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We Can Have Zero Unemployment, Virtually Overnight

Economics / Employment Jan 29, 2010 - 12:33 AM GMT

By: LewRockwell

Economics

Best Financial Markets Analysis ArticleAll this talk of unemployment is preposterous. Think of it. We live in a world with lots of imperfections, things that need to be done. It has always been so and always will be so. That means that there is work to be done, and therefore always jobs. The problem of unemployment is a problem of disconnect between those who would work and those who would hire.


What is the disconnect? It comes down to affordability. Businesses right now can't afford to hire new workers. They keep letting them go. Therefore, unemployment is high, in the double-digits, approaching 17% or more. Among black men, it is 25%. Among the youth, it is 30% or higher. And the problem is spreading and will continue to spread so long as there are barriers to deal-making between hirers and workers.

Again, it is not a lack of work to be done. It is too expensive to pay for the work to be done. So ask yourself, what are those things that prevent deals from being made?

Let me list a few barriers:

  • The high minimum wage that knocks out the first several rungs from the bottom of the ladder;
  • The high payroll tax that robs employees and employers of resources;
  • The laws that threaten firms with lawsuits should the employee be fired;
  • The laws that established myriad conditions for hiring beyond the market-based condition that matters: can he or she get the job done?;
  • The unemployment subsidy in the form of phony insurance that pays people not to work;
  • The high cost of business start-ups in the form of taxes and mandates;
  • The mandated benefits that employers are forced to cough up for every new employee under certain conditions;
  • The withholding tax that prevents employers and employees from making their own deals;
  • The age restrictions that treat everyone under the age of 16 as useless;
  • The social security and income taxes that together devour nearly half of contract income;
  • The labor union laws that permit thugs to loot a firm and keep out workers who would love a chance to offer their wares for less.

Now, that's just a few of the interventions. But if they were eliminated today, and it would only take one act of Congress to do so, the unemployment rate would collapse very quickly. Everyone who wanted a job would get one.

Depending on the credibility of the new approach, businesses would begin hiring immediately. It would be a spectacular thing to behold. However, the new approach would have to be certain and not something to be reversed in a couple of months. No one wants to invest in employees only to have their investment taken away. So there could be no expiration date on the new laissez-faire approach.

What is the objection to this approach? I seriously doubt that many people would dispute that it would work to end unemployment. But many people say, oh, this won't do at all. It is not just jobs we want. It is good-paying jobs!

If that's the case, you have to understand what is being claimed here. People are saying that it is better that people be unemployed rather than being exploited at low wages. If so, it all comes down to your definition of exploitation. If $10 per hour is exploitation, we should be creating even more unemployment by raising the minimum wage. We could dis-employ all but a few by raising the minimum wage to $1,000 per hour.

In a market-based labor contract, there is no exploitation. People come to agree based on their own perceptions of mutual benefit. A person who believes it is better to work for $1 an hour rather than sit at home doing nothing is free to make that contract. In fact, a person who works for a negative wage – who pays for an internship, for example – is free to make that deal too.

I propose to you, then, a definition of exploitation that comes from the writings of William H. Hutt: violence or threat of violence implied in the negotiation of anything affecting the life of a worker or employer. In that sense, the present system is exploitation. Workers are robbed of wages. Employers are robbed of profits. Poor people and young people especially are robbed of opportunity.

Read any account of economic history from the late middles ages through the 19th century and try to find any evidence of the existence of unemployment. You won't find it. Why is that? Because long-term unemployment is a fixture of the modern world created by the interventionist state. "We" try to cure it and "we" ended up doing the opposite.

So it is hard for me to take seriously all the political plans for ramping up intervention in the name of curing unemployment. There is no voluntary unemployment in a free market, because there is always work to be done in this world. It is all a matter of making the deal.

All that stands between the present awful reality and 0% unemployment is a class of social managers unwilling to admit error. How much higher does the rate need to get before we admit the error of our ways?

Llewellyn H. Rockwell, Jr. [send him mail] is founder and chairman of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author, most recently, of The Left, The Right, and The State.

http://www.lewrockwell.com

    © 2010 Copyright LewRockwell.com - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Geoffrey
29 Jan 10, 06:27
Earnings to Work Done Ratio

Scenario:

There were 4 apples for sale per week at 1 coin each.

Tom and Jim earn 2 coins a week for 1 hour of work. Both buy 2 apples each.

Then Jim decides to work a little harder and earns 3 coins for 2 hours work.

There is more money than apples for sale. The price of apples becomes 2 coins each.

Tom has to work harder in order to buy food.

Jim then works harder to maintain his increased share of the food.

Eventually, Tom and Jim are working double shifts, 7 days a week for 14 hours a day. The price of apples is 40,000 coins each and Tom and Jim earn 10,000 coins a week.

Conclusion:

It's not about how much you earn, except in ratio to other people. If too many people work a little harder, in order to increase their share of the wealth - then everyone will have to work a little harder. Eventually, everyone is working as hard as physically possible and finally, the entire system reaches a maximum point where everyone is a slave, working for the same portion of wealth that they were receiving in the beginning for much less work.


Pat
29 Jan 10, 07:44
This article

Basically, I just think that Lew has it wrong. Lower minimum wages isn't the best method. Getting rid of all the aliens is.


Pete Murphy
30 Jan 10, 13:25
Unemployment

Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn't account for the relationship between population density and per capita consumption.

Following the beating the field of economics took over the seeming failure of Malthus' theory about overpopulation, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated - nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs - tantamount to economic suicide.

Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.

Pete Murphy

Author, "Five Short Blasts"


Badtux
01 Feb 10, 17:08
Ridiculous

My take on this is that a large number of economists (especially of the dry inland variety) a) have never run a business before, b) have no idea how business works, and c) would be absolutely appalled about the difference between how things work in actual, real life reality, as vs. in their ivory tower constructs.

Take, for example, the common rubric that unemployment is caused by high wages and thus if someone is unemployed, it's only because he hasn't cut his wages to the point where someone will hire him. Uhm, no. As a businessman, I hire the minimum number of workers needed to meet my businesses' demand, and not one more, regardless of how cheap my workers are. Whether they are hired on for $1.00 per day or $100 per hour, I still need three workers in my sandwich shop to get the sandwich made and presented to the customer. The only wage that counts to me as a sandwich shop owner is the wage that my competitor pays to his worker, if my wage base is higher than his wage base then my prices will need to be higher than his to maximize profits and I'll thus lose market share to him. But if we're both paying $1.00 per day or $100 per hour, whichever is required or allowed by law, then there isn't going to be any hiring or firing done, just general inflation and deflation in the economy (and redistribution from affluent to service workers in the case of the latter) which does not in general change demand for my sandwiches.

That's the reality of me as a small businessman. But 9 out of 10 "Chicago economists" would glare at me, appalled, and say "That can't be! As labor gets cheaper you'll hire more people to make your sandwiches!" At which point I roll my eyes and say, "Why? I'm a business, not a charity, I hire the fewest people needed to meet demand and not one more, I'm in business to maximize my profits, otherwise I couldn't compete with the sandwich shop down the block who operates in that manner!" It's funny how people who claim to support capitalism just don't seem to have the foggiest idea how it actually operates down in the trenches and keep spewing nonsense like this! I'm a business, not a charity. I don't hire people because they're cheap. I hire them because I need them to meet demand -- period!


ANONYMOUS@AOL.COM
08 Feb 11, 00:00
ANONYMOUS

MAYBE THE ECONOMISTS WERE THINKING THAT IF YOUR BUSINESS EXPAND THEN YOU CAN HIRE MORE WORKERS, IF IT WAS CHEAP TO HIRE THEM. AND, YES THAT YOU ARE ALSO CORRECT ON YOUR TAKE/VIEW ON ECONOMICS, IS NOT ALWAYS ABOUT COMMON SENSE, IS WHY THERE IS %% UNEMPLOYMENT.


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