Friday, March 1, 2013

What Ever Happened To 'Full Employment'?

The Modern Economy

ne of the signs of a healthy economy and a healthy society is when people who want full-time jobs can find them. This is not the case today, and has not been for a number of years. There have been many articles in the media that suggest that we are now entering an era where full-time jobs will generally be harder to find. And that unemployment rates in industrialized nations will remain high.

The unemployment rate is 7.9 percent in the United States; 7.0 percent in Canada, 7.7 percent in Britain and 10.3 percent in France. Such are among the best industrialized nations; Spain has an unsustainable unemployment rate of 26.02 percent, by far the highest in Europe. Bear in mind that these official government rates do not take into account individuals who have either dropped out of the workforce or who are working only part-time but prefer not to. The picture, so to speak  is much bleaker than official unemployment figures suggest.

For example, consider an article ("Half of Toronto-area workers have fallen into 'precarious employment': study"; Saturday, February 23, 2013), by Susan McIsaac and Charlotte Yates, in the Globe & Mail, which states the state of employment in Canada's largest city:
Research released Saturday by McMaster University and United Way Toronto provides new insights into just how much the labour market in Southern Ontario has changed. Barely half of people working in the Greater Toronto and Hamilton areas have permanent, full-time jobs that provide benefits and stability. Everyone else is working in situations that are part-time, vulnerable or insecure in some way. This includes a growing number of temporary, contract and on-call positions. Jobs without benefits. Jobs with uncertain futures. This significant rise in precarious employment is a serious threat – not only to the collective prosperity of the region, but also to the social fabric of communities.
Beneath this finding is another surprise: precarious employment is hurting everyone. It’s found across all demographic groups, in every sector and across income levels that were previously immune. Having a middle-class income can now come with increased employment insecurity.
It is now common for many workers to piece together year-round, full-time hours by working multiple jobs. In addition, working conditions are more uncertain, as existing labour laws have not kept up with changing realities. Union membership is on the decline. Doors to opportunity are limited as opportunities for job training and development decline.
The news is not good, and is unlikely to get better soon, chiefly because of the way businesses operate. The chief question not often asked is what happened to the economic idea of the 1970s called "full employment," that anyone who wants to work full-time can find a suitable job? Depending on the economist and the model that he uses, this equates to an unemployment rate of between 3 percent and 5 percent. No industrialized nation approaches the bottom figure of 3 percent and it is doubtful that this will take place soon. (Austria and Germany are around 5 percent—the best of any industrialized nation.) Millions of individuals are living quietly desperate lives, often depressed and humiliated, wishing they could have a job but can't find one.

So, who's to blame? The Government? The Unions? The Corporations? The short answer is that all three can share blame for the way things have turned out. It's true that corporations say they cannot hire more workers because consumer demand is low, and yet transnationals, multinationals and super-large extraterritorial companies take full advantage of tax laws to stash away money in off-shore tax havens, while still benefiting from tax-funded publicly financed services. All perfectly legal, of course, unless its use is for money laundering, another matter altogether.

Unions have made unreasonable demands over the years that have worked against their interests, coming against corporations that are all too willing to close shop and relocate elsewhere, usually in Asia, where labour rates are comparatively lower. Consumer demand is low because many people are not purchasing goods since they have less money to do so and they suffer job insecurity; and the governments in general have little room to make the needed policy changes, since they are generally in bed with Big Business. It has been said that governments can't create jobs; they can, however, create the economic and social climate for companies to invest.

That is the accepted idea, with the truism that economies and employment figures rise and fall over time. But this time it's different.  Forget about full employment; that idea was shelved in the 1970s and replaced in the 1990s by the shiny and slimy "New Economy." In the much touted "New Economy," the casualties have been many, most notably the manufacturing sector and the loss of millions of well-paying jobs and expertise, which is essentially non-existent in Canada, the U.S., and most European nations. The New Economy benefits mainly large corporations, which chiefly focus on increasing "shareholder value," which is not the same as the legal requirement of publicly traded companies to maximize profit.

Maximizing shareholder value is an outdated and "dumb" concept emanating from a 1976 academic paper (Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester). By 1990, the idea of linking executive compensation to share prices became normative, and that became the central focus (obsession) of all senior executives. When shareholder value becomes the focus, senior executives worry more about manipulating the stock than about focusing their energies on the real and necessary requirement on how to better manage the business, which includes customer and employee satisfaction; senior executives of public companies, after all, are managers, not owners. For senior executives today, this matters little. And if laying off thousands of employees will increase the stock, and thus their personal fortunes, so be it. Full employment is not even on the radar screen of company executives; it seen as a liability to their increased personal fortunes.

And, yet, many companies say they can't find suitable employees to fill their vacancies. it sounds like a mismatch of giant proportions. But most of the jobs are geared toward the service economy, and many are low paying in comparison to what the manufacturing sector was paying decades ago, before everything went overseas to Asia, where wages are comparatively lower.

As for the industrialized nations, there are public displays, sort of— secrecy is the key—where the powerful leaders get together to talk about what must be done, both in the near term and the far. There are all kinds of conferences, such as the useless G20 Summits, G8 Summits, and the World Economic Forum, where business and political leaders get together for a few days to wine and dine, pat each other on the shoulders and ostensibly discuss the world economy; and every year the outcome is similar: make the same announcements that things are bad, dire, catastrophic. Yet, nothing changes, except that things get worse for tens of millions of individuals worldwide. Such conferences have little effect on the average individual, and will not change government policy or make corporations act any differently than they now do.

Of course the benefits of full employment are a classic win-win-win situation: workers who hold secure full-time jobs will spend more on consumer items, often supporting the same companies that hire them; corporations get to hire exceptional workers, which leads to innovation and productivity and a higher bottom line; and governments benefit by not only increased tax revenues but by knowing that society in general will become safer and more harmonious, since happily and productive working individuals tend to enjoy social peace and are not looking to create trouble.

It's a simple solution, one of many, but it's unlikely to ever receive the light of day. The chief reason? It's the calibre and type of leaders, both political and economic, who are at the helm of our economy. Cardboard Cut-Outs. Bland. Uninspiring. Lacking Courage. Self-seeking. There is no reason in their minds that they ought to do anything different. They like the way things are. Comfortably numb in the status quo. They are personally doing OK, living the lives they want to live. Feeling good about themselves. Business as usual. Reaping in large profits. Receiving large tax revenues.

So, I am not optimistic that anything will change in the next few years or decades. It might even get worse. Tens of Millions of talented individuals not working. It's a classic lose-lose-lose situation. So, if there are any good ideas out there that might receive attention from our economic and political leaders, I would like to hear them.