The Awesomeness of Full Employment

Full employment: Rarely has a policy aim with such radical ramifications appeared in such a wonky, stolid package. The subject of a dispassionate Brookings white paper, yes. But a way to dramatically reorient power relations in the workplace? Couldn’t be. I mean, Matt Yglesias, a bête noire for the anti-neoliberal left, relentlessly pushes the idea for god’s sake.

But its wonky exterior belies its transformative potential, as Chris Maisano explains in the current issue of Jacobin (the piece is print-only, but you should be a subscriber anyways):

“We want full employment precisely because it weakens the disciplinary powers of the boss and opens up possibilities for less work and more leisure. A full-employment economy raises the bargaining power and living standards of the working class in the short run and erodes the social power of capital in the political economy as a whole, opening up possibilities for radical social transformation.”

In short, advancing full employment is quintessential incremental radicalism; the incremental reform contains the seeds of radical social change. In this case, the hand of labor is strengthened, the power of capital weakened. That, in and of itself, is quite radical. Yet, when the labor-capital conflict really becomes a pitched battle, effaced and obscured no longer—when capital decides they won’t tolerate any additional curtailment of their authority and labor has the capacity to fight back—the yields are potentially even more profound.

Capital has long been cognizant of this overlooked tendency of full-employment. Indeed, Michal Kalecki, in “Political Aspects of Full Employment”, highlighted it as the main reason for their animus. Their objections weren’t economic or pecuniary, Kalecki asserted. Business could benefit from a fully employed workforce. They opposed full employment because they (correctly) viewed it as a threat to their power. Writing in 1943, the Polish political economist put it this way: “”[D]iscipline in the factories” and “political stability” are more appreciated than profits by business leaders.  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.”

Full employment doesn’t have to mean everybody has a job. There are lots of really crappy jobs out there, and the left shouldn’t be interested in creating more drudgery. (Paradoxically, full employment could actually eliminate some degrading, non-essential jobs. If workers had more bargaining power, the worker cleaning rich people’s houses could demand better pay and working conditions, or just quit. I imagine some menial jobs would just disappear as a result.) Full employment simply means that everyone who wants a job can find one.

Consequently, it could be achieved by coupling a permanent WPA-style jobs program with a guaranteed minimum income, so people could opt out of the labor force. To my mind, this approach both would be superior to relying on general government stimulus or loose monetary policy, which would just fuel the engine of consumer capitalism. JK Galbraith’s felicitous phrase about public squalor alongside private affluence still applies; public employment programs should be designed to deliver social benefits, rectifying the ignominious imbalance.

That’s the other thing about full employment: It’s a potentially radical incremental reform, but it makes people’s lives better today. The only time in the last few decades that low-income workers saw meaningful wage growth was in the late 1990s, when unemployment was kept at bay. From what I gather this was largely accidental, but it still brought down poverty rates and increased wages at the bottom. And bringing down poverty rates, of course, has spillover effects: Our public education system, for instance, would be immeasurably better if were poverty eradicated.

So there you have it—the awesomeness of full employment. Now why is Matt Yglesias so high on it?

67 thoughts on “The Awesomeness of Full Employment

  1. France famously (or perhaps mythically, I’m not entirely certain) addressed its employment problems by imposing a thirty-five hour work week. France also has a very different set of labor laws and labor structures — and a labor force with a very annoying tendency to go on strike in critical industries at the exact time that I manage to save up enough money to make the trip there.

    Now, I realize that a proposal of that nature in the U.S. today would be called a “job destroyer” and a “shackle on economic growth.” And, of course, condemned for being too French. So this is just talking on the internet here. But is that a mechanism you see as a way we could get closer to full employment?

    I also think you might want to make the case (or maybe restate it if it’s made in the Maisano article you link) that full employment is good for businesses and corporations. In your shoes, I’d argue that it isn’t a coincidence that the stock market was doing very well at a time of both very low unemployment and higher wages. More people with money to spend means more customers.


    • Good point re reducing work hours— it serves the dual purpose of reducing waged work hours (an end in itself, in my mind) and would also help bring about full employment.

      As for whether full employment would be good for businesses and corporations, I’d echo Kalecki: It’s in their self interest, at least for a time. But their power is eroded under full employment, so it’s not something they’re going to get behind. And I don’t blame them—it’s not in their long-term self interest.


    • I personally have no problem with how the French handle employment by imposing strict numbers of maximum hours.

      For the most part, I think that many European nations are much better at achieving the whole “work-life balance” thing than Americans. They understand how to enjoy time with their friends and families and that life is not all about work.

      I don’t understand why many Americans seem to think it is a natural or even a categorical/moral good to work 60-80 hours a week, sometimes more. This could be because of my absolute disconnection to our Puritan/Calvinst past. My ancestors were Jews who did come to the States until the late-19th/early 20th century.

      Would Americans freak out at having so much free time?


      • well, it is not necessary to consider “all” Americans as the same. It’s not a problem if 70% want to work at 60-80hrs, as long as the 30% who prefer 20-30 hrs have their jobs as well (paid proportionately less, of course) . A successful society will have opportunities for all work preferences and lifestyles.


  2. “Consequently, it could be achieved by coupling a permanent WPA-style jobs program with a guaranteed minimum income, so people could opt out of the labor force. ”

    Do you worry about creating a disincentive to work? Or do you s’pose a black labor market would develop among recipients of the guaranteed minimum income?


      • I understand and probably agree with the ideal, I just question the practicality. What portion of healthy adults do you suppose would opt out of working? Whatever the number, I wonder if it would cripple the economy to have so many on state support.


        • Even if that weren’t an issue – and I believe it would be – I consider long-term unemployment to be a problem for the soul. They go off-course. I’ve seen it happen to a lot of people. It’s one of the things that distresses me most about the current economy.


          • Yup.

            I am currently employed as a contract attorney. This is a fancy way of saying I am a temp. The pay is good, the firm likes me, and I have been given new projects as stuff ended but it is still stressful and does not feel permanent. Yeah, I know we live in a country of at-will employment and in theory even if I was an associate with benefits and PTO, I could still be terminated easily. However, being a contract attorney is different. There is a sense that I can go in anyday and be told ‘Thank you very much. The project you are working on has ended if we have something else we will let you know.”

            It does not help that when I apply for more permanent positions (which is really sending out a lot of blind cover letters and resumes) there is either no reply or a polite rejection.

            I’ve done some savings and am certainly making good money but worry a lot about being stuck as a temp while everyone around me seems to be advacing. The temp aspect also makes me hesistant to pursue romantic relationships.

            It sucks.


          • That’s involuntary employment with all the stress of being judged for not having a job, plus the worry about economic solvency, etc etc.

            That’s not exactly what I’m referring to. I’m referring to those who aren’t really looking. In some cases, quit their previous job for a trivial reason. I’m not downplaying the stresses of involuntary unemployment, but outside of students and retirees, it can have some really deleterious effects.

            Phase One of the current economic problem is that people want work and can’t find it. Phase Two is when they stop even wanting to work and get used to not working.


      • How about a 35-40 hour work week as a moral and ethical good? It allows people to have more time to cultivate themselves as friends, as family, as citizens. There will be less of the “bowling alone” phenomenon. Families will eat dinner together more often without feeling burnt-out. People will have more time for exercise and healthy eating and this will save on healthcare costs.

        There will be less stress, less rate race, etc. I think a reduced work week will lead to a healthier and happier citizenry. This is completely unquantifiable but things that are unquantifiable are very important.


        • James Hanley touches on the concerns I have with a mandatory reduced workweek. It doesn’t give me the shivers like GMI does, but I’m not on board with it presently.

          Somewhere down the line I think that we may have to do something like that, though.

          I should also add that I do support shifting many, many more jobs from salary to hourly.


        • Why should we aim for a universal standard, whether it is 35, 40, or 60? Why not have a flexible labor market, where everyone can work more or less, to their preference. It’s not more “moral” to work 30 hours vs 60 hrs or vice versa; but it is moral to earn what you consume.

          That said, you’re right, the prevalent culture maintains it is more moral to work and consume more (as opposed to voluntarily choosing to work and consume less), and I often find it extremely annoying, as I never shared that point of view, just like you haven’t. I even tried to run a meetup in my city on voluntary simplicity, but it didn’t generate enough interest.


    • I like the idea of basic income, but I can’t help worrying about disincentive effects, especially for amounts around $10K + health care. I’m lazy and capable of being frugal, *I’d* think about not working at that level… Full employment policies and guaranteed jobs seem to get around that. (Interesting question: why is WPA good, and workfare bad? Implementation details?)

      Note full employment doesn’t have to mean WPA, at least outside of liquidity traps; a central bank that rates employment higher than ultra-low inflation can probably do well, combined with a robust regular public workforce as buffer. But probably can’t hurt to have lots of low-pay moderate-hours auxiliary jobs available, like “collect more census data” or “be eyeballs on the streets” or “extra inspectors”, stuff that we don’t *need* (and thus won’t miss if they run off to join a boom) but that makes the country incrementally (or asymptotically) more informed and safer.


  3. Well, putting aside how we’re going to get (conservatively) 500 billion a year to pay for this, and how we’re going to handle the inflationary pressures – because both of those are relatively straightforward – I’d be curious on how you’re going to handle immigration with this plan.


    • The inflationary pressures are something that the market, or more precisely businesses, handle through increased productivity. Remember the 90’s. We had full employment and low inflation. If we were to have full employment again, we would still have inflation much lower than in the 70’s, and probably inflation lower than in the 80’s. There is a ton of labor saving technology out there that isn’t being utilized in the U.S., but is being used in other countries such as France and Japan. Full employment would just mean that the U.S. would become a more capital intensive economy, and it would likely mean a lot more employment in industries that develop and produce new technologies. It really is a free lunch. Which I think is why the right hates it.


      • The inflationary pressures are something that the market, or more precisely businesses, handle through increased productivity.

        Hiring more people to do the same work tends to work against increased productivity.

        There is a ton of labor saving technology out there that isn’t being utilized in the U.S., but is being used in other countries such as France and Japan. Full employment would just mean that the U.S. would become a more capital intensive economy,

        Actually, it’s the labor saving technology in industry–which equates to increased productivity–that’s part of the cause of our slow rebound in employment. So let’s save more labor in order to create labor? Seems a bit counterintuitive.

        it would likely mean a lot more employment in industries that develop and produce new technologies.

        Eh, that tends to require specialized education…the folks having the hardest time finding jobs are the ones without that specialized education–the ones most easily replaced by labor saving technology.


  4. It’s not like full employment is some sort of phantom. We had basically full employment in the United States for most of 2006 and 2007, with rates in the 4.5% range. Because there’s always going to be some degree of unemployment even in the best of times, 4.5% is effectively full employment.


    • Robert Pollin and others have identified the magic number as 4 percent or below. I’m no economist, so I can’t speak to the validity of it, but Pollin argues that’s when benefits really start accruing to people at the bottom of the wage distribution.


  5. Picture yourself in a job that pays millions
    With no education and a 30 hour work week
    Some boss tries to fire you, you answer quite slowly
    I’ll just make more millions at an easier job

    Libertarians in the sky with full employment
    Neo-liberals in the sky with full employment,ah

    etc., etc.

    Granted full-employment is better than lots of unemployment. But the idea that it can bring about some sort of radical change, especially in eliminating income and wealth inequality is, at best, unproven.

    This is where I find a problem:

    “Full employment doesn’t have to mean everybody has a job. There are lots of really crappy jobs out there, and the left shouldn’t be interested in creating more drudgery. (Paradoxically, full employment could actually eliminate some degrading, non-essential jobs. If workers had more bargaining power, the worker cleaning rich people’s houses could demand better pay and working conditions, or just quit.”

    I don’t see how we get to the point where a low skilled laborer can get much more than she already gets by selling her (comparatively unproductive, in pure dollar terms) labor to the highest bidder.

    The employer will say, “I’m losing money or not making the return on investment paying you that much.” The employee will say “Good luck finding anyone cheaper in this full employment period.” The employer will then say either

    a. I’ll take production offshore.
    b. I’ll close up shop temporarily or permanently to reinvest
    c. I’ll pay you or someone else slightly more

    If employers take option a. (which they have been) then unemployment rises, killing the whole thing. (Free trade brought a lot, but it made economic equality hard to do without transfer of weath in the form of progressive taxes and aid to the lower and middle class,)

    If they take option b., then the who game is over. I doubt they’ll take b. over the long term, but it is an option that Capital could take in the short term to kill the new-found bargaining power of unskilled labor. (I’m not saying there is a cabal of capitalist leaders here, but when pressed smart wealthy people start to see what strategies are necessary to fight back and make higher profits even in a new environment.) Capital always goes (in the long run) to where it makes the most profit. If low skilled workers start to earn more, businesses that employ them will be less profitable. A few industries will see this and use (Bain-style) selective bankruptcies to temporarily throw workers out. Once they’re thrown out, then we have unemployment, and every employer around the country can point and say “This will happen to you if you ask for more pay.”

    c. In some cases employers will take option c., but the gains to wages made here will be -in the long run- wiped out by the effects of a. and b.

    I’ll be honest here. I don’t think unions or government jobs programs that attempt to induce full-employment can really save unskilled labor. Capital holds all the cards and unskilled labor holds none. Unions and these full-employment programs try to give unskilled labor some pretend power, but it’s just pretend, and Capital takes it away whenever Capital so chooses.

    A future economy that is happy and healthy will require transfers of wealth and income from Capital and skilled labor. (That is how it has been in all modern, 1st world countries that are at all successful, and that is how it will continue to be for the foreseeable future.)


    • That is how it has been in all modern, 1st world countries that are at all successful, and that is how it will continue to be for the foreseeable future.)

      Singapore and Hong Kong are very successful and have fewer wealth transfers than the US (top marginal income tax rate is at about 20%)


    • >>The employer will say, “I’m losing money or not making the return on investment paying you that much.”

      Certainly it all has to balance out. The worker will not be able to infinitely keep raising his price. What we are talking about is that the worker will raise this salary to a maximum point, which still leaves the employer enough profit, worth his while to run the business. As far as outsourcing, this is something we as a society can affect, for example by tax structures favoring domestic employment in strategic industries, etc, if we consider it necessary.


  6. “I’ll be honest here. I don’t think unions or government jobs programs that attempt to induce full-employment can really save unskilled labor. Capital holds all the cards and unskilled labor holds none.”

    I think that the difference is that in a period of full employment, capital is willing to invest in skilling up unskilled labor. “Hiring a trained forklist operator is expensive, so we’re willing to invest in teaching John to drive it and getting him certified. We may have to pay him a couple more bucks an hour, but he’s worked here a couple years so he probably won’t jump ship as soon as he’s got the card.”

    “Yeah, Mary the temp has a degree in History instead of comp sci or something, but she seems to know which end of the mouse to click and I’ve seen her helping coworkers with computer problems. See if she’s willing to commit to a year on the help desk if we send her to training for an entry level cert.”

    It’s not going to make the warehouse worker independently wealthy, but this is a ratchet effect; John has just moved from unskilled to semi-skilled labor, and Mary has moved from working-class to lower-middle-class wages. And later on, John may get trained as a commercial driver and Mary may move from a help desk role to a business analyst role…. Yeah, looks transformative to me (speaking as somebody who has been lucky enough to land at two companies in a row that were willing to invest in me).


  7. The more I think about it, the more I think that without either a radical rewriting of our laws and norms about work (as I suggested in my initial comments) or something like the WPA (as Shawn wrote of in the OP) “full employment” is more of a tangible articulation or a metric of a healthy economy rather than an independent policy goal that we can’t get to from here.


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  10. Are progressives insane?

    They gum up the jobs market with thousands of pages of regulations, mandatory benefits, rules on hiring and firing, minimum wages and maximum hours before overtime, and taxes. Then they support countless regulations that make it illegal to be self employed by doing things like drive a personal taxi, redecorate peoples homes, style hair, polish nails or run a lemonade or hot dog stand.

    Then they force mortgage companies to give loans with no downpay and no income verification to people who should never own a house. This of course blows up and takes down the economy and drives unemployment through the roof.

    Then they support increasing unemployment benefits for almost two years. Then they go against the wishes of the people and deceptively pass Obamacare to make it even more expensive to hire less skilled workers.

    And the solution? Let’s build a top down make work, politicicized jobs program.

    Yeah, we’ve got it all figured out.


    • Roger, I’m sorry but your entire paragraph on the mortgage collapse is pure Fox News level bull. Over 84% of the subprime loans that were issued were done by non GSE entities and there’s no evidence that government was somehow forcing all of those banks to issue the loans. The banks were happily doing this on their own with no government forcing their hands. Commercial real estate, for example, had a similar collapse and there was absolutely zero government mandates or GSE involvement in those fields.

      I’m fine with your first paragraph and I’m not even going to bother with the Obamacare which is just standard GOP boilerplate spin but I just couldn’t let your
      mortgage nonsense go by without some pushback.


      • That’s not entirely true, North. I can’t find the source right off-hand, but the federal government explicitly threatened lenders who didn’t find ways to give loans to subprime borrowers, threatening them with charges of red-lining (the lenders said they weren’t giving loans to poor urban folks because they were, well, too poor to afford the loans, and the government implicitly charged them with doing it for racial reasons).

        There’s also the issue of Fannie and Freddie.

        There’s also the issue of the Fed’s easy money policy which inflated the value of the housing market, making subprime loans–particularly the ARMs–look more attractive because the market value of the home was sure (for a while) to increase enough to make a refi possible. (I benefited from one of those ARMs, to purchase my first home–little did I realize then that I was actually part of the problem.)

        The lenders aren’t remotely blameless, but neither is the federal government. We had policies of good intentions paving the path to hell, and lenders who found the path so delightful that they fooled themselves into thinking it must really lead to paradise.


        • James, I don’t have a problem with your nuanced approach .
          Rogers paragraph laid the entire mortgage debacle at the doorstep of progressive and while that may be comfortable and convenient for libertarians to pretend that somehow government forced the entire finance industry to make these errors that’s not blame that they can assign so simply.

          To the specifics I wouldn’t even begin to claim Gov hasn’t meddled in mortgage or that government regulation or liberal political correctness screeching didn’t have some contributory effect but any implication that the Feds forcably bullied and frog marched the finance industry into making billions of dollars on subprime loans is laughable. As I noted FNMA and FHLMC represented 16% of the subprime loans that were issued and as to blaming the Fed, well may as well blame the sky or the fallen nature of man as blame the Fed. You’re not a goldbug though maybe you’re in favor of some sortof arbitrary alternative system to the Fed?


          • The sky doesn’t make mistakes; the Fed does. They’re human, and as much as people like to pretend they’re dangerously unaccountable, they are in a political position and feel the pressures to do something to “help people.” They had good reason for the easy money policy–we had a jobless recovery from the post-9/11 recession–but as with so many well intended policies they didn’t sufficiently think about the side effects.

            No, I’m no goldbug and I like the Fed precisely because it’s a little more protected from public pressure than the Prez or Congress. But pointing out their mistakes and making them publicly known serves as a learning tool for both the public and for future Fed governors.

            As to FNMA and FHLMC representing only 16% of the loans, that’s a bit misleading. They had a disproportionately large share of it, and by securing loans for other lenders they both made it safer for those other lenders to engage in the practice but as gov’t corporations also gave a sort of official stamp of legitimacy to the practice. They’re not remotely wholly to blame. In fact they lagged the rest of the industry in the practice and were effectively pressured into it by comparisons of their returns with the returns of the big lenders who were doing it. But they did succumb to the pressure and in doing so exacerbated the problem.

            I do think Roger’s paragraph was too simplistic, but I think it’s important to recognize that in large part, although not necessarily in whole, the lenders were acting in response to public policy. Businesses operate on playing fields designed by government, and if government changes the field, businesses will respond by changing the game they’re playing.

            It would be easy to eliminate subprime mortgages without making any rules against them or even making any rules against mortgage-backed securities. Just keep a tight money supply and make personal bankruptcy with full discharge of mortgages easy.* Lenders wouldn’t dream of making subprime mortgages then, because the secondary market wouldn’t buy the MBSes. Do the reverse and we can guarantee they’ll make subprime mortgages as fast as they can.
            *Side effects? Oh, sure, there’ll be side effects. But since the Fed got to ignore side effects in making an easy money supply, and liberals get to ignore side effects in arguing for government relief from mortgage obligations, I get to ignore side effects at least for the sake of argument. 😉


          • We’re in agreement on side effects and we’re in agreement about the government setting the business environment, heck even hard core liberals agree about that which’s why they get all exercised about regulation (and they’ll point out with great satisfaction the heavily regulated stogy banks of our neighbors to the north who never experienced the crisis at all). My core point was merely that the subprime debacle was too big to be fobbed off on evil regulating liberals alone, this was a system wide failure which certainly included (but emphatically not specifically includes) government and liberal meddlers along with greedy corporations and the glorious free market.


          • My core point was merely that the subprime debacle was too big to be fobbed off on evil regulating liberals alone, .

            True, Greenspan isn’t a liberal. 😉

            OK, true. Period.


        • James,
          NC and one of the Newengland/mid atlantic states took those same banks to task for giving black folks worse loan rates than white folks. They won.

          Government, busy fighting itself as it takes on the banksters! 😉

          Yeah, please, Blame Greenspan!!!

          Note that the federal government isn’t the ONLY person responsible for inflating the housing market (but you knew that…)


      • North,

        First, sorry if my two sentences on this progressive snafu were not sufficiently nuanced for you. I usually write too much, so it is probably good to err the other way once in a while.

        That said, I had just finished reading Chapter one of After The Crisis by the obviously progressive writer named Lord Adair Turner who happens to be Chairman of the Financial Services Authority in Great Britain.

        Let me quote:

        “Increasing US inequality at the lower end of the distribution, moreover, has had consequences that undoubtedly have contributed to a major set- back to human welfare for many people around the world. As Raghuram Rajan points out in his recent book Fault Lines,25 increasing inequality in the United States, which in the American political culture could not be offset by a distributional response, led instead to the deliberately encouraged palliative of risky credit extension to lower income groups. This explosion of sub-prime lending was a substantial contributor to the financial crisis.”

        You then dismiss my Obamacare criticism with the deep, substantive claim that it is “GOP boilerplate spin.” This is an odd retort to someone who is neither a member nor a fan of the GOP. The point is that it increases employment costs, especially for the unskilled, and this is a pretty silly thing to do if you are interested in promoting hiring in a time of systemic unemployment. Wouldnt you begrudgingly agree?


      • By the way, Turner’s booklet is fascinating. It is on the topic of Happiness vs GDP growth. He brings up lots of interesting topics, most of which I disagree with, but which required a bit of wrestling with to handle. My guess is progressives will love it, and classical libs like James will find it frustrating but worthwhile. It would actually make a great front page discussion.

        Here is the free PDF link to all of the chapter…


        • I’ll have to check it out. I always tell my political economy students that material well-being != happiness. But creating happiness is an even harder policy task than creating material well-being, and the most likely outcome of sustained efforts in that direction are to reduce both prosperity and happiness.


    • The things I do to avoid what I should be doing. OK lets look

      I then went here and got General government financial balances, % of nominal GDP as a very rough proxy for ‘amount of top down stuff’.

      I had to take out Turkey, Chile and Mexico as for some reason they are only in the unemployment list.

      Then I played about with excel and plotted unemployment rate against government spending (using 2011 data) and put in a trend line. If someone can tell me how to put this in a comment I will but it looks to me as if there is a negative correlation, government spending is higher where unemployment is lower. I suspect I may be reading the graph wrong though as eyeballing the data puts Sweden and Denmark high in the unemployment list and those are not places noted for low government spending.


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  12. Good ideas.

    Employment could be also increased by encouraging employers to support a flexible labor market, where we would get a good mix of workweeks (i.e. 20, 40, or 60+ workweek jobs, in most professions). Currently, we have a 40-60 workweek for most professional jobs, and there’s little flexibility with anything under 40 hrs. For example as a software engineer I found it impossible and had to go as far as changing professions to get any flexibility with the workweek.

    As far as WPA-typejobs, I believe they should be focused on training people to new skills, rather than just give them something unproductive to do. Someone’s “job” could be going to school and becoming a plumber, an IT specialist, or a medical assistant.


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