

The economist as storyteller

The average person dislikes an objective explanation (e.g. the thunderbolt is an electromagnetic phenomenon subject to physical laws) and likes a subjective explanation (e.g. Zeus threw the thunderbolt because he was angry/vengeful/authoritarian). The scientific explanation takes the form of a theory, the non-scientific explanation takes the form of a narrative. Almost all societal communication consists of storytelling/blather/wish-wash/truisms, only a tiny part has scientific content.

Economics claims to be a science, yet has never risen above the level of storytelling. Accordingly, the SUBJECTIVE explanation of unemployment (UE) takes the following forms.

Psychologism: the unemployed actually enjoy UE, are indifferent, have resigned, suffer. Darwinism: UE’s are unfit, unqualified, lack motivation, are beyond help. Moral hazard: UE is the result of a wrong incentive structure or of perverted rewards/punishments, UE’s game the system. Mind reading: leisure is rationally preferred by UE’s over work at the given wage. Moralizing: the UE’s deserve their fate. Blaming: UE is a self-inflicted blow-back of irrational behavior, i.e. of sticky wages, strikes, shirking. Historicism: today’s unemployment is the result of known adverse external shocks and identifiable wrongheaded measures of DEM/REP/FED/GOV since WWII. Sociologism: the UE’s have not enough leverage for changes in their favor; are brainwashed into acceptance of everything. UE is deliberately created by capitalists/oligarchs/one-percenters/government as means of social control. UE’s are the losers in a rigged power-play.

Within this tiny intellectual box of folk psychology, folk sociology, folk history, and folk politics economic storytelling has taken place since Adam Smith: “He ... disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.” (Schumpeter)

The time travel fantasies about Harlem, Haight-Ashbury, Paris or Surbiton above show that economics stagnates since A. Smith. Clearly, from retarded storytellers no solution of any economic problem is ever to be expected.

While dabbling in the so-called social sciences, economists overlooked that economics is a system science and that it is their very task to explain how a monetary economy works. Until this day, economists do not even understand what profit is. And it should be obvious that they will never find it out by second-guessing and interpreting and understanding human behavior. This is NOT how science works. What is currently discussed among economists as employment theory is sitcom junk.

Storytelling is not prohibited, of course, neither is the pluralism of any number of false theories, but there is no place for storytellers in the sciences. So, economists have to leave it for good now because of proven scientific incompetence over more than 200 years.

Egmont Kakarot-Handtke