Toward a Fair Economy: The Economic Context for 2004

NATIONAL JOBS FOR ALL COALITION Special Report 3 © October 2003

by Members of the NJFAC Executive Committee, Gertrude Schaffner Goldberg, Chair

A Work Ethic without Enough Work

More than at any time since the Great Depression, Washington has made work the core of its social and economic policies. This fits the American emphasis on the work ethic, but it’s not very ethical: Where is a parallel commitment to opportunities to practice the work ethic? Where is the opportunity for all to work at livable wages? Where is a guarantee of health, unemployment, and retirement benefits? If new policies require the mothers of young children to work, what assurance do they have of affordable substitutes for parental care?

Unemployment was low — but by no means vanquished — in the closing years of the 20th century. Even then, real wages still lagged behind the levels of the 1970s, a time when the nation was much less wealthy. The minimum wage could once be called an anti-poverty wage. That is hardly the case now when year-round, full-time work at the statutory minimum wage amounts to less than 60% of an official poverty level that is itself inadequate. Workers have lost pensions, health insurance, unemployment insurance, and other workplace rights that were once expected — once referred to as a Social Contract. In short, jobs are not what they used to be.

Workers have lost ground because of greatly expanded business power, abetted by deregulation, unrestrained globalization, and a related assault on organized labor. Workers are expected to be flexible and mobile, to accustom themselves to frequent turnover. And government policy, which once offered them some protection against the vicissitudes of a market economy, often exacerbates and seldom reduces their heightened insecurity.

Unemployment: Acute, Chronic and Costly to the Nation

Our brief holiday from mass unemployment is over. The U.S. economy has dropped 2.8 million jobs since the start of 2001, 2.5 million of which have been in manufacturing. 2.1 million people were looking for work 27 weeks or longer. In September, employment rose for the first time in seven months just enough to match labor force growth; consequently, unemployment held at 6.1%. In fact, the percentage of adults with jobs fell to the lowest level in 10 years. Unemployment has reduced health care coverage and increased poverty.

The latest Administration budget is likely to make unemployment even worse. Tax cuts for the rich are not an economic stimulus. Government tax policies, moreover, are throwing away the resources that could mitigate growing inequality and widespread insecurity. This budget will snatch billions of dollars from social programs in the next decade. It proposes to eliminate school lunches for many low-income children, lower already lean food stamp benefits, and reduce health coverage for millions of children. But it will also cut the jobs of those who provide the benefits and services — who prepare the lunches, sell the food, deliver the health care. And its tax policies have reduced the revenues of already-strapped states, forcing tax and spending policies that will doubtless weaken labor market conditions.

The defense budget has escalated, but military spending creates fewer jobs for the buck than domestic spending. Clearly, this military spending has not brought down unemployment and is unlikely to do so in the future. Beleaguered industries like air transportation and tourism are further hampered by the war.

Rising unemployment not only causes hardships for job losers but reduces tax revenues by billions of dollars–dollars that could finance vital social programs and create more jobs. Unemployment literally throws away billions of dollars of potential national output — schools and housing not built, child and elder care not provided. Four percent unemployment in 1994, instead of the actual rate of 6.1%, would have meant $280 billion in additional goods and services or $1,000 for every man, woman, and child.

Unemployment: The Personal Costs

At the same time that it reduces our national product, unemployment devastates the people who are denied a job and a living (an apt word)–not to mention the disruption of their family life.

To rob a person of a job is a deadly deprivation. As Martin Luther King, Jr. put it so poignantly:

It is murder, psychologically to deprive a man[sic] of a job or an income. You are in substance saying to that man that he has no right to exist. You are in a real way depriving him of life, liberty, and the pursuit of happiness, denying in his case the very creed of his society: The Trumpet of Conscience, 1967.

African Americans and other minority groups have suffered most from the failure to accompany civil rights with employment rights. They are the disproportionate victims of the millions of jobs lost to the economy and to American workers in the last two years. Work is disappearing in the ghettos that were beginning to revive during the brief period of lower unemployment in the late 1990s. But African Americans have never been the majority of the unemployed. This is a problem that transcends class, color, education, and color lines. It is an American problem.

“Jobs and Freedom” were twin goals of the Civil Rights Movement. Civil rights for women and minorities have been expanded, but they are not fully guaranteed without economic rights. In 1944, President Franklin Roosevelt called for an Economic Bill of Rights, the first of which was the right to a useful and remunerative job. As Roosevelt put it, true freedom cannot exist without economic security and independence. According to the Economic Bill of Rights, Necessitous men [sic] are not free men.

The Unemployment Undercount

Why have we not extended the right to employment–the right most consonant with our national creed– to all our people? One reason is that during times when official unemployment is relatively low, the problem tends to be overlooked. That’s because it is grossly undercounted. In order to be counted as unemployed, a worker has to have worked less than one hour in paid employment during the week of record and to be actively looking for work. The way the government measures unemployment obscures the problem everywhere, not only in the ghettos, but also in rural areas.

Unemployment Statistics: Not the Whole Story, prepared by the National Jobs for All Coalition, graphically makes the point that the way government counts unemployment “whitewashes” the problem. Each month the Coalition posts new figures on official and hidden unemployment on its website. The total rate is typically twice the official rate. In 2000, when the official unemployment rate of 3.9% was the lowest in 30 years, 5.5 million people were counted as unemployed. Excluded from the official count were 3.2 million people who worked part-time because they couldn’t find full-time work. Another 4.4 million people wanted jobs but were not counted because there were not looking for work. These two categories amounted to more than the number of people counted as unemployed. In addition, about 17 million people were essentially underemployed–working full-time, year-round for less than the four-person poverty level.

Today, unemployment is an acute problem, but it is a chronic ill, one that is always with us, always causing hardship to millions of people. By underestimating the problem of unemployment, we mute the public outcry that could demand a solution.

At times like the present, the public becomes aware of the problem. Why? It’s not only because the magnitudes are larger; it’s also that increasing numbers of the better organized and more vocal segments of the population are affected. (Witness Leaning on Their Parents Again, an article about well-off parents obliged to help their formerly well-paid and steadily employed adult children, New York Times, 7/19/03). It is times like these that are ripe for solutions to the problem that is always with us. This is the time for a Presidential aspirant to articulate a plan that could inspire our people to vote for An America that Works.

Greater Wealth, Greater Inequality and Poor Economics

The United States is a very rich nation. Yet, as we have grown richer we have become less willing to share our abundant resources. In 2002, the U.S. Gross Domestic Product was nearly twice as large in real dollars as in 1980. What we lack is not dollars but political will to share our riches more equitably. The poorest one-fifth of households have less than 4% of total income while the top fifth have 50%. How can a democratic nation countenance such inequality? Government, nonetheless, widens inequality through its tax policies and throws away the resources that could counter it.

Inequality is politically and economically costly to a nation. Democratic government is clearly compromised if great wealth can dictate its policies. Huge disparities in income are also an economic liability. If we don’t reduce economic inequality, if we don’t make it possible for ordinary people to consume what the economy can produce, we will be poorer in the long run — just as inequality in the 1920s led to near destruction of the economy and even of short-sighted business classes.

Trust in Government

Much of what we must do depends on rebuilding our trust in government. National figures who are running for high office can counter the Right-wing attack on Americans’ faith in government. For what else but democratic government can protect us from the insecurities of a market economy that generates ever more wealth and ever more risk and hardship?

Full Employment in a Fair Economy

How should democratic government cope with a level of inequality that is dangerous to democratic institutions? We must take steps to create a Fair Economy, one that balances the stricter work ethic enacted in recent years and that distributes resources more equitably. The core of a Fair Economy is the opportunity for a job at a livable wage and for the other Economic Rights that Franklin Roosevelt could envision as long ago as 1944 — particularly health care and decent housing. We need to acknowledge that only about two-fifths of the workforce are covered by unemployment insurance and extend protection against the risk of joblessness to all workers.

The Benefits of Large-Scale Job Creation

The National Jobs for All Coalition believes that government economic policy needs to be oriented toward the goal of full employment at livable wages. An important part of this would be a large-scale job creation program. The Coalition has examined the feasibility of mounting such a program. It has critically examined the experience with work programs in the Great Depression and in the 1970s with the Comprehensive Employment and Training Act. It has analyzed the costs of a large-scale job-creation initiative. It has also looked at what such a program would produce in the way of useful goods and services or what it would add to national resources and what it would generate in the way of extra taxes paid and in savings from unemployment insurance and other direct costs of joblessness (although not the indirect costs such as the well-documented social problems that are caused by unemployment).

These estimates were made by Philip Harvey, an economist and member of the Executive Committee of the National Jobs for All Coalition. These are Harvey’s extremely heartening conclusions:

When all these factors are considered, it is hard not to conclude that a jobs program capable of providing work for everyone who needs it would not cost us money. It would save us money. Existing policies are more expensive. A comprehensive job-creation program would lighten the burden on taxpayers. As with the provision of universal health insurance, making sure that all Americans have jobs they can live on is not only the humane and just thing to do. It’s just plain smart.

Responding to Rising Unemployment

The National Jobs for All Coalition is prepared to fashion a 21ST century version of FULL EMPLOYMENT IN A FAIR ECONOMY. A first step in the achievement of such a goal would be: a sizeable job creation program that would have an interim goal of reducing unemployment to a stated target rate in a stated period of time.

Staged Job Creation

A staged JOBS FOR ALL program is a practical, attainable initiative that is inspiring as well. Full employment would make every major domestic problem easier to solve. To cite just one example: More people working and paying taxes and fewer forced to retire early is the best insurance for Social Security. (See the Coalition’s Social Security Packet.

According to Nobel Laureate, Joseph Stiglitz, Chairman of the Council of Economic Advisors under President Bill Clinton:

There is no safety net that can fully replace the security provided by an economy running at full employment.

The National Jobs for All Coalition holds that a Safety Net is always necessary but recognizes that with lower unemployment, fewer people need certain forms of social protection, such as unemployment insurance. At the same time, full employment makes it easier to finance other benefits — paid parental leave, affordable child care, and affordable housing. A program of JOBS FOR ALL, including these vital resources, should be the heart of a compassionate, affordable, and vote-getting platform.

© National Jobs for All Coalition.