How to increase the value of labor and lower unemployment

By Kevin Price

Paul Revere and the Raiders provided a hit which has lyrics that seems very foreign to most Americans today. The song "Cherokee Nation, Cherokee Pride" states:

"They took away our native tongue
And taught their English to our young
And all the beads we made by hand
Are nowadays made in Japan"

Today, when we discuss "cheap goods" and "cheap labor," we think of China and India, not Japan. In fact, Japan has among the highest per capita incomes in the world. But in the 1960s Japan was the source of cheap labor and the target of a great deal of concern among average Americans.

So how did Japan go from cheap labor to among the most expensive? By allowing the market as the primary determination of what a worker's time is worth. Ironically, allowing labor to become cheap in the short-term, can make it cost more valuable in the long term. Think of supply and demand. Market driven (aka "cheap") labor would increase the need for it and would, over time, lead to people making more both in dollars and in an economy's productivity. If productivity increases, over time, the cost of goods will go down and allow people to make more than their incomes reflect. Increasing the value of labor can be done in several ways, here are just a few examples:

* Put the burden of taxation entirely on the buyer of goods and services and not those who make them. Social Security and Medicare should be paid for by the person with the job, not the one that is trying to create employment. Since companies don't pay taxes, it is a fixed cost of doing business, having individuals pay this would make for a more efficient economy and a more politically aware population.

* Eliminate the federal minimum wage. The Constitution does not have a role for determining the relationship employers have with employees. The US government should consider mandating the states to have its own minimum wage and watch the power of competition take place. States would have to create that delicate balance between protecting individuals, and yet making it a safe place for business. This would make states more competitive and unleash an interest in labor.

* Eliminate virtually all federal laws that pertain to labor and leave this to the states. Again, competition would help the states create better environments for businesses to go and for jobs to grow. If states are excessive in their regulations, the businesses would leave. The top heavy, federal approach has made the entire nation less attractive when it comes to jobs.

Because of the strange approach to labor that exists in our country, entrepreneurs look at employment in a way that is contrary to labor's interest. Instead of seeing labor as a great resource that should be harnessed to grow a business, they see it as a regulatory threat and often as an obstacle to economic growth. Some of the policy changes mentioned above might have the short term effect of lowering wages, but in the long term it will unleash the economy in a way we have not seen in decades. In time, wages would become higher and demand for labor would increase. We can then say goodbye to 14 percent unemployment and hello to an economy in which labor matters.

© Kevin Price