After World War II, government policy was to make sure people had jobs, and it did what it could to make sure that happened. Corporations saw their profits rise and they shared those profits with their employees through higher wages, which, in turn, resulted in even more profits for corporations as people had more money to spend, and so on and so on. It was a very symbiotic relationship between the government, people and corporations.
Check out the chart below to see how workers experienced the same prosperity that cooperations did from after WWII right up until the mid 70s.
But then some (greedy?) economists decided that this prosperity should not be shared with the employees – claiming that rising wages leads to inflation, so they came up with a cockamamie idea to have the government implement a policy that guaranteed that a certain percentage (around 10%) of the population be unemployed. This way, workers would be too insecure to ask for higher wages, knowing that there was always someone else there ready to take their job.
John Maynard Keynes, one of the smartest economists of the 20th century, thought this idea was “crazily improbable” when it was proposed:
The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years.
Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy.
John Maynard Keynes (1929)
But, economists kept hammering away at this idea (perhaps fueled by corporate interests?) and in the mid 70s, they finally got the government to start implementing this program, which is still implemented to this day – guaranteed unemployment for some. The results of this policy can be seen in the chart below:
Weird that the government that works for the people would implement such a policy that only seems to be helping the corporations and not the people.
Our government can implement a policy of zero unemployment, and no, it’s not inflationary to do so, so perhaps it’s time to do away with a policy designed to make workers’ lives worse off.