On June 11, 2013, Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and former Secretary of Labor in the Clinton administration, writes:
Jobs are returning with depressing slowness, and most of the new jobs pay less than the jobs that were lost in the Great Recession.
Economic determinists — fatalists, really — assume that globalization and technological change must now condemn a large portion of the American workforce to under-unemployment and stagnant wages, while rewarding those with the best eductions and connections with ever higher wages and wealth. And therefore that the only way to get good jobs back and avoid widening inequality is to withdraw from the global economy and become neo-Luddites, destroying the new labor-saving technologies.
That’s dead wrong. Economic isolationism and neo-Ludditism would reduce everyone’s living standards. Most importantly, there are many ways to create good jobs and reduce inequality.
If we had a strategy designed to increase jobs and wages, what would it look like? For starters, it would focus on raising the productivity of all Americans through better education — including early-childhood education and near-free higher education. That would require a revolution in how we finance public education.
Better education would just be a start. We would also unionize low-wage service workers in order to give them bargaining power to get better wages. Such workers — mostly in big-box retailers, fast-food chains, hospitals, and hotel chains — aren’t exposed to global competition or endangered by labor-substituting technologies, yet their wages and working conditions are among the worst in the nation. And they represent among the fastest-growing of all job categories.
We would raise the minimum wage to half the median wage and expand the Earned Income Tax Credit. We’d also eliminate payroll taxes on the first $15,000 of income, making up the shortfall in Social Security by raising the cap on income subject to the payroll tax.
We’d also restructure the relationships between management and labor. We would require, for example, that companies give their workers shares of stock, and more voice in corporate decision making. And that companies spend at least 2 percent of their earnings upgrading the skills of their lower-wage workers.
For a “professor of public policy” and former labor secretary, Robert Reich still does not understand economics nor does he acknowledge the exponential function of the non-human factor of production––physical productive capital as in human-intelligent machines, super-automation, robotics, digital computerized operations, etc.––which is creating tectonic shifts in the technologies of production while simultaneously destroying jobs and devaluing the worth of labor.
His strategy to increase jobs and wages flies in the face how businesses run. Full employment is not an objective of businesses; nor is paying wages higher than market value. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
Reich’s entire strategy is to REDISTRIBUTE in some form or another what the owners of productive capital assets have acquired. He would require that companies GIVE their workers shares of stock, and more VOICE in corporate decision making. Nowhere does he advocate that companies implement Employee Stock Ownership Plan (ESOP) trusts whereby each individual employee has access to capital credit to acquire new stock issues of the companies they are employed by and pay for their acquisition out of the pre-tax earnings of the investment in the FUTURE growth of their companies. Under this policy approach, the private property rights of existing owners would not be disregarded and the employees would earn full voting rights as FUTURE stock owners in their companies.
Reich would also unionize low-wage service workers in order to give them bargaining power to get better wages; not ownership and thus second dividend income, but more wage incomes for the same work or less and less work. He fails to see the need for unions to become producers’ ownership unions, whereby the employees can demand a real ESOP and demand the right to participate in the expansion of their employer by asserting their constitutional preferential rights to become capital owners, be productive, and succeed. Unfortunately, at the present time the union movement that Reich supports is built on one-factor economics––the labor worker. The insufficiency of labor worker earnings to purchase increasingly capital-produced products and services gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions.
Reich’s thinking is enveloped in one-factor labor worker policies rather than recognizing that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders, such as Professor Reich (an educator), still pretend to believe that labor is becoming more productive.
Reich needs to study more to understand that his strategy is doomed to failure. His focus should be on OWNERSHIP CREATION policies that will accelerate broadened individual ownership of wealth-creating, income-generating FUTURE productive capital assets. Promoting job growth in and of itself is not understanding the economics of reality––the fact that there has been an ever-accelerating shift to productive capital, which reflects tectonic shifts in the technologies of production.
The answers that Reich is seeking are to be found in the proposed Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm, and the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797
