Thursday, May 1, 2014

Bring down unemployment, improve labor laws

America has some of the most lax labor laws in the world. Mother Jones published an article outlining the laws we have in our country. I find job offers saying you have to be willing to work (and this is current, not 100 years old) 7 days a week on a frequent basis. This is immoral, and we need to have free time to spend our income, and work more efficiently when we have breaks.

Countries that lack basic labor rights for private sector workers are few in number nowadays, paid maternity leave is not in place in only 6 countries, paid annual leave is not in place in only 9 countries, and required time off each week is not required in 16 countries. (13 undeveloped or developing countries, the US, New Zealand, and Australia)

There are several reasons we should change our laws. First of all, when people are working two jobs, unemployment rises. It would be better for everyone if people made more at their current jobs so they don't need to work multiple jobs and more people fill the number of jobs available. Companies shouldn't be legally allowed to ask for people to work for more than 40 hours a week and should be required to hire someone else when they need people on staff all the time. This is the most direct way better labor laws reduces unemployment.

Companies (or at least large companies) should be required to pay their workers enough so that they don't qualify for Medicaid and food stamps.

Workers should be able to unionize so that skilled professionals will get paid what they deserve and at least can see cost of living increases to their wages which has not been happening. The consequence of this is unionized workers are paid more than non-unionized workers (as Mother Jones has found). A decreasing quality of living, combined with the marginal propensity to consume, means that our demand curve and economy will continue to decline if people don't see their quality of life continue to stay at their current level at a minimum. With middle income employees getting paid more they will spend more which will give businesses and incentive to grow and hire more people (or face competition that will gladly take the business) which will bring our employment-population ratio up which is currently at a level I would consider a crisis, given how it hasn't significantly moved up since the recession in 2008. Businesses won't expand if they don't have the demand for their services, and the private sector as a whole obviously will not grow if businesses aren't growing.

People should be required to have at least some vacation time in their jobs every year, and 4 weeks is a reasonable amount of time.

This will directly boost the pay that workers receive in unskilled professions. This will have a positive effect to the economy because they spend close to 100% of their income while their employers who are middle class or wealthy will spend significantly less than 100%, diverting a lot of funds to investments and pay more in taxes. The other benefit to increasing pay for people in retail and food service (etc.) is they will qualify for fewer state benefits, reducing the need for welfare, and making it so their employers will directly pay them enough to live on. Because of this, and how states usually make up the difference, improving labor laws will have a positive effect on the economy and decrease the need for welfare.

The other major benefit I must mention is how unions are more effective than minimum wages. For people in unskilled professions that can be quickly learned on the job, the minimum wage will work well, but for skilled professionals the minimum wage rising will have almost no effect on their wages. When people are unionized by their profession (and have the ability to form new unions if one union has trouble, competition is very important for unions to be successful) they can negotiate for pay raises which keeps the distribution of income closer. There is ample evidence that union workers are paid more (BLS) and this has a positive effect on the economy because most of these workers are in the middle class and lower classes, so they spend a larger percent of their income than someone who makes a million dollars a year. By having unions by profession we can have the market set rates in a more fair way, and a faster way, than an economist can possibly calculate by calculating numbers. Unions are also more resilient to growth, and are more able to respond to a sudden increase in technology by demanding a pay raise to go along with their productivity. Increasing workers wages across the board boosts the demand curve, which makes it more attractive for entrepreneurs to enter those businesses due to larger earning potential, which helps move our economy to be more competitive which increases innovation. Increasing the number of small businesses also increases the demand for labor which offsets any decrease in employment from higher wages. Without the increase in demand from fair wages we will not see that increase in innovation from more entrepreneurs and have fewer businesses to choose to purchase from. This is why higher wages are better for the entire economy and the actual effect in the long run is small, because it is more a redistribution of wealth than anything else.

The alternative to having unions or a minimum wage is as I outlined above a stagnant demand curve which directly harms the private sector, which is unacceptable. There will be times of expansion where we are operating above our potential (such as the 1990s with the computer revolution) where this will be not noticed, but the vast majority of the time this will be the case.

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