Available Job Sources
What kind of work can we include under the proposed discount program? The answer is that we are not concerned as to what it is, so long as we make certain that it constitutes a genuine addition to employment. We do not have to worry about whether the labor will be used efiiciently, or whether the goods that are produced will be salable. Under the individual enterprise system the employer, in effect, guarantees that the labor will be used productively. If there is any failure to meet the productivity requirements, the loss does not fall upon the community, as it does under collective ownership; it is absorbed by the owners of risk capital. The general public does not have to be concerned as to whether an employer gets his moneys worth out of labor regularly employed, and by handling the auxiliary employment under comparable conditions, the same freedom from care can be enjoyed with respect to the efficiency of the additional work.
The government employment agency has no functions in connection with the auxiliary employment plan but to regulate the discount rate to meet changing conditions, and to see that the surplus labor is placed only on bona ilde additional work. This latter function is the only thing about the whole program that requires the exercise of any more than routine judgment and discretion. Obviously we would get nowhere by permitting the discount labor to replace workers on regular employment. Nor would we be any better off to allow displacement of the regular workers to take place indirectly through competitive processes. The surplus labor must be placed on genuine additional work. As has been stressed throughout the discussion, our theoretical analysis makes it clear that this must be work which, in the absence of the discount program, would not be done because it is not quite profitable.
The objective of all of the recommendations that were made in Chapter XII is the same as that of the measures proposed in Chapter XI; that is, to make additional self supporting employment possible by exempting certain specific operations from the normaI requirement that they must be more than self supporting. It should be noted, however, that the mechanism of the proposal discussed in Chapter XII is not the same as that of the earlier recommendations. The suggested changes in policies with respect to business taxation and iixed interest financing would permit some of the existing enterprises that would otherwise be forced into bankruptcy to continue operating and furnishing employment. Here we would produce a net increase in employment by avoiding some of the normal loss of self supporting jobs.
But even though there are a number of factors which would induce the owners to keep unprofitable enterprises in operation, at least for a time, if this is made possible by such policy changes as those which we are suggesting, we cannot expect new enterprises to be organized unless there is a reasonable expectation of profit. In order to generate new employment we must therefore set up our program on the basis of additional work rather than additional enterprises. Since it is not practical, in this case, to arrange a direct exemption from taxes and capital costs, this additional work will be required to make its full normal contribution toward the community overhead expense, and the equivalent of the exemption will be returned to the producing enterprise in the form of a discount on the Iabor, thus accomplishing the same objective in a different manner. Unlike the unprofitable enterprise, however, the unprofitable work is not automatically identified. It is therefore essential to make certain that the labor discount is authorized only for work which represents a genuine addition to employment, and will not be offset by any reduction of employment in competitive operations.
The simplest method of avoiding any disruption of competitive relations that might affect employment is to assign the workers to additional production of a noncompetitive nature. For purposes of this program the term noncampetitive should be understood as meaning not directly competitive. In one sense, alI producers are competing with aIl other producers; competition for the consumers dollar, as it is often called. But in the present instance we do not need to consider this generalized form of competition because the additional employment adds to the total consumers dollars just as much as it adds to the products competing for those dollars, and the relative position of the competitors is unchanged. On the other hand, if we were to permit a shoe factory to utilize the discount Iabor on direct production of shoes we would enable this producer to lower prices and sell more shoes, but most of his additional sales would be at the expense of other shoe producers, who would have to cut down production and lay off workers.
When there is only a relatively small labor surplus, as will be true when business cycles are eliminated, or reduced to a minimum, and an employment promotion policy is being followed, there is little need for utilizing anything other than the noncompetitive type of work as a source of jobs for the surplus labor. In general, this will consist of items which are now just below the profitability point under normal conditions and which can be moved into the profitable class by a moderate discount on the labor. A typical example is the salvage of used materials. Under normal conditions an extremely large amount of material goes to waste simply because the cost of salvage exceeds the value of the material, often by only a relatively small percentage. During World War II the values of much of this material rose above the salvage cost because of warcreated scarcities, and as a consequence huge quantities of such materials were reclaimed. The same result can be achieved by the reverse process through the operation of the discount program. If labor for salvage and reconditioning is available at a discount, the salvage cost will drop below the value of the material, and salvage operations will again be profitable.
Salvage work has some special features that make it particuIarly appropriate as a source of auxiliary employment. One of these is the fact that it utilizes mainly the type of labor of which we have a growing surplus, and it therefore aids in dealing with the problem of fitting the workers to the available jobs. Another point that is of special signiiicance at the present time is that salvage operations can make a substantial contribution to the improvement of environmental conditions that is currently a very live issue.
The list of jobs that would be transformed from potentialities into actual providers of employment by a moderate cost reduction is a long one. Closely related to salvage is the utilization of products agricultural or forest products, for example that are currently being wasted or underutilized because of temporary local surpluses or lack of accessible markets. Many property improvement projects that are not economically feasible at full Iabor cost construction of fences and retaining walls, levelling and landscaping, even painting in some circumstances could be brought within the program. Larger undertakings such as reclaiming of waste lands (swamps or loggedoff lands, for example), extension of utility services into sparsely populated areas, pollution control projects, protection against erosion, more intensive exploration of natural resources, etc., could also be authorized when a large enough labor surplus is available.
Another major source of additional employment can be opened up by authorizing the use of the discount labor to perform specific operations that are customarily handled by machinery. This involves a decrease in productive efficiency, of course, but the cause of the present unemployment problem is our attempt to maintain too high a standard of productivity, and the logical remedy, the one that is being proposed in this work, is to back down just a little to the point where we can maintain full employment without sacrificing any more efficiency than is actually necessary. As long as some decrease in productivity must be allowed, it is immaterial whether this comes as a result of doing certain work that is not quite profitable on the basis of normal standards or whether it comes as a result of doing certain other work in a less efficient rnanner than usual.
Inasmuch as the present high productivity and the accompanying unemployment have resulted largely from factors that have encouraged the replacement of hand labor by machines, a partial return to hand work is a logical and effective means of accomplishing what needs to be done. In taking this course we are simply backing down the same path on which we climbed to the present level. Of course, preference will be given to those types of work in which the machine has the least advantage over hand labor. Like salvage and some of the other work previously mentioned, this program will have the added advantage of utilizing mainly the kind of labor of which we have the greatest surplus.
The proposed use of the discount plan as a part of a comprehensive employment program will require it to handle only a relatively small residue of unemployment, together with temporary fluctuations of a minor character. For this reason the employment agency will confine its activities mainly to shortterm commitments, so that the workers can be recalled promptly when normal jobs develop. There are, however, some special circumstances under which it might be desirable to supply the surplus labor on a more extended basis. It would no doubt be advisable, for example, to take advantage of any opportunity to place substandard workers on a longterm basis.
Another objective that might be accomplished in this manner is to facilitate the establishment of certain kinds of new business enterprises. The financial problem that is involved in launching a new business was pointed out in Chapter XI, and the proposed policy of making business taxes a charge against earnings only was cited as a means whereby these new undertakings could be helped to survive the critical initial period. Where the enterprise is essentially noncompetitive, either because of the nature of the product, or because of the location of the operations, the discount plan could also be applied; that is, the employment agency could make a commitment to supply discount labor for a period of time long enough to enable the business to overcome the initial disadvantages.
Construction is usually one of the first items that is suggested in connection with increasing the availability of employment. As stated earlier, construction subsidies have previously been proposed as a business stimulation measure. But major construction is not very well adapted to participate in the auxiliary employment program, except possibly in serious depressions. No advantage would be gained in allowing the use of the surplus labor on projects already planned and initiated, since the employment generated by these projects will materialize without any assistance, and the time lag involved in getting new projects under way would make this new work useless for the purpose of meeting shortterxn labor fluctuations.
Some of the minor construction projects, miscellaneous improvements, and certain types of maintenance work are not subject to the same considerations that affect the major construction jobs, and might be included in the auxiliary employment program. The regular day to day maintenance work has the same status as direct production labor, but there are many items that are to some degree optional, at least from a short range standpoint, and where a backlog of deferred work of this nature exists it could be brought into the program. If the discount plan is put into effect during a period of heavy unemployment, it will be expedient to make considerable use of this source of jobs at the start, as it can be made available quickly by getting the cooperation of large employers. After the plan is in full operation, however, it will probably be advisable to exclude industrial construction and maintenance, except for some special cases, because of the problems involved in distinguishing between eligible and noneligible work in this area.
But this maintenance type of work will still play an important role as a source of employment, as it is not limited to industrial enterprises. Almost every farmer and homeowner has a budget of maintenance and minor improvement projects that he would like to carry out if they were not so costly, and any material discount on the labor cost would activate a large number of such projects. Furthermore, much of this work is of a character that would be suitable for the socalled unemployable workers, and hence this is another field that has some important advantages from the standpoint of placing the surplus workers.
Much of the work that has been mentioned as suitable for inclusion under the discount program, particularly salvage and reconstruction, can conveniently be handled by very small scale operations. In fact, there is a great deal of potential work that now goes undone simply because it is not available in large enough quantities to fit the requirements of presentday business and industry. In dealing with such situations it will often be appropriate for the unemployed worker to undertake the entrepreneurial functions. For instance, an unemployed carpenter may wish to apply his own efforts, with or without some helpers, to the reconstruction of a deteriorated building; an unemployed truck driver may wish to use his own equipment in hauling surplus products from one area to a distant market; an unemployed auto mechanic may wish to undertake the reconditioning of some cars, or parts thereof, or may wish to open up an auto repair shop in a location where no such service is currently available, and so on.
From the standpoint of the employment agency self employment accomplishes the same objective as employment by others, and when an entrepreneur removes himself from the unemployment rolls by such an undertaking he is entitled to the same discount for the same period of time on his own labor that would have been appropriate if he were assigned to work for some other employer. In view of the wellknown preference that many individuals have for working on their own, even where the returns may be somewhat less than would result from other employment, this type of activity can be an important source of auxiliary employment, if properly cultivated.
One thing that can not be done under this program is to assign the discount labor to public projects. There will, of course, be considerable pressure for such an extension of the authorized job categories from governmental agencies that are hard pressed financially, and from individuals who do not have a clear understanding of the fundamentals on which the auxiliary employment program is based. Let us have some of the beneflt of this cheap labor, will undoubtedly be the rallying cry. But government employment already gets the equivalent of the proposed discount. Aside from some indirect payments in the purchase of materials, and a relatively small amount of bond interest, governmental bodies pay no capital costs, no property taxes, and no excise taxes. We cannot rebate their contribution toward the community overhead expense as a means of creating additional self supporting employment because they make no significant contribution of this kind.
Furthermore, the objective of the program is to create the additional employment at no cost to the taxpayers, so that a positive guarantee of continuous employment will become feasible. Assigning the discount labor to public projects that are essential and will therefore be undertaken in any event does not create any additional employment. But if this labor is assigned to projects which are not essential and would not otherwise be undertaken, the entire cost of the projects is an additional burden on the taxpayers. The employment objective therefore cannot be attained by utilizing the surplus workers on either essential or nonessential government projects. A meaningful guarantee of continuity of employment is possible only if enough jobs of a selfsupporting character can be made available, and more jobs of this nature can come only from the area in which normal work is required to be more than self supporting.
In normal times, the workers that will need to be provided with jobs under the discount plan will be mainly those with limited skills, and the kinds of activities that have been discussed thus far are well adapted to the requirements. However, under the conditions that may develop when the economy undergoes a drastic change, such as a transition from wartime to peacetime production, there is likely to be a temporary surplus of workers in more specialized categories. Placement of such workers will require some special efforts on the part of the employment agency, and usually will call for the opening up of some job sources that are not included in the normal program.
For example, there may be a temporary surplus of scientific and engineering personnel. One of the expedients that can be utilized in such a situation is to apply the discount plan to research and development, a ileld which has an almost unlimited potential for expansion, and is particularly suitable for the purpose because there is relatively little nonlabor cost involved. This means that the discount on the labor is nearly equivalent to a corresponding reduction in the total cost, and the employment program can therefore be made very attractive to the employer. Research is not a competitive activity in the sense in which the term is being used in determining the suitability of different kinds of work for inclusion under the discount program; that is, an increase in the research undertaken by one firm does not have the effect of decreasing the amount of research done by this firms competitors. If they react at all, they are more likely to increase their own research.
It should be understood that special measures of this kind to support undertakings that will providejobs for surplus workers with highly specialized skills are appropriate only to meet temporary conditions. They cannot be justified for the purpose of dealing with a continuing surplus of such skills. Some jobs will always be considered more desirable than others, and the applicants for such jobs will outnumber the vacancies, inasmuch as the nature of the work that needs to be done is not determined by the preferences of the workers, but by the requirements of the community. Where there is a continuing surplus, it will be necessary for the agency to divert some of the less qualified applicants for such jobs into other work of an appropriate character until equilibrium is reestablished.
Ofiice work is an example of a category that is subject to a practical limit. The number of office jobs cannot expand indefinitely; it must bear at least a general relation to the amount of direct production that is currently going on. The functions of the employment agency in this area should therefore be confined mainly to placing workers in availablejobs, and the discount plan should be utilized only in very exceptional cases. If a continuing surplus of applicants for of~ce work develops, it will be necessary to take the same action as indicated in connection with a possible oversupply of scientific and engineering personnel; that is, some of the less qualiĝied applicants will have to be shifted into other occupations perhaps into the service industries.
If countercyclical policies are carried out in at least a reasonably efficient manner, the possibility of another depression such as that of the thirties will be permanently eliminated. The amount of unemployment to be handled by the new full employment program will therefore approximate that which now exists during periods of relative business stability, roughly about five percent of the working force. This total should be reduced more than fifty percent by the various employment aids discussed in Chapters X and XI, if they are put into effect, and by the reduction of business uncertainties as a result of the stabilization program. On the other hand, there are many individuals who would prefer to work but have been discouraged by the difficulty of finding employment, and have quit looking for jobs, with the result that they are no longer included as unemployed in the official statistics, and these workers will reenter the labor force when jobs become readily available. Taking all of these factors into consideration, it may be anticipated that, after the program is in full operation, the discount plan will not be called upon to take care of more than two or three percent of the ablebodied working force.
The types of work that have been discussed in the foregoing paragraphs should easily provide all of the additional jobs that are necessary in order to deal with a situation of this magnitude. Some rather large discounts may be required in order to get the plan into operation initially, but after it is generally realized that there are worthwhile gains to be made by participation in the program the agency will have the benefit of the efforts of a host of workers and entrepreneurs who are interested in locating job opportunities from which they can gain some personal advantage. The individual enterprise system is successful because thousands of persons are continually on the alert for opporiunities to better their own situations by contributing to the efficient operation of the system; that is, by increasing the production of economic values. The discount system will operate in exactly the same way, and it will therefore fit easily and naturally into the existing economic system.
Just in case the adoption of the full employment plan is delayed too long, or the program is mishandled after it is put into operation, so that a depression is allowed to develop, it will be advisable to supplement the foregoing discussion with a consideration of the additions that will need to be made to the categories of discount work to take care of the added load that will develop under these circumstances. It was pointed out earlier that one of the principal merits of the discount program is that it accomplishes its objectives unobtrusively. Under normal conditions, it is highly desirable to control the employment situation by inconspicuous behindthescenes manipulation rather than by measures which attract attention, as the latter may well induce psychological reactionson the part of the general public that will tend to increase the problems of control. In the midst of a depression, however, the conditions are quite different. Here a fear psychology is already dominant, and if any change in the public attitude results from the actions which are taken toward improvement of the existing situation, it will be a change for the better. Hence drastic and spectacular moves which indicate the willingness and ability of the authorities to take hold of the situation are likely to go a long way toward increasing confidence, and thereby lessening the task which has to be accomplished.
It should be recognized, however, that nothing in the auxiliary employment program proposed in this work actually requires this confidence on the part of the public. The program is based on taking certain specific economic actions which necessarily produce certain specific results regardless of the state of public opinion, and it is not subject to any limitations as to how severe a situation it can handle. But it is obviously easier and simpler to cope with a less severe dislocation of general economic conditions, and the psychological effect of clearly visible governmental action is helpful for this reason.
Bold and effective actions, considerably beyond the scope of the normal program, can be taken with respect to increasing employment whenever they are justified by the seriousness of the existing situation. The general nature of these more drastic measures must, of course, be the same as that of the normal features of the program. There must be a selective lowering of the survival limit, and, as we have found, this can best be accomplished by applying a discount to the labor cost on certain classes of work that would not otherwise be economically feasible. What we would do, therefore, in an emergency is to broaden the categories of work to be included in the auxiliary employment program.
In some special cases this program could be extended to direct production without affecting the competitive equilibrium. Many businesses are essentially noncompetitive insofar as the effect of any change in the labor cost on the competitive position is concerned. Railroads, for instance, have their rates fixed by the regulatory authorities, and cannot take business away from each other by price concessions regardless of any operating cost advantages that one or the other may enjoy. It is therefore feasible to authorize the use of surplus labor by the railroads, or any other similarly situated enterprises, for any purpose, as long as it involves an actual addition to their working force, and does not represent work for which they obviously would have had to employ additional workers in any case.
It should be clearly understood that the objection to the assignment of the discount labor to competitive production does not rest on the premise that an increase in the volume of goods thus produced is undesirable. The doctrines of the overproduction school of thought have already been thoroughly exploded in the earlier pages. The only object of this restriction is to prevent the increase of production by one producer at the expense of others, an action that disturbs normal business relations without making any gain in employment. Where the competitive advantage can be eliminated by one means or another there is no objection to using the surplus labor on direct competitive production. In fact, such action is positively essential if the unemployment is very severe. Equalization of competitive advantage can therefore be classified as a feasible expedient for placing the surplus labor in a serious employment crisis.
In a ileld where the number of competitors is small it is quite possible that voluntary arrangements could be made between the concerns involved so that a joint application for the use of surplus labor for the expansion of direct production could be submitted. Such agreements in which all interested parties contract for extra help could be greatly stimulated by promotional work on the part of the employment agency when and if the surplus labor supply is large enough to warrant such action.
A still wider extension of the method of equalization of competitive advantage, one which has a practically unlimited field of application, is available through action taken on the initiative of the agency itself. In a period of depression, when practically all producers are operating at subnormal levels, it is not necessary to wait for voluntary agreements; the employment agency can arbitrarily authorize the use of surplus labor by all employers in any selected industry up to a specified percentage of the existing production force. This would not compel any employer to use the extra workers, but few could afford to pass up the opportunity and allow their competitors to gain a price advantage.
In the ordinary application of the auxiliary plan, where it will be called upon only to take up the small amount of slack remaining after business conditions have been stabilized at a high level, the output of most industries will be at or near their peaks, and it would not be advisable to undertake any compulsory increases of production as there would be no data available concerning the amount of each kind of goods that could be absorbed by the markets when purchasing power is increased. Such measures were therefore not recommended as a part of the regular program, especially since other means of an unquestionably suitable character were available. In dealing with a depression situation, however, we do have ample data of this kind. We know how much of each variety of goods was marketed under normal economic conditions, and it is a safe assumption that an increase in purchasing power to the same level would absorb approximately the same quantities of specific consumer goods. Since the extra employment will provide the required purchasing power, and we know from previous experience that the consumers will buy these particular goods when they have the income, we are safe in going ahead with this forced increase in production. It is quite unlikely that the use of this kind of a measure will ever be required, even if a depression is allowed to develop before effective action with regard to employment is taken, but if drastic and spectacular action toward providing employment is ever needed, this is the step to take.
It should be emphasized that there is no limit to the application of this auxiliary employment program. We are accustomed to thinking of emergency employment measures as something on the order of public works programs, which obviously cannot be carried beyond a certain point because someone has to produce the goods that the workers on the public projects consume, and when the public payroll gets too large the burden on the productive workers becomes intolerable. But here we have a program wherein the workers that are assigned to the specially created employment, whether it be in an economic crisis or under normal conditions, do their own producing of economic values, and are not a burden to anyone. Even if we were to have a depression more severe than that of the thirties, we could still put the entire labor force to work on efficient production by this means, and maintain them there indeimitely.
This is a very significant point. It means that we have finally arrived at an employment program which enables us to guarantee full time employment at normal wages to everyone who is willing and able to work. There is much talk of security these days, but as long as there is no assurance of steady employment, and each individual has to rely on the hope that the taxpayers will continue to support him if he is out of work, security is no more than a grim jest. As long as they are available, unemployment insurance, welfare, or minimum income guarantees will help to cushion the blow, to be sure, but the ordinary worker never drives the wolf far enough away from his door to enable him to continue very long on a partial income without serious hardship. The textbooks concede, says Galbraith, that we must settle for something less than completely full employment.67 But nothing less will serve the purpose. We must overrule the textbooks. Certainty of employment is the co~nerstone of any security program worthy of the name. Here we have the means by which it can be accomplished.