Trying Again for Full Employment

Monday, November 19, 2018
Dollars & Sense: Real World Economics

Leading progressives in Congress have recently revived the idea of full-employment legislation. This would be the third attempt by Congress to assure a job for everyone who wants one and to put an end to the scourge of unemployment. In the 1940s and again in the 1970s, Congress seriously debated full employment. Both efforts resulted in laws—but ones that fell far short of guaranteeing an economic right to living-wage work. What will it take to enact a job guarantee today? Examining the history of these earlier attempts can help assure success this time.

The First Try: Full Employment in the 1940s 

The first congressional attempt to achieve full employment came at an opportune time: Americans had not forgotten the mass unemployment and widespread misery of the Great Depression. They had just experienced the salutary economic effects of wartime full employment, and they feared postwar demobilization and consequent job loss. Introduced by leading senators, the Murray-Wagner Full Employment Bill of 1945 (S. 380) stated: “All Americans able to work and seeking work have the right to useful, remunerative, regular, and full-time employment, and it is the policy of the United States to assure ... sufficient employment opportunities to enable all Americans ... to freely exercise this right.”

Murray-Wagner spelled out the federal government’s role in assuring full employment: the government would assess how big the labor force would have to be to achieve full employment; determine the total national production needed to provide jobs for that labor force; encourage, if necessary, additional non-federal investment and expenditures to stimulate private-sector employment; and make investments to close any remaining gap. However, missing from these means of achieving full employment was direct job- creation—in which government hires, manages, and pays unemployed workers. This was the New Deal model of putting millions of jobless people to work and at the same time rebuilding the nation’s infrastructure, preserving its natural resources, creating recreational facilities, and making the arts widely available to Americans otherwise unable to afford them.

The bill that eventually passed the Senate by the very wide margin of 71–10 still retained a commitment, albeit in softened language, to the right to work. However, it no longer guaranteed the funding necessary for the federal government to close the economy’s job gap. Also absent from the act was a mechanism by which workers could claim their entitlement to remunerative work. 

The Senate-passed bill maintained the substantive provisions of the original version of S.380, although some liberal adherents felt that one of the amendments left it with nothing specifically providing jobs for anybody. Whatever remained of the entitlement to employment in the Senate version did not survive the House of Representatives, where Southern Democrats led the opposition and were joined by Midwestern Republicans. Mobilized mainly after Senate passage of S. 380, opposition came from the National Association of Manufacturers, the Chamber of Commerce, the American Farm Bureau Federation, and a mostly hostile press. Moreover, by the time the House debated full employment, the legislation seemed less necessary because the mass unemployment that some feared during demobilization had not occurred.

Most observers hold that the House version differed greatly from the Senate’s, that it omitted “full employment” and countercyclical, compensatory spending by the federal government that would have financed jobs for all. What emerged from the Conference Committee to resolve differences between the House and Senate versions was the Employment Act of 1946, with “full” employment conspicuously absent from its title. Instead of full employment as an unambiguous priority, the goal was “maximum employment,” meaning that the government commitment was limited to “all practical means consistent with the needs and obligations of national policy.” The terms could seem interchangeable, but they were not. As leading Republican opponent of full employment Senator Robert Taft (R-Ohio) told the Senate in the final 1946 debate: “I do not think any Republican need fear voting for the bill because of any apprehension that there is a victory in the passage of the full employment bill, because there is no full employment bill anymore.” However, the Employment Act of 1946 did initiate federal responsibility for the nation’s economy and create such important economic planning measures as the President’s Council of Economic Advisors (CEA) and the Congressional Joint Economic Committee. 

In the years following passage of the Employment Act of 1946, the nation did not achieve full employment. Yet mass unemployment, a recurring calamity in prior U.S. history, did not occur in the postwar decades. Rates of unemployment ranged from a low of 2.9% at the height of the Korean War to highs of 5.9% and 6.8% in 1947 and 1960, respectively. In other words, “maximum employment” could mean relatively high unemployment. Following the Korean War, during which black workers maintained their World War II employment gains, the black unemployment rate climbed, averaging over 9% in the Eisenhower years with the emergence of a persisting pattern of black unemployment that was double the rate for white workers.

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