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Getting To Full Employment

letsgetitdone's picture

Given the problems the United States has been having and the unnecessary, misplaced, and wrong-headed, but very real angst of people about becoming insolvent if we continue to increase the size of the deficit, I find myself wondering why we have not turned to another time-tested and very effective New Deal solution to the problem of growing employment. That solution is the Fair Labor Standards Act.

Why not amend the Act so that the standard for a full-time work week is lowered to 35 Hours, while the minimum wage is raised to $10.00 per hour? While this would not by itself create full employment, because many of the already employed, will increase the frequency with which they work at second jobs, I think it's likely to decrease the unemployment rate by 5% or so. Along with a Federal Job Guarantee program, which would cost much less if it were implemented in the context of a decreased normal work week and an increase in the minimum wage, the employment problem would be gone within 6 months, and the increase in aggregate demand would end the recession.

The benefits for working people of decreasing the hours in a full-time work week are fairly obvious, so I won't say very much about them, but I do want to point out that doing this is one way of ensuring that some small share of the rapidly increasing productivity that has occurred since 1970 goes to working people, rather than just to the pocketbooks of wealthy Americans who have been enjoying almost all the fruits of that productivity increase over the past 40 years.

Such a measure would also be a cure for the reported $1.8 Trillion in cash that businesses are reluctant to invest, since higher wage costs would cut into the profits of large companies and force some of that cash off the sidelines. In addition, the projected rise of aggregate demand, will provide incentives for businesses to invest and get still more of that business cash off the sidelines.

Republicans, of course, will object to any such proposal saying that business, and particularly small business won't be able to afford it in a recession. FDR faced similar arguments in 1937 and 1938. Of course, he won the day, and Americans have benefited from his courage ever since.

One of the most attractive aspects of this proposal to amend the Fair Labor Standards Act is that it will have a positive impact on the deficit, not so much because those working at the minimum wage will pay very much in income taxes; but they will pay FICA and unemployment insurance taxes, and their employment will reduce Federal safety net expenditures, as well.

So, politically this proposal could be cast simultaneously as a jobs creating/deficit reduction measure which could make it tough to defeat, if only a majority vote in the Senate is needed to do it. Of course, a super-majority will be needed in the Senate.

So, this measure, along with many other worthwhile solutions to America's growing risk of problems can only be passed if the filibuster is ended first. If "the nuclear option" is used, this can be done at anytime. So, why can't we do these things? Only because our political system is broken, and is no longer subject to the will of the majority.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

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