74 12.4 Improving Work and the Economy

This chapter has discussed problems related to work and the economy. Critics of capitalism say many of these and other problems arise from the nature of capitalism. According to this way of thinking, capitalism as an economic system emphasizes competition and thus a “winner takes all” mentality. In this kind of system, there are many losers, and there is also unbridled greed for ever greater wealth. Further, because there is relatively little government regulation in the free-market system that is a hallmark of capitalism, large corporations are left relatively free to engage in behavior that advances their profits but that also stifles competition, harms the environment, and causes other social ills. Regardless of the merits of this general critique, capitalism is not about to disappear. Any improvement in work and the economy, then, must stem from social reforms based on sound social research. This chapter’s discussion points to several important problems that must be addressed.

One problem is racial and ethnic discrimination in hiring and employment. Several kinds of studies, but especially field experiments involving job applicants who are similar except for their race and ethnicity, provide powerful evidence of continuing discrimination despite federal and state laws banning it. This evidence certainly suggests the need for stronger enforcement of existing laws against racial and ethnic bias in employment and for public education campaigns to alert workers to signs of this type of discrimination.

A second problem concerns worker morale. Economic inequality and a faltering economy continue to threaten to undermine worker morale and hence worker productivity. Individual employers can do little about these two fundamental problems in the larger economy, but they can do something about worker morale. In this regard, this chapter discussed the importance of coworker friendships for workers’ satisfaction with their jobs and for their more general individual well-being. In view of this importance, employers and employees alike should make special efforts to promote coworker friendships. Because work is such an important part of most people’s lives, these efforts should prove beneficial for many reasons. Employers should also take other measures to improve worker morale, including improvements in wages and working conditions.

A third problem is unemployment. Sociologists, psychologists, and other scholars have documented the social and emotional consequences of unemployment. The effects of unemployment go far beyond the loss of money. Revealed by much research, these consequences sometimes seem forgotten in national debates over whether to extend unemployment insurance benefits. But unemployment does have a human face, and it is essential to provide monetary benefits and other kinds of help for the unemployed.

A fourth problem is corporate misbehavior. As this chapter discussed, corporations are essential to the US economy but also cause great harm. It is not an exaggeration to say that corporate crime is rampant and that it goes largely unpunished. Stricter federal and state oversight of and sanctions against corporate misbehavior are needed.

A fifth problem is economic inequality. The degree of inequality has grown during the past few decades, thanks in large part to changes in the tax codes that greatly favored the wealthy. Restoring tax rates to their standards before the 1980s would help to lessen economic inequality and thus help lessen the problems arising from this type of inequality. In a related area, although the official federal tax rate for corporate profits is 35 percent, many corporations pay a much lower percentage than this because of various loopholes and shelters in the federal tax code. From 2009 to 2011, 280 corporations paid an average of only 18.5 percent of their profits in federal taxes, and 30 of these corporations paid no federal tax during this period (Kocieniewski, 2011). The corporations’ effective tax rate was lower than that of corporations in many other democracies. For the ten-year period beginning 2002, General Electric paid only 2.3 percent of its profits in federal taxes (Eichler, 2012). Ending the loopholes and shelters that corporations enjoy will help greatly to increase federal revenue. As the advocacy group Citizens for Tax Justice observes, “Closing the loopholes will have real benefits, including a fairer tax system, reduced federal budget deficits and more resources to improve our roads, bridges and schools—things that are really important for economic development here in the United States” (Kocieniewski, 2011, p. B1).

More generally, it is worth noting a recommendation of many observers concerning the federal government’s role in the economy. These observers say the government must take a more active role in improving the national infrastructure, job training, and research and development, and in more generally providing incentives for large corporations to invest their resources in job creation. In this regard, they cite the recent experience of Germany, which has recovered faster than the United States from the worldwide recession (Jacobs, 2012).

To improve the economy and create many jobs, many observers say the federal government needs to follow the example of Western Europe by expanding its role in the economy.

Diego Cambiaso – White House – CC BY-SA 2.0.

Germany had this success, these observers say, because it undertook several labor market policies. In particular, Germany provided more generous unemployment benefits than found in the United States (including unemployment compensation in return for working shorter hours, which avoided layoffs), and it provided businesses incentives for employment training and subsidies and incentives to hire the unemployed. Other nations have also eased the effects of the recession because their governments have played this type of active role, one that is much more active than found in the United States. The experience of Germany and of several other nations strongly suggests that “government policy and investment can play a vital role in providing incentives for the private sector,” as one journalist put it (Zakaria, 2012). If so, the US federal government would do well to follow the example of Germany and other nations.

In this regard, a comprehensive approach involving job-creation funding is essential (Fieldhouse and Thiess, 2011). This approach would involve federal funding and/or budgetary policy reform in the following areas: (1) funding for the renovation of schools, improvement in transportation, and improvements in other components of the national infrastructure; (2) funding for the hiring of thousands of teachers, child care workers, and community service workers; and (3) expansion of unemployment insurance benefits, both to help the families of the unemployed and to give them money that they will spend to help stimulate the economy.

Taken together, these measures promise to create millions of jobs. Because these jobs would stimulate the economy and increase tax revenue, these measures would help to pay for themselves. Additional funding for these measures would come from raising tax rates on the very wealthy, as discussed earlier, and from other types of tax reform, including ending tax loopholes for the oil and gas industry and implementing a “financial speculation tax” (Fieldhouse & Thiess, 2011). This last type of tax reform would involve a small tax on all stock transactions, with a 0.5 percent tax raising about $80 billion annually (Bivens, 2011).

More generally, recall that the social democracies of Scandinavia have combined democratic freedom and economic prosperity. Although there are certainly no signs that the United States is about to follow their example, our nation also has much to learn from these societies as it considers how best to rebuild its economy and to help the millions of people who are unemployed or underemployed.

References

Bivens, J. (2011). Truly shared sacrifice includes Wall Street. Retrieved from http://www.epi.org/blog/shared-sacrifice-wall-street-financial-speculation-tax.

Eichler, A. (2012, February 27). General Electric tax rate 2.3 percent over decade, report finds. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/02/27/general-electric-tax-rate_n_1305196.html.

Fieldhouse, A., & Thiess, R. (2011). The Restore the American Dream for the 99% Act: An analysis of job-creation provisions. Washington, DC: Economic Policy Institute.

Jacobs, E. (2012). Growth through innovation: Lessons for the United States from the German labor market miracle. Washington, DC: Brookings Institution.

Kocieniewski, D. (2011, November 3). Biggest public firms paid little US tax, study says. New York Times, p. B1.

Zakaria, F. (2012, January 18). The economic lessons the rest of the world could teach us. The Washington Post. Retrieved from http://www.washingtonpost.com/opinions/the-economic-lessons-the-rest-of-the-world-could-teach-us/2012/01/18/gIQAfSuG9P_story.html.