Mr. Cooley is Associate Professor of Economics at Ohio Northern University.
"Employment" is not a simple term denoting the mere holding of a job for which a wage is paid, or the operating of one’s own business. Rather, it signifies the state of anyone who is doing what, under the circumstances, he most wants to do. Such a person is fully "employed." A community or nation has "full employment" when all of its people are fully employed.
The ways in which people may be employed are legion. One may be writing a book, another writing a letter. One may be teaching a class, or speaking from the hustings. One may be tending a lathe, a baby, or a fish line. One may be driving an automobile, baking cookies, dancing the twist, enduring an appendectomy, or lying on the ground gazing up into the blue. All are employment, all are done to satisfy, and the satisfactions received, whether measurable in money or not, are income to the recipient and a part of the "national income."
Shister wrote, concerning a worker who prefers part-time his home locality to migrating elsewhere for full-time work:
….if the attachments in the area mean so much to the worker that he would rather stay there than move to a full-time job it follows that these attachments have a real value to him, though they have no market value. In a free society, they are every bit as much a part of the "national income" as is a suit of clothes, an automobile, or a yacht.1
And yet, those who compute the national income ignore psychic reward, dismissing it for the reason that it is immeasurable. They are content to reckon the monetary income and cite it as the total of satisfactions received, when plainly it is not. Because a quantity cannot be measured does not mean that it does not exist. Certainly, one cannot ignore such a quantity as though it did not move people to act.
Income, since it consists of satisfactions received, or the wherewithal to exchange for such satisfactions, tends to satisfy the recipient. It removes, in whole or in part, his uneasiness. He now consumes or enjoys the income, and then tends to return to the same source for more. Thus, if his income is gained from work, he resumes the work; if it is gained from leisure, he continues the leisure. Only when in his mind an image forms of a way to earn more or higher quality income does he change his ways. Human action, then, is motivated by the search for satisfactions, that is, for income, material or psychic.
In one respect, psychic income is superior to monetary income. Money must be converted into consumable goods or services and the latter consumed before actual satisfactions are realized, but psychic income requires no conversion or consumption since it consists of the final satisfactions themselves. It is immediate income while money income is mediate. Thus, work yields wages, which must be exchanged for food before one can enjoy the satisfaction of eating and of renewing his strength, but leisure yields income in the form of rest, recreation, social activity, and so forth, which is the satisfaction itself, directly and immediately experienced.
On the other hand, monetary income has the superiority of being exchangeable for any satisfactions which are available for purchase. Psychic income is not exchangeable. Hence, if one is to enjoy those satisfactions which can only be purchased, some money income is necessary.
Examples of Psychic Income
As a rule people are not motivated by psychic income or by material income alone but by a combination of the two. Rarely is one present without the other. Sometimes one will be a negative quantity, but their algebraic sum will be positive. To give examples:
Here is a man who farms not merely for the material rewards he gains from farming, which he is aware are less than he could earn in business, but because he enjoys living outdoors, tilling the soil, and being his own boss. Without these psychic rewards, he would desert the farm for business. His life-work has been determined by psychic income.
Here is a man who loves science and the laboratory and the search for knowledge; he is a research physicist though he knows that he might earn more money as an engineer. Psychic, not material, income is the determinant of his vocation.
One may imagine a contractor who builds houses in Florida, though he once made and could still make more money building skyscrapers in Manhattan.
A certain man is in politics because he believes he can thereby serve his community, or because he enjoys the power that political office confers.
This woman has deliberately quit her salaried job in an office to stay at home and keep house and bring up children.
Here is a man who quit a government job out of boredom and took a job in industry because it was more exciting.
And here is one who is living on unemployment compensation for the time being because he is tired of the time-clock and the foreman and likes to play cards, or because the readjustment he would have to make in order to get a job would be too unpleasant.
Examples of lives directed by psychic factors are all about us.
Indeed, everyone, if he will examine his own motives, will admit that many, perhaps most, of his actions are prompted, fully or in part, by the prospect of direct satisfactions, either physical, intellectual, or spiritual.
Everyone Wants More
It may be taken for granted that all men want greater rewards, either material or psychic or both, than they are receiving. In some the desire for increased reward is much keener than in others; those in whom it is keen are on the lookout for more lucrative employment.
Some complain that their rewards are altogether "too small" and insist that they should have more. If they are able to persuade the community of this, they may be given an additional material reward or they may be offered the chance to work and earn an additional amount.
Those whose rewards are considered by the community to be "too small" and who aver that they want to earn more are classed as "unemployed" and are looked upon as a social problem. The "problem" is to increase their rewards. It is assumed (wholly without proof) that they cannot do this for themselves and hence that society must do it for them. However, the "unemployed" are not differently situated from others. They are receiving some rewards and they want more; the same can be said of us all. If the "unemployed" are helpless, so is everyone.
Who Is More Deserving?
Somehow it is assumed that people in certain circumstances are more deserving of increased rewards than are others. It cannot be because these people, the "unemployed," now receive less total rewards than others receive for, psychic rewards being immeasurable, it is impossible to calculate and know anyone’s total reward.
Granted, the "unemployed" are usually receiving less material rewards than the "employed" receive. However, an "unemployed" person may easily be receiving vastly more psychic reward, and hence more total reward, than an "employed" person. So, one wonders why the "unemployed" person’s neighbors tax themselves to give him money to increase his total reward. They likely may be giving "to him who hath."
No one but the person himself knows or can know what the rewards, that is, the total income, of his way of life are. Therefore, the only criterion the community has for determining whether his rewards are "sufficient" are his actions. If he bestirs himself to increase his rewards, evidently his rewards are "insufficient" to meet his wants. Dissatisfied with his present way of life, he changes it.
Since only he knows what his present rewards are, only he can know whether they compare favorably with what he might receive in a different situation. Therefore, only he can decide whether he should make a change.
There is no call for any action by the community; any such action, in fact, will inevitably collide with his own action, since a body cannot move in two directions at one time. For example, a grant of "relief" by the community may meet head-on his intent to go to a neighboring city to look for a job—and may overcome it. The relief payment plus the psychic reward attached to remaining idle in his home environment may exceed the wage of working in the neighboring city plus any psychic reward (or cost, that is, negative reward) connected with the new environment and experience.
In such case, the action of the community cannot be said to have "solved" a "social problem." In the first place, there was no "social problem," and in the second, the community’s action is merely alternative to his own, planned, autonomous action. It is different but not "better"; in fact, it is socially "worse," because it has imposed a cost on the community which the person’s own contemplated action would not have imposed.
The Meaning of "Full Employment"
Those who advocate "full employment" are really advocating not "full" employment, which already prevails, but directed employment. They claim to desire more people to be employed, but they really desire people to be employed in different ways than prevail. The "unemployed" and the "underemployed" they want to see "fully" employed. But by what right do they state that some are not doing as much as they ought to do? And how do they justify using the power of government to hire people to alter their employment?2
The error arises from the assumption that some of the nation’s human resources are not being used and hence can be put to use without taking them away from any other use—that Paul can be paid without robbing Peter. But, as we have seen, all people are employed, at some activity, if it be nothing more exciting than rocking on the front porch, and
2 When the federal government finances public works spending with newly manufactured, costless "money," as it frequently does, the power of government is being used to commandeer resources, just as truly as it is when men are drafted into the armed forces, all are receiving rewards, material and immaterial, in unknown amounts. Who is to say that they are not now "fully" employed, or that they will be more "fully" employed after some have been moved by external direction into different employment?
The authorities admit that in recent years employers have actively sought workers while in the same areas an ever-increasing number of workers were reported without jobs. There is abundant evidence that jobless people are being dissuaded, by public aids, from taking available jobs. It is manifestly untrue to say that these people can be hired, by massive injections of new money into the spending stream, without cost to the economy. As soon as such a person is hired—for example, on a public project launched to eliminate his "unemployment"—he will cease to receive and enjoy the psychic satisfactions he was receiving as a jobless person, and the national income will be reduced by the amount of these satisfactions. The value of the income sacrificed will be equal to the least amount he would go to work for on the public project, minus the amount of cash aid he had been receiving.
To put it another way, while out of a job and on unemployment compensation, a person receives his livelihood plus the satisfactions of idleness. When he is put to work on a public works project, he receives only his livelihood. Yet the "full employment" school of thought holds that there has been no loss.
The aim of the "full employment" school is to provide relatively high-wage jobs and attract workers into them. Private employers, being limited by the marginal productivity of the workers, cannot provide such jobs, but the government can. The "full employment" advocates would insure against workers taking low-wage jobs by providing generous unemployment compensation and public assistance, which compete successfully with low-wage jobs for the workers’ favor. The higher the levels of these aids, the more people who appear to claim them, and hence the longer the rolls of the "unemployed." Thus, "less than full employment" becomes a chronic condition, making appropriate, according to the Keynesian prescription, ever greater injections of fiat money. In short, their solution to "unemployment" is to raise wages—which in turn results in more "unemployment."
This vicious circle can only be broken by recognition that "less than full employment" is a fiction. No free person is "unemployed."
Everyone is employed at the activity of his choice. Some are more productive of measurable wealth than others, but only in a totalitarian state could any pretense be made of directing everyone into that employment where he produced the most measurable wealth. In a free society, people spend much time and energy in producing immeasurable, psychic wealth. They also switch quickly from producing material wealth to producing psychic wealth, and vice versa.
No Common Measure of Value
Any theory of employment which ignores psychic wages and the employments which yield such wages is incomplete and inadequate. Any attempt to quantify all wages and express the quantities in a common measure of value is doomed to failure. No one knows or can know what another’s income totals. Hence, no one can know what the total "national income" is, or whether it is greater or less this year than last. If we consider an increase of national income to be a "measure of economic growth," no one can make other than the wildest estimate of the rate of economic growth.
Since World War II, government spending has been liberally used to direct people into wage employment, and undoubtedly some have been so directed. Whether this has caused the "national income" to be higher than it would have been is impossible to say. However, it is a matter of common observation that not all have been induced to take wage jobs; the lengthening relief rolls and the continuing queues of unemployment compensation claimants testify to that.
More and more we hear of "chronic unemployment." Some call it "permanent unemployment." It is really not unemployment at all but alternative employment. In many cases public agencies are playing the role of "employers"; in others the people are "self-employed," or subsisting on savings or other resources of their own.
To hold that whenever there is "less than full employment" people can be directed into wage jobs without being lured away from other satisfying activity and thus without detracting from production already in progress is to imply that all jobless people are wasting their time and would give up nothing if they were to take jobs. To reveal the weakness of this implication, we need only ask: what of those who have quit work voluntarily? What of the retired, the professors on sabbatical leave, and so on? In fact, a state of chosen leisure may well be the richest employment imaginable. Literally "full employment" at wage and salary jobs would be a most wasteful use of manpower. To use government power to achieve "full employment" is just as antisocial as it is uneconomic.
Economists widely hold that it is evil—the term is "inflationary"—for government to launch a spend-to-create-employment program when "full employment" already prevails, but to do this when there is "less than full employment" is quite all right, in fact, is the appropriate remedy. If, as the writer holds, there is no essential difference between "full employment" and "less than full employment"—if in a true sense the former always prevails in a free society, it follows that government spending programs are always inflationary.
The essence of such a spending program is that the government spends costless, or "legally counterfeit," money to hire resources. The source, and the only source, of the value of such "money" is the value of other money in circulation. It is a diluting operation, for all the world like pouring a bucket of water into a can of milk. In reality, the government claims and takes the services of resources, including workers, without giving up wealth for them. A fully employed economy, it is held, cannot afford to give up these services but a "less than fully employed" economy can.
If, however, as held here, people are "unemployed" because they prefer to be, that is, because the satisfactions of "unemployment" add up to a more attractive package than do the satisfactions of "employment," then manifestly they will not benefit by being moved into employment, which means being required to give up the greater satisfactions for the lesser. This is really the meaning of "inflation"; it is a process by which people are lured into comparatively unproductive employment, the entire economy is impoverished, and all are condemned to receive lesser satisfactions. Thus, regardless of what the statisticians say is the "rate of unemployment," government spending is never the remedy.
What bearing has this theory of employment on the thesis that government "aids" are subsidizing idleness and reducing productivity? Just this. Through aids, we are enabling people to consume without producing. The subsidized persons are, to the extent of the subsidy, escaping the disutility of labor, which is imposed on man by nature. They are becoming drones living off the workers. And they are assuming this favored status on the ground that through forces beyond their control they have been placed in the disadvantageous position of being "unemployed" and thus have a valid claim upon society.
In point of fact, they are not "unemployed," nor are they victims of forces beyond their control. They are free persons choosing from various alternatives how they shall spend their days, just as all persons are doing. They are free to produce little, if they wish, but it follows that they should consume proportionately, in which case they will be moved most strongly to become more productive.
Society cannot afford to give them consumption goods in excess of what they produce, since this merely prolongs their unproductive state, nor is there any reason, economic or other, for so doing. On the contrary, reason dictates that the "aids" be cut off, both to save the product for those who have produced it and to stimulate the unproductive to become more productive.
Perhaps the most serious aid-induced waste is the erosion of the spirit of enterprise, which inevitably results from putting people on a dole, since it reduces the necessity to venture and to exert oneself. The American worker’s ready acceptance of the fatalistic notion that he "cannot find a job" should give us pause. Only as the worker succeeds in selling his labor and keeping himself continuously at work will the economy produce to the utmost.
Government "aid" of all kinds, whether it be compensation to the "unemployed," relief to the "needy," price supports to farmers, minimum wages to workers, subsidies to shipbuilders, easy credit to "small" business, urban renewal grants, defense contracts to "depressed areas," or "aid to education," should be discontinued, if not immediately, then gradually. Government should withdraw from the "aid" business, at the same time serving notice on the people that they must depend upon their own initiative. Not only the federal but the state and local governments should demobilize their "aid" forces.
Such action, we predict, would be followed by such a surge of productive activity as this country has never seen. As the easy, lackadaisical, subsidized life came to an end, men would bestir themselves, throw off their aid-induced lethargy, shed the cynical "every-body’s-getting-his-why-shouldn’t-I-get-mine" attitude, and go to work with vigor and daring.
The "unemployed," having no government crutch to lean upon, would break down the "union wage" tradition and find jobs at market wages. As they went to work, production would increase, new projects not now feasible because of cost would spring into being and enterprise would expand. The demand for capital would increase. Simultaneously, knowing that they now must depend on their own resources, people would save more, providing the new investment funds. Opportunities for entrepreneurs would multiply. So would opportunities for workers.
We must get used to the idea that the job is not static—not a given. The technology of electronics, computers, and so forth accelerates the displacement of workers. That is to say, entrepreneurs are enjoying a period of extraordinary success in devising less costly ways of production. They are not "creating jobs," nor can they be expected to do so; their function is to create wealth. The worker must fend for himself. This makes it all the more essential that we not demobilize the job-seeker, but that we encourage the job-finding, job-creating efforts of every worker.
1J Schister, Economics of Labor Market (Philadephia: Lippincott, 1956), page 376.