How to eliminate unemployment in 60 seconds

For the purposes of this post I define full employment as the ability for everyone to get a job who wants a job.

Short Answer:

Here are three things off of the top of my head that can eliminate unemployment:

1. Free Market Money:  A stable currency that is not subject to manipulation via government printing presses and central bank credit expansion and contraction.  A stable currency allows stability in the market which rewards savers and investors who provide capital to entrepreneurs who then invest in goods producing businesses.  This creates employment, and increased economic prosperity for all.  History has shown that gold and silver tend to fill this role best.

2. Elimination of Minimum Wage Laws:  Minimum wage laws actually create unemployment by preventing workers from bidding on jobs at lower rates than their competitors.  An excellent illustration of this free market competition is used book sales at Amazon.com.  Sellers of used books can underbid other sellers in order to have theirs selected first.  The same concept works in the job market.  Anyone who wants to work can underbid his competitor and get the job.  The resulting benefits to all are lower labor costs which flow down to lower costs of goods and services.  This lowers the cost of living for everyone – including those who are the most competitive in offering their labor.  Imagine the dramatic increase in employment (employers could afford to hire) and the dramatic increase in the standard of living due to lower prices.

3. Respect for Property Rights:  Coercive Government is the major offender here.  By interfering with contracts, changing laws to serve the latest pressure group, and the outright confiscation of private property through taxation and seizure, they have frozen up economic activity.  Because of this interventionism it is practically impossible for entrepreneurs and capitalists (the owners of capital) to make long term commitments and investments in industry since they have no idea what rights of theirs, if any, will still be protected during the investment period.  This is why most banana republics never prosper – capitalists will not invest when their property rights are not respected.

4. Elimination of all Occupational Licensing: Okay, I said “three things” but I came up with one more. Occupational Licensing simply restricts competition and keeps prices artificially high. There are better ways to judge competency. Independent rating agencies like Underwriter Laboratories and Consumer Reports are more effective. The information age has also enabled highly effective rating models such as those used by eBay, Angie’s List, and TripAdvisor – all provided on a voluntary, real time basis.  New entrants to occupations can prove their competence through apprenticeship followed by the endorsement of skilled and respected professionals who can “vouch” for the new entrants’ competency by putting their name and reputation behind the successful apprentice.

Shorter Answer:  Eliminate Government by Coercion

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21 responses to “How to eliminate unemployment in 60 seconds

  1. Pingback: Regulatory Uncertainty delays Recovery « The Freedom School

  2. Pingback: A Post Worth Repeating – How to Eliminate Unemployment « The Freedom School

  3. Pingback: 60 Minutes Story on Staggering Unemployment plus The Solution | The Freedom School

  4. Your used Amazon.com book sale does not exemplify point number 2, the Elimination of Minimum Wage Laws. It is a unfit comparison because you don’t acknowledge the price of shipping and handling. Shipping and handling fees nearly always exceed the price of shipping. As sellers drive the price of book down near zero, they know that they still stand to profit from the standard and constant $3.95 shipping and handling fee (sound a bit like excess labor competing for minimum wage jobs?). The majority of their profit margin on the cheap books (which Amazon has so, so, many of) is garnered from the minimum shipping fees. This poor comparison to Amazon.com books is moreso an argument for the minimum wage than against it.

  5. @ Adam:
    Good point – the minimum shipping fee is, in and of itself, a form of minimum wage but I don’t see how you can see it as “moreso an argument for the minimum wage than against it”.

  6. “Moreso an argument for the minimum wage than against it,” is just a vague way of concluding that “the minimum shipping fee is, in and of itself, a form of minimum wage.” How I should have phrased it is: the prospering sales of cheap books on Amazon.com is a demonstration of how the minimum wage can benefit society. Even if pricing is a penny, the seller has incentive to sell because of shipping profits; and the buyers CONSISTENTLY have access to more books at prices no one could have imagined before Amazon.com’s existence.

    • @Adam,

      In this case the shipping fee represents a “minimum wage” enforced by the governing body (Amazon). This results in unsold books (or unemployment in our analogy) when the bookseller (ie.laborer) would have sold his books for less (including the lesser shipping fee). The net result is unsold books assuming the Market Price is lower than the Sales Price + the forced shipping fee (more buyers would emerge at the lower overall price). If the market price is above the “minimum wage” then there is no reason to argue in favor of the forced “minimum wage” in the first place since the market is already paying more. The ultimate result is that minimum wage laws cause unemployment when the minimum wage is above the market rate (where buyers and sellers are willing to meet).

      • It is the politicians who use minimum wage laws to gain votes. Employees represent the majority of voters and they are easy dupes when politicians seek their votes. The ignorant voters do not realize that they are creating more unemployment and higher prices for themselves when they do this. This is why economic education is so important and this is the primary purpose of the Freedom School.

  7. When living wage matches the minimum wage, minimum wage is not a term limited to political definitions. Say a man without work can afford and survive on 500 calories worth of food a day from his garden. If man labors all day, he will need 1,500 calories to survive. But man is only being paid enough to buy 500 more calories. If he takes the job, the owner gets an extra day of labor (yay!) but the next day (and the next day and so on) the labor will decline in value because he is malnourished, leaving the integrity of the good at stake, which makes the consumer question his future willingness to purchase and thus the owner questioning if this business is worth continuing. Because of Amazon.com’s minimum profit return from shipping and handling fees, the owners of the books will not question their use of Amazon. Do you think a that if a book owner sells a “Shitty Book” for a penny and makes no money on shipping and handing, he will take (I mean waste) the time to sell “Shitty Book 2” on the site? The consistency and security offered by profits from shipping and handling will keep the output of the industry larger in the long-run.

    • @Adam:

      What you are suggesting is that the freedom of choice be taken away from the actors involved. Minimum wage laws deprive the individual from underbidding his competition for the work being offered. A “just wage” is subjective and it is up to the individual to decide what is sufficient and “just” in the transaction. This is also what Friedrich Hayek termed “the fatal conceit” – the belief that central planners know what is best for everyone else. These central planners make these decisions without sufficient knowledge of the circumstances of the individual actors involved.

  8. @freemarketstudies 5:20 pm above:

    Hayek also referred to this as “The Pretense of Knowledge”:
    http://mises.org/story/3229

  9. Freemarketstudies, you are right I went too far along in assuming people’s personnel choice. Sometimes starving but eating is better than not eating and really starving. I just can not see how the Elimination of shipping handling fees could possibly increase the longterm stability of Amazon.com’s book revenue.

    • @Adam:
      When you state “…I went too far along in assuming people’s personnel choice. Sometimes starving but eating is better than not eating and really starving…” you fall into the logical fallacy of the “false dilemma” which assumes there is only one possible outcome in the matter. You neglect to look at other possible solutions. For example: a worker may have a natural talent, a unique skill, or an exclusive tool that enables him to be more productive than his competitors thus allowing him to underbid his competition and still remain profitable.

      When you state “…I just can not see how the Elimination of shipping handling fees could possibly increase the longterm stability of Amazon.com’s book revenue…” you fall into the logical fallacy of “diversion” which is “a wandering from the subject and a turning aside from the path”.
      I never argued for the elimination of shipping fees. I only pointed out how the minimum shipping fee can be compared to minimum wage laws in that it results in unsold goods (similar to how minimum wage laws create unemployment).

  10. If Amazon.com is the government where are we?

  11. I never assumed “there is only one possible outcome in the matter.” My assumption was binary, wages either offer enough goods to survive (specifically food, also shelter, clean water etc.) or they don’t. Figuring out how the elimination of shipping handling fees could possibly increase the longterm stability of Amazon.com’s book revenue is not a diversion; it’s why I posted on this site to begin with – to weed out an inaccurate example or figure out how that example could possibly make sense. It is you who assumed Amazon.com’s book sales have only one cause for the outcome of sale, underbidding each other on book price – that assumption is a diversion for how sales actually occur on the site. You write, “Minimum wage laws actually create unemployment by preventing workers from bidding on jobs at lower rates than their competitors. An excellent illustration of this free market competition is used book sales at Amazon.com. Sellers of used books can underbid other sellers in order to have theirs selected first (above the profits from shipping and handling) . The same concept works in the job market (above the minimum wage). ”
    You write like someone who has never had a minimum wage job. You write like someone who wasn’t thrilled when the minimum wage rose and you could finally have a second meal in the day.

    • Adam,

      Flip the script for a moment: Imagine that you are interested in buying a product up to a certain price – and no more (at any higher of a price you would rather spend your money on something else or simply hang on to it). The seller is willing to sell you that product at the price you are willing to pay. Then step in the bureaucrats who say that the seller must sell the product at a higher price or not at all. The net result is that you cannot buy the product at the price you are willing to pay and the seller’s product remains unsold. You both lose.

      Freedom of choice and property rights are what are at stake here. If you and I agree to trade at a price that is acceptable to both of us, what right does anyone have to tell us otherwise?

  12. If one provides the medium to make a transaction possible, one has minimal rights upon the buyer and seller. The medium – and not just a willing buyer and seller – is necessary to make a transaction occur. The medium deserves a markup. Shipping and handling profits from Amazon.com’s cheap books keep sellers loyal to the site so that more books can be sold. My point of view is: Would more or less cars be bought and goods be shipped be if the government stopped building and maintaining roads?

    • @Adam:

      Yes, Amazon – being a private company offering a service – has the right to dictate it’s own terms of service and the users are not forced to use the service if they do not agree with the terms. They can simply elect not to use the service. In this situation all actions are purely voluntary – no one is coerced into doing something that he doesn’t want to do – unlike minimum wage laws.

      Regarding government roads…

      The real question you should be asking is “by what moral right does the government have in building roads in the first place?” considering the fact that they fund their projects with money taken from people without their voluntary consent (taxation).

      A system consisting of private ownership of roads would respect property rights. They could be funded by only the people who use the road via a toll booth and those that do not use them would not be forced to pay for them. They could also be funded on a voluntary basis by businesses and residents of an area that wish to attract customers. The construction of roads would be dictated by market demand and I would venture to hypothesize that traffic jams would be greatly reduced, if not entirely eliminated, due to ability of private enterprise to quickly add supply to meet market demand. This would increase the movement of goods provided there was an increased demand for them.

      An excellent book that discusses these types of things is Walter Block’s “Defending the Undefendable”. Also, Henry Hazlitt’s “Economics in One Lesson” is a must read for any one truly interested in economics and, in particular, the Minimum Wage issue.

  13. 1. What right does an airline have to kick you off a flight you have already paid for because they overbooked the flight? The right they have is leverage. The consumer is at the mercy of transaction contracts, that if broken, are without repercussion (we wait in the airport for the next flight, and reap no benefits beyond whatever the airline – the bias provider (the government in this example)- decides is the market rate for this inconvenience). All powerful businesses occasionally exercise it against the will of the consumer, including the Government.

    2. Your explanation for roads, while an amusing and a popular thought experiment, is not what I asked about. You pick an example starting from some normative hypothetical scratch where there are no roads (on that note: what logic makes you think that a world without roads would be able to build roads?) There are roads! We can only think on the margin. So I ask again, Would more or less cars be bought and goods be shipped be if the government stopped building and maintaining roads? Chaos and unreliable delivery is not good for increasing business.

    3. To clarify: Do you really believe that if Amazon.com took away its shipping and handling profits from its sellers that more cheap books would be sold at Amazon.com?

    • @Adam,

      Thank you for this stimulating and thought-provoking discussion. I believe I have stated my arguments clearly and I see no point in continuing. I believe in respecting property rights and freedom of choice – apparently you do not. Just do not be surprised when your same arguments are used against you by those who also seek to take away your property and freedom of choice – thus making you their slave.