The Importance of Full Employment

Mike Konczal needs to start writing shorter blog posts. Until then, let’s just talk about the end of this post on the need for economic policy to be about more than handouts for the unfortunate:

To me, the end result of having a safety net without giving workers stronger bargaining power is that what you end up with is a kind of pity-charity liberal capitalism. That’s better than nothing, but at the end it can be a dead-end, if the government doesn’t step in to fight for full employment. Particularly if you think of unemployment as a particularly scarring state of existence and, like me, think that the next major battlegrounds already are closer looks at production and the experience and conditions under which people work.

I think that’s correct, but that “full employment” is doing almost all the work here even while Konczal’s emotional emphasis seems to be on bargaining power. After all, if you have strong labor unions and a government that doesn’t fight for full employment, then what happens is the unions use their bargaining power to cut insider/outsider deals at the expense of the unemployed. One of the great virtues of American unions in their heyday is that they used their political muscle to push the government to fight for full employment, which was excellent and it’s a political voice we’re desperately missing today. But that’s not to say that the unions themselves are a viable substitute for full employment. A market economy is either going to operate near full employment, or else people will only share in its benefits thanks to handouts. That’s true for any given set of labor market institutions.