Does the current crisis justify an expanded role for government as an employer of last result?

Consider the following facts from research by the Economic Policy Institute:

* Number unemployed: 15.4 million percent (up from 7.5 million in December 2007).
* Portion of official unemployed considered structural: 3.9 million.
* Portion of unemployed who have been jobless more than six months: 38.3 percent.
* Total jobs lost during the recession: 8.0 million.
* Jobs needed to return to pre-recession unemployment rate: 10.9 million.
* Number of job-seekers per job opening: 6.1.
* Unemployment rate: 10.0 percent.
* Underemployment rate: 17.2 percent; Share of workers un- or underemployed: more than 1 in 6.
* States with double-digit unemployment in October, 2009: 15.
* White unemployment: 9.3 percent; African American unemployment: 15.6 percent; Hispanic unemployment: 12.7 percent.
* Manufacturing jobs lost since the start of the recession: 2.1 million (15.5 percent of sector's jobs).
* Construction jobs lost in the recession: 1.6 million (20.8 percent, nearly one in five construction jobs).
* Mass layoffs (50 or more people by a single employer) in October 2009: 2,127; jobs lost: 217,182.
* Under- and unemployed, marginally attached and involuntary part-time workers: 26.9 million.
* Americans with no health insurance in 2008: 46.3 million.
* Annual Social Security benefit for average retiree: $13,922; Share of older Americans receiving all their income from Social Security: more than 1 out of 4.
* Number of children in poverty in 2008: 14.1 million (over one-third)
* Drop in real median income from 2007 to 2008: 3.6 percent (largest one-year drop since 1967).
* Growth rate of nominal, hourly wages of production workers over the last three months:1.7 percent.
* Additional people covered by Medicaid/SCHIP in 2008: 3 million.

Not since the Great Depression has structural unemployment been so intense or sustained. Despite faster and smarter liquidity and fiscal efforts by government than occurred then, employment decline has merely decelerated 24 months into what is now dubbed "The Great Recession." It is not yet near enough to avert 5-10 years of unemployment rates above six percent (the level at which the 'Great Recession' started). The foundation of New Deal anti-depression actions, and one of the most successful and long lasting in its effects, was directly putting men to work in public works projects that became associated with several national service programs. The economist Hyman Minsky coined the term "Employer of Last Resort" to describe government full employment efforts, which were part of his economic prescription, discussed more below, for countering capitalism's inherent vulnerability to financial instability.

This article explores the appropriateness, precedents and how-to's of national service programs (the chief US version of employer of last resort) in responding to the current crisis. The moral and social virtues of putting the unemployed to work in the creation of useful and meaningful public goods, instead of subjecting them to sustained idleness, should be self-evident.

The path to national service

1933 was the worst year of the Great Depression with unemployment peaking at 25.2 percent. Adolf Hitler became the chancellor of Germany and opened the first concentration camp at Dachau. Tens of thousands traveled the road and rail in America looking for work, and the US banking system which was under great strain was propped up by the US banking act of 1933 to try and stop the panic of people withdrawing their money from the banks. The continuing drought in the Midwest cursed even more of the land into dust bowls.

Franklin Delano Roosevelt was inaugurated as the 32nd U.S. President on March 6, 1933. A bill known as the Emergency Work Progress Bill was introduced in Congress on March 21, enacted into law March 31. This bill spawned numerous federal agencies, such as the Public Works Administration (PWA), its successor the Works Progress Administration (WPA) and the Civil Works Administration (CWA) and its successor, the Civilian Conservation Corps (CCC). There were approximately 5,000 camps of 200 enrollees set up in all states, plus the American Territories. The enrollees enlisted for periods of six months at a time and were paid $1.00 per day, of which $25.00 per month was sent directly to their families. The CCC was made up of approximately 3.5 million men, 225,000 World War I veterans, the balance young American boys, unmarried, between the ages of 17 and 28 years. The CCC existed for over nine years until June 30, 1942, at which time it was absorbed into America's Armed Forces. General George C Marshall, Army Chief of Staff under Roosevelt, testified before Congress at the end of World War II that the early training given to the men of the CCC was a major factor in America winning that war.

Direct government employment is the most practical and realizable path to capping unemployment, and adding credibility to the much needed stimulus efforts. This is especially true in a major economic crisis - but also should be a permanent feature of government intervention to address structural unemployment - lost jobs that are never coming back. Various programs to provide tax incentives and sub-contracts to private contractors do not work nearly as well -- witness the poor response of hard-pressed homeowners to recent winterizing incentives, and the lengthy delays common with contracting. Picture the thankful and very direct response to the alternative: neighbors contacting neighbors to do energy audits, perform the winterization work, making the personal connection, making a difference.

President Obama's jobs programs need less PWA and more CWA

The PWA was the Public Works Administration, led by Harold Ickes Sr. The CWA was the Civil Works Administration, led by Harry Hopkins. Both were New Deal agencies created in 1933 to get Americans quickly back to work at a time when unemployment reached 25 percent, its highest point in U.S. history.

The PWA tackled unemployment indirectly by spending money largely through private contractors. Only $110 million of the program's authorized $3.3 billion was spent during the program's crucial first year. Frustrated by PWA's slow progress, Roosevelt yielded to the pleas of his relief administrator, Harry Hopkins, to help get unemployed workers through the coming winter by putting them directly onto the federal payroll. Roosevelt had been reluctant to create a federal work program for fear of alienating Bill Green, the president of the American Federation of Labor, who believed such programs would undermine the private labor market where the average wage was about $1.35 per hour. Hopkins argued that Samuel Gompers, founder of the American Federation of Labor, had in 1898 proposed essentially the same idea, and that the program could be kept from getting large enough to undermine private labor rates.

Roosevelt diverted not quite one-third of the PWA budget to CWA with the goal of putting to work 4 million people. As a percentage of the population, that would be the equivalent of putting 10 million people to work today. Under Hopkins leadership the CWA got this done in two months time. The current economic downturn has yet to bring us near the depths of the Great Depression, but the situation is dire. The official unemployment rate now stands at 10 percent-plus, a figure that rises to more than 17 percent when you add in people who've given up looking for work and people working part-time only because they can't find full-time work. Further analysts calculate that at least 2.5 percent of the official unemployment rate is structural - that is, jobs that are never coming back under market conditions. The economy shed more jobs last year than in any single year since 1945. The outlook for recovery - given current stimulus efforts - sees no return to pre-recession employment for at least four years.

The CWA benefited from Harry Hopkins noted adaptive leadership and organizational style. But the CWA was also structurally better able than the PWA to mobilize quickly because it could avoid the cumbersome - and often corrupt, political - process of putting contracts out to bid and all the other obstacles to swift action that arise with public-private partnerships. CWA enjoyed immediate carte blanche to apply directly the apparatus of the federal government. Hopkins shifted staff from the federal relief program he'd headed up, seized tools and equipment from Army warehouses, and cut checks through the Veterans Administration's vast disbursement system. The CWA laid 12 million feet of sewer pipe and built or made substantial improvements to 255,000 miles of roads, 40,000 schools, 3,700 playgrounds, and nearly 1,000 airports (not to mention 250,000 outhouses still badly needed in rural America). Most of the jobs involved manual labor, to which most of the population, having been raised on the farm, was far more accustomed than it would be today. But the CWA also provided considerable white-collar work, employing, among others, statisticians, bookbinders, architects, 50,000 teachers, and 3,000 writers and artists. This was achieved with a remarkable minimum of overhead. Of the nearly $1 billion - the equivalent today of nearly $16 billion - that Hopkins spent during the CWA's five-month existence, 80 percent went directly into workers' pockets and thence stimulated the economy by going into the cash registers of grocers and shop owners. Most of the rest went to equipment costs. Less than two percent was paid for administration. The People's World editorial board article on "New Deal 2.0" has more extensive detail on the achievements of the CWA-CCC.

The only serious obstacle the CWA encountered is the same one that President Obama would face today: right wing politics. Republicans and conservative Democrats in Congress screamed bloody murder about Roosevelt's dalliance with what they termed "state socialism" - Republicans like Landon who were willing to admit a government program might actually work were as rare then as they are today-and the segregationist Georgia Gov. Eugene Talmadge was apoplectic to learn that black laborers were being paid as much as white ones. Once winter had passed, Roosevelt, worried that the controversy would cost him Democratic seats in the coming midterm congressional elections, ordered Hopkins to shut the CWA down. A year later, though, with huge numbers still unemployed, Roosevelt put Hopkins in charge of the Works Progress Administration. Over its life, the WPA would create, on the model of the CWA, more than 8 million jobs, which today would be equivalent to creating more than 20 million.

The Kennedy and Clinton administrations (the latter to a lesser extent and with lesser success) also promoted National Service. The Peace Corp, VISTA, AmeriCorp were prominent initiatives.

A new national service provision incorporated into the first Obama stimulus package has nearly been drowned out by its vicious enemies on the right wing, who like to compare folks repairing the Appalachian Trail, or winterizing homes, to fascist Hitler brown-shirts brigades. In addition it has been made nearly invisible in the pressures of the immediate struggle to pass health care reform. But I believe it is a critical component in the economic recovery from this crisis. The debate over the shape and size and funding sources of the needed second stimulus is officially underway since the recent Obama Jobs Summit.

It is a good time to reintroduce an "employer-of-last-resort" proposal, which is the economic role that national service programs perform. Without the government stepping in as the employer-of-last-resort for all those whose jobs are not coming back - an unsustainable level of long-term unemployment will ensue (for many this is already the case). To have 10-20 percent of the workforce idle can become a very corrosive and dangerous force. It puts continuous, punishing downward pressure on working people's incomes. It inevitably provokes sharp divisions, including persistent anti-immigrant, racist outbursts and panics. Such pressures can bring down the best laid recovery plans, and presidents, including progressive ones. Nowhere are the defects of advanced multinational corporate society more exposed than in a great depression. Only more socialist like measures, such as direct government employment, will work. In such crises, markets will not fix themselves, nor the social damage done, on their own. Free market apologists frequently counter that "in the long run" markets will return to "equilibrium". But, as JM Keynes famously observed: "in the long run, we are all dead."

In the struggle to compel the government to assume the "employer-of-last-resort" role, finally putting a cap on the unemployment rate, all progressive and democratic forces have a big stake in the outcome.

The values of both the public goods national service produces, as well as the social and moral values that progressive service projects nourish in both the participants and those whom are served, are as close to those envisioned and cherished by the founders of both socialist and radical democratic visions of social relations as one is likely to find in this era. To labor directly in service to the working people of the United States - is a high calling to us. And with the exception of the word "working" this sentence and its intended spirit quotes the current president of the United States, on the purpose of national service - a circumstance not seen since at least Kennedy. Distinct from some other political forces, we on the Left focus our understanding of service with a class bias. We see the expansion of the programs to include all who are structurally unemployed, including youth and seniors. And distinct from the 1930's we also envision self-organization of these workers as the bulwark that can best prevent their being turned toward reactionary purposes when the President may not be at all progressive, and at all times we champion the progressive goals and ideals of the service. But this is hardly a sectarian tendency, since public goods serving the working people of our country serve all the people as well.

None other than the Communist Manifesto identified as "communists" those who, among few other qualifications, distinguish themselves as follows: "in the various stages of development which the struggle of the working class against the bourgeoisie has to pass through, they always and everywhere represent the interests of the movement as a whole." Progressive-led national service is not the only means by which advanced social qualities can be realized. But its timeliness and its potential to reconnect socialist and progressive ideals to tangible initiatives, demonstrable integrity and a better way of both working and living - make it shine as a service and growth opportunity for the Left not seen in the US in many decades.

What socialist values are promoted in progressive national service?

1. National service represents, or can represent, a move toward full employment in an economy which is predominantly - although not exclusively - still capitalist and dominated by private property relations. It is a move which can do more to stabilize capitalism's inherent instability than any other reform. Economic development under any economic system must have an efficient means to allocate - and reallocate - people toward productive labor. Productivity and efficiency are in constant flux under the pressures of supply, demand, level of workforce culture and skills, technological change and many other factors. A government employer-of-last-resort program that is permanently targeted at structural unemployment effectively removes poverty, ruin and death as the consequences of capitalism's raw means of effecting structural change.

2. National service is dedicated to the production of public goods. The expansion of wealth in public goods, as contrasted with commodities, is a key feature of the advance of a much less unequal society.

3. Since Paul Samuelson "public goods" have acquired a specific economic definition, independent of the range of goods and services already supplied by public enterprise. They are either "non-rival" [there is no scarcity] or non-exclusive [use by non-buyers cannot be prohibited]), or both. Their scope is much enlarged since the 1930's. This is evident in two ways: first, the proportion of government GDP to private GDP has steadily increased, stimulated by both market failures (health, education, etc) in various areas or externalities (environmental, security, etc); second, the proportion of intangible goods - in short, all the products and services of the "knowledge economy" - to physical commodities has dramatically increased. Intangible goods are considered very poor commodities by many economists and, barring certain monopoly conditions (e.g. Microsoft) have many qualities of public goods. In addition the average skills of the labor force today are much advanced since that time. To traditional public works such as roads, schools, hospitals, security, must be added (in degrees) health care, too-big-to-fail enterprises, more rental housing, and many educational, public health and environmental initiatives. In many ways the economic transition from capitalism to a more advanced society can be measured in the proportion of wealth in public goods relative to commodities.

4. As production of commodities becomes more and more automated, services (both public and private) gradually become the dominant form of work. The provision of services, with often very low capital accumulation thresholds for firms by comparison to industrial firms in the past, is more amenable to cooperative, non-profit, or shared-profit models of enterprise - if stability and growth can be sustained. Employer-of-last-resort programs focus exclusively on public goods and service.

5. From each according to his ability, to each according to their needs - this was the slogan of the Communist Manifesto reflecting the ideal principle upon which an economy freed of commodity production and its inevitable divisions of labor, including the division between labor and capital, could be constructed. National service in its progressive vision models exactly this principle. It is even more advanced than the principle of socialism which merely envisions the fulfillment of bourgeois right - the ideals of the enlightenment, and of the declaration of Independence, for all who labor - from each according to his ability, to each according to his work. Equal pay for equal work plus investment in people's abilities equals socialism. Abolition of the division of labor in commodities equals the foundation of the communist ideal.

Steps to take

Current status of national service programs:

Of course the biggest current national service program is the US military. And in many ways the terms and benefits of military service will have a strong influence on terms, standards and benefits of national non-military service, if it truly evolves into an employer-of-last-resort alternative.

In his inaugural address, President Obama said, "The question we ask today is not whether our government is too big or too small but whether it works."

That stands in contrast to the Republican orthodoxy, which says "government is the problem", or various Democratic accommodations to Republican orthodoxy, which say: "the era of big government is over".

If government can do the job best, let it.

On April 27th of this year President Barack Obama signed the Edward M. Kennedy Serve America Act later today as part of his pledge to expand programs and funding for community and civil service opportunities across the nation. The legislation was named for longtime services supporter Sen. Edward Kennedy, and authorizes nearly $6 billion, a 25 percent increase, through 2014 to benefit existing programs, including AmeriCorps and the Peace Corp, as well as new service programs. There are 75,000 active AmeriCorps volunteers today, and the law intends to expand that number to 250,000 by 2017.

Melody Barnes, the director of the White House Domestic Policy Council said: "We really believe that this is just the beginning." The Corporation for National and Community Service oversees AmeriCorps and other service programs,has received more than 40,000 online AmeriCorps applications were received in March - six times the number from a year earlier.

The CNCS is a federal agency created in 1993 by President Clinton and is overseen by a bipartisan board appointed by the president. Since it began, more than 570,000 have volunteered 718 million hours and received $1.6 billion in education awards to pay for college.

Counting youth, first time job seekers, seniors forced on fixed incomes, workers laid off whose entire occupations will not return - upwards of eight million workers could fully benefit from direct employment programs - and do so without causing dangerous inflation in private or other public labor markets so long as the average size of the programs remains targeting structural unemployment, and so long as the pay in the programs corresponds to the original service principles - less than the prevailing wage, but more than unemployment and not less than the minimum compensation.

Having Government play the role of the employer-of-last-resort, through programs like those in the national service tradition and spirit, cannot be the only component in a full recovery, full employment strategy. It may not even the most important component of broader public employment in the overall economy. Most Infrastructure development, for example, will require long-term capital investments and permanent jobs in the millions. Employer-of-last-resort programs address specifically the structurally unemployed faction of the unemployed population: workers for whom there will be no recall, and whose occupation, in fact, is in long term decline. In addition to compensation, participants must receive in exchange educational and retraining opportunities. We are, in a sense, investing in losers in the restructuring to ensure their successful re-entry into the overall labor market. And we are also helping create better citizens and more conscious forces who have helped lead efforts to materially and spiritually strengthen communities. By substituting service for unemployment benefits for these folks, we simultaneously place a cap on unemployment beyond.

Hyman Minsky

The late Post-Keynesian economist Hyman Minsky gave national service, employer-of-last-resort, projects like the WPA a key role in his strategies for countering (not eliminating, just balancing) capitalism's inherent tendency toward instability. His classic work, Stabilizing an Unstable Economy is now enjoying a celebrated revival in the post-monetarist age. He favored, in a word, a "more socialist" capitalism, with lower investment and higher consumption; one that maintains full employment; one that fosters smaller organizations, especially in the private sector. He was highly skeptical that capitalism could ever achieve full employment without direct job creation by government. He argued only government can provide an infinitely elastic demand for labor, which a full employment program requires, and that such a comprehensive program would not exceed 1.25 percent of GDP. Experience in India, Argentina, China and Vietnam - all of which embrace Minsky like employment philosophies - validate this estimate. In addition, Minsky argued that, unlike welfare or unemployment, in which income is increased without an increase in supply of goods or services, employer of last resort programs are not inflationary.

Labor Ambivalence

The resistance to the WPA programs of the 1930's from the American Federation of Labor President William Green is mirrored today in the lukewarm at best support of national service in either of Labor's major federations, and for the same reason. Fear of competition with the private labor market. Yet the history of wage patterns in the years following the WPA launch in 1934 did not justify Mr Green's fears. In the first place the programs mirrored exactly advocated by Mr Green's predecessor, Samuel Gompers, and endorsed by Eugene debs. The effect of the programs were to tighten overall labor markets and reduce and in some cases reverse the dramatic fall in wages that occurred following the crash of 1929. The nearly 8 million men who passed through the WPA era programs were actually counted as part of the unemployed. The proportion of union wages to service compensation did not change throughout the era so there was no harm the service programs caused to average wages - especially as the tightened labor markets gave strength to the great CIO organizing drives underway that would soon double the size of organized labor. Some have argued the tighter immigration laws in the 30's also tightened labor markets as well, but, in any event, national service played a positive, not a negative role in the union upsurge of the late 1930's.

In the new era the fight for full employment, including in the employer-of-last-resort efforts, could use a labor lead this time, to in fact preserve the base for the progressive interpretation of "in service to the people of the United States."

How Can the Left Make a Difference?

Below is an example "home audit" project scenario, adapted from the serve.gov website, exploring the mechanics of forming a progressive service project, and transforming it into a base for public direct green employment funding and management.

General suggestions for getting started on any project:

* Create a team with your friends and neighbors to share the effort;
* Give a mission and name to your project that reflects the shared values of your team. Mission: Invoke themes that strengthen the project's ultimate political visibility.
* Set outcome-based goals and track your progress to those goals;
* Celebrate your successes together.

An environmental "Home Audit" project to audit potential saved charges and efficiency for all renters and homeowners for known energy investments.

* Audit Facts
1. Every year, more than $13 billion worth of energy leaks from houses through small holes and cracks. That's more than $150 per family!
2. A compact fluorescent light bulb uses 75 percent less energy than a regular bulb - and it can last up to four years.
3. Across America, home refrigerators use the electricity of 25 large power plants every year.
4. Some new refrigerators are so energy-smart they use less electricity than a light bulb!
5. A hot water faucet that leaks one drop per second can add up to 165 gallons a month. That's more than one person uses in two weeks.
6. An energy-smart clothes washer can save more water in one year than one person drinks in an entire lifetime!
7. A crack as small as 1/16th of an inch around a window frame can let in as much cold air as leaving the window open three inches!
8. An automatic dishwasher uses less hot water than doing dishes by hand - an average of six gallons less, or more than 2,000 gallons per year.
9. This summer, commit yourself and a team of your friends, family, and neighbors to help save energy in your home and to help others do so, too. Join United We Serve. This tool kit will give you the basics to start reducing our carbon footprint, recruit a team, organize your group, and make an impact this summer.
* The Challenge: Many community-based organizations do not have enough capacity to manage a large number of volunteers, so they need people who can organize themselves in coordination with them. As an organized group you can either organize a group to be a positive addition to a community-based organization, or, if such an organization does not exist, to be a well-organized independently-run group that fills a needed gap in the community.
1. Step One: Identify Local Partners
a) Check out the organizations already doing good work in your area. Many existing service groups have identified community needs and built the expertise to provide solutions.
b) Call or visit the websites of national and local energy and environmental groups and ask how volunteers can contribute. Examples could be your state's energy office, your local utility company, The Alliance to Save Energy, The Department of Energy, and the Sierra Club.
c) If no environmental organizations exist in your community, you have all the tools needed to start an auditing team. Information on how to perform an audit can be found at the Department of Energy's website.
d) If you want to learn more about saving energy, a simple Internet search on energy efficiency will bring tons of resources and information on how you can save energy.
e) You can also contact your local home improvement store like Home Depot, Lowe's, etc. to find out about information and products they offer to help you save money in your home. Energy challenges vary in different parts of the country.
2. Step Two: Build a Team to share the work, motivate members and hold each other accountable.
a) Build community.
b) Ask your family, comrades, friends, colleagues, faith group members, book club devotees - you have a book group, right??? - to serve with you.
c) Labor and other organizations that serve the unemployed can be important sponsors and partners.
d) Tip - serve good food at house meetings whenever possible.
e) Encourage participation that reflects the racial, national, ethnic, age and sexual diversity within the working people of your community - but do not let imperfections slow getting started.
3. Step Three: Set a Goal, including dates, and hold yourself accountable.
a) Commit as individuals and as a team to reducing carbon emissions by a certain amount and audit a certain number of homes.
b) focus on communities who most need and would benefit by a public effort at energy efficiency.
c) Set your goals high to stretch yourself.
d) Keep track of how you are doing and designate someone to be responsible for updating the group on how you are progressing toward your goals. Commit, focus, and follow through.
4. Step Four: Serve Your Community --do the audits, reach out to your neighbors and colleagues, and reduce carbon footprints.
5. Step Five: Report and Celebrate Successes and develop a campaign to implement the conclusions of the audit.
a) Your team members, your community, your city councils, Mayors, legislators and Congressional representatives, and the President want to know about your results and hear your stories. Share your accomplishments by reporting your results as widely as possible, including on the President's service blog: www.serve.gov.
b) From recent efforts, it is almost certain the result of audits reveal many families who qualify for already existing winterization programs who either do not know they exist, or who found applying for them, arranging for contractors, equipment, etc too daunting to take advantage of in a recession, if at all. If the state will not intervene and serve as middlemen for the consumers, the winterization funds in the first stimulus will remain largely undeployed.
c) Ergo - a strong argument for government directly using stimulus funds to hire the work done. Yet it will also show substantial saving that would accrue to families if relatively modest energy saving investments could be made. Using a national service program for such work gives a very large return for dollar invested, and a political foundation for expanding public work and putting people back to work directly through a funded winterization project, or other energy saving measures that will vary by area climate, resources and season.
d) Demonstrating a strong, green job creating investment that also saves consumers money is a stronger issue than many successful candidates for public office have been afforded.

The president's serve.gov site has other examples and tool-kits to assist groups form and initiate their own service projects that reflect their particular concerns and interests, whether the domain of the effort is the environment, conflict resolution, education, health, or other issues.

Yes We Can!