I was clearing out some old filing boxes today – I am moving offices soon – and came across a conference proceedings from 1976, which I had picked up somewhere in the 1980s when my own academic career really began. It was entitled: Directions for a national manpower policy : a collection of policy papers prepared for three regional conferences and published by in Washington by the US National Commission for Manpower Policy in 1976. There was a chapter in it that I recalled fondly by US economist Charles C. Killingsworth entitled Should full employment be a major national goal. He was a long-time advocate of public employment programs and understood how lacking my profession is when it comes to caring about people. In terms of public service employment programs – what really have we go to fear? Answer: not much, unless you don’t enjoy the most disadvantaged having a better life!
At times you could be lulled into thinking the article was just written. He begins by saying:
Tomorrow morning in Washington there is going to be an announcement of momentous significance. About 14 hours from now the Department of Labor is going to tell the waiting world what the new unemployment rate is. Part of its importance, of course, lies in the fact that this will be the last unemployment figure announced prior to the election. I’m not going to tell you what the figure will be. I will make a prediction that I think is completely safe. Whatever the number is that they announce tomorrow morning, it will be the highest unemployment rate of the entire postwar period after 18 months of recovery. Now let me say that again. The number that will be announced tomorrow will be the highest unemployment rate this country has experienced since World War II in the 18th months of a recovery from recession. I say that in all seriousness because I think that the point is that the current economic recovery has done less to reduce the unemployment rate than any other recovery in our post-war experience.
Charles Killingsworth takes his audience back to the late 1940s to focus on the unemployment rate – “not simply because of historical interest but because I want to try to identify some lessons from it”.
He introduced a graph:
I’ve prepared a chart … to illustrate a point regarding the behaviour of the unemployment rate during these recovery periods. What I have done is take as the starting point the unemployment rate in the trough month – that is, the turning point, the month in which according to the National Bureau of Economic Research the recession came to an end and the recovery period begins. The chart shows monthly changes in the unemployment rate following the trough.
The standard business cycle dating for the US that he refers to comes from the US National Bureau of Economic Research who provide a table of US Business Cycle Expansions and Contractions.
The following table presents a summary of the NBER recessions since the 1930s.
I have updated his graph (Changes in the Unemployment Rate for the Civilian Labor Force in Months Following Trough of Five Postwar Recessions) using the latest US Bureau of labor Statistics Labour Force Data (to July 2012).
The black line is the recession he was referring to in the opening. The relatively bright (lurid?) blue line is the current recession. I have included 50 months after the recession trough for comparison.
The response in the current recession was worse than the recession that Charles Killingsworth was worried about.
To put the current recession in more historical perspective I also graphed the US national unemployment rate (%) from January 1948 to July 2012. Only the short-sharp 1982 recession when the unemployment rate peaked at 10.4 per cent has seen a worse result than the current recession. In terms of the recession in 1975 that Charles Killingsworth was horrified by the peak then was 9 per cent.
Indeed, all of the subsequent recessions have been worse in the recovery response. The period since Charles Killingsworth wrote the article (based on a speech at the conference noted above) just happens to be the period that coincides with the abandonment of full employment as a legitimate policy goal by national governments and the substitution of the neo-liberal concept of a Non-Accelerating-Inflation-Rate-of-Unemployment (NAIRU) for the previous concept of full employment.
Please read my blog – The dreaded NAIRU is still about! – for more discussion on this point.
Charles Killingsworth said that his speech to the Conference was about: Should full employment be a major national goal? He said:
It may come as a surprise to those of you that take this goal for granted, but there are a great many people who would answer that question with a resounding “no–full employment should not be a national goal”. In fact, some of the statements that have been made during the past year by quite prominent and respected economists would lead you to believe that it would be nothing short of a national disaster to achieve full employment in this country. Some have actually used those terms. Full employment would be disastrous. Economics has been called a dismal science for a long time but rarely has that characterisation been as justified in the the last couple of years.
At each turn of his argument I felt that we were just re-living the same sorts of arguments that he came up against in his day. At that time, the profession had been stormed by Friedman and the natural rate of unemployment gang and the notion of Keynesian fiscal policy was considered lunacy.
This was the beginning of the Monetarist onslaught that evolved in the 1980s into the vapid and rabid belief that self-regulating markets would deliver the highest wealth to all of us. The privatisation and deregulation accompanied that mantra.
At that time, any notion that the government might use fiscal policy or direct job creation was being attacked with arguments that it would cause spiralling inflation and, eventually hyperinflation and that interest rates would soar as bond markets lost faith in government debt issues.
The same narratives that we hear each day now were being played out then – nothing much has changed. They were wrong then and continue to be wrong.
Charles Killingsworth was very aware of that. In asserting that the US definitely should make full employment a major national policy he said that:
… too many of us have been intimidated for too long by the many prestigious economists and others who have been telling us that manpower programs don’t work; that the only way to reduce unemployment is to cut taxes; and that if you cut taxes enough to approach full employment, you will have an inflation and destroy the country.
The economics establishment is wrong about this diagnosis, as it has been wrong so many times before in the last forty years … The crucial point is, what quality of life will we choose for our country? I say that we can continue our present course and slip further into the fortress society, where the majority of us sit behind triple-locked doors and try to think of more ways to protect ourselves against the miserable, bitter, dangerous underclass outside. Or we can, if we choose, make full employment a major goal of this great country and start moving in the direction of a stronger, more secure country and a better quality of life for all of us.
So if we do some arithmetic and add the 36 years since 1976 to the forty years prior to 1976 then the “many prestigious economists and others” have been wrong from around 76 years!
Charles Killingsworth was a strong advocate of public employment (PSE) programs to relieve unemployment and provide a better life for everyone. In his speech he said that “a ten billion dollar public service employment program … can increase gross national product bu at least as much as a ten billion dollar tax cut. That is elementary macro-econmics.”
In fact, it would increase GDP by considerably more because some of the tax cut will be lost to saving and it is highly likely the marginal propensity to consume of those given wages in the program would be higher than the national average.
While that is “elementary macro-econmics”, Charles Killingsworth noted that “it is almost totally ignored in the current discussions of employment policies”.
He also believed that a public service employment program would be “much less inflationary than tax cutting” because it “can be targeted.”
He noted that the unemployed do not “benefit direct from tax cuts because they don’t pay income taxes” and that a PSE program could be concentrated on the most disadvantaged. He believed that PSE programs have been shown to be “much easier to scale down , and that it can be terminated much more readily than a tax cut can be reversed.”
He went on to consider the stereotyping of PSE programs that form the basis of the conservative criticism. He noted that:
I do want to say that I’m aware that a great many people have a kind of knee-jerk adverse reaction to the idea of creating more government jobs. I think that a mental image appears of a clear sitting down at a desk between coffee breaks, moving pieces of paper from the in-box to the out-box, and leaving a half hour before quitting time. Now I don’t care much for that kind of job either. If that’s public service employment, I not really enthusiastic about it. But I think that image is the product of a poverty of imagination.
He then described the way, as an example, the way the public education system had been reduced by bean counters intent on budget savings. The type of jobs eliminated included teacher aides and paraprofessionals, non-core jobs which add to the efficiency of the core jobs (the teachers).
He noted that “the first casualties of budget cutting across the country in public education have been precisely” these type of jobs. He noted that “they have disappeared by the tens or hundreds of thousands all across the country …”
I can visualise creating several hundreds of thousands of this kind of job alone. This is the kind of public service employment … that makes sense … I think that it would not take a great amount of straining of the imagination to come up with other approaches, other kinds of employment that would make just as much sense as that one example.
He closed that section of his talk by saying that PSE programs are not the “panacea” but part of an overall solution to restore full employment. He did feel that PSE programs would be the largest part of an effective strategy.
I have written about PSE programs before – often. I consider the first policy a government should put in place is a Job Guarantee.
Please see the host of blogs under this search string – Job Guarantee
I admit that I have studied this topic for so long in so much detail that I lose touch with the fact that it is not blindingly obvious to everyone that PSE programs should be a baseline strategy for national governments.
What have people to fear of such policies? The reality is that if the Job Guarantee was such a disaster after implementation then it could simply be revoked. What long-term damage can it cause relative to the intergenerational disadvantage that accompanies
In this blog (from April 22, 2009)- Boondoggling and leaf-raking … – I consider the put-downs against PSE programs.
Boondoggling and leaf-raking – it is the term that invokes the ultimate put down by the conservatives who laud the virtues of the private sector as they create hundreds of thousands of low-skill, low-paid, precarious and mind-numbing jobs but hate, with an irrational passion, the idea that the public sector could employ workers that the private sector doesn’t want and get them to work on community development projects at a minimum wage. And to put a finer point on it … on projects that can leave massive positive legacies to all that follow.
I am currently working on a presentation for the up-coming Jobs for Europe: The Employment Policy Conference – which the European Commission is staging in Brussels on September 6-7.
The EC describe the event “a major conference on employment policy” and, in addition to the Commission President, José Manuel Barroso, the President of the European Parliament, Martin Schulz, the President of the European Council, Herman van Rompuy and the Secretary-General of the OECD, Angel Gurria being present, the conference will “bring together members of the EU Employment Committee, the Social Protection Committee, heads of Public Employment Services, representatives of national parliaments, as well as national and EU-level social partners.”
I have been invited as a speaker to discuss employment guarantees. I was very pleased to be invited by the Employment, Social Affairs and Inclusion Commissioner, who is organising the conference.
I will rehearse all the unimaginative and wrongful criticisms of large-scale PSE programs.
In the blog I link to above I consider many of them. Many of them – from those that espouse the primacy of market forces, actually reflect their fear of letting market forces work when it comes to providing advantages and opportunities to the most disadvantaged workers in our communities.
The critics prefer to keep this disadvantaged cohort suspended in a void of joblessness and cycle them through clearly irrelevant training programs. They seemed to distrust the ability of the private sector to structure interesting and attractive jobs to lure workers away from Job Guarantee positions.
Remember, that the Job Guarantee I provide and which forms an integral part of Modern Monetary Theory (MMT), provides buffer stock employment to anyone who wants such a job at any time at any fraction of a working week. It is an unconditional fixed wage offer to anyone by the Government. That is a very powerful aspect of the proposal as it means the Government ‘hires off the bottom’ rather than the top and can never be a source of inflationary pressure.
Further, the private sector can employ the JG workers any time they choose. All they have to do is provide a better “market” opportunity. That would encourage dynamic efficiencies because the incentives would be there in the private sector to improve productivity and on-the-job training to ensure that the wages paid were profitable.
Others argue that the JG workers might never want to leave the Job Guarantee despite the fact that the private sector has complete scope to hire out of the Job Guarantee workforce by simply offering attractive employment conditions.
To think that the workers would never be lured out of the Job Guarantee is to display a staggering lack of confidence in market forces.
Moreover, what a shocking thing it would be that the workers who have been unable to find work because the economy has failed to produce enough jobs (due to deficient macroeconomic policy) might actually enjoy working for the safety net wage.
Wouldn’t that be something to regret! It is better to keep them unemployed doing nothing and feeling the various social stigmas that are continually placed on them by Government and the media than to give them a job that is adding value to our communities and get them off the welfare rolls! Why is it better? Because they might like the jobs!
In the cited blog I consider many more arguments in detail and if you are feeling angst as you read this I urge you to confront your negativity by learning more.
Charles Killingsworth was an old-style economist from the great US institutionalist tradition. He had an advanced understanding of economics but also maintained his empathy towards humans.
I gave a talk last week in Grafton, NSW to a group of citizens that were attempt a grassroots movement to take on the neo-liberal attacks on their services. The town (and region) had recently lost its major employer as the NSW state government shut the prison to save money.
It was obvious that the treasury had taken this view without the slightest regard for the human dimensions. For example, it is a very disadvantaged area and the prison had a high proportion of indigenous Australia inmates (them being among the most disadvantaged peoples in the world).
The prisoners were shipped off to other jails some 7-8 hours by road (longer by public transport) away – from their families and support bases. That effectively withdraws that essential support from these prisoners given the families are unlikely to be able to afford to travel those distances to visit etc.
The bean counters counted the dollars saved but I bet they didn’t have a column for human suffering in their calculations.
The same goes for attacks on PSE programs. If we thought people first and realised that the only costs of such program are the extra real resources that would be required to mount the program and attributable to the extra consumption possibilities that the JG workers would be able to entertain (from close to zero to not very much!) then our responses would be vastly different.
That is enough for today!
(c) Copyright 2012 Bill Mitchell. All Rights Reserved.