Freeman

ARTICLE

The Ups and Downs of Unemployment

In an Unhampered Market, Unemployment Is Voluntary

AUGUST 01, 1995 by RUSSELL MADDEN

Russell Madden is an instructor in communications at Mt. Mercy College in Cedar Rapids, Iowa.

Anyone who has found himself without a job for an extended period of time knows the problems that can accrue from having no work. As someone who has experienced such episodes firsthand at various periods in my life, I can empathize with the ups and downs–mostly downs–which unemployment can bring.

At first, unemployment may seem like a nice change. Relief from the psychological and physical stresses that accompany many jobs can be a welcome respite. No more alarm clock jolting you to bleary-eyed awareness at too early an hour of the morning. No more scramble to shower, dress, and eat. No rush to drop off children at school or the sitter’s. No “rush” hour traffic. No annoying boss, co-workers, or customers with their incessant demands and complaints. No lack of time to catch up on sports, reading, house repairs, or just relaxing.

No money . . .

That point, of course, is the wall against which such pleasantries come to a screeching halt. No money means goods and services done without. It means uncertainty and worry about the present and even more about the future. It means bills piling up and debts left unpaid amidst escalating arguments with your spouse. It means bill collectors calling on the phone or knocking at the door. It means self-doubt, anger, and depression. It means the threatened loss of all you worked so hard to earn.

With such potentially dire disruptions staring them in the eyes, it is little wonder that most individuals abhor the prospect of joblessness. In a free society, such adverse conditions provide powerful motivation to seek other employment as quickly as possible.

Of course, politicians are quite vocal in their opposition to unemployment, as well. Greater unemployment leads to an angry electorate and a threat to the officeholder’s re-election. It leads to greater demands on governmental services such as unemployment checks, food stamps, and other forms of welfare at the very time when revenue from taxes dwindles because of fewer workers collecting paychecks. This shortfall of funds leads to diminished opportunities for politicians to create new governmental programs to expand their power, influence, and control.

Such is the situation most people hear reported in the media. For the unemployed worker, and the politician who fears his own future unemployment if he fails to please his constituents, “unemployment” becomes a reviled menace to be avoided at all costs. Many people loathe it so much they are willing to trade away the exercise of their freedoms and rights for more of that illusive ideal, “security.” In the long run, of course, they cannot succeed. Security bought at the price of liberty leads to no security at all.

In a free market, joblessness does not represent the kind of widespread societal crisis that requires governmental intervention. Indeed, the kinds of “safety net” programs favored by so many in and out of government exacerbate the problem of occasional joblessness into a chronic condition. They not only lower the number of jobs available, but also weaken or destroy the incentives necessary to encourage individuals to work.

When I found myself unemployed after over a decade with the same employer, my life was–to say the least—disrupted. That painful period is not one I would care to repeat. Yet in retrospect, being without a job turned out to be one of the best things that ever happened to me. As Henry Hazlitt pointed out so long ago, to understand the true impact of an action, we must look not merely at the short-term results but include the long-term effects in rendering our judgments as to that action’s utility or harm.

Had I been eligible for and accepted unemployment payments, I might have drifted along for a period of time while I sought out a similar job that gave me relative security but little fulfillment. As the situation stood, however, reality demanded that I expand my range of options. With plenty of time to re-think my situation, I began to look for solutions beyond the horizons to which I had grown accustomed. First I moved to another city. With no luck there, I traveled to another state. When a suitable position still eluded me, I shifted direction yet again. I chose graduate school as a way to improve and expand my skills and value in the job market.

Throughout this period, I relied upon the assistance of friends and family and worked whatever part-time jobs I could find as I inched painfully along the new road I had chosen to follow. My task was made all the more difficult by the very programs those in Washington assured me would protect me and cushion my discomfort. The wealth diverted from more worthwhile projects or wasted by governmentally imposed regulations and laws decreased the number of jobs available to me and diminished the potential salaries of those I might have obtained.

Still–no thanks to the politicians–my period of unemployment provided me with the opportunity (and the incentive) to try out new ideas and to do things I might not otherwise have done. I discovered the works of Ayn Rand. Her novels and essays led me into even wider realms as I explored the history, politics, economics, and philosophy of classical liberalism … a radical change in my understanding which might never have occurred had I remained secure and employed. An advanced degree provided me with an opportunity to share with my students the exciting things I learned and to change some of their thinking as well. The positive personal changes I experienced continue to open new doors for me.

No one should misconstrue my point here and believe I advocate quitting a job and waiting around to “see what happens.” There are less negative ways of improving one’s life. Yet if a person does find himself unemployed, one message the market is sending him is that his personal resources—his talents and skills and experience–are being utilized in an inappropriate manner. He would do well to heed that warning and look for employment in a field of endeavor better suited to his particular circumstances.

Making Choices

A person in such a situation has two choices: (1) accept the status quo and rely upon the government to provide a solution, or (2) be determined to use the time available to create new opportunities for himself. Job retraining, more education, or relocation to another city or state may offer someone greater growth than he might ever have enjoyed had he remained fully employed in his old position. Over a lifetime, periodic unemployment may actually result in his achieving greater wealth than he might otherwise have enjoyed.

Indeed, some unemployed people decide to leave the ranks of the jobless by giving themselves a job, that is, by becoming entrepreneurs. Perhaps they borrow money from friends or dip into savings and start their own auto repair shop or clothing store. Perhaps they use the time during their unemployment to indulge in a favorite hobby and suddenly realize that people might actually pay for those carvings or cookies or cabinets they enjoy making so much. If successful, these individuals may move from being unemployed to being self-employed to becoming employers themselves as they continue to create wealth by fulfilling the needs and wants of their customers.

It all begins with an idea and the freedom to put that idea into practice.

If politicians are truly interested in maximizing employment, they can best do so by eliminating the restrictions that currently govern hiring and firing; by repealing laws that prevent people who want to work from doing so; by doing away with regulations and paperwork and taxes that encumber employers and employees. Only in the kind of hampered market that plagues us today can widespread, chronic unemployment become a reality. Minimum wage laws and government-sanctioned labor union practices maintain wages above market levels. Unemployment compensation and other types of welfare only strengthen the disruptions which the loss of jobs entails … even though all of these are usually (and erroneously) touted as being the mechanisms which have improved the lot of laborers.

Like poverty, unemployment always will be with us. Some people will not want to work no matter how extensive the want-ads are; there are those who prefer to loaf. Others value free time more than additional money and will work only long enough to pay expenses before voluntarily becoming jobless once again. A certain group of people will live with unemployment—perhaps relying upon savings or friends or relatives–until they are able to obtain the kind of position they feel most appropriate for them, whether that is defined in terms of prestige, salary, or skills demanded. People employed in seasonal occupations such as farming or construction might fit in here as would those who believe that certain jobs are “beneath” them. Others might endure unemployment because seeking a job in another location might require selling their homes and uprooting their families; accepting short-term employment elsewhere might prevent them from obtaining a more suitable long-term job closer to home.

Whatever the particular situation or reasons might be, in a free and unhampered market, unemployment—even if unpleasant—is always voluntary. There will always be lower paying jobs available or positions in other parts of the country which an individual could accept … if he were willing to do so.

The True Friends of Labor

The true friends of labor are the free market, the entrepreneurs who provide its motor, and the increases in productivity which only progress—not any government—can produce. Unemployment resulting from changes in the marketplace can open up new avenues to the future for workers and is, at worst, temporary. To deal with such unemployment, government need only allow employers and employees the freedom to decide for themselves which arrangements best suit their own particular needs. The benefits will follow in due course. However, unemployment resulting from changes caused by governmental interference can throw up roadblocks to success few individuals can overcome by themselves.

It is crucial to be able to recognize the difference between these two types of unemployment: it’s the difference between freedom and slavery, between prosperity and poverty.

I know which one I choose.

ASSOCIATED ISSUE

August 1995

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