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What to do about Labor Displacement

The moral basis of our society rests, in part, on the idea that human beings have both the right and duty to meet their material needs by doing useful, renumerative work. This system is under continual challenge from investment in “labor-saving” technologies. There is an increasing amount of equipment that allows goods and services to be produced with a smaller component of human labor. Business owners investing in such equipment save the wages otherwise paid. Such investment is quite profitable.

In the meanwhile, we have a population, both in the United States and elsewhere in the world, which has continuing material needs. Because of automation, there may not be as great a demand for its labor as in previous periods. What is society to do? A real answer in too many cases, especially in poor nations, is: Do nothing. Let people starve. In the alternative, government can take several different approaches which might be characterized as follows.

(1) the welfare state: Let those who work continue to work and pay taxes. Some of the taxes will go toward supporting through transfer payments others who do not work.

(2) economic waste: Government promotes a financially growing economy whose incremental product has no real value to people. It’s like asking someone to dig a hole, then shovel dirt back into the hole, and then dig another hole in the same place, etc. If the public buys this questionable scheme, there will always be opportunities for “full employment”. And so it is with economies of waste. We would not really want to abolish wars, or crime, would we? What would people do for a living?

There is, however, a third way. Despite continued investment in “labor-saving technology”, full employment can be had if work hours are cut to a point where human labor plus its mechanical augmentation produces output in balance with people’s real wants and needs. Employers are still able to earn a profit from investing in labor-saving machines. Human beings are paid for their work at an increasing hourly rate. They thus reap part of the benefit from the productivity enhancement that comes from machines.

Let’s imagine a world where all able-bodied persons are productively employed and receive compensation that fully meets their material needs. It would also be a world which gives working people enough free time to meet their personal and spiritual needs. Such a world is possible with the right government policies.

National governments can pass laws that bring about hours reductions in their domestic economies. In the United States, the Fair Labor Standards Act is a model. If the number of hours in the “standard workweek” is reduced so that employers have to pay overtime, most employers would adjust their work schedules accordingly. To discourage overtime work, the penalty rate could be increased.

Economic policymakers must also pay attention to the competitive pressures from doing business in a global economy. Nations which are too generous with wages and benefits sometimes find themselves priced out of the world market. So we must begin to think of coordinating national policies on an international scale.

Generally speaking, the United Nations and other international political bodies lack powers of enforcement. The exception is the World Trade Organization. Here there is a mechanism to punish nations practicing in violation of the “free trade” principle. But free trade works to the advantage of international business. What about punishing businesses that pay low wages and force their employees to work abnormally long hours?

It’s relative, of course, to the nation’s stage of economic development. Increasing social and economic development is the aim. Business profits, employee wages, and generally shortened work hours must be achieved in a balanced way.

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