Matthew Forstater: Why Full Employment?

Hat tip, Tschäff Reisberg.

Why full employment?
By Mathew Forstater

The first argument for full employment is that the economic and social costs of unemployment - direct and indirect - are staggering. Unemployment causes permanent losses in potential output of goods and services; economic, social, psychological and other problems resulting in crime, ill health (physical and mental), divorce, suicide and so on; deterioration of labor skills and productivity; and more. The argument that full employment is the key to social stability may also be included here. Quite simply, a compelling argument can be made that the benefits of full employment outweigh the costs of its achievement, and that unemployment, rather than inflation, ought to be viewed as ‘Public Enemy Number One’.

The second argument for full employment is based on the idea that, just as there are human, political and civil rights that may be considered ‘inalienable’, so too are the economic and social ‘rights’, of which the right to employment is one of the most important. This view was expressed by Franklin Delano Roosevelt in his 1944 State of the Union, and may also be found in a number of UN documents, including the ‘Universal Declaration of Human Rights’. Similar proclamations can be found in many other countries as well. If individuals are ready, willing, and able to work and have no employment opportunities, it is government’s responsibility to guarantee employment. Therefore, even if it were argued or could be shown that the costs of eliminating unemployment were greater than the monetary benefits, government would still be responsible for guaranteeing full employment.

The third argument is that the promotion and maintenance of full employment is required in many countries by law. In the United States, this is through legislation such as the Employment Act of 1946 and the Full Employment and Balanced Growth act of 1978 (Humphrey-Hawkins bill). The former corresponds roughly to the 1944 British White Paper on Employment Policy. Similar legislation exists in many other industrialized nations as well. Thus, even if it were argued that the costs are prohibitive and employment is not an inalienable right, it may be argued that under current law many governments are obligated to guarantee full employment.

The forth argument is that full employment is an ethical imperative in a capitalist economy. In a society in which unemployment is systemic, public inaction constitutes social assignment of workers and their families to poverty and/or various forms of assistance. Therefore, even if the costs are prohibitive, employment is not considered an inalienable right, and current legislation is not interpreted as legally requiring government to take action to promote and maintain full employment, it would nevertheless be wrong for government not to provide full employment.

Doubtless there are many other arguments, and these categories overlap and should be treated as provisional. Clearly, however the arguments for full employment- both individually, and taken together are compelling. The crucial point is that unemployment is endemic to capitalism. Of course even if unemployment were not inherent in capitalism, the arguments for government policies to promote full employment would still be strong, but for the existence of involuntary unemployment provides a strong justification for the priority of full employment initiatives.

Source: A Post Keynesian Perspective on 21st Century Economic Problems