Reducing Unemployment Requires Shift in Policy

Reducing Unemployment Requires Shift in Policy

An Impossible Situation: No Jobs while Labor is Idle

By Andreas Hallbauer

[This 2001 article is translated from the German on the World Wide Web, http://www.pds-im-bundestag.de/aktuelles/publikationen/wsw/2001/20/ws01070907.php. Andreas Hallbauer is a PDS lecturer on labor market policy.]

Insults of those no longer “needed” in the production process in this society are not new. Abuse always occurred when no reasons to be especially concerned about the excluded and discriminated occurred to the respective governments. The red-green government has now reached this point. There is no right to laziness, Schroder declared. Respected journals like Spiegel jumped at the opportunity (Spiegel, May 2001) with old texts about life in the hammock. The “Special” examined this problematic from another perspective.

The red-green coalition set out to reduce mass unemployment. Little changed for nearly three years. Chancellor Schroder reproached the jobless for laziness to divert from his failures, an obvious maneuver at the expense and burden of the unemployed.

The Federal government depended on lower taxes and fees. Massive capital was released from liability to strengthen its position in the competition on the world market. However this calculation was wrong. The released funds were not adequately invested. At the same time the public budget lacked funds. The country, territories and communes had to economize. Funds for an expansive employment policy could not be found. Different short-term measures brought no conclusive success. This success will only be possible when there is a fundamental shift in employment policy.

The long-term rise of mass unemployment in the past 25 years is a structural problem and is not based on slack periods. In 1943, the English economist John Maynard Keynes pointed out that full employment will first occur in the post-war development after a phase of high investments because of pent-up and unsatisfied consumer desires and conversion from war- to peace production. The level could stabilize in a second phase. In the third phase, he saw stagnation – if no counter-measures were enacted – and increased unemployment. Already in 1949, the Frenchman Jean Fourastie prophesied a relative shriveling of the industrial sector on account of higher productivity resulting from competition and technical progress. His optimistic assumption of a relatively problem-free transition from the industrial- to the service society was not fulfilled. Many services, particularly those close to industry, are subject to higher productivity and rationalization. There is insufficient demand for personal services - for example in the public health system and social services – since money is lacking both in the private realm and in the public treasury. While the service sector has grown compared to the industrial sector, the job reduction cannot be compensated.

An economic growth on the scale necessary to restore full unemployment is not in sight. The effective demand for that growth is lacking both on the domestic market and the export markets. In Germany, a certain satiation in mass market commodities occurs. Purchasing power is lacking, particularly in east Germany. The export markets are vigorously contested. At most, predatory competition takes place. Individual industrial nations like Germany could get the upper hand. However the sales chances are not great enough to decisively reduce mass unemployment. Thus an export-offensive alone is not a way out. A zero-sum game is played. The industry of one nation loses when the export industry of another industry wins.

“Excess savings” (Keynes’ term) appears because of this development. Realized profits cannot be invested any more to a sufficient extent. To make a profit, investors flee in financial assets and speculation. A relative independence of the financial sector occurs. (Sales in foreign exchange trading rose from $120 billion per workday in 1979 to $1.490 billion per workday in 1998, more than twelve-fold.) This development affects production since rationalization and personnel cuts are intensified through high profit demands. Another circumstance in Germany intensifying the problem of mass unemployment is the unification policy of the Kohl government that resulted in East Germany’s almost exhaustive de-industrialization. Regional inequality is strengthened, not corrected by the market mechanism.

Two ways

The “crisis of the work society” cannot be overcome by only short-term business cycle measures conforming to the market. Long-term redirection of investments is necessary to prevent growing social differences.

There are essentially only two ways to reduce mass unemployment, firstly a redistribution of work through different forms of reduction in working hours and secondly the creation of new jobs through additional expenditures and investments.

For the latter, two steps are crucial:

· expansion of mass purchasing power through wage- and salary increases and improvement of benefits like income support, unemployment benefits and pensions
· increased expenditures of the public treasury including investments.

As the sector of agriculture is reduced through development of productivity, fewer and fewer people are needed in the industrial sector. To compensate these job losses, a society must be strongly marked by ecological production and social and cultural services. These services go to waste because they don’t promise any immediate profit. Since the market fails in creating urgently necessary jobs, the state must intervene through direct and indirect measures. Massive investments are available if there is political will. Additional investments and public service possibilities are vital. New jobs can arise by changing economic- and tax policy. The state can create the framing conditions for a publically promoted employment sector. Overtime hours could be reduced by changing the working hours law… In particular, East Germany urgently needs more investments in future-friendly jobs.

Acceptable offers with living wages that are future-friendly are imperative for different groups that have a hard time on the labor market, not only for the unemployed generally – young persons who seek an apprenticeship, the poorly trained, senior citizens, foreigners and above all women. This is true for East Germany generally.

Additional investments strengthening mass purchasing power and reduction in working hours without wage losses cost money. This money exists and could be mobilized for additional jobs. Job-effective rededication of past economic output would release billions in funds. Regroupings within the Federal budget are possible and sensible so additional jobs arise.

The bottom-to-top redistribution as also happens under red-green must be stopped and reversed. A change of past tax policy is necessary. By releasing businesses, large owners of capital and higher income classes, the financial losses through the tax reform alone amount to 150 billion marks.

Through a consistent wage policy, the redistribution can be reversed. Mass purchasing power could grow through wage- and salary increases. Additional job possibilities could arise through reduction in working hours. This is feasible because the margin of productivity advance was hardly exhausted in the last years.

Proposals for the Next Years and Today

“For Future-Friendly Jobs with Living Wages” is the title of a paper of the PDS fraction. In the next months, an employment program for reducing mass unemployment over several years will be presented. Both the party leaders and the fraction assembly are occupied with the first draft that aims at creating jobs in the most varied areas like ecological reorganization, infrastructure and education through very different measures.

Essential elements like reduction in working hours and introduction of a publically promoted jobs sector have been demands of the PDS fraction for a long while. A bill on maximum working hours was recently discussed in the parliament and rejected by the other fractions. The overtime mountain co9uld be effectively tackled at last with the maximum weekly working time of 40 hours proposed by the PDS. Purely arithmetically, annual overtime corresponds to 1.2 million jobs. Realistically according to the opinion of the PDS, 250,000 new jobs could arise.

According to the ideas of the PDS, the public jobs sector provides living wage jobs in social, cultural and ecological areas where engagement is not attractive for the private economy on account of poor profit prospects but where quality of life is at stake. Many jobs could arise here in the next years…