August 8, 2015

Reflections On Full Employment And Labor Day

In 1946, the federal government enacted a law entitled the Employment Act of 1946, which is codified in 15 U.S. Code Section 1021.

As we have celebrated the Labor Day holiday, it is important that we remember what our national policy on employment is supposed to be, and that the policies and laws that are either put into place or advocated today are fundamentally inconsistent with the intent of this law.

The law is general, but far-reaching in its statement of intent, in promoting “full employment,” including “self employment.”  It also intends that the federal government create conditions for “useful employment opportunities.”

However, what do we have today?

  • A federal government and many state governments that focus more on protecting existing jobs and maximizing wages and benefits for existing or retired employees than on the effect those compensation costs have on employment opportunities for the unemployed, the underemployed or young people who are about to enter the workforce;
  • Both employers and unions should be actively collaborating on change management efforts that prepare unionized employees for the future, not participating in an adversarial process that enables them to hang on stubbornly to the past. My Dad was a member of the International Typographers Union, now part of the Communications Workers of America, and when he joined the union in 1946, it focused heavily on training and work preparation as part of the services the union offered. Printer jobs, like many jobs of the postwar era, were obsoleted by technology, but he was well prepared for a job that gave him a wonderful 32-year career;
  • A set of regulations and taxes on employment, including the Affordable Care Act coverage mandates and healthcare costs, that reduce the attractiveness of new job creation and give employers strong incentives to eliminate American jobs;
  • A set of state licenses, certifications and job qualifications that reduce the number of individuals able to enter a wide range of jobs and professions.  Today, almost 1/3 of all jobs require some form of government license or certification, compared with 5% of all jobs in 1968; and
  • A clearly active hostility to self-employment and freelancing, as reflected in a variety of laws and regulations at all levels that try to create employer-employee relationships, instead of leaving relationships as independent contractors.

Organized labor and minimum wage mandates increase the pay and benefits of those lucky enough or organized enough to keep their jobs, and of retirees.  However, we pay a huge price in the reduction or elimination of millions, perhaps tens of millions, of opportunities for employment.

One great explanation of what is very likely to happen at employers like Walmart is that the firm will focus more on making fewer, higher-paid employees more productive, as cogently explained by Tim Worstall, a Forbes contributor in this piece published today.

What Worstall also notes is that many “progressive” Americans positively cite Costco, which pays its employees far more than Walmart.  However, Costco, according to Worstall, has half as many employees for the same amount of revenue.

The Employment Act of 1946 was designed to elevate the value of employment and paid work, not to promote an increase in unionized employment to enable elected officials to secure major campaign contributions more easily through union dues.  It articulates a clear preference for having more people employed, versus having far fewer people employed at artificially high pay levels.

Right now, the US has relatively low “unemployment” rates, but it has a very high percentage of Americans who have dropped out of the labor force against their will, because they have given up trying to find a job.

Many of the jobs are part time and temporary. At the same time, there are many full-time job opportunities going begging because we do not have Americans with the skills to fill them.

This Labor Day should be a time at which we step back and take an intelligent, thoughtful look at a lot of misguided federal and state government policies, scrap them, and start with a clean sheet of paper to design a system that produces full employment (with a larger total population actually working than we have today) and work experiences that help people grow into jobs that pay living wages.  Government micromanagement of the job market has not produced full employment or a high population of people earning living wages today.

This has to change!