Why not celebrate full employment?

To someone of my generation, there's a curiosity about politics today - that the Tories are not making more of the fact that unemployment is remarkably low.

Two facts make this especially strange.

One is that the government has bugger all else to celebrate. As Henry Hill, a Tory sympathizer, says "the Government’s list of achievements is thin." NHS waiting lists are at a record high; real wages have stagnated for 15 years; shit is pouring into our rivers and seas; housing is unaffordable and sometimes uninhabitable; record numbers of people are dependent on food banks; and our poorest citizens are becoming poorer than those of Slovenia or Poland. Given this litany of abject shame, why not highlight the one area where the UK is doing well?

And near-full employment is indeed something to celebrate. Joblessness causes misery and crime (pdf), and can leave lifelong financial and emotional scars. As David Bell and David Blanchflower wrote (pdf):

Increases in the unemployment rate lower the happiness of everyone, not just the unemployed...Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression.

Which was why, for so long, full employment was considered the prime goal of governments. Back when policy-making was influenced by men of intellect William Beveridge wrote (pdf) that being without work was a "personal catastrophe." "Idleness even on an income corrupts; the feeling of not being wanted demoralizes."

This isn't to say that one of Beveridge's "five giants" - idleness - is completely slain. Although the official unemployment rate is close to its lowest level since 1974 - a remarkable achievement given the nasty terms of trade shock that is high gas prices - there are still almost 1.8 million people out of the labour force who would like a job.

Nevertheless, the total out of work, at just under three million, is near a multi-decade low, and lower than anything reached under the New Labour government - although there are still more people under-employed now than there were for much of the 1997-2010 period.

Of course, it's not at all clear how far this is due to actual government policy. But there's no reason why this should stop the Tories claiming credit for it. A party that blamed Labour for the global financial crisis doesn't scruple about attributing economic outcomes.

Hence my puzzle: why are the Tories so quiet about this?

It could be that their silence is another symptom of their intellectual decline: they have lost the ability to think about economics. But I think something else might also be at work.

Of course, there would be an irony in the party of Thatcher - who denied that governments should have full employment as an objective - celebrating our proximity to its achievement. But the Tories have repudiated Thatcherism in other ways - in leaving the single market; in having the highest tax burden in 70 years; and in having a Prime Minister who wanted to "fuck business". So why not break with her in another way?

You might think it's because there is in fact little to celebrate. Many of the jobs created are low-productivity, low-paid and insecure ones.

In theory, however, full employment should be the solution to this problem.

For one thing, it should boost productivity as companies seek to replace scarce labour. Beveridge applauded "the stimulus to technical advance that is given by shortage of labour":

Where men are few, machines are used to save men for what men alone can do. Where labour is cheap it is often wasted in brainless, unassisted toil.

And for another, a sellers' market for labour-power should increase workers' bargaining power and hence, eventually, real wages.

Which brings us to the issue. There's little sign of either of these mechanisms working right now. The volume of business investment is still lower than it was in 2016. And real wages have actually fallen 2.1 per cent in the last 12 months.

This raises two dangers, one for all of us and one for the right.

The danger for all of us is perhaps that decades of abundant labour has caused bosses to lose the ability to replace labour with capital or to improve efficiency by any means other than brute coercion. If so, then it will be even harder than we think to raise productivity growth.

The danger for the Tories, though, is that workers won't always remain quiescent. We see their fear not only in their hostility to striking workers but also in Huw Pill's assertion that workers "need to accept" that they are worse off and stop bidding up wages*. What Beveridge saw as a benefit of full employment is for them a threat. As Kalecki famously wrote (pdf):

It is true that profits would be higher under a regime of full employment than they are on the average under laisser-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 affects adversely only the rentier interests. But "discipline in the factories" and "political stability" are more appreciated by the business leaders than profits. 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.

Yes, unemployment poses challenges for the left. But it's a bigger problem for the right.

* Pedants might point out that Pill is a Bank of England economist and not a Tory. But as Arnaud Amalric said: "Caedite eos. Novit enim Dominus qui sunt eius."

Comments

[Blissex]

«the Tories are not making more of the fact that unemployment is remarkably low.»

David Davis lucidly wrote:

https://www.conservativehome.com/platform/2016/07/david-davis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-for-britain.html

“Economic growth in the UK has been founded on a number of unhealthy characteristics in the last decade or so. It has depended above all on large population increases based on uncontrolled mass migration. This has made the economy bigger, but not necessarily better for individual citizens, as shown by GDP per capita growth rates of two per cent or less – significantly weaker than in most decades since the Second World War. It has depended on moving a large number of people moving out of unemployment, which is good, but because the new jobs tend to be low paid it created a low productivity economy.”

[Blissex]

«the government has bugger all else to celebrate. [...] NHS waiting lists are at a record high; real wages have stagnated for 15 years; shit is pouring into our rivers and seas; housing is unaffordable and sometimes uninhabitable; record numbers of people are dependent on food banks; and our poorest citizens are becoming poorer than those of Slovenia or Poland.»

Our blogger is perhaps being ingenuous, as these are considerable successes:

* Funding for the "socialist" NHS is being minimized.
* Wage costs, which impact so many people, have been contained.
* Unnecessary environmental regulation had been suspended.
* Property based incomes, which benefit so many people, have surged.
* Private charity as in food banks has saved taxpayers quite a bit of money.
* The UK working classes are becoming competitive with those of Poland and Slovenia.

The typical Conservative party voter is very pleased with how well their party have been managing "the economy".
The democratic success of Conservative policies is such that New, New Labour is positioning themselves with similar policies to appeal to the same pool of 14 million voters.

[Blissex]

«The danger for the Tories, though, is that workers won't always remain quiescent.»

And what can the workers do about it? Especially when all major parties agree that more competitive wage costs and better asset incomes are of great benefit to "the economy".
Peasants in England have occasionally if rarely rioted, but the system did not change for more than a thousand years.

[Blissex]

«Huw Pill's assertion that workers "need to accept" that they are worse off and stop bidding up wages»

Obviously Pill knew very well how a previous similarly hortative statement by the governor had been received, and he is not an idiot, so I guess that he, like the governor before him, did expect the reaction it got.

Therefore I reckon that his statement, like that of the previous one by the governor, had an oblique purpose: to reassure investors ("the markets") that the BoE officially blames inflation 100% on wages and will make workers pay for any policy adjustment.

BTW as to the latter point there have been dramatic developments like -9% real interest rates, huge changes in M2 and velocity of money, continuing supply shortages, yet public discourse is focused on personalities, "cultural issues" and related "gotchas". Amazing.

[D]

So,

a. assuming we need to be worst off *on average*, at least for some period of time, due to inflation caused by, eg, increased energy prices.

b. increasing benefits and worker wages to compensate will, taken on its own, cause more inflation and risk very high inflation.

To what extent is it possible to protect workers and control inflation with other policy measures, eg increased taxes on the rich?

To what extent are common objections to this true? (our financial industry will leave for lower tax places, the rich won't bother to work any more, "growth will be harmed I tell ye! growth will be harmed!" [for unspecified reason]" etc and so on)

[Blissex]

«we need to be worst off *on average* [...] increasing benefits and worker wages to compensate [...] is it possible to protect workers and control inflation with other policy measures, eg increased taxes on the rich?»

But that is ... COMMUNISM! :-)

The BoE, the Conservatives, New New Labour, LibDems, and the vast majority of their voters are anti-communist. Look at how zealous has been Starmer too in fighting the communists within (Corbyn, Abbott, ..) and outside (Xi, Putin, ...).

https://www.ft.com/content/5584b204-079a-11ea-a984-fbbacad9e7dd
2019-11-15 “The Thatcher revolution is coming under threat”

«To what extent are common objections to this true?»

Andrew Glyn, who our blogger much appreciated, made the useful observation that as social-democratic policies and other factors reduced the rate of profit, investment in productive activities became weaker. A quick search gives:

https://www.marxists.org/history/etol/writers/glyn/1981/10/tumbling.html
"Tumbling profits – Crumbling industry (October 1981)"

But even if the main effect of investment in productive activities is *production*, production is a mere side annoyance (and of course an ungentlemanly vulgar trade) for those whose goal is to make profits, so we can consider production an externality of investment.

So there is a case for the state to fund investment in production, if profit levels be low generally, but that would be ... COMMUNISM! :-)

[Blissex]

“To what extent is it possible to protect workers and control inflation with other policy measures, eg increased taxes on the rich?”
«Andrew Glyn, who our blogger much appreciated»

Let's assume that "possible" as in "to protect workers" does not mean "technically possible" but "politically possible". As our blogger had usefully reminded us:

https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2021/08/whats-the-mechanism.html
«The late great Andrew Glyn always asked: “what’s the mechanism?”»

As to the mechanism, another blogger is arguing that workers engaged in "immaterial labour" can eventually become an organized movement vial social media, even if they are no longer concentrated in big industrial sites, but dispersed in many small service ones.

http://averypublicsociologist.blogspot.com/2017/08/class-struggle-and-common.html

That is an interesting potential mechanism. But someone else noticed that.

For the past several years, especially after the outraged press campaign post-2008 against the monstrously large handouts of public money from treasury and central bank to finance and property, and the consequent "Occupy Wall Street" movement, there has been a huge campaign to ensure that both public media and social media can only be used within "approved" guardrails:

https://taibbi.substack.com/p/everybodys-saying-it-guardrails

[Kester Pembroke]

Question for blissex: could UK implement mass test trace isolate Zero COVID in May 2033 or are new varients too fast spreading?

China abandoned in December 2022, could it theoretically be introduced in May 2023 and would it still work?

[Blissex]

«could UK implement mass test»

That could be done and my guess is that it would still be quite useful, fir only for information.

«trace isolate Zero COVID in May 2033 or are new varients too fast spreading?»

The "trace" part is the technically difficult part with "fast spreading", it needs to be faster. Unfortunately I don't know how fast new variants spread and whether a tracing operation can get ahead of that.

Also "trace" does not need to keep ahead of contagion *everywhere*, it can contain some areas which is better than nowhere. This is obvious from comparing countries, but it can be applied within a country.

NOTE: if CoV-SARS-2 had a higher death rate then its "base" 1-3% (reduced to 0.1%-0.3% by lock-downs, vaccination and treatment), and it were less concentrated on some demographics, then there would much higher pressure to reshape society to slow down contagion until tracing were faster.

If trace were fast enough then "isolate" would still work but politically it seems to be unacceptable in less civilized states in the grip of neoliberalism (where the affluent and rich can more easily self-isolate and can more easily afford treatment).

«China abandoned in December 2022»

If tracing is fast enough TTI can be used to contain infection *cheaply* (mass isolation is an *expensive* containment alternative) but containment should not be permanent, so at some point one has to "let it rip" and rely on vaccination and treatment to reduce the impact.

The chinese government at that point realized that they had reached a plateau of the vaccination rate and vaccine effectiveness.

[rsm]

《the monstrously large handouts of public money from treasury and central bank to finance and property》

What if Occupy Wall Street had studied the Greenback Party of the 1870s and called for printing money for an inflation-indexed basic income?

[ltr]

So,

a. assuming we need to be worse off *on average*, at least for some period of time, due to inflation caused by, eg, increased energy prices.

b. increasing benefits and worker wages to compensate will, taken on its own, cause more inflation and risk very high inflation.

To what extent is it possible to protect workers and control inflation with other policy measures...

[ Fine question, and just what Keynes extensively and correctly explained. The UK needs to be open to the EU and China and build infrastructure, but the UK has been closing and is lagging almost every country in infrastructure development. ]