Full Employment: Asking the Wrong Question?

...One need not be a seer to recognize the central problem with which the institutions of economic society will be preoccupied for the foreseeable future, nationally as well as globally...

...and if the commodity market is not cleared out, the labor market cannot be, either...

...Recent agreements to shorten the work week together with wage cuts indicate a drastic change of scene in German industrial relations and wage-scale policy...

...The five reasons are well known...

...unified unions...

...But they lack an institutional mechanism that would allow them to distribute their wealth to all their citizens...

...First comes actual prohibition on workers' entering the labor market, specifically foreigners and (married) women...

...only a short time ago they would have been completely unacceptable...

...regional wage agreements...

...Since the end of the 1970s, "supply-oriented" economic doctrine has prevailed in Europe, and Keynesianism has lost WINTER • 1995 • 77 Full Employment almost all intellectual and practical currency...

...That will remain true as long as society holds that the value and success of an individual's life manifest themselves on the labor market and in his or her prosperity as a wage earner...

...We are sending a signal that if we just think hard enough, consult the right experts, establish the right priorities, and then act decisively, we cannot fail to find a solution...

...That is false reasoning, because in every developed economy there are actually two equilibrium wages, which lie far apart...

...First: no one has the right to exclude entire categories of the population (according to sex, age, nationality, qualifications, and so on) from participation in the labor market...

...It is not a problem because full employment can no longer be realistically expected, and therefore does not represent a solution one can responsibly dangle before people...

...Unemployment should not be described as a "problem" but as a grim phenomenon...

...Perhaps they encourage employers to hire workers or not to lay employees off...

...This debate is fruitless because, although many theoretical considerations support the supply-side doctrine, the harsh institutional realities of wage-distribution policy in the German Federal Republic stand on the side of demand theory...

...The equilibrium wage that clears out the labor market differs drastically from the equilibrium wage that would also clear out the commodity market...

...When it becomes routine government practice, it leads only to subsidies for investors, not also to an increase in employment—and furthermore to the last three causes for the defeat of Keynesianism: inflation, increased national debt, and a lack of financial capital and higher investment costs...

...Third: compensation for withdrawing from the labor market, about which individuals can change their mind at any time, should not simply reward people for taking their labor out of the economy...

...For the vast majority of the population the rule is this: only if you have income from work or family or Social Security can you claim a share in your country's wealth...

...Altogether, this postcommunist globalization results in persistently high levels of unemployment within the European Union...

...Second, Keynesian demand policy proves effective only when imposed "unexpectedly...

...Meanwhile, the notion that one can share in the commodities and values of life only if one has successfully marketed one's own labor has become morally indefensible...

...but when reductions in real wages result, it becomes more difficult for the producers of consumer goods to sell their wares...

...This imbalance can be interpreted in two ways: either the demand for workers is "too low" or the supply is "too large...

...The question "What should be done...

...On the contrary: the citizens of our workoriented society find the material and immaterial 80 • DISSENT Full Employment rewards attached to the allegedly "normal" existence of the wage earner too attractive for significant numbers of them to consider giving up full-time work and the corresponding income...

...For as the industrial societies have developed, they have tended to force workers into a "modernization trap": for a long time, the labor market appeared so much more rewarding than any informal and self-sufficient forms of activity that these largely died out, and now, when the market can no longer absorb the volume of available labor, they are not there in reserve for a subsistence economy...

...And we know when we have found the solution because all at once the problem is gone...

...It is compelling, on the other hand, because in our work-oriented society the dominant institutions in fact reserve the things that make life worth living (freedom, independence, security, recognition, self-esteem) for those people who prove themselves in economic life as earners...

...Its weakness is that in practice it becomes "morally stressful" for the employed themselves to adhere to this model...

...As regards reducing the cost of employment, the prevailing supply-oriented theories proceed from the assumption that "cheaper" labor automatically yields more jobs...

...Our experts in economic and social policy automatically gravitate toward the first interpretation...

...That leaves unanswered the question of whether, and for how long, a policy of deliberately dismantling the extensive rights to employment and social protections that German workers enjoy will be able to forestall those desperate reactions already manifesting themselves: on one hand, a left-wing militant struggle for government protection of jobs, on the other a right-wing chauvinistic struggle for government protection against "foreign" workers seeking employment...

...Systematic reordering of work according to such principles would not eliminate unemployment...

...These societies have no clue as to how to confront the problem that their wealth is being produced by a declining percentage of their citizens, but that all citizens claim an adequate share of this wealth...

...It does no good to address this painful and chronic condition with the full-employment rhetoric beloved by Germany's Social Democratic party...

...the family, welfare-state, and development-aid conduits will be drying up—conduits that once provided the means of subsistence and opportunities for participation to persons and regions outside the "productive core" of the global economy...

...In the mid-eighties, this conceptual model dominated the policy toward work time...

...This arrangement has the advantage that income transfer is no longer subject to fluctuations in the demand for labor...

...Unemployment exists when more people are looking for jobs than can find them...

...Second, the productivity of the East Asian economies is not only steadily destroying the competitive advantage the German economy once derived from its infrastructure and technology...

...It should come in the form of a right to a base income, without any further conditions (such as need, willingness to work, family circumstances), and should be financed from taxes, at a level commensurate with a modest way of life...

...They say the cost of employment must approach an "equilibrium wage," defined as one that uses up the available labor...

...Under pressure from the world market, the EU countries are breaking away from deluxe working conditions and high income levels...

...Indeed, the more unlikely it becomes that every adult will be able to find and keep a secure, satisfying, and well-paying job, the more frantic and aggressive the competition becomes— between generations, sexes, ethnic groups—for this "supreme good...

...A system of this sort can be articulated in terms of three principles...

...All this took place under the umbrella of a relatively robust social harmony, which the proponents of this "Deutschland Model" praised as a "fourth production factor" unique to the German economy...

...instead, income transfer goes into effect—and with it a reduction in manifest unemployment—as soon as citizens choose to take advantage of it...

...Only if employers can be coaxed over these hurdles by the lure of wage subsidies will the promised positive effects on domestic unemployment be achieved...

...This concept of normality is as wrongheaded as it is compelling...

...the supply can be rationed per day, per week, per year, per life in such a way that—all other conditions remaining constant—an oversupply of labor could be reduced or perhaps avoided altogether for the future...

...The key question remains whether and how we can structure this situation to minimize its social and political impact...

...Yet we can speak of these conditions of prosperity and full employment only in the past tense...

...They can decide, according to personal circumstances and the state of the labor market, whether they want to add to their subsistence income by taking a regular job...

...Some conservative prophets, noting the overwhelming value placed on formal work, believe that life outside the labor market (in the family, in the community, in one's own garden, in cooperatives, networks, and associations) would have to be revalued far more than can be done by moralistic praise for renunciation, modest expectations, and a sense of community...

...The result is that on the supply side of the labor market little can be accomplished, either through control of available personnel or through control of work time...

...Second: since adult citizens do not have a "right to work" but instead a right to compete for employment, then all those who voluntarily withdraw from the competition are doing a favor to all those who remain, whose chances are correspondingly improved...

...The conclusion usually drawn in our post-Keynesian era is that the cost of labor (that is, wages plus benefits) must be reduced or the incentives increased for employers to create (domestic) jobs—whatever the effect on wages...

...they must be reinvented, sponsored, and encouraged...

...Successful employment policies in individual countries or regions are achieved only at the cost of mounting unemployment in other countries...

...Or that it is fair to limit opportunities for consumption, Social Security, and social standing to those who have won them on the labor market...

...If not, then all of us might end up worse off than before...

...Not only would the equitable distribution of social wealth be at stake, but also the survival of democratic institutions and political processes...

...To be sure, this argument retroactively discredits the humane value of earlier technical and economic progress that liberated people from backbreaking work...

...If the goods produced cannot be marketed, that will lead to "too low" a demand for labor...

...It remains to be seen whether what the member countries of the European Union (EU) can no longer do on their own can be done by integrated European institutions and policies...

...True, outside the intimate circle of the family, such possibilities are not so easy to find...

...This transformation is also supported politically by a growing "capitalist popular front" with a defensive strategy aimed at increasing employment by cutting wages...

...At the same time it tacitly recognizes the wretchedness of a social order that cannot keep its citizens in line except through structured labor...

...Besides, now that state socialism is gone, there is far less incentive in the West to maintain full employment and generous social benefits so as to keep the population happy, immune to the blandishments of the "other side...

...First, globalization of economic relations and the system of floating exchange rates have rendered futile any attempt to sustain national economic hegemony by Keynesian means...

...It should encourage them to put their labor to uses other than selling it in return for wages...

...In this situation, praise of a modest way of life does not prove very helpful...

...A different, much less common reading of the imbalance in the labor market is this: what we need is not an increase in the number of jobs but a reduction in the volume of work (the product of employment-seeking persons WINTER • 1995 • 79 Full Employment and the number of work hours per person...

...This loss provides a fairly watertight excuse for doing nothing...

...Will he really translate my and others' reduced work time into a larger (or even just a stable) work force...

...When economists focus narrowly on one or the other of these two functions of wages, they cannot avoid the dispiriting conflict that pits the "right-wing liberal" supply-oriented theories, which call for reducing the cost of wages, against the "left-wing Keynesian" demand-oriented recipes, which defend real wage income or even want to see it increased—both in the name of achieving or restoring "full employment...

...Assuring people that it can be very satisfying to "do something meaningful for others" in the family or in volunteer work or to enjoy a contemplative existence will hardly persuade them to stay home by the hearth...

...They are all the more welcome because in Germany they have contributed to the creation of working conditions that can only be described as deluxe in comparison to those of the United States, France, and Spain...

...Any possibility of influencing the labor supply through control of personnel must be dismissed...

...It makes no sense to pretend otherwise, thereby subjecting them to a lasting, humiliating experience of failure...

...Anyone who does not work at least intermittently or part-time incurs considerable disadvantages as far as income and security are concerned—and often moral (self-) condemnation as well...

...Current initiatives and proposals on labormarket and wage policies have one thing in common: their thrust is defensive...

...Yet it remains to be seen whether this solution will succeed even in stabilizing employment...

...But since it is unlikely that there will ever again be enough work to go around, we should embrace an arrangement that will create tolerable conditions and thereby lessen the likelihood of social conflict...

...becomes irrelevant, to a large extent simply because not one of the individual nations could go it alone...

...The logic of "jobless growth" divorces growth in the economy from growth in employment...

...Guaranteed Base Income Base-income models differ in one important respect from all the suggestions for negative taxation of income in the low-income sector, which amount to a reduction in wages without a corresponding reduction in income: in base-income models, income transfer is tied not to individual circumstances (need, current employment, willingness and ability to work, and so on), but exclusively to citizenship and possibly to the person's age...

...The mechanisms with which one could achieve this can be quickly enumerated...

...First of all, the economic integration of Western Europe brings not only intensified competition to commodities and labor markets, but also a loss of national hegemony in the realm of economic and social policy...

...To put it another way, wages represent not only a cost to the employer but also income for the employees' households...

...And third, since the end of the cold war, not only the Iron Curtain countries but also the Western European capitalist countries have become "postcommunist": the latter must adjust to the immediate proximity of economic systems in which the training of the work force may he almost on a par with their own, but where the cost of labor, at least for the present, amounts to only about one-seventh (for example, in the Czech Republic...

...We will simply have to get used to the idea that a large part of our adult population of both sexes will not find a berth or bread in "normal" jobs...

...For, as Brecht says, circumstances just ain't that way...

...Highquality products were produced by highly qualified and highly paid workers under highly regulated working conditions (and with a ratcheted-up pay scale...

...Those who fail (by being unemployed) to fulfill the norm or decide not to adhere to it (for instance, mothers, or "mere housewives," or house husbands) need pretty good justifications if they want to avoid appearing to be losers to themselves and others...

...for legal and moral reasons this measure cannot be implemented...

...The moral, cultural, and institutional foundations of work-oriented society reward the wage earner, but many citizens are no longer eligible for these rewards...

...The societies of the European Union countries are still wealthy—that is the difference between the present situation and the worldwide depression at the end of the 1920s...

...Those who withdraw deserve compensation for the duration of their nonparticipation in the labor market...

...One argument for full employment gaining increasing, if sometimes openly cynical, support suggests that the integration of the largest possible number of people into the labor market is desirable not for reasons of social justice but for reasons of social control...

...In this model, strong labor unions are welcome, for they provide the push toward rationalization needed to promote modernization throughout the economy...

...The segments of the population that create economic value will be shrinking...

...Organizing income transfer in such a fashion would make allowances for the fact that, because of lack of suitability and lack of demand, many workers can never be permanently integrated into the labor market, even at extremely low wages...

...It is wrongheaded because it drives many people into a rat-race in which they can only lose...

...78 • DISSENT Full Employment What we are experiencing in Europe as a reaction to this situation is a policy of more or less controlled reduction of the costs of employment and Social Security...

...Why should I agree to work shorter hours (and thereby give up income or raises) just so that you can also get work, especially when it is not even certain that the employer will (or can) reward my sacrifice...

...But German institutional realities (that is, wage-scale autonomy...

...If such struggles became a mass phenomenon, in one version or the other, we would presumably be facing challenges on a scale almost unknown in Europe since the Second World War...

...Such are the grim perspectives that present themselves when one clings to the notion that a steady volume of wage earners must be supplied at declining prices and squeezed into jobs...

...The pessimistic view of human nature that underlies this argument is plain: if human beings do not work under supervision and within the framework of formal contractual obligations, they will necessarily fall into a chaotic way of life...

...Let me recall them under the heading of "threefold globalization...

...Translated from the German by KRISHNA WINSTON WINTER • 1995 • 81...

...The revaluation of leisure and the selfdetermined activity with which it might be filled or, conversely, the societal devaluation of the labor market, is a project that goes to the moral, institutional, and economic heart of democratic industrial societies...

...In this same context belongs the courageous suggestion of a prominent social democratic theorist, Fritz Scharpf, that a low-wage sector be created in the German economy, with wages subsidized from tax revenues...

...At best they preserve existing jobs but do not create any new ones...

...the costs of Social Security, tied to income and shared proportionally by employers and employees) were intended to, and in the past actually did help to, create in the Federal Republic a highly productive economy based on industrial exports...

...What justifies the idea that the sum total of useful activities a human being can perform must pass through the needle's eye of an employment contract...

...it is also making certain disadvantages of location all the more obvious, at least for the Federal Republic...

...The reasons are also well known...

...Accordingly, there is no reason to expect that alternative forms of useful activity will crop up spontaneously or on command...

...yet we have no indication that employers would even be interested in creating such low-cost jobs, nor is it certain that—if they were—they could be counted on to fill these jobs chiefly with newly hired workers, and with Germans rather than guest-workers...

...Society mobilizes a constant surplus of labor that it cannot absorb, cannot use for the production of goods and services...

...What remains is control of work time...

...Once this ceases to be the case, and this supposedly normal condition has disappeared for good, the problem of distribution can be solved only by establishing specific economic rights that all citizens grant to each other...

...Economic Rights As long as almost all wage earners are involved in producing wealth, the problem of sharing wealth is solved by way of each individual's job...