Americas Built-in Unemployment

Mr. Chamberlin is a skilled observer and re­porter of economic and political conditions at home and abroad. In addition to writing a number of books (his latest, The German Phoenix, Duell, Sloan & Pearce, reviewed on page 61 of this issue), he has lectured widely and is a contributor to The Wall Street Jour­nal and numerous magazines.

It is hard to pick up a magazine or newspaper without reading an article about America’s dangerous problem of mass unemployment. This is also a familiar theme of presidential messages, of discus­sion in Congress. No decent or hu­mane person would lightly brush off the tragedy of involuntary un­employment, and there are regions where the decline or transfer of a traditional industry has created genuine hardship. But, when fig­ures of the number of people out of work are cited, a considerable discount must be made for two categories: (1) those who would rather depend upon social security and relief payments than accept jobs requiring minimum skill and paying comparatively low wages; and (2) those (especially adoles­cents) who are prevented from working by overdeveloped welfare legislation.

In the Greater Boston area, where I live and where a fair number of people are recipients of security and relief payments, there is a marked absence of the visible signs of distress that formerly marked periods of industrial de­pression and slack employment. There are no line-ups for free food; the few beggars are almost invariably drink or drug addicts; and one is impressed by the fre­quency of “Help Wanted” signs in the windows of stores, restau­rants, and lunch counters.

The present editor of a national journal once told me of his ex­perience when, just out of college in the depression-ridden thirties, he came from another state to New York with fifty dollars in his pocket and a determination to sink or swim on his own efforts.

“It was always possible to find a job,” he said, “although it took some time to find the kind of job I wanted. I washed dishes in a cafeteria and took on other work of this kind until something bet­ter opened up. It wasn’t a pleas­ant experience, although in retro­spect it may have done me some good. Anyway, I never starved and never had to sleep on a park bench.”

Anyone with this mental atti­tude would have little difficulty in getting off the rolls of the unem­ployed in Boston and adjacent communities; and this is true of most American cities and towns, except in special areas where re­adjustment has lagged after the decline of an important local in­dustry.

Another unmistakable fact of present-day life that casts doubt on the existence of a really des­perate type of unemployment is the extreme difficulty of obtaining domestic help or finding helpers for odd jobs. At a dinner party in an academic community the hos­tess remarked:

“Before World War II, the family of every professor in our department had a full-time maid. Now this is true of only two, and they are independently well-to-do.”

One explanation for this changed situation was furnished by the ex­perience of a woman volunteer so­cial worker who was checking up on the post-treatment condition of some patients who had been in the ward of the city hospital. To one inquiry she received the reply: “Mary is collecting security,” as if this were a recognized occupa­tion, as it doubtless is. In the time before “security” was widely and freely available, “Mary” presum­ably would have been doing some work for her money.

The Traditional Way

In the bad old days, when “se­curity” in the modern sense of the word was unknown and there was a social stigma to receiving public aid, it was a familiar part of the experience of boys from poor families to help out with family expenses and pay their own way through college, to take on odd jobs outside school hours.

This was an old American tradition which was taken over by many children of Americans of newer stocks. Many of the men who later became prominent in business and the professions have passed through this early appren­ticeship and almost invariably consider it a very useful introduc­tion to life and its responsibilities.

Now, however, eager do-gooders have surrounded the employment of youths with so many punitive restrictions in the way of mini­mum wages and maximum hours that potential employers who need assistance are frightened away from giving employment. An ex­perience at a neighboring grocery store illustrates this point. The woman owner took on a delivery boy at what seemed to her a fair wage for the value of his work. Put up to it by some acquaintance with a knowledge of protective social legislation, the boy sued the owner for paying him less than the federal minimum wage and, on the basis of a court decision, extracted from her a letter of apology and a considerable sum in alleged damages.

Such experiences are not calcu­lated to multiply job opportuni­ties. Often the same social reform­ers who weep crocodile tears over the high incidence of unemploy­ment among youths who have left school are adamant in upholding a mass of legislative restrictions which make it unprofitable and even impossible for owners of small businesses to take on youths as helpers. So the street-corner gangs multiply; and Satan, as the police court records show, finds plenty of work for idle hands, while the social reformers con­tinue to lament and deplore.

This is an extension, in the youth field, of a frequent cause of adult lack of work. The present-day coal miner, scrambling for work at cut-rate wages, has little reason for being grateful to John L. Lewis for forcing wages far beyond what the competitive traf­fic would bear. And newspaper workers, in editorial and craft de­partments alike, have little reason to bless the name of the head of the printers’ union for shutting down New York newspapers in a prolonged drive for an unecon­omic wage scale. The consequences have been declining advertising and circulation, fewer job oppor­tunities, one large paper closed down, and others possibly in line to follow.

Sentiments and Laws

The problem of relief for peo­ple out of work in a modern in­dustrial society offers no easy solution. It may be argued on hu­manitarian grounds that it is bet­ter to have nine shirkers, who could find work but prefer relief payments to wages appropriate to their level of skill, than one family in distress because the breadwinner, after an honest search, has not found employ­ment.

At the same time the high offi­cial figures of unemployment must be discounted to allow for two im­portant considerations. A good many men and women prefer liv­ing on relief payments to accept­ing work at lower paid jobs. The howls that go up when someone like the former city manager of Newburgh suggests some reason­able tests for the genuineness of relief applications, or when it is proposed in New York City to require a reasonable period of residence before getting on the public handout rolls, show that this subject is enveloped in a fog of sentimentality.

The second point to consider is that, under existing legislation, young people in many cases can­not work at wages and under con­ditions which their prospective employers would find economic and reasonable. In other words, a good deal—not all, of course—of our statistical unemployment is of a built-in character which is not likely to disappear until and unless conditions for relief pay­ments are appreciably tightened and restrictive regulations on youth employment are modified or abolished.

Myrdal’s Medicine

Failure to recognize the built-in character of much American unemployment leads some social and economic commentators up a number of blind alleys. A good example is a recently published work by a Swedish social planner named Gunnar Myrdal, Challenge to Affluence. A trend of the times is that European socialists have become more moderate, not so much in their ultimate aim of an egalitarian society with almost unlimited state controls over the individual as in their willingness to achieve this aim gradually, and without resort to violence. (The more extreme socialists, at one time or another, went over to the communists).

There is, therefore, a good deal of affinity between European so­cialists, in their present relatively moderate phase, and the more avid advocates of state planning and government spending and controls in this country. It is easy to think of American economists who largely share Myrdal’s line of reasoning.

His proposed recipe for “get­ting America moving” is to ex­pand welfare state measures, in­crease government spending and enlarge the scope of official plan­ning. Myrdal would increase ex­isting unemployment benefits, create a government subsidized medical system, and enlarge the functions of the state all along the line. The heart of his mes­sage, in his own words, is as fol­lows:

“There is bound to be a bigger government in the sense that the government will have to take increased responsibility for organ­izing public consumption in the fields of education and health. It will have to redistribute incomes on a large scale by its taxation, social security schemes, and agri­cultural policies. It will have to invest much more in slum clear­ance and low-rent housing and, indeed, in the complete renewal of the cities and their transport systems, as well as more generally in resource development. It will generally have to increase its re­sponsibilities for a larger part of consumption and investment and, consequently, for employment and production.” (Italics supplied.)

All this advance toward a more socialized society and economy, according to Mr. Myrdal, may be counted on to kill two birds with one stone: to promote social jus­tice and to “get America moving again.” One finds in Myrdal’s work frequent reflections of the idea voiced in professor-diplomat J. K. Galbraith’s The Affluent Society: that the public sector of expenditure in America is starved and condemned to squalor, while the private sector is pampered and permitted to indulge in orgies of extravagance on such sinful luxuries as automobile tail-fins. So Myrdal writes:

“It is fairly generally recog­nized by those who have studied the problem that there is a seri­ous and irrational bias against public investment and consump­tion in America.”

Irresponsible Spending

Such a bias most probably ex­ists; but there is no reason to call it “irrational.” A good deal of concrete evidence from the expe­rience of the United States and other countries could be presented to show that public spending, on balance, is less purposeful and more wasteful than private; and for one very obvious reason, among others: the public spenders are not risking their own money. It is also anything but irrational if the average American views with suspicion and distaste the idea that he is incompetent to spend or save his own money in­telligently, and must therefore be subjected to the discipline of some faceless bureaucrats who would like to dictate through the use of the tax screw what he may pur­chase and invest.

Myrdal and those in this coun­try who would agree with him that higher government welfare spending is a way out of a slug­gish economic growth rate and its accompaniment, a burden of unemployment, seem almost mag­nificently oblivious of the present rates of American taxation, fed­eral, state, municipal, and local. Even some politicians and economists who cannot be suspected of undue orthodoxy and conserv­atism in financial and economic matters are prepared to concede that the rates of federal income taxation are so high as to con­stitute a brake on the normal de­velopment of the economy.

Another important point to which the spenders turn a blind eye is that every dollar taken from the individual by taxation is a dollar lost to spending or to the equally important economic func­tion of investment.

Risk Accompanies Choice

Being unemployed is one of the occupational risks of a free econ­omy. It is the corollary of being able to choose and shift jobs at will. A communist state, disposing of the labor of its subjects, can find work for everyone—at timber cutting in Arctic conditions and with starvation food rations in Russia or at building dykes under the same conditions in China. In­mates of Sing Sing Prison also have guaranteed employment. Yet few people would eliminate the risk of being unemployed in a free society by emigrating to a com­munist-ruled country or by volun­tarily subjecting themselves to a term in jail.

Direct attacks on unemployment by doles and leaf-raking “madework” are unsatisfactory make­shift expedients at best. By far the most hopeful means of elim­inating a serious figure of people out of work is to create an atmo­sphere of business confidence by appropriate fiscal and taxation pol­icies which afford opportunities and incentives. And, if one may judge from the speed with which the German Federal Republic, since the end of the war, rose literally from rags to riches, transformed a shambles into booming prosper­ity, and quickly outgrew a heavy initial burden of unemployment, the most promising program for achieving these ends is just the opposite of what the planners like to prescribe. It has been balanced budgets, rigid limitation of public expenditures, justifying and ac­companying tax reductions, and a clean sweep of price and wage con­trols that furnished the key to suc­cess in Germany.

As for the proposal to raise un­employment benefits, this would only increase the present consid­erable incidence of built-in auto­matic unemployment. The more favorable the financial rewards of being out of work, the more dif­ficulty there will be in finding workers for a wider variety of oc­cupations calling for little skill and paying comparatively low compensation.