Although a program that will achieve full primary employment, as defined in Chapter II, will eliminate individual hardship, and will therefore accomplish the most urgent employment objective, such a program is still far from being completely satisfactory from the standpoint of the community at large, since the general standard of living depends on how effectively the economy makes use of all available labor. From this standpoint a fully satisfactory employment program must not only provide full primary employment but must also generate the maximum practical volume of secondary employment.
One of the most absurd and, we may say, tragic, features of present-day economic life in the United States is that the dead weight of a completely erroneous conception of the nature and cause of unemployment has resulted in the general acceptance of policies that restrict and discourage the full use of the available labor supply, thereby depriving millions of individuals of the potential fruits of their labor, and at the same time forcing the nation as a whole to accept a lower standard of living than that which could be attained. Adoption of these policies, based upon the delusion that there are not enough jobs to go around and that we can meet the unemployment problem only by compelling part of the potential working force to remain idle, is beyond doubt the most costly economic mistake that this nation has ever made.
Basically, this colossal blunder rests on a misconception of the potential capacity of the modern productive plant. Great strides actually have been made toward increased productivity, and the current output of the economy is far above that of only a few decades ago, but too many individuals have acquired a fantastically exaggerated notion as to the potentialities of present-day production methods and facilities. Business administrators, engineers, and others who are actually participating in the task of pushing productivity to higher levels, and who have first-hand knowledge of how difficult it is to achieve even a modest gain, seldom fall into this kind of an error, but many academic economists and writers in the economic field, who are personally engaged in supplying services, a large and growing segment of the economy in which little or no gain in productivity ever takes place, somehow manage to persuade themselves that the economic millennium has arrived.
In the realm of fancy which these individuals inhabit, such preposterous expressions as the “Age of Abundance” and the “Era of Plenty” are tossed about in all seriousness, and wild schemes for disposing of our economic “surplus” are hatched in profusion. “The era of abundance has arrived”, says Robert Theobald, “Today, the productive system can grow fast enough to meet any demand which is likely to be placed on it”.15 Galbraith is equally confident. “No one”, he declares, “would be called upon to write at such length on a problem so easily solved as that of increasing production”.16 Our problem now, they tell us, is how to get rid of the stuff. “Abundance is a world-wide problem”, asserts Theobald.
But we are not living in this fairyland; we live in a cold hard world of inescapable realities. In this world of fact and not of fancy man must toil for everything he wants. The great bulk of the human race still lives in the shadow of starvation, condemned to labor almost unceasingly merely to produce the bare essentials of life. Only in comparatively recent years and in the most favored lands have we been able to reach the point where some of the comforts and conveniences that make life pleasant and enjoyable are available to the people at large. And why? Because we are Limited by our ability to produce. By the exercise of the ingenuity and imagination of millions of our people we are slowly and painfully raising our production per worker at a practically uniform rate year in and year out regardless of war or peace, boom or depression. But the productive capacity we have thus far attained is puny in comparison with our unfilled wants, and in view of our inability to make more than a slow and gradual improvement, the controlling factor in economic life for hundreds of years to come, perhaps forever, will still be scarcity just as it has been throughout the long upward march of human progress.
If we want to get the utmost out of our existing organization and facilities in the interim while we are going through the slow and difficult process of developing more efficient methods and tools, we have two options: we can use more workers or we can work longer hours. Nothing has ever been devised that will enable us to evade this brutal fact, regardless of what the dreamers may tell us. A full scale demonstration of just what we can do, and what is necessary in order to achieve maximum production, was staged during World War II. In this emergency it was obviously necessary to exert ourselves to the utmost, and in response to this all-out effort our factories poured out war material in quantities far surpassing anything that the world had ever seen before. But when we take the reduction in production of civilian goods into account, and correct our production figures for the inflation of dollar values, we find that the actual increase in total production above the pre-war level was only about thirty percent, and it was accomplished by adding the equivalent of about thirty percent to the total working force. The National Industrial Conference Board appraised the results in this manner:
Contrary to popular belief, wars are not accompanied by a marked increase in physical output of manufactured goods per hour of labor. In World War I, for example, output per man hour in manufacturing was slightly lower in 1919 than in 1914. The trend for World War II is still in dispute, but preliminary figures suggest that the output per man hour rose only about 1% a year, or far less than the annual gain in peacetime. It is true that the output per man hour rises in war industries, particularly where the volume is greatly expanded, as in aircraft or shipbuilding. But these gains are largely offset by declining productivity in civilian industries, which suffer from a substandard labor force, an uncertain flow of materials, and other retarding factors.17
This gets us back again to the significant fact that the average production per worker is not subject to sudden and spectacular changes. Any gain is a slow and laborious process, a matter of inching our way forward along a front that extends through thousands of different industries and occupations. Any improvement in one industry, no matter how substantial, represents only a very minor change in the general average. The high level of production that we would like to have cannot be attained by any kind of magic; it can be reached only by the slow evolution of better production methods, or by utilizing the same expedients that had to be employed to meet the demands of the war machine: increasing the number of workers and extending the working hours. Under the spur of military necessity we increased the total man-hours about thirty percent, and the result was an increase in total production amounting to just about thirty percent. The relation between man-hours and volume of production is direct and unmistakable.
Furthermore, there is no support for the widespread belief that wartime discoveries and technological improvements have added enormously to our production potential and have uncovered latent capabilities that have vastly increased our ability to produce goods from now on. Even the slightest attempt at a critical examination will show that this belief has no foundation in fact. We did not increase our capacity to produce peacetime goods during the war. The war production record was accomplished mainly by converting small scale industries to the mass production methods that were already standard practice in the civilian industries operating on a large scale, not by the discovery of any new techniques that could be transferred over to civilian production. It was the efficiency of pre-war industry that made the war record possible; civilian industry was the teacher, not the pupil.
It should also be noted that the “automation” that we have been hearing so much about lately is not a magic formula that will solve all of our production problems. In the first place, it is not something new that has just appeared on the scene; only the name is new. Automation is simply a controlled application of power to the tasks of industry, and it has been around for a long time. It is true that there have been some important developments in this field in recent years, but it takes a continuous series of new developments of some kind just to maintain the modest rate of increase in productivity—about two percent per year—that we have been accomplishing heretofore. There has not been any significant increase in this rate of gain since automation became a household word, and there is no indication that such an increase will be forthcoming. “A sharp break in the continuity of technical progress has not occurred, nor is it likely to occur in the next decade”,18 reports the National Commission on Technology, Automation and Economic Progress (1966).
Even those who contend that we are now in a position to provide the consumers with an almost limitless supply of goods are forced to return to reality when they undertake to tell us how these remarkable results are to be achieved. For instance, Galbraith, who regards increasing production as a “problem easily solved”, can do no more than suggest utilization of
Inasmuch as we now have in the United States an economic organization that uses more capital, employs labor and capital more efficiently, and possesses a more efficient technology than any other organization that the human race has thus far been able to devise, and there is no indication that we can improve our position in any of these categories at any faster rate than we are now doing, Galbraith’s list reduces to the same conclusion that was reached in the preceding discussion; namely, that we can speed up the rate of increase of production only by employing more labor or by working longer hours.
The first of these expedients, that of employing more workers, is the simplest, because there are a great many individuals who would prefer to work, but are prevented from so doing by existing economic policies and conditions. The World War II experience gives us a good idea as to the possibilities in this connection. Statistics compiled by the Department of Labor indicate that the increase in the total number of workers from 1940 to the wartime peak, over and above the normal growth of the working population, was about 13½ million. More than half of these workers drawn into production activity by the war emergency, over 7½ million, came from the ranks of the able-bodied unemployed, 3 million were youths of school age, 1½ million were women not normally employed in industry, and 1½ million were persons normally classified as unemployable.
The attainment of one hundred percent primary employment by means of measures of the kind that will be recommended in the concluding chapters of this work will eliminate the reservoir of able-bodied unemployed. Sound public policy will require keeping the youth in school, and these young workers will only be available during vacation periods. It is also doubtful whether full-time employment of women in industrial production can be increased to anything like the wartime level. The current tendency is toward more full-time work by women in service and professional occupations, but this is a reflection of general social conditions, and is not likely to be responsive to government employment policy. The potential increase in the working force, beyond that which will be accomplished by providing full primary employment, therefore reduces mainly to a matter of making more effective use of part-time workers and those who are now considered unemployable.
An important point in connection with the latter group that was mentioned earlier is that a large proportion of these individuals are not unemployable as a matter of fact; they are in this class only because of legal provisions that deny them employment, or accomplish the same end by denying them compensation for the work that they might do. Some increase in production can be obtained, for instance, by restoring the option of continuing at work to those older persons who reach the age at which they become eligible for social security pensions. At present the payment of pensions is made contingent on almost complete abstention from active gainful employment. The only basis for this requirement is the theory that the removal of these workers from the active labor force will leave more job opportunities for the younger job seekers, and there never has been any factual foundation for this supposition.
The whole conception of a limit to the number of potential jobs is a gross error, and the amount of unemployment is not affected in any significant way by the size of the labor force. The great mass of facts and figures that establish this basic principle beyond question will be discussed at length in the next chapter. Mere force of argument and reasoning may not be enough, however, to convince everyone that the present beliefs are mistaken, as the idea that the retirement of one group of workers leaves jobs for others has such a ring of plausibility about it that it takes a close scrutiny of the facts to detect the fallacy. This is another point where a definite guarantee of employment is important. When we guarantee full-time jobs to all those who are willing and able to work there will no longer be any argument at all for forcing the pensioners to remain idle. On the contrary, any contribution that they can make toward the national production of goods should be welcomed. The decision as to whether to quit work on reaching pension age should be made optional, and the present practice of withholding pension benefits from those who earn any substantial amount from “gainful employment” should be discontinued.
This does not necessarily mean abandoning the policy of mandatory retirement at a specified age which is now in effect in a large segment of American industry. There are valid arguments both for and against mandatory retirement, and this question should be resolved on its own merits. The objectionable feature of the present policies is that they are deliberately designed to force the older worker into idleness, to bar him not only from his usual job but from any job, in the fatuous belief that this opens up an employment opportunity for a younger worker.
Another legal restriction on employment that should be removed is the one that is imposed—quite unintentionally, but nevertheless effectively—by the minimum wage laws. These laws do not assure a worker that he will receive the established minimum wage; they simply forbid employers to hire him at any lower rate. The employer cannot remain an employer unless he gets his money’s worth from the labor that he employs, and hence the net result is to deny employment to anyone whose production is worth less than the established minimum wage. The higher this minimum is pushed, the more men are forced into idleness. This is a classic example of the kind of results that we obtain when we base economic policy on sociological objectives without considering the factual aspects of economics. A program intended to force the employer to pay higher wages to the less productive workers actually results in denying employment to those individuals.
There is much to be said in favor of the objective of the minimum wage laws—a reasonable minimum income for the worker, consistent with the level of the national income as a whole—but here, as in so many other instances, the socio-economist and his following among the lay public refuse to recognize the existence of basic laws governing economic processes, and blithely assume that irreproachable motives are sufficient to assure the success of policies of this kind. The actual fact is that if the sub-standard worker is to be paid more than the value of his production someone else must make up the difference. The employer who might have use for this sub-standard labor cannot accept this kind of a burden and still stay in business—whether or not he might wish to do so is entirely irrelevant—hence that “someone” must be the general public. But the same public that gives hearty approval to the minimum wage policy in principle has no visible inclination to pay the price that would make it work, and the result is that the sort of minimum wage laws that are now on the statute books do a grave injustice to the very persons they are intended to benefit.
In order to extricate ourselves from this absurd situation in which we are forcing individuals into idleness and building up a class of “unemployables” who add to our serious national problems in a great many ways, we should so organize our activities that anyone who is able to work at all is afforded the opportunity to make a contribution to his own support and to the welfare of the community by so doing, irrespective of how small that contribution may be. The goal of one hundred percent primary employment set up in Chapter II contemplates that continuous employment at normal wages be furnished for those who are able to earn these normal amounts. The point of the present discussion is that some further provision needs to be made for those who are unable to meet the normal standards. For instance, a number of substandard classifications could be established, and the workers unable to handle normal assignments could be placed in work where both the job requirements and the wage rates conform to the lower standards of the particular classification.
The question as to whether these sub-standard workers who earn sub-standard wages should receive any supplemental payments to bring their income up to some minimum level meeting the approval of the community is a separate, and non-economic, issue that should be considered on its own merits. The essential point that must be recognized is that if the citizens of the community decide that they want such a policy followed, then they must be prepared to pay the cost. As of now, the citizens, through their elected representatives, have, by enacting the minimum wage laws, given approval to the principle of a minimum income for all workers, but only on condition that someone else pays the bill. Whether or not the idea will still be looked upon with the same favor when it becomes clear to the general public that they must stand the cost is something that we will have to find out. At any rate, the present policies which simply force the sub-standard worker to remain idle are clearly not the right answer to the problem.
Development of procedures for making the most effective use of part-time workers is an objective that will justify a great deal of attention on the part of the employment administration. This presents an opportunity not only to add to the total productive man-hours, but also to make some contribution toward more efficient use of the available manpower. There has always been a considerable amount of variability in the requirements for different kinds of labor, due to seasonal conditions and other factors, but the irregularity is much greater in present-day practice than ever before, because of the increasing amount of specialization both in labor and in products, and because the consumer is now in a better position to demand that goods be available to him when, where, and as he wants them. Of course, business enterprises try to level out the peaks as much as possible, but the uncontrollable variations are large enough to constitute a major problem.
In some cases, such as certain types of construction, the answer thus far has been to create a work force that is employed only intermittently. In order to make this practical from the standpoint of the worker, the pay scales have to be high enough to compensate for the idle periods, and, in effect, these workers are therefore being paid for the idle time as well as for the working time. However, the individual worker has no assurance that he will fare equitably under this system. He may work steadily throughout the year and have very substantial earnings, but it is also possible that he may work seldom and earn very little. From the standpoint of the economy as a whole, the existing program is even less satisfactory, as it wastes a large part of the potential labor of the workers.
The use of part-time workers, individuals who want only part-time work, to meet the peak demands for labor is a much more efficient method of handling the fluctuating requirements. Here there is no waste of potential labor, as the time during which an individual does not want to work cannot be considered potential working time in a free society (as long as he is in a position where he does not have to work). Furthermore, there is no necessity, under this kind of an arrangement, for any unrealistic pay scales such as those which are now in effect in many of the occupations where men depend on intermittent work for a livelihood. One of the essential requirements of a complete employment program, therefore, is to set up facilities for making the most effective use of part-time labor.
There are also a great many opportunities for converting jobs of the intermittent type into full-time jobs by appropriate coupling of seasonal occupations and training the workers for more than one job. Before the days of the mechanical refrigerator, the combination coal and ice businesses were a familiar example of a logical coupling of this kind. Many industrial organizations undertake to do as much as they can along this line, as a means of stabilizing their labor force, but, as matters now stand, they are hampered by restrictions imposed by the labor unions—seniority rules, jurisdictional lines, etc. These, in turn, have their origin in the workers’ fear of losing their jobs. When full-time primary employment is guaranteed it should be possible to remove such obstacles to the efficient use of the available labor. Employment of students during the summer vacation periods to replace regular workers who are taking their vacations is an example of an effective coupling of this nature that can be utilized much more extensively after the various obstacles are cleared away.
The second way in which production can be increased beyond the levels to which the modest annual improvement in productivity will bring us is to increase hours of work. Here we come into conflict with a desire on the part of some workers to reduce their working hours to gain more leisure. However, workers in general do not now realize that for the working force as a whole this is a matter of one or the other. They cannot have both the goods and the leisure. If they prefer the leisure they will have to forfeit the goods that could be produced by working; if they prefer the goods they will have to forfeit the leisure. Of course, some workers may be able to enforce demands for reduced hours without reduction in pay, but this merely means that some other workers will have their real income reduced. The average real wage, the wage in terms of buying power, is determined entirely by the national productivity, and any action, such as a reduction of working hours, that cuts production automatically reduces the average real wage of the working population.
A limitation of the work week is in reality nothing but another means of creating involuntary unemployment. In its effect on the man who would prefer the income from an additional eight hours of work per week rather than the extra day of leisure, the existing 40 hour limitation is no different from a business recession that causes the factory to close down for two months out of the year. In either case he loses the potential income from about 50 days work.
One of the important factors in this situation is that the preferences of the individual workers are by no means uniform. Some prefer more leisure; others prefer more goods. As time goes on and continued improvements in technology increase productivity still further so that still more leisure will be practical for the average worker this matter will become increasingly important, as the range of individual preferences will be that much greater. It would seem, therefore, that some consideration ought to be given to ways and means of permitting more individual latitude in working hours. This would actually be a significant step in the direction of greater economic freedom. The present limitations are intended to benefit the worker by giving him more leisure, but their supporters overlook the fact that the additional leisure is not given to him; he is compelled to buy it at the price of giving up comforts and luxuries that he could have earned by working the additional time. It would seem much more consistent with our American ideals of individual liberty to permit each worker to have at least some chance to exercise the privilege of free choice, rather than to be forced to conform strictly to a program that may be directly opposed to his best interests.
It is often contended by those who advocate continuing reduction of working hours that the workers prefer the leisure to the additional income, and that there is no substantial element of the working population that would wish to take advantage of an opportunity to work longer hours. The erroneous nature of this contention is clearly demonstrated by the large and growing practice of “moonlighting”. The Department of Labor made a survey of this situation a few years ago, and found, as reported in Business Week, that during the month of the study (May 1962) “one out of every 20 employed persons held more than one job …The median number of hours worked on both jobs was 52, of which 12 were on the second job”.20
These are very significant figures. When we take into account the initiative and effort that are required in order to find a suitable second job, as well as the difficulty of making a satisfactory adjustment of working hours, it is evident that the five percent of the working force that extended their working time by “moonlighting” during the month covered by these statistics would be increased very materially if extra working time could be arranged more easily. This indicates that a substantial proportion of the working population prefers additional income to additional leisure. The present policy of forcing them to take the leisure against their wishes is open to serious question.
When limitations were first placed on working hours the objective was to protect the health of the workers. But we have dropped below the fatigue limit long ago, and reduction of working hours is now aimed at an entirely different objective: to increase leisure. Retention of practices set up on the basis of the earlier objective now gives rise to many absurdities. According to the theory under which we are now operating, the workers are being imposed upon when they are asked to work overtime, and the overtime premium is supposed to act as a deterrent to prevent the employer from working his employees extra hours when there is no real necessity. But the majority of the workers are eager for the overtime work, even when the overtime premium is small, and this creates the absurd situation in which the workers are actively seeking—in many cases even demanding—that which the employers are penalized for forcing upon them.
One practical method of eliminating inconsistencies of this nature and achieving a reasonable amount of latitude for individual choice in the matter of working hours would be to establish a double standard that would give proper recognition to the two separate reasons for limiting working hours. Under this plan the upper standard would be based on the fatigue theory, and would represent the limit beyond which work would not be permitted without penalty regardless of the attitude of the individual worker; it being assumed that the state should be concerned to prevent the worker from taking actions injurious to his health. This limit has no relation to productivity and should therefore remain fixed regardless of technological advances, although it would probably be advisable to have some variability between occupations. The lower limit would be based on the current productive efficiency, and would represent that amount of working time necessary to provide an acceptable minimum standard of living. This limit would be progressively lowered as the average production per worker continues to increase. Employers would be prohibited from requiring anyone to work more than this lower minimum as a condition of employment, but would be authorized to make mutually satisfactory arrangements with employees for any hours of work, either permanently or temporarily and without overtime premium, up to the maximum established by the upper limit.
Such a plan would give the individual a chance to adjust his hours of work to his own special situation, and it would improve the general level of economic satisfaction to a substantial degree, as those who prefer the minimum hours with the corresponding minimum living standard could stay on that basis, whereas those who feel that they could put forth additional effort to advantage could go ahead with a heavier program to the extent that their employer’s situation would permit. The optimum work week for any individual is that number of hours beyond which he values the leisure more than the goods that could be purchased with the additional income. This is clearly a matter of individual appraisal, and any such mandatory limitation of working time as that imposed by current laws and overtime practices operates to the detriment of the person who values more goods above more leisure, whereas it confers no corresponding gain on the person who has the opposite preference. We recognize that it is definitely advantageous to the individual, in his capacity as a consumer, to be able to make his purchases in those quantities that are most convenient to him, and the sellers go to considerable lengths to satisfy his preferences. It would similarly be advantageous to the individual, in his capacity as a worker, to be able to sell his labor in those quantities that are most convenient to him, and if we are to secure the maximum values from our economic system some means of accomplishing this end is essential. Here, for once, our conclusions are in full accord with those of Galbraith, as expressed in the following statement:
The employed person should be accorded a much wider set of options than at present as between work and goods on the one hand and leisure on the other. The way should be open for the individual who wishes to satisfy his needs for food, clothing and simple houseroom with ten or twenty hours of labor a week to do so…men who speak much of liberty should allow and even encourage it.21
Most employers will probably object to optional arrangements of the kind proposed on the ground that they would complicate operations and increase costs. But the truth is that any additional costs that apply to all producers can be, and therefore are, added to the selling prices and are borne by the consuming public, not by the employers. Hence the preferences of the employers are not entitled to any consideration. The only pertinent question is whether the individual citizens, in their capacity as workers, get enough benefit from the increased flexibility of working hours to justify the relatively small amount that would be added to the prices which they, in their capacity as consumers, have to pay in the marketplace. There can hardly be much doubt on this score.
Summarizing the discussion in this chapter, the goal of the employment program with respect to secondary employment should be to eliminate those features of existing economic policies that result in compulsory idleness, and to set up the necessary machinery to enable maximum utilization of the available labor of the secondary type. The principal objection to measures of this kind, the fear that increased working time for some individuals will result in unemployment for others, will be removed by the adoption of an employment program of the type outlined in the chapters to follow: a program that will enable a guarantee of full primary employment for all. There is some question as to whether we are justified in going so far as to try to induce individuals to work, or to work more, in the absence of any need on their part or any national emergency that makes greater production imperative, but it is obviously desirable that every person should have the opportunity of exercising the “goods or leisure” option, and should not be forced into partial or total idleness against his will.