Who are the Unemployed? P.L. Poirot

WHO ARE THE UNEMPLOYED? tg paulof. poirof ~ UNEMPLOYMENT was no problem on Robinson Crusoe's island. Nor does it plague the people of primitive agrari an societies where each serves as jack-of-all-trades to wrest his bare living from nature. The American Indians, for instance, failed to utilize 'a number of natural resources, but all the people were fully employed-at a subsistence level. In a sense, it seems that unemployment comes with capitalism and industrialization-a consequence of savings and automation and division of labor and trade-a prob lem that follows economic progress. But this says only that employment must come first. Before A can offer a job opportunity attractive to B, A must possess capital in the form of creative ideas, raw materials, tools, scarce re sources that will enable' B to work more effectively than he could, on his own. There is nothing to be gained in doing each other's laundry. The reason why individuals exchange labor, or work for one another, is that each gains something by the trade, or thinks he does. Some are more skilled at one task, some at another. Some men are able to save more and accumulate capital faster than others. Some have extraordinary managerial abilities.

Some are superior salesmen. And so they trade, to their 162 WHO ARE THE UNEMPLOYED? 163 mutual advantage, offering employment opportunities to one another. Employment opportunities must have been developed in a society before there can be such a thing as unem ployment. But is there anything inherent in the indus trialization process or in the market economy that neces sarily causes unemployment? That a man can earn a bet ter living for himself by working under another's super vision for wages explains why he might be so employed. It fails to explain why he might stop working altogether or be unemployed. Why, then, does the problem of unem ployment seem to develop as men begin to specialize and trade and seek economic progress through industrial ization? Look to the Intervention There is abundant evidence that unemployment occurs in the most prosperous industrialized economies in the world. There. also is ample evidence of unemployment in poverty-stricken nations such as Red China where in dustrialization is attempted through coercion· and men are forced from traditional subsistence farming into the tax-supported heavy· industries planned and promoted by the rulers. When shortages of raw materials or tools disrupt "The Plan" in Red China, the coolies who have been drawn into factories find themselves unemployed and starving.

Evidently, it is not the stage or the degree of indus trialization that accounts for the severity or persistence of unemployment. Serious unemployment can occur in a 164 PAUL L. POI ROT United States of chronic surpluses as well as in a Red China or Russia of chronic shortages. Perhaps the sur pluses and shortages afford a clue. These are signs of a malfunction of the market, of supply in excess of demand, or vice versa. There is a surplus of wheat in the United States because someone has been using the force of the government to regulate the price of wheat, holding it up by law instead of leaving it free to rise or fall to that point which would tend to balance supply and demand and clear the .wheat market. And the shortage of food grains in Red China likewise is the result of government tampering with the price signal, holding the prices down by law to a point.too low to stimulate the production con sumers want and otherwise would pay for.

It should be clear that a surplus or a shortage of any commodity is not an inevitable co~sequence of indus trialization or of. trade in an unrigged market.': The sur plus or shortage arises because of price control~because the market is not allowed to perform its natural function of bringing supply and demand toward equilibrium~ because people are not permitted to buy and sell what they please at prices acceptable to everyone concerned. When a surplus or a shortage of any commodity occurs, you may rest assured that the force of government has displaced individual choice. The effect of price control for services-that is, control of the level of wages-is the same as the effect of govern ment price control of commodities. In other words, un employment in reality is a surplus of labor. And a sur plus of labor can occur in any society only if someone WHO ARE THE UNEMPLOYED? 165 is using the force of government to hold wage rates above the level that would clear the labor market. If willing workers are unable to find willing employers at a given wage rate, this means that the wage rate is being held at too high a level. On the other hand, if wages are set by government at lower than a free market level, then will ing employers will be unable to hire as many willing workers as they'd like; the resultant shortage of labor is sometimes referred to as "over-full-employment."

Unemployment is not a necessary condition of indus trialization or free market exchange; it is caused by con trol of wage rates...;.-by the., government directly, or by some person or group having usurped and exercised gov ernmental powers of coercion. This explains why there can be unemployment in a prosperous'wealthy nation as well as in Red China: wage rates. are being held higher than the supply-demand situation warrants. Unemployed by Definition The government-assembled statistics of the United States show that unemployment has averaged over the past two years about 5.5 per cent of all experienced wage and salary workers,' and that about 80 per cent of those classed as unemployed were eligible for government "un employment compensation." Certainly, that is one an swer to the question: ."Who are the unemployed?" They are the ones the government recognizes as unemployed.! 1 See the preceding article in this volume, 4<What Is 'Employ ment'?" by Oscar W. Cooley.

166 PAUL ·L. POIROT It may he argued, of course, that the goveinment·bases its count .'on faulty information, that many of those pre sumed to be unemployed are simply waiting out the nor.. mal interval between jobs, or that some of them have never really looked for job opportunities and wouldn't work if offered the chance. And of the four out of. five actually being paid not to work, a high proportion must consider· that arrangement the most satisfactory of all ways to "earn" a living. At least, it should come as no sur prise to anyone that 5.5 per cent of the labor force are unemployed when the coercive power of· government is used to.uphold a high level of wages and when a govern ment subsidy is made available to those who can't find work or won't accept it at prevailing wage rates and con ditionsof employment. From that point of view, it might appear that the government's count overstates the seri ousness of the unemployment situation.

W orkingfor N othin.g There is another side· of the picture, however. Does the government's· count include the thousands of farmers who· are being paid not to produce wheat, cotton, to bacco, and other "basic commodities"? Are not these farmers as effectively unemployed as the laborers collect ing "unemployment compensation" for not producing coal or cars or steel or whatever? And can it be said that they were fully· and effectively.,employed who grew the wheat and cotton and other "surplus" commodities no\v". deteriorating 'in government storage?

"VHO ARE THE UNEMPLOYED? 167 Are shipyard workers fully and effectively employed while building subsidized vessels fora subsidized merchant marine? What of those workers in "depressed areas" who are engaged in subsidized highway construction, or sub sidized urban renewal; are they fully and effectively em ployed? Above all, what of the jobs "saved" in shady and questionable private enterprises by the government's de liberate policy of deficit-financed inflation designed to conceal business bankruptcies and thus keep working those union members who .. otherwise would have priced themselves out of the market into the ranks of the un employed?2 Without further extending. the list of government projects and policies designed primarily to make work for the otherwise unemployed, it seems reasonably clear that the government's unemployment count has grossly understated rather than overstated the seriousness of the problem. When governments .at various levels in the United States are spending more than a third of the total earnings of all individuals, there can be little doubt that far more of us are effectively unemployed than govern ment statistics reveal. The beneficiaries of this govern ment intervention and spending are not really earning their own living because they are not working at jobs for which anyone would voluntarily employ them.

Furthermore, these workers are worse than idle; for the purely make-work projects that employ them to no useful economic purpose also draw from the market all 2 See "Wages, Unemployment, and Inflation" by Ludwig von Mises, Essays on Liberty, Vol. V, p. 25.

168 PAUL L. POIROT kinds of raw materials and tools and power and light and heat and other scarce and valuable resources, in effect wasting them and increasing the prices of supplies re maining for the creative and constructive purposes of those willing to risk their own time and savings. The harsh fact is that government intervention-in the form of special powers and privileges to labor unions plus a vast tax-and-deficit-financed matrix of "depressed area" work projects designed to shelter and hide those who have arbitrarily priced their services out of the mar ket-has resulted in a surplus of labor, a rate of unem ployment and malemployment that not even the wealthi est nation in the world can .long endure. The govern ment statistics do not even begin to show the extent of the unemployment problem. The corrective is to repeal those grants of power and privilege, stop the foolish gov ernment spending, and let prices and wages find their own level in a free markec THE FAILURES OF PRIV A TE ENTERPRISE THE FANTASTIC successes of the American free enterprise system and the dismal failures of socialism in the USSR, Red China, and elsewhere, should be familiar facts to anybody who reads. And it is probably the glittering pro ductivity of the American business system that forces its domestic enemies to attempt their changes, not by openly advocating socialism, but by de'claring themselves to be in favor of "preserving competition," "saving capital ism," or "protecting small business." Scarcely any Ameri ..