Reducing the cost of labour to create full employment (1978) | Brussels Blog

Reducing the cost of labour to create full employment (1978)

posted by on 29th Aug 2015

This was published in the Computer Weekly in 1978. Key point:

“technological change can bring about conditions under which
a large proportion of the population cannot live by the sale
of their labour alone, and they should not be expected to do so.”

Headings have been added.

BEFORE discussing the details of the different methods for reducing the cost of labour to create full employment as discussed in your correspondence columns, it is worth pointing out that the general principle behind such policies has not yet been given sufficient consideration. For example, no such policy was considered by Barrie Sherman (Futureview, February 23) even in the form that Keynes proposed: reducing real wages by creating inflation.

No to the Keynesian solution

Naturally, I would have been shocked if Barrie Sherman had suggested a further dose of the Keynesian solution with the lowering of workers‘ standard of living at a time when technological change is making large increases in real wealth possible. It does need to be appreciated, however, that the present phase of technological change is likely to bring a fall in the real value of labour, just as happened in the first industrial revolution.

This point was well understood at that time by Robert Owen and well expressed by his son:

“Will any man who stands on his reputation for sanity affirm that thenecessary result of over production is famine: that because labour produces more than even luxury can waste. labour shall not have bread to eat? If we can imagine a point at which all the necessaries and comforts of life shall be produced without human labour. are we to suppose that the human labourer is then to be dismissed to be told that he is now a useless encumbrance which they cannot afford to hire.”

To me the message is simple: technological change can bring about conditions under which a large proportion of the population cannot live by the sale of their labour alone, and they should not be expected to do so.

Labour subsidies instead of the dole queue

This should not mean that their labour (which can still have a significant value), should be wasted in the dole queue where they are denied the opportunity of raising their standards of living and enjoying the sense of satisfaction that a job can bring. Both national wage and labour subsidy policies promise to avoid such waste and should be given much wider consideration. I hope Barrie Sherman and his research team will be among those to do this.

With regard to the distinction between a national wage (as suggested by John Harris and D. J. Grover) and labour subsidies. I cannot see how any major difference could arise in the long run, except that the former allows unemployment benefit to be included in the national wage, perhaps giving it a better image. This may well be important, but at this stage of the discussion when both policies are so far outside orthodox economic thought, the short term advantage that labour subsidies have of enabling the raising of expenditure taxes a without raising prices: make them more-immediately interesting.

Scarce resources

I agree with Grover that lowering the cost of labour as a factor of production means that certain new technologies should not be introduced. This is especially true if they make a high demand on other factors of production such as, for example, energy. Indeed, many existing processes should be phased out because they waste scarce resources. (Incidentally, others should be phased out because they degrade labour by creating boring and unpleasant jobs.) It seems likely, however, that there are many applications for the new microprocessor technology which enable a saving of both labour and other resources. Such applications should obviously be greatly encouraged.

If it is true that the problem of unemployment can be solved by reducing the cost of labour (and it has yet to be shown that it cannot) and if the new technology can take much of the drudgery out of life then we should all look forward to great benefits from this next industrial revolution.

Research Fellow

Leeds Polytechnic

Postscript: A subsequent publication

The Employment Effect of Subsidies (1997)
Report to the European Commission by J K Swales, D R Holden, G Beacon


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