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Thursday, December 19, 2013

Getting There - How to have Full Employment with Good Wages

In my previous article I talked about the need to reduce the length of the work week.  But this cannot be done in isolation; if we simply all began to work less, then we would produce less, and we all would be poorer.  No, it must be done in synchrony with other measures.  This is the plan that I present below.

First, let me list some facts:

1. A large fraction of the U.S. population are either unemployed or under-employed. Also, many are earning poverty wages even when working full time or more than full time.

2. The gap between the incomes of ordinary people and the incomes of the wealthy is very large.  The last time it was this large was about 1928. Since then it has mostly been much lower, until recently. You can see a nice graph of this here: http://wallstreetonparade.com/2013/10/the-great-regression-robert-reichs-new-film-mainstreams-the-dangers-of-income-inequality/

3. America's large corporations are doing very well. Their profits declined briefly during the recent recession, but quickly recovered to reach record levels. Wealthy individuals are also doing very well. (The rich have gotten richer.)

4.There is no shortage of investment capital to invest in plants and equipment, or to hire new employees, should corporations decide to do so. They are currently able to supply the demand for their goods and services with what they already have, so they are investing very little.  (The so-called "job creators" are not doing it.)

5. About 70% of the goods and services produced by American businesses are consumed by Americans.

6. Wealthy people spend a fraction of their income on goods and services; the rest they invest. The size of the fraction depends on the income. (of course there is individual variation) The very wealthy invest most of their income.

7. Poor people save nothing, they spend all of their income quickly. Middle class people save a little; they spend most of their income fairly quickly.

8. Due to pervasive and continually increasing automation, the number of workers needed, is less than the population of working age adults.  This unbalance will grow, probably for decades to come.

Now let's address how to improve our situation:

If the populace were to smarten up just a little, and elect representatives that understood these issues, and had the courage to do what's best for the whole country, then they would begin to fix the roads, bridges and railroads, and invest in alternative energy, and raise subsidies for the installation of solar systems on homes and small businesses, and a host of other things.  Not just any other things; they must be projects that result in significant employment gains, and with little delay.  This would employ many people directly, and many more people through the increased spending by those who are directly employed. (the well-known multiplier effect)  Projects that mostly transfer tax dollars to wealthy people and corporations should be avoided.

There are 3 ways to pay for this: Money can be borrowed, revenue can be increased, or the government can "print" the money. (as you know, this last means that they simply create money by accounting entries in computers.)

Although there can be a mix, IMO it's best to pay for most of it by increasing revenue. There will be substantial revenue increase just due to the increased employment and increased profits of businesses, but some tax increases, or loophole plugging, are desirable.  Taxes should be progressive, because if the goal is to boost the economy, then it's important for the average person to have money to spend.  (This follows from items 5, 6, and 7 above.)  This is not a new idea: http://earthchurch.blogspot.com/2012/06/what-do-henry-ford-joseph-stiglitz-have.html

For those who think that increasing revenue will prevent the economic gains, I refer you again to items 5, 6, and 7 above.

The main and important goal, as I see it, should be to maintain, over the long term, a balance between a labor shortage and a labor surplus. Currently we have a labor surplus. That leads to low wages, and to oppressive working conditions. A labor shortage would also not be a good thing; it would lead to inflation and high labor turnover. Too much government spending on job-creating projects will create a labor shortage. Hence government spending needs to be adjustable. It needs to be part of a feedback control system. It should reflect the unemployment rate.

When the unemployment rate is high, government spending should be increased. When it is low, spending should be decreased. I suggest a "dead band" of 3% to 5%. When the unemployment rate is below 3%, then spending should be decreased. When it is above 5%, then spending should be increased. As a side issue, it would be very desirable if the labor department would calculate and publish a true unemployment rate, It is this rate that should be input into this proposed feedback control system.

Legislation can be enacted which describes the broad outlines of such a scheme, but it is impossible to get everything right in advance. Congress will have to revisit this topic annually, or better yet, semi-annually, and make necessary adjustments, with the goal of maintaining unemployment within the desired range. And of course that range may also need to be changed.

Now to the question of the length of the work week: As a consequence of the great strides that have been made in automation, it is no longer necessary for people to work a 40-hour week. In fact, that custom makes it more difficult to keep everyone employed. The only way that we could maintain full employment and the 40-hour week is to undertake major projects, something like building the pyramids. An expanded space program is one example, but it would probably not be sufficient. We could also build lots of hospitals, clinics and schools of all kinds. Or we could expand the defense establishment even beyond it's present bloated condition.

It is difficult to regulate the work week. There are many categories of people who want to work long hours, and should be allowed to do so. Into this category fall artists and other creative workers, as well as the self-employed. However, it is only necessary for work-week regulation to apply to a majority of the population, in order to have the intended effect of enabling full employment. It should apply to all of the most common occupations, blue and white collar. It does not need to apply to any category that includes relatively few people.

Current labor law (Fair Labor Standards Act) makes a 40-hour week standard, and requires the payment of time-and-a-half for overtime. This law applies to the employees of most large organizations, public and private, and hence covers a large fraction of the workforce. What I propose is that the FLSA be modified to reduce the 40 hour figure according to a flexible schedule. The initial schedule would be simply one hour less for every year that passes. However, whenever the unemployment rate is low, say below 5% for example, the work week would not be changed.  Whenever the unemployment rate climbs above 5%, then the once-a-year lowering of the work week would resume.  The work week would never be lowered by more than one hour per year.

I'm sure it is obvious that the present congress is neither willing nor capable of implementing my proposal. It cannot happen until we have a congress that is dominated by people who are both intelligent and open-minded, and furthermore are not beholden to conservative political donors.

Why do I want the government monkeying with the economy to such a degree, some will ask? My answer is that I am convinced that without such "monkeying" we will continue to regress toward a very hierarchical society, with the vast majority of the populace in poverty. This has been the normal state of human civilization ever since the rise of large cities several thousand years ago. It is still the norm in most of the world.  I prefer a society where there is a well paid job for everyone who wants one.

Friday, September 20, 2013

Should people work hard?

I'm talking about the U.S.A., in the 21st century. What do you think, should people work hard? Our ancestors certainly did; shouldn't we keep doing the same?

Funny thing, though - part of the work that our ancestors did was to invent labor-saving methods and devices.  This is still going on, so that less and less labor is required as time marches on. One of the consequences is that we typically work about half as many hours per week as our great-great-grandfathers did. Nevertheless, at the present time we are able to produce all that we need without using the entire labor force. A large fraction of today's adult population is either unemployed or under-employed. And this is with millions of people in the military or in the some aspect of the defense industry. What if peace were to break out?  (actually, it already has. The U.S. is not currently at war, nor is it currently threatened by any major military power.)

Maybe it's time to reconsider the "protestant ethic"? After centuries of development of labor saving technology, perhaps it's time to start working less.  Otherwise, what was the point of all of that clever inventing?  Should we keep everyone working full time and simply produce a huge amount of stuff that is not really needed?  Or would it make more sense for most people to just work less, and have more free time?

Today in America, many people are struggling to get by.  How can this be, when there is so much technology, which accomplishes so much with minimal human input? The answer to that question is that most of that technology is benefiting the business owners and not their employees. The latter are mostly receiving rather low wages, because there is a labor surplus in America.  The market for labor currently favors the employers, in most cases.

If the nation were somehow able to get people to work substantially fewer hours, then many new jobs would open up, as people were hired to fill in the missing hours. This could lead to full employment, and a happier American workforce, with time for relaxation, sports, and hobbies.

In a future article I will describe how that might be accomplished.  Some thoughts in that direction can be found in these older articles:
http://earthchurch.blogspot.com/2011/12/full-employment-let-me-count-ways.html
and http://earthchurch.blogspot.com/2012/09/full-employment-revisited.html

Tuesday, July 2, 2013

A Petition on the White House Website

The White House has a website where anyone can post a petition, and then signatures are collected in support of that petition. (it's at petitions.whitehouse.gov)

There are many videos on youtube.com showing policemen in action.  Many of them show policemen doing bad things.  Not surprisingly, there are many instances of police punishing people for making videos, even though courts have held that people have the right to make them.  The particular video that inspired me to create this petition is here:
http://www.youtube.com/watch?v=WDBZr4ie2AE
This ends badly, but what the cops did wrong was to handcuff a person who did nothing to warrant it.

I want to let you know about this petition, and ask for your support. Will you add your name to mine?  If this petition gets 100,000 signatures by July 31, 2013, the White House will review it and respond.

You can view and sign the petition here: http://wh.gov/lcE6q

We ask the U.S. government to:
Ensure that the people have the right to create videos of police in action, and not be punished for doing that.

In recent years there have been numerous instances of police mistreating people because they were making video records of police in action.  These videos need to be made, to expose police who behave in a non-professional manner.  It's important to protect the people who make videos of police behavior.   If you are unsure about this issue, search for "videos of police brutality" on youtube.com.

Wednesday, January 23, 2013

Guns and Cars - Treat 'em the Same!

This essay is liable to annoy both gun enthusiasts and gun control advocates; the former because I'm advocating a lot of regulations, and the latter because I'm allowing every competent person to own guns.


I think guns and automobiles should be treated the same. Both are potentially dangerous machines which are very useful and also loved by many. You should need to be tested to get a license for either, and both should be registered.

There are some differences of course.  Cars are used every day by most Americans, whereas guns are used much less.  Of course many gun owners keep theirs in the home for possible defense, so you could say that it's being used every day.  Although the number of gun owners is much less than car owners, still there are roughly a third of the population that does own a gun.  It's estimated that there are about 300 million guns in the U.S., but many gun owners have several guns, which explains how there can be so many guns and also so many people who don't own a gun.  A big difference between cars and guns is that almost all deaths due to cars are accidental, whereas most gun deaths are either deliberate, or the result of a gun being used in a crime.

If guns are to be treated like cars, that implies training, testing, licensing, registration and taxation.  In order to drive a car safely, everyone gets some training, either in high school, or by a driving school, or by a family member or close friend.  Then everyone gets tested to see that they do know how to handle the vehicle, and that they know the traffic laws.  Finally, they are issued a license, without which it is illegal to drive.   

All of that is apart from vehicle registration.  All vehicles that use the public roads are required to be registered, meaning that a state motor vehicles department knows their serial number, and who owns them.  When ownership is transferred the state must be notified.  If the car is stolen the state must be notified.  Every car has a unique serial number (VIN) which it is illegal to remove.  Cars must be tested for minimum safety requirements, such as functioning brakes and lights.   Finally, there is a registration fee, which is necessary in order to pay for all of the above.  (That's what I meant by taxation.)


The primary purpose of all of the above is to reduce accidents on the nation's streets and highways.   It has worked fairly well, since tens of thousands of miles are driven for every accident, and the accident rate per mile traveled has been steadily declining for decades.   Most of that decline has probably been due to improvements in roads and vehicles, but the system of training, testing, licensing and registration deserves some of the credit.  There are secondary purposes as well, such as recovering stolen cars, identifying owners of abandoned cars, and identifying cars involved in crimes


If we were to begin treating guns the same as cars, it would require the various states to create Departments of Firearms, just as they now have Departments of Motor Vehicles.  Then a system of training, testing, licensing and registration would have to be devised, along with a fee structure to pay for it all.   Serial numbers on guns would continue to be required; they might be called FINs.   So, under this proposed system, a young would-be gun owner would have to get some training in the proper use of firearms, and the laws governing them.  Then he would have to pass a test to demonstrate his knowledge.  Ideally, that would have a written part, and a "live" part, where he would shoot a few bullets at a firing range, and demonstrate his knowledge of proper gun handling.  Probably there would be a minimum age for a license, and there might be a one or two year provisional licence when the user would be required to have a fully licensed person present when using the gun.  There might also be advanced types of licenses required for more dangerous weapons.


The weapon itself would have to be registered with the state Department of Firearms.  The owner would have to be responsible for seeing that the registration is updated when the ownership changes.  Stolen guns must be reported to the police and the DF.  (Department of Firearms)