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Why lying about unemployment is so important

As the unemployment rate soars in most Western economies, we are finally seeing a new measurement of unemployment begin to compete with the “official”, headline rate. Of all the various financial and economic crises facing Western governments, nothing makes the politicians as fearful as the prospect of being forced to tell the truth about unemployment.

I have written extensively about this issue in the past (most recently, with “Unemployment: the BIG Lie”), so my apologies to readers who have heard some of this before. However, with U.S. media sources pointing out, over the weekend, that a secondary measurement of U.S. unemployment showed a rate of over 15%, this seemed like a good time to discuss (again) why lying about unemployment is such a crucial component of economic management for all Western economies.

To understand this issue, we must go back in time to the 1970's, and an era of high inflation which required draconian, “scorched-earth&... monetary policy to bring prices back under control. In the 70's we experienced a classic “wage-price spiral”. Prices for various essentials were increasing rapidly, therefore workers demanded large wage-increases to compensate for declining purchasing power, while those wage-increases then drove prices even higher.

At that point, Western governments conspired together to never tell the truth about unemployment, again. What made this a perfect scheme is that all these governments had to do to lie about unemployment was to continue with the same “measurement", which had been rendered obsolete due to changes in the labour market.

To explain this, we must go back even further – to the beginning of the Industrial Revolution. The original “work week” was seven days a week, twelve hours a day – more than double our current “work week”. How did the work-week shrink by more than 50%?

Simple. One economic truth since the dawn of the Industrial Revolution is that technology always eliminates jobs through new efficiencies faster than it increases employment with new applications. This has been unequivocally true for more than two hundred years. Thus, every few decades, governments were forced to reduce the length of the work-week to make “full employment” possible.

Flash ahead to today. We have now gone well over half a century with no reduction in the length of the work-week, despite the invention of the biggest job-killing technology in history: computers.

Western governments (with the exception of France) refused to shorten their work-week because they never want to have “full employment” in their economies, again. Why would governments seek to punish their own citizens with such a seemingly self-destructive policy?

The answer was blurted-out at a press conference, more than twenty years ago, by the former governor of the Bank of Canada, Gerald Bouey – in a moment of foolish candor: “we are fighting inflation with high unemployment[emphasis mine].

This is how it works. By always ensuring there are millions of employable people who are never allowed to get a job, this keeps those who are employed in perpetual fear of losing their own employment. Most people in the workforce today can't even remember what “job security” feels like.

Let me refresh your memories. In the “good old days”, when labour markets were in balance, if you felt you were grossly underpaid by your employer, you walked into your boss's office and asked for a raise – and if you were turned-down, you quit your job, and went looking for a better one.

How many people out there have demanded a raise from their boss – any time in the last decade? How many people even know of someone who has done this?

By keeping workers in perpetual fear of losing their jobs, they will either not seek any raise in their wages (even when prices are rising), or they will seek a raise significantly less than the “cost of living” - meaning that every year the real wages of most Western workers are declining.

Think back to last year, when soaring prices created the largest fear of runaway inflation since the 1970's. What did the “experts” say then? “Don't worry, because we have seen no evidence of elevated wage demands.” In other words, by maintaining perpetually high unemployment, Western governments can now keep wages depressed, even when prices are rising rapidly.

The only people who have been getting real increases in their wages over the last thirty years are the 'fat cats' at the top of the economic pyramid. These are the SAME people who are responsible for ensuring that everyone else's wages are steadily falling.

Having now explained why governments want to lie about high unemployment, I will now briefly discuss how they lie about unemployment. The current measurement of unemployment which governments use as their “headline number” only counts people who have been recently laid-off or are actively looking for work.

When this definition was first created (more than a half-century ago), it was a reasonable measurement, since everyone who steadily searched for employment would eventually find a job. Today, this is no longer true.

With millions of “excess workers”, if all the employable people who wanted jobs looked for work steadily, month-after-month, year-after-year, millions of people would still never find employment. If any “excess worker” is lucky enough to get hired, they simply push a formerly employed individual down into the status of “excess worker”.

What separates this from previous eras of high unemployment is that even at the “peak” of each business cycle there are still millions of chronically-unemployed, “excess workers”.

Since government lies about unemployment are so extreme, compiling aggregate statistics is necessarily speculative. My best estimate (as a “ball-park figure”) is that there are approximately 50 MILLION employable people in Western nations who are not allowed to work.

The happiness and well-being of these people is being totally sacrificed by these governments to allow the 'fat cats' to not only continue to award themselves huge, real increases in their own wages, but to keep prices relatively stable so that they never lose any purchasing-power.

For the rest of the employed population, the best they can hope for is to 'only' get a little poorer each year – and hope that some “excess worker” doesn't take their job, and banish them to a life of perpetual poverty.

However, this system can only last as long as the lies about unemployment are still believed by the “peasants” who are being oppressed in this manner by their own governments. If the “official” U.S. unemployment rate of 8.9% was completely discarded (as it should be), and all Americans became aware that real unemployment was already pushing close to 20%, how long would they continue to tolerate the ineffective economic 'band-aids', first from Bush and now from Obama?

Every year that we maintain a work-week which has been rendered obsolete through computerization, the 'fat cats' will continue to get fatter, while everyone else continues to get poorer. With all of these economies now long overdue for a reduction in the length of the work-week (which would allow full-employment), what is now required is an immediate transition to a four-day work-week.

Do not listen to the lies of employers and “experts” who will “predict” that such a change would “destroy”our economies. They made the same dire predictions when the work-week was seven days a week, and the same predictions when the work-week was six days long. Instead, those reductions in the work week only increased the prosperity of our societies – as history has demonstrated, unequivocally.

This is truly an instance where “the truth shall set you free.”