The Elusive Objective of Full Employment

One of the anomalies of 1975 was the curious public quiescence about the highest unemployment rates that the nation has seen in the era since World War II. The rate hit 9.2% last May, and has since inched down to 8.3%. Members of TIME'S Board of Economists unanimously predict, in line with most other forecasters, that it will still be above 7% at the end of 1976--meaning that it will be as high after a year-and-a-half of recovery as it has been at the bottom of some previous recessions.

Yet there were no job riots, no encampments of the unemployed in Washington, few loud calls for radical economic and social change. As the election year of 1976 opens, the AFL-CIO is calling for a damn-the-consequences drive to slash the jobless rate as rapidly as possible. It urges the Government to expand the money supply at whatever rate may be necessary, adopt whatever tax-and-spending policies seem called for, and even start direct public-hiring programs (the union federation does not say for what kind of jobs) to get the jobless rate down to 3% and keep it there. By much the same measures, a bill introduced almost a year ago by perennial Presidential Hopeful Hubert Humphrey and Democratic Congressman Augustus Hawkins of California calls for a 3% rate within 18 months --but that bill has not advanced even to the stage of committee hearings. In fact, the latest opinion polls show that unemployment ranks a poor second to inflation as a public economic worry.

Why this strange quiet in a nation supposedly committed by law (the Employment Act of 1946) to strive always for "maximum employment"?

Part of the answer undoubtedly is that the public, in the words of Economist Otto Eckstein, is still "shell-shocked" by the severity of the recession that ended last spring. People seem to recognize, accurately, that years will be required to repair the damage to the jolted economy. In addition, the consciences of people who are working have been assuaged by the knowledge that the U.S.

does a far better job of taking care of its unemployed than it used to. Jobless benefits paid out during 1975 totaled about $20 billion; an unemployed worker with dependents can now collect up to $156 a week tax free for as long as 65 weeks, though the average payment is $71 a week.

But much of the public quiet probably reflects a puzzled awareness that the economy and the labor force are changing in such a way as to make the goal of "full employment" difficult even to define, let alone reach. Traditionally, a 4% jobless rate has been accepted as practical "full employment." That definition is now 20 years old; it is based on the fact that unemployment averaged 4.1% during 1956, a year in which the economy seemed to be showing balanced growth, at about its best long-range potential, with little inflation.

In recent years, the nation's labor force has been swollen by a vast influx of new people looking for work. Between 1968 and 1974, the labor force grew by 11 million people, or 2 million more than the Government's Bureau of Labor Statistics had projected. (The labor force now totals 93.4 million--so that each percentage point of the unemployment rate stands for 934,000 people who want jobs and cannot get them.) Many of the new entrants are blacks; many more are women and teenagers, some of whom are seeking to earn second incomes in families that already have a breadwinner employed. These people tend to change jobs frequently and move in and out of the unemployment category. A poorly educated, unskilled black or a teenager, for example, may alternate between a few weeks of work at a local car wash when it is especially busy, and a few weeks on the unemployment rolls.

A third of the 8 million people counted as jobless in November had been out of work less than five weeks.

A Hair Below. Some economists argue, in fact, that the economy is doing about as well as it ever has in creating jobs for traditional, career-minded workers. Irwin Kellner, vice president and economist of Manufacturers Hanover Trust Co. in New York, points out that since 1948 the number of people who do have jobs has averaged 55.4% of the U.S. population over 16 years of age. The ratio in November was only a hair below that: 55.2%.

An 8% unemployment rate no longer means as much joblessness among primary breadwinners as the same rate would have 20, ten or even five years ago. In November, for example, the unemployment rate for married men was 4.6%--not much more than half the average for all would-be workers, though high by prosperity standards. By contrast, the rate for adult women was 7.8% --lower than the average for all groups, but higher than the rate for adult men.

The rate was 13.8% for blacks and other minorities, and for teen-agers a towering 18.6%.

None of this means that joblessness can be callously dismissed as a minor problem. Many inflation-pressed families need the second income that an employed woman or teen-ager could earn.

Moreover, warns Eckstein, if a nation frustrates the ambitions of large numbers of people to work, "you destroy social cohesion." The black who wants to hold a steady job, the woman who wants to use her training and talents outside the home, the teen-ager who longs to start supporting himself, could, with some justice, feel bitter against an economic system that confines them to, at best, in-and-out roles in the labor market.

Even so, many economists contend that the traditional 4% "full-employment" goal has become unrealistic. They view a 5% figure as about the best that can be achieved without radical changes in the way that labor markets operate. Still other experts argue, with much force, that no single statistic can or should be sanctified as the "full-employment" goal. One of them is Robert Aaron Gordon of the University of California, who headed a Government study that led to the last major overhaul of employment statistics in 1962.

He contends that the nation should develop "an array of target unemployment rates for different segments of the labor force." Unfortunately, much more analytical work will have to be done before economists or Government officials can decide with any assurance what would be realistic, achievable target employment rates for, say, blacks, women and teenagers.

What Not to Do. How to reach whatever targets might be set? The way not to do it is to adopt the AFL-ClO-Humphrey-Hawkins approach. This inevitably would pump so much money into the economy as to raise demand to the point at which employers sign on almost anybody who shows up, with the Government hiring the residue, many in make-work jobs. A non-partisan study last May by the Library of Congress indicated that an attempt to get the overall jobless rate down to 3% within 18 months would push inflation back up to "a 12% to 13% annual rate" initially, and even more later on. One reason: long before employers hired the last ghetto black or unskilled high-schooler, severe shortages of skilled technical and professional workers would develop, leading to low productivity and inflationary wage boosts. Such a program would be self-defeating, because unrestrained inflation eventually causes job-destroying recession--by pricing houses out of the reach of people who might want to buy them, for instance.

Rather than a crash program, the nation needs years of steady growth in production at somewhere around the 6% pace widely predicted for 1976 to come anywhere close to full employment. In order to achieve 6% economic expansion for several years, the Government may well have to adopt more generous money-supply, tax and spending policies. But even steady growth will not solve the problems of low skills and high turnover rates among would-be workers that now contribute so heavily to high unemployment. The nation also needs supplementary programs offering specific help to the people who now find it hardest to get and hold jobs. Among steps that should be taken:

> Vigorous enforcement of antidiscrimination laws and "affirmative action" programs to stimulate the hiring of women and blacks.

-- Expansion and redirection of Government-financed job-training programs. Economist Charles Holt of the Urban Institute, a private research organization, suggests that the Government finance more programs to train semiskilled workers to move up into highly skilled jobs. That would open up more semiskilled jobs.

> Easing of the transition between school and work--which is now much rougher in the U.S. than it is in many other industrial countries. Former Labor Secretary Willard Wirtz, for example, calls for setting up local community-education-work councils. These help students with career planning--and help schools train them for jobs that actually will be there.

-- Making the minimum wage lower for teen-agers than for adults. At present employers must pay the same basic minimum--$2.30 an hour as of New Year's Day--to workers of all ages. That requirement prices out of the market many youths looking for their first jobs.

These are only first steps; many more could be suggested. The nation should surely set up a computerized "job bank," which would list employment opportunities all over the country and perhaps pay Government job-search and relocation allowances to people who cannot find work in their home communities. Many economists argue for revisions of U.S. tax laws, such as higher depreciation allowances and a lower corporate income tax, to spur more job-creating investments. Whatever the precise mix of policies, the point is that the U.S. must begin some such program of structural reforms in the labor market soon. In the economy of the 1970s, even continued growth, though indispensable, can no longer guarantee a regular job to everybody who wants one.

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