Growth v. employment: where should our loyalties lie?
We have seen that the decades following the reconstruction effort of war-torn Europe and the rise of the United States’ prominence in the global economy were marked by deep tensions in the U.S. over economic policies that strove toward full employment versus those that promoted greater economic growth. Similar tensions exist today, with unemployment slowly rebounding after the 2008 recession (currently at 5.7% or 9 million Americans), deficit spending and public-held debt at record highs, and economic growth waning in recent years.
Which policy objective do you believe should have prevailed then and should prevail today, and why? In answering this question, you must (1) briefly explain whether these two policy objectives are inherently contradictory (is it not possible to achieve both concurrently?), (2) identify what the primary social or moral value is that grounds you answer (e.g., prosperity or security or equality, etc.), and (3) briefly discuss one particular public policy whose consequences illustrate why you believe that eliminating unemployment or achieving greater economic growth was/is more important than the other.
Critical Deliberation 
Growth in the Economy Pivots on the Unemployment Rate
In terms of economic growth, our largest concern as a nation is our unemployment rate. Without workers to generate money, our economy begins to suffer, and so does the nation’s GDP. Based off an article in Forbes, it was shown that an inverse relationship exists between the unemployment rate and the GDP. The article states that, “upon careful scrutiny, you will notice that most of the time GDP falls as unemployment rises and vice versa.” (Patton, 2012) While this may not come as a surprise to some people, there has been a large amount of research showing that there is a strong correlation between unemployment and GDP.
Considering the following information, we can safely say that the unemployment rate in America can be taken as sign of how well the economy is doing. Inherently, this means that the employment rate and our economic growth are not contradictory of each other, and are in fact intertwined. Seeing as the percentage of workers who are unable to find work fluctuates day by day, and is dependent on a large number of factors, it is fair to mention that certain policies enacted by the government will tend to affect this percentage. It is arguable as to which policies help or harm the unemployment rate, but my belief is that unemployment policies generally aim to help the country. One such public policy is that regarding unemployment benefits. This policy aims to provide a certain amount of income to those workers who find themselves between jobs. This policy does wonders for those people unfortunate enough to lose their jobs. By helping average workers to stay on their feet with a flow of income, this provides them with more opportunity to find a good job position. My grounds for believing this are found in the socially desirable value of security; if a person feels secure about the fact that they can find another job if they truly need to, it will help to stimulate their search in the job market.
Many people would argue that these unemployment benefits actually hinder economic growth however. I believe they are wrong. There are statistics in debate about whether this policy of unemployment benefits really helps people secure another job or not, and some statistics show that it in fact, these benefits increase unemployment. My counterargument would be that these statistics have been taken out of context. As a writer on the Forbes website put it: “the fight back against this idea is largely driven by those insisting that [the policy] didn’t make any difference at all as there just weren’t any jobs to take.” (Worstall, 2015) If there aren’t any jobs to take during an economic downturn, of course we will see an increase in unemployment. My point here however, is that if workers are able to stay afloat while looking for work in a lucrative job market, they will be able to secure more desirable positions, and thus contribute a larger portion to the overall economic growth of the country.
Patton, Mike. “The Key to Economic Growth: Reduce The Unemployment Rate!” Forbes. 27 Aug. 2012. Web. 2 Mar. 2015.
Worstall, Tim. “Increased Welfare Benefits Really Do Reduce The Employment Rate.” Forbes. 20 Feb. 2015. Web. 2 Mar. 2015.
Response to Dustin
Although I agree with Dustin on the fact that the relationship between unemployment and economic growth are codependent with a growth in the economy leading to a reduction of unemployment, policy must bolster economic growth which will in turn assist unemployment levels and not the other way around. Unemployment is a very intricate rate that has several dependencies and exclusions that do not properly reflect that growth of the economy. With these uncertainties in mind, the government should take an initiative to develop policy that favors prosperity in the economy which will create job security in the future.
As Dustin mentioned, the rate of employment and economic growth go hand in hand. It is impossible to have one without the other in a capitalist economy. As GDP rises, aggregate demand rises and businesses will require more labor to reach the equilibrium price, so employment will also rise. Vice-versa, as employment increases there will be more people earning an income which will also trigger an increase in aggregate demand, increasing GDP.
The unemployment rate isn’t a simple way to explain the percent of a country at work, but rather it exemplifies the percent of workers that are experiencing unemployment and are currently looking for a job. “You might as well say that the unemployment rate would be zero if everyone just quit looking for work” ( Zuckerman, 2014). This excludes people who have taken part time work or those that are in school. The type of unemployment that is directly related to economic growth is cyclical unemployment, “the type of unemployment that’s caused by economic recessions”(Gray, 2011). The only way to ensure that those experiencing cyclical employment obtain equivalent jobs to the jobs they had prior to the economic hardships, is to improve the demand for labor through expansionary economic policies by the government.
“The U.S. needs to generate above-trend growth”( Zuckerman, 2014). For this to be possible, policy focusing on prosperity of the economy as a whole must be adopted. Expansionary policy like tax-breaks and government spending must be implemented if growth is to be achieved. An alternative Dustin mentions to government spending on the economy is the offering of unemployment benefits. Unemployment assistance is not necessarily a bad idea as it offers a way for those that are unemployed focus on getting employed again. This system however doesn’t ensure that there is demand for labor as it transfers “money from people who produce to people who are not producing. Businesses pay unemployment taxes (called unemployment insurance) to state and federal governments”(Pekau, 2014). This practice could therefore even cause a hindrance to economic growth and increase unemployment. Another concern about unemployment benefits is the possibility for those receiving checks to abuse the system and not actively search for a job, but rather stay unemployed and receive benefits for the max time allotted. Based on these ideas, the government shouldn’t eliminate unemployment benefits but rather refrain for their expansion and focus on creating job through tax breaks and government spending.
Zuckerman, Mortimer. US News. U.S. News & World Report. Web. 5 Mar. 2015.
Gray, Carolyn. “4 Types of Unemployment.” EHow. Demand Media, 7 Apr. 2011. Web. 5 Mar. 2015.
Pekau, Keith. “Extending Unemployment Benefits Is Bad Economic Policy.” Western Free Press. 14 Jan. 2014. Web. 5 Mar. 2015.
Survival of the Fit and Wealthy
In a world that seems to be inherently cruel and unjust, people must make decisions that are ultimately for themselves and themselves only. It is common knowledge in the economic world that for one to be made better off, another must be made worse off. As much as we try to help humanity as a whole, it is impossible for everyone to succeed.
Therefore, in order to improve the lives of as many people as we can, we must swallow our guilt of leaving the unemployed behind and strive for a greater economy. I believe that the policies regarding greater economic growth should have prevailed following the war.
Back when America was helping Europe rebuild, America tried to fix their economic problems by reducing unemployment. Although this plan seems good, it is too good to be true. The real value of money is relative, so more people in a weaker economy equates to the value of money dropping. In the Daly News, Herman Daly writes, “What the corporations really want is a surplus of labor,” showing that while our economy is weak, corporations will continue to look for cheaper labor and promote unemployment. These two policy objectives are not completely contradictory, because if done correctly, the policies can help each other grow. As sad as it may seem, it is more realistic to focus on economic growth than to focus on those who may not be fortunate enough to have a job.
I do believe in equality, and I do believe in helping those who are not as fortunate as I. However, for the greater good of the country, those sad feelings must be set aside. My arguments are based more on the security of the nation and not as much as on the moral aspect. Those who are the fittest to survive in this world will rise and attain wealth, paving the trail for those who are not as lucky to eventually follow. An argument against this policy would be that in order for our economy to grow, our labor force must grow too. For those who are desperately looking for jobs, the policy could be deemed completely unfair. I recognize that it does seem unfair, but is it realistic that we will ever reduce our unemployment to 0%?
I believe that small government capitalism is an easy way to illustrate what I am trying to explain. Capitalism gives people the motivation to succeed, and to do so, they will most likely take up something that could be useful to the society. If they can produce a good or service that others want, they have just reduced the unemployment rate while achieving greater economic growth. However, if a country were to focus just on eliminating unemployment, people would be forced into unneeded jobs and the wages per person would decrease, weakening the economy.
Daly, Herman. “Full Employment Versus Jobless Growth” The Daly News. June 2013
Madrick, Jeff. “Why policies promoting demand offer a better way for the U.S. economy” The Economic Policy Institute. June 22, 2007
Useful Jobs Reduce Unemployment and Grow Economies
Response to Cody
I find that Cody’s post is almost self-contradicting, as he brings up several good arguments that work against his main point. First, the assumption that “for one to be made better off, another must be made worse off” implies a zero-sum situation. The existence of economic growth contradicts this however, so perhaps a more accurate phrasing might be ‘if one is made better off, another may not be made as better off as he could have been’. Some gains do come from the loss of another, but there are situations in which there is gain for all parties. This shows that employment and economic growth are not mutually exclusive.
The situation he brings up in small government capitalism (an unemployed person taking up a job that is beneficial to society) is a perfect example of these two going hand in hand. What this means is that as long as unmet demand exists, there will be incentive for jobs to be created to fill that need. The danger, as mentioned, is unneeded jobs existing which will take more resources than they give back. In the case of someone starting a new business it will usually be easy to see whether the job is needed or not by its success/survival. As systems get more complicated though, it’s more common to see jobs appear that could likely be combined and done by less people, if not dissolved entirely. J.W. Smith claims that “We could eliminate a total of 37 million unnecessary jobs in insurance, law, transportation, agriculture, health care, the welfare system, education, and defense, along with excess managers and supervisors in other fields.” (Smith). This matches my personal experience where a job that was once done by 4 people suddenly had to be done by 2. There was a small transition phase where the job was not done well, but after some adjustments and new ideas we could do the job without any extra effort, leaving us to wonder how we once had enough work for 4 people.
This cut in unneeded jobs would provide a huge surplus of profits (as the production would not be affected by the loss of an unnecessary job), which could then be funnelled back into the jobs that are productive. Smith mentions cutting back the work-day, meaning you could hire two people to work half the time that one normally would. This means the job still gets done (production is not affected) with a higher rate of employment. If everyone were doing productive jobs, there would be enough work for everyone to be employed.
Perfect competition states that “firms in competitive markets make zero profit” (rze). Ignoring saving, this means our economy could support an infinite amount of jobs, as all money would be evenly exchanged within the system. If I made $100 profit from my job, then turned around and spent $100 on other things, I’ve only held the money temporarily. The amount of money in the system then would be the only limiting factor in this system.
Of course our market is not perfectly competitive, and people are driven to save/hoard money out of fear of the future. The vicious cycle is that this fear is self-justifying. Still, I think the principle stands that unemployment need not be considered incompatible with economic growth. The thing to keep in mind is to strive for jobs that are useful; “Be a motor, or be a cog in the system. But make sure you’re actually doing something and not just taking up space.” (Tynan)
rze. “Microeconomics – Zero Profit Equilibrium.” Principles of Economics and Business. 30 Nov 2014. Web. 04 Mar 2015.
Smith, J.W. “Wasted Time, Wasted Wealth.” Context Institute. Winter 1994. Web. 04 Mar 2015.
Tynan. “Cogs in the System.” Tynan. Oct 2014. Web. 04 Mar 2015.
Not an either/or situation but a both
Response to Cody
I find myself agreeing with Cody on several points but I find it difficult to believe that employment and economic growth are two separate black and white issues that can’t coalesce. Full employment is not something that must come at such a high cost, as Cody seems to be assuming. This may be true in some cases but I believe that a higher employed and paid work force can be beneficial for all. I find that Keyes approach to the economic problem of unemployment has been a just one. His belief that unemployment is not a result of wages being too high but rather from the demand for goods that labors produces being too low. He goes on to say that higher wages would equate higher demand and in turn increase output, economic growth and lead to higher employment. This increase in production can benefit not only the working class but also those who control the means of production.
Cody goes on to discuss the issue with inequality in the United States and again I must point out that these issue are not as separate from the issue of unemployment as he makes them out to be. Especially in the recent administration there has been a focus on improving workers condition in and outside of the workplace with policies like the Affordable Care Act, which decouples health insurance from full-time work (Barro 2015: 1.) and tax credits that go to low income families (Romer 2013:1). This isn’t an issue of survival of the fittest but a distribution of basic rights that citizen should expect from their government. These policies in turn go back to the capitalist ideal Cody discusses regarding the motivation to succeed, but I see its potential of a more productive and innovative work force emerging because workers feel like they are justly taken care of any represented by their government. Barro goes on to say “the best middle-class economic agenda might be to do no harm: Let the positive trends on job growth and gas prices continue, watch them flow through to wages.” (Barro 2015: 1.). What I mean to illustrate is that economic growth and employment go hand in hand if done the right way. To conclude, the issue lies not in the decision between growth and employment but finding a way thought policy to bring the two together effectively.
Barro, Josh. “What Is ‘Middle-Class Economics’?” New York Times. 25 Feb. 2015. Web. 06 Mar. 2015.
Romer, Christina D. “The Business of the Minimum Wage.” New York
Times. 02 Mar. 2013. Web. 06 Mar. 2015.
Blog Post 2 Unemployment
Full employment is the dream for the working class and a burden for the wealthy. For this reason alone I feel that it is a worthy policy goal for our government to aim for. The prompt and common literature claims that the problem with full employment is that it will increase inflation and stifle overall growth. But I suggest that this is misinformation put out by academics that buy into a system that favors the wealthy. (If your agenda was to keep unemployment up so that workers had less leverage, raising the specter that full employment leads to inflation or stifles growth would be the perfect cover, right?)
The argument goes something like this: full employment would cause inflation because production could not be increased simply by hiring more workers, and when an item was in demand its price would just go up and up. But I disagree for two reasons. Firstly while it would be harder to increase production it would not be that much harder because companies could simply shift workers from producing items that are not so much in demand. Secondly, since when is the inflation rate even linked to employment? Inflation can only occur if there is an increase in the total number of dollars in existence, or if there is a decrease in the total wealth in the nation. Since the total wealth of the nation has done nothing but increase since colonial times that means that inflations happens when someone makes more dollars. There’s only one organization that can do that, the FED. I would like to submit that the inflation rate is entirely under the direction of the FED and completely unrelated to employment.
The argument that overall growth is incompatible with full employment is similarly distorted. Yes it would increase demand for labor and drive wages up making it harder for employers to increase production. But I would contend that the United States enjoys continued immigration and population growth and that this will largely mitigate the increased difficulty of finding new workers. But I would also add that I think full employment would increase overall productivity in a Keynesian fashion. Full employment would increase wages which would increase demand which would still increase production even if that production was more expensive.
A blog post I found from 2011 entitled: Can we get to below 4% unemployment claims that the FED consistently prioritizes low inflation over employment (you couldn’t tell that from the actual inflation rate by the way) and that the last time they did the opposite it led to the housing bubble (Kenworthy, 2011). However I agree that it would be very difficult to reduce the unemployment rate much more. Individual political leaders do not have so much control over the economy as to be able to institute full employment, and the American government as a whole is far to divided to take decisive action.
In Getting Back to Full Employment: A Better Bargain for Working People, Jared Bernstein calls full employment “the best, if not the only, friend of the working class” because it would boost wages and help reduce income inequality. I strongly agree and add that by making companies compete for workers and rather than workers compete for jobs, the vast majority of Americans would see better wages and working conditions. Meanwhile to pay those higher wages and still remain competitive, corporations would have to cut into the enormous profit margins enjoyed at the top which would be a key step to a more efficient and more equitable economy.
Baker, Dean and Bernstein, Jared. Getting Back to Full Employment: A Better Bargain for Working People. Center for economic and policy research. Washington, DC, 2013. Found online at https://povertyandpolicy.wordpress.com/2014/03/13/why-we-need-full-employment-policies-now/
Kenworthy, Lane. Can we get to below -4% unemployment? Do we need to? Lanekenworthy.net, Jan 2011. http://lanekenworthy.net/2011/01/26/can-we-get-to-below-4-unemployment-do-we-need-to/
Unemployment: Unrealistic and Unhelpful
Response to Kai
Although 0% unemployment is ideal for people, it is not realistic and it is not necessarily better for the economy. To achieve no unemployment, the government would likely have to be heavily involved, which as we have seen is not always the best for anyone. Often times it makes the economy worse off and does not help those it intended to. If the free market could achieve unemployment naturally then maybe it would better for the economy, but it will not happen.
The problem isn’t the rich telling us that unemployment is bad to keep their power. The problem would be that while the government is trying to reach no unemployment, they ruin the economy, leading to more unemployment. They could also end up helping those already in power and not those who need the help.
According to Annalyn Censky, a reporter at CNN, full employment can happen and can be good, which would counter my argument. She says that in niche markets this can be achieved. For example “In the U.S., college grads who studied astrophysics, geophysics, pharmacology and actuarial science had zero unemployment in 2010, according to the Georgetown University Center on Education and the Workforce” (Censky 2011: 1). Unfortunately, this can’t happen in every industry because there isn’t enough niche markets to make this sustainable. Because of this the U.S. shouldn’t focus all its energy on trying to stop unemployment when there are more important issues.
Mark Thoma, a University of Oregon professor, says that full employment would be like “Suppose[ing]every apartment in the country is full, and I wanted to move from New York to Los Angeles,” he said. “I would have to find someone in L.A. who wants to move to New York, and we would have to do a trade. It’s much more efficient to have some vacancies” (Censky 2011: 1) Therefore, some unemployment allows for transition and advancement. If there were no extra labor force then the economy would be stagnant or the U.S would have to find labor elsewhere.
Having unemployment can also be deceiving. Stephen Gandel, a reporter for Time, says “The unemployment rate tracks not just how many people have jobs, but how many people are looking for jobs… When people give up looking for work, essentially giving up on the economy, that indicates a really bad drop in confidence, something a recovery feeds on” (Gandel 2010:1) Based on this and my above statements, I think low unemployment is good but no unemployment is a problem. It can have negative effects that we don’t immediately think about.
Censky, Annalyn. “What 0% Unemployment Looks like.” CNNMoney. Cable News Network, 15 May 2012. Web. 6 Mar. 2015.
Gandel, Stephen. “What’s Good About Rising Unemployment?” TIME.com. 3 Sept. 2010. Web. 6 Mar. 2015.
Although growth and employment are not inherently contradictory, it is at some point necessary to choose one to focus on more than the other. A healthy growing economy can ensure that there are growing sectors to employ people, and high employment can ensure that as many people as possible are getting to work on growing our economy. However, is not possible to maximize focus on both growth and employment concurrently as our resources are not unlimited and we must choose where to invest them. As such, I make the normative argument that it is important to focus on employment rather than growth, because although it is important to pursue the goals of a society as a whole, it is more important to focus on the equity of individuals. Otherwise, when the economy as a whole grows, the gains in made in this ever-stratifying economy could end up benefiting fewer and fewer people on only the highest rungs of the social ladder.
Our focus on growth leads to high inequality; and our economy has matured to the point where new growth no longer makes us any measurably happier (McKibben 2007: 11). One example of public policy which McKibben cites to illustrate this point is Clinton’s signing of NAFTA in order to increase our growth through efficient trade (McKibben 2007: 12). He then paints a bleak picture of struggling small farmers amid their dying crops as they can no longer compete with the large corporations that benefitted from NAFTA. Our economy was already grown to levels that would have been unimaginable in years prior to WWII; now, this growth was coming at the expense of the workers, those citizens of the United States whom a growing economy should have sought to serve.
It is of course important to keep in mind that if the economy does not grow as our population does, then many people will find themselves out of work anyway as other economies overpass us. To this argument, I would respond with the traditional Keynsian view that full employment is a method of ensuring full output – employment will lead to growth (Dimand 1988: 26). However, it is also important to keep in mind that by laws of physics growth can only go so far; because our growth is pursued in environmental unsustainable manners, we can’t realistically sustain it (McKibben 2007: 11). Since further growth isn’t making American society in the aggregate any happier, and is pursued in environmentally unsustainable manners, it is then important to focus on society’s marginalized, who often have been put in this positions by the stratifying conditions of the pursuit of growth.
Economic growth is important. It is also not sustainable at this level, in a world increasingly devoid of natural resources and filled more and more with pollution, and therefore cannot be our primary focus. Perhaps it would be beneficial to seek methods of high employment which could begin to solve the potential impending environmental crisis.
Dimand, Robert William. The Origins of the Keynesian Revolution: The Development of Keynes’ Theory. Standford: Stanford University Press, 1988.
McKibben, Bill. Deep Economy: The Wealth of Communities and the Durable Future. New York: Holt Paperbacks, 2007.
Prioritizing Unemployment Policies
Response to Natalie
A country does not supply enough resources to focus attention towards both economic growth and decreasing the unemployment rate, something Natalie had mentioned. The two factors have an interchangeable relationship; each often times influencing the other. But a country must concentrate more of their efforts towards the unemployment rate in order to maintain a sense of balance to the economy for people within the society.
Recent years have been commended with extremely low unemployment rates. The job growth placed the nation’s unemployment “rate at the top of the 5.2% to 5.5% range that many Fed policy makers consider to be full employment, or the rate the economy can sustain without stoking too much inflation” (Morath, WSJ). This surge in jobs set up an economy that is able to grow from an increase in production demand and the flow of income being redistributed out by these newly employed people. Maintaining a certain percentage of unemployment is necessary in upholding the stability of an economy but hitting this low range, sparks the potential for economic improvement. John Williams, a Federal Reserve President in San Francisco predicts, “we’re going to see a labor market that’s much stronger, which will spur wage and price growth” because of this recent pattern in our unemployment rate (Morath, WSJ). Even policies surrounding “Buy America” prove the supply of jobs will inherently better the American economy. Taxpayer dollars would now be placed back into the system in which they originated from. Americans can see a full cycle, of their dollars supplying employment and production within their territory and then bought by them, circulating their dollars back into their pockets. Jobs are supplied increasing the employment rate and the economy is prospering.
Clinton’s NAFTA pact was a perfect example to exemplify how certain tiers of the labor force can be forgotten if policy is created just solely to grow the economy. The jobs and people putting in the work to simulate this economy are the ones that need to be prioritized. Growing the employment of the masses will essentially grow the economy.
http://www.wsj.com/articles/jobs-report-u-s-adds-295-500-jobs-unemployment-falls-to-5-5-1425648924
http://abcnews.go.com/blogs/politics/2012/07/made-in-america-policies-hugely-popular-survey-shows/
The Solution: The Vital Need For Employment
With the United States being stuck in a tumultuous economic crisis the need for refuge, due to the economic recession, for the citizens was vital. With a differing methodology of how to fix the pressing issue of the economic downturn created tensions within the United States. With suggestions to focus efforts towards ensuring full employment in comparison to directing energies towards promoting greater economic growth were the solutions presented. However, when citizens are all employed a byproduct of these efforts is that it’s able to help the economy grow. The rational here is that when people receive higher wages it will inevitably lead individuals to be more inclined to spend money, resulting in a stronger and larger economy. However, with this tactic comes the integral risk of inflation rates, which need to be carefully regulated. The need for citizens to be in the work force is to ensure that the United States continues to prosper and that all individuals have a sense of stability and security in their own personal lives.
The economic downturn of 2008 is able to depict how the government dealt with an economic crisis of such large proportions. President Obama implementing the execution of trying to help the economy grow through efforts of a Keynesian stimulus failed and some would argue extended the economic recession. “Unemployment actually rose after June, 2009, and did not fall back down below that level until 18 months later in December, 2010. Instead of a recovery, America has suffered the longest period of unemployment near 9% or above since the Great Depression, under President Obama’s public policy malpractice.” (Ferrara) With no economic growth and an alarming amount of people out of work created an elongated recession. With out having a keen focus on the workforce was able to add to the problem of these tactics inherently presented.
Unlike Obamas approach President Reagan handled the previous economic recession much differently. Overall it can be strongly argued that President Reagan did a much better job managing the economic crisis he was faced with. “Reagan’s economy was so strong that, for the last three-quarters of his administration, Americans were flooding into the workforce.” (Smith) With the massive influx of Americans working the economy was able to lift itself out of the turmoil it had be stuck in and begin to prosper once again. With people in the work force the economy began to gain traction and grow immensely bigger and stronger.
Ferrara, Peter.”The Worst Economic Recovery Since The Great Depression.” Forbes. Forbes Magazine, n.d. Web. 03 Mar. 2015.
Smith, Kyle. “Sorry, Obama Fans: Reagan Did Better on Jobs and Growth.” Forbes. Forbes Magazine, n.d. Web. 03 Mar. 2015.