Unemployment and Productivity

There is constant talk about unemployment, and for good reason.  The unemployment rate is high right now.  It is officially at 8.3%.  If we counted those who have given up looking for work and those who are working part time (who want to be full time), then the unemployment rate would be over 15%, and this is a conservative number.

This is, of course, highly significant for individuals and families who have been directly affected.  Times are tough enough with a steady income.  It is incredibly hard for those who have lost their job and cannot find another job that pays a comparable salary.  In discussing the economics of this issue, it in no way is attempting to show a lack of empathy for people who have faced unemployment.

The problem with the subject of unemployment is that employment itself seems to become the goal.  This is reinforced by the media, by politicians, and by bad economists (which is the majority of economists).

Low rates of unemployment is not the ultimate goal.  If we didn't live in a world with scarce goods, then employment wouldn't be necessary.  If we could have robots do all of our work, then we would not need to work.  If robots could provide all of our food, clothing, and housing, along with luxury goods and services, why would we need to work?  Everything would be handed to us.

The reality is that we don't have robots to do everything.  We certainly have more advanced technology than in the past, but it is still necessary for humans to work to satisfy our wants and needs.

When we discuss employment as an end instead of a means, then we lose focus and we get bad economics.  The key to making a society richer is by having greater productivity.  That is the main problem with high unemployment.  There are people who are willing and capable of working who are not working.  They are producing nothing.  (I'm not including things they may do at home for their families.)  They are not contributing to society.  It's not that anyone has an obligation to contribute to society, but having people wanting to work and contribute in order to improve their own lives is a benefit to everyone in society, as long as it is done honestly.

There are many reasons for the high unemployment numbers and most of them have to do with government.  I have discussed some of these things before.  And now we have people suggesting things that will only do further damage.

This thinking leads people to say things like, "we can't stop this war or there will be defense contractors who will have to let people go and we will have even higher unemployment."  Aside from this being possible war propaganda, it is also really bad economics.  If productivity is going needlessly to a defense contractor, then it should not be sustained.  Those resources need to be reallocated to better meet the needs and wants of consumers.

If getting people employed were all that mattered, then we could simply get people to dig ditches and fill the ditches back in with dirt.  But someone would have to pay them.  It is easy to see that this does not lead to any net wealth for society.  It may redistribute some wealth, but it does nothing to create any.

Employment should not be the ultimate goal.  Employment is a means to get more productivity.  With higher productivity, a society has a larger amount of wealth in the form of goods and services.  It means a higher standard of living.  So we should want people to get back to work who want to work, but it should not just be for the sake of working.  It should be for the sake of productivity to meet consumer wants and needs.