Collective Conscious

Ygle­sias thinks it’s the dri­ver of working-​​class pros­per­ity:

Mike Kon­czal needs to start writ­ing shorter blog posts. Until then, let’s just talk about the end of this post on the need for eco­nomic pol­icy to be about more than hand­outs for the unfortunate:

To me, the end result of hav­ing a safety net with­out giv­ing work­ers stronger bar­gain­ing power is that what you end up with is a kind of pity-​​charity lib­eral cap­i­tal­ism. That’s bet­ter than noth­ing, but at the end it can be a dead-​​end, if the gov­ern­ment doesn’t step in to fight for full employ­ment. Par­tic­u­larly if you think of unem­ploy­ment as a par­tic­u­larly scar­ring state of exis­tence and, like me, think that the next major bat­tle­grounds already are closer looks at pro­duc­tion and the expe­ri­ence and con­di­tions under which peo­ple work.

I think that’s cor­rect, but that “full employ­ment” is doing almost all the work here even while Konczal’s emo­tional empha­sis seems to be on bar­gain­ing power. After all, if you have strong labor unions and a gov­ern­ment that doesn’t fight for full employ­ment, then what hap­pens is the unions use their bar­gain­ing power to cut insider/​outsider deals at the expense of the unem­ployed. One of the great virtues of Amer­i­can unions in their hey­day is that they used their polit­i­cal mus­cle to push the gov­ern­ment to fight for full employ­ment, which was excel­lent and it’s a polit­i­cal voice we’re des­per­ately miss­ing today. But that’s not to say that the unions them­selves are a viable sub­sti­tute for full employ­ment. A mar­ket econ­omy is either going to oper­ate near full employ­ment, or else peo­ple will only share in its ben­e­fits thanks to hand­outs. That’s true for any given set of labor mar­ket institutions.

I dis­agree. I don’t think ‘full employ­ment’ with respect to labor is some fixed num­ber where every indi­vid­ual capa­ble of work­ing has a job. Con­trast this to ‘full employ­ment’ of the econ­omy, where the impli­ca­tion is indeed that every pro­duc­tive resource is pro­duc­ing at capac­ity, labor included. Per­haps ‘full employ­ment’ is even a bad name for the con­cept as it relates to labor. Some­thing like ‘opti­mal employ­ment’ is prob­a­bly bet­ter in the labor-​​specific sense.

Full/​optimal employ­ment of labor is in and of itself a func­tion of wages — given the cost of labor, it’s the amount of labor which would be most pro­duc­tive in an econ­omy given the amount of cap­i­tal avail­able for those work­ers to use. In this sense full employ­ment is def­i­nitely sec­ondary to the set­ting of wages, since increas­ing wages increases the share of total income that goes to labor (to a point, but there’s no rea­son to believe we’re on the wrong side of the labor Laf­fer curve).

In an econ­omy where wages are set first by a bar­gain­ing process, and then employ­ers decide how much labor to hire, we can think of the lib­eral project this way: get wages as high as pos­si­ble (max­i­mize the share of income going to labor) and then use safety-​​net pro­grams to redis­trib­ute to peo­ple whose low pro­duc­tiv­ity puts them out­side of the ‘opti­mal employ­ment’ group. The redis­tri­b­u­tion should aim at improv­ing their pro­duc­tiv­ity, namely, by sub­si­diz­ing health care, food, and education.

The rea­son this doesn’t mesh with Ygle­sias’ def­i­n­i­tion is that it’s easy to imag­ine an optimally-​​employed econ­omy (ie, all work­ers are work­ing) where the cap­i­tal coali­tion is so powerful/​oligopolistic that it only offers sub­sis­tence wages. Work­ers are never able to save any money, and all of the excess prof­its accu­mu­late to own­ers of cap­i­tal. So fight­ing for full employ­ment in the sense of ‘total employ­ment’ is not the best way to improve out­comes for labor.