03) UNEMPLOYMENT RATES: WHY IS 6% "JUST ABOUT RIGHT"?
By Peter Kerek, Editor, The Interior Worker (Kamloops, BC)
Have you ever wondered why economic advisors to Canadian governments suggest that 8 or 9 per cent unemployment in Canada is quite high, 20% is beyond belief, but 6% is just about perfect?
Here are a few numbers to help put that 6% goal in perspective for British Columbians. We've got a population of 4.4 million, and according to Statistics Canada for the year 2011, 60% of all British Columbians, for a total of 2.64 million, meet the definition of "working". Roughly 40% of British Columbians were not considered to be part of the work force, so their state of unemployment was not included in the official unemployment rate.
So the part of the workforce that was considered unemployed is around 200,000 (for a rate of 7.5%). If we had achieved the ideal rate of 6% unemployment, then there would have been about 160,000 people unemployed. This is just about the perfect number of unemployed workers in this province (according to most mainstream economic/political advisors), give or take 1%. If the unemployment rate were to drop to 5% that would still leave about 132,000 unemployed in BC.
But, who exactly is this "perfect" for? Answer: employers seeking to maximize profits via lowering wage costs.
There are many ways to maximize profits in our capitalist system; the simplest ways include skirting environmental and safety regulations, reducing costs of labour, and using creative accounting to exploit tax loopholes. The more costly ways of maximizing profits include innovation and investment in practices and products that allow you to make a product more efficiently and thereby increase profits because you can reduce the costs of production, or, you can increase profits by creating a better product that can out‑sell more inferior products, or that allow you to charge more for your product because people are willing to pay more for that superior product.
But since this is a discussion on unemployment rates, let's focus on labour costs, since the two are directly related.
One of the best ways to bring wages down is to ensure that workers are given the impression that they are easily replaced and that there's always a pool of workers who will do the same work for less money. With this so‑called "reserve pool of the unemployed" workers are less inclined to demand a fair share of the profits, or unionize, or even report employers who are breaking labour laws and safety regulations.
Workers in the non‑union sector, and increasingly amongst unionized worksites, are receiving the message that they are expendable ‑ not only because of the number of already available unemployed workers ‑ but also because of the increasing numbers of "temporary" foreign workers being brought over to work for less than Canadians. And, in the worst case scenario, Canadian workers are told they need to compete with wages paid to workers who survive on just a few dollars a day in third‑world countries who can do the same work for much less.
That's primarily why we no longer manufacture anything in Canada. The only reason we still have mining, lumber, oil, gas and agricultural work is because these things are literally attached to the soil, otherwise they too would have all been sent to China, India or Mexico. With the elimination of most trade barriers and controls that once protected the Canadian manufacturing industries there was no need for the industrialists/capitalists to keep making things here.
The Kamloops and District Labour Council sent questionnaires to all provincial candidates (that belonged to a party) in the two Kamloops ridings during the recent election. The Liberal and Conservative candidates chose not to participate. Responses were received for both NDP candidates, and although the Green Party did not have any candidates here, their campaign headquarters did reply to the questionnaire.
One of the 33 questions was: "Which of the following three options do you feel is the most desirable unemployment rate for British Columbians, and why: 1%, 10%, or 20%?"
Neither the Greens nor the NDP actually answered the question. Each party (the response from each NDP candidate was identical) indicated that they had plans to address unemployment but refused to indicate what they thought was a good unemployment rate. The Greens' response was, however, somewhat more lengthy and they did suggest that there will always be a certain number of people unemployed because their jobs were no longer needed and they are in the midst of finding new work, and that some of this unemployment is simply "a function of the business cycle."
This really wasn't a difficult question ‑ we even made it multiple choice with three very distinct suggestions. Yet an admission that both these parties are comfortable with anywhere between 100,000 and 200,000 British Columbians being unemployed on any given day is not a philosophically appealing prospect for people who are concerned about things like being able to find suitable and desirable work or even attaining the basic necessities of life. And the alternative goal of 1% would have chased away every last corporate donation while seeing the corporate media begin a furious campaign to discredit a party that sought a near-full employment rate. Thus neither party gave a straight answer.
As for the Liberal and Conservative candidates this question was likely a deal‑breaker for their participation in the questionnaire; ideally the neo‑liberal and conservative approach to the labour market relies on an unnecessarily high rate of unemployment in order to keep the cost of production down, so, their reply, if they were honest, would be either 10% or 20%.
As mentioned earlier, the biggest corporations are financiers of neo‑liberal and conservative parties. Part of maximizing profits is driving down wages; this is especially true when their products are not for domestic consumption anyway, so there's no real concern about whether people in your manufacturing area can afford to purchase what you're manufacturing, all that matters is that some group of people in the world makes enough to purchase your goods. However, it would be a political nightmare to defend such unemployment rates with talk of how their idea of a so‑called "functioning labour market" requires a certain number of unemployed to ensure the cost of things doesn't keep creeping up. They would excuse increasing unemployment rates on things that were out of their control: free trade agreements, foreign markets, lack of corporate/foreign investment, red tape, etc.
The harsh reality is that there is no desire by any of the four major parties in BC to end unemployment, or at least bring it to the point where ordinary working people can start demanding the wages that ensure they are getting their fair share of the profit pie. With the existence of the "reserve pool of the unemployed" working folks will seldom be in a position to do much more than fight for the few pennies that might help them keep up with inflation. And let there be no mistake, every decent thing that working people have today came by fighting and demanding these things from the entities that control the purse‑strings.
For folks who want to challenge the idea that there must always be hundreds of thousands of British Columbians unemployed in order to have a functioning economy, I suggest your first question to the next politician who comes knocking on your door should be: "Do you think it's fair that tens, or hundreds, of thousands of British Columbians must remain unemployed in order to ensure corporations can maximize profits?" or, "When you say `functioning economy', who is it supposed to be functioning for?"
(The above article is from the September 1-15, 2013, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $30/year, or $15 low income rate; for U.S. readers - $45 US per year; other overseas readers - $45 US or $50 CDN per year. Send to People's Voice, c/o PV Business Manager, 706 Clark Drive, Vancouver, BC,