Are you possibly getting a bit tired of the spasms in the financial markets? the currency markets? the export markets? Are you getting frustrated by the flatness in our own domestic consumer markets? Are you the least little bit concerned, in the long term, about terrorism and nuclear proliferation abroad - and bulging prisons and booming prison construction at home? How long can we go on like this - talking Goldilocks economy and ignoring the bears? Wouldn't we prefer more stability and predictability - and long term security?
There is one market where we have been building overwhelming leverage for ourselves while sacrificing predictability everywhere else. I'm talking about the job market. By going along with a situation that guarantees us thousands of resumes for each job opening - without even thinking of doing any training - all the while griping about the shortage of qualified applicants because we can't find the perfect ready-made fit right off the bat, we are guaranteeing gyrations in all our other markets. Because we are accepting a situation where jobs and business opportunities are scarce, just to make exotic skills and job candidates plentiful - and at bargain prices in terms of low wages. We forget that our employees are our customers' customers - and if they don't have much money to spend....
We think it's good practice to downsize and get our operation more efficient so Wall Street rewards us - temporarily. Again, have we considered that our employees are our customers' customers? The more of them we downsize, the more we downsize our customers' markets, and the more of that we get, the more we downsize our own markets.
That's the "unintended consequences." By downsizing, and even by just going along with a situation where resumes are plentiful while wages are at bargain rates, we're downsizing our own markets. True we get a huge salary and fabulous stock options, but look at the unpredictabilities we generate. We have to spend plenty on security systems and our net worth on paper is gyrating like a yoyo. And the more our net worth rolls up, the more overall net worth of America concentrates in us. And the more concentration, the less circulation. Translation, we upsize concentration, we downsize our own markets.
What's the alternative? We could have another war - or possibly a runaway lethal virus. These have been our traditional solutions to this problem. The Black Death in 1348 killed a quarter of Europe and made the economy BOOM. World Wars I and II killed and maimed a huge number of people - while efficiently manufacturing as much product as fast as we could - to ship overseas and blow up. Let's not miss the point - we got VERY "efficient" at production for... destruction.
How does war or plague work as an economic stimulant? It creates what we employers would see as an acute overall labor shortage. That engages market forces and raises wages and benefits, all across the economy - no minimum wage or benefit laws required - no rent controls, housing subsidies, block grants, enterprise zones, unions.... We as CEOs get so desperate for help that we stop griping about lack of qualified applicants and lack of sufficient visas to bring in qualified (low-wage) applicants from India, and we actually set up on-the-job training to create what we need out of the people who are already on hand, maybe even people in our prisons.
But this creates a strange miracle. Our markets start growing. Though less money is going into our Swiss bank accounts, more is going into our employees' paychecks - and our consumer markets are strengthening with puzzling speed - all over the economy. Why? Because all over the economy, we are reinvesting in our own markets at a colossal rate, instead of skimming and hoarding. We're getting the "multiplier effect" working for us for a change instead of against us, as now. With this happening all over the economy, our customers' customers (our own employees) are doing better pay-wise, so our customers are doing better, so we're doing better - in a more predictable way.
And unlike us, who already have everything we need and not a lot of time for shopping anyway, all these people need a lot of things and they have more time than us to go out and buy them. Domestic spending builds and with it, domestic consumer markets - the markets that are two thirds of the American economy.
And as the old saying goes, "a rising tide floats all boats." American consumer markets stabilize and grow - regardless of exports. The American dollar stabilizes and strengthens - regardless of exports.
Now, what about the American financial markets? They certainly expand more slowly than the last few years, but guess what - they're not inflating, they're growing because with our stronger American dollar, more people overseas are pouring money into our economy. After all, once again, we've got the strongest, most predictable currency.
All this means predictability. And that means long-term, sustainable control. We are actually sacrificing the illusion of control - in the short term, for real control - in the long-term. We're sacrificing short-term discipline in the workforce that's eroding for long-term discipline in the workforce that's sustainable. We have harder-to-get-and-keep employees but the ones that stay are happier, more secure employees and they're providing bigger, more stable markets and P/E ratios.
How do we engineer a war-level labor shortage without war - or plague? First we ration the availability of manhours to the job market, i.e., to ourselves as employers.
How do we do that? Two ways, - first, we enforce the 40-hour workweek by making sure that any overtime automatically triggers on-the-job training or hiring so it phases itself out.
Then if that is not enough to fully employ everyone currently dependent on taxpayers (unemployed, welfare, disabled, homeless, imprisoned, forced into self-employment/"consulting", forced into part-time), we resume our century-an-a-half history of adjusting the workweek downwards. (The workweek has only been frozen for the last 65 years.)
I call this approach timesizing,® and I design it to be as non-arbitrary, market-determined, and gradual as possible.
What else does it do for you? I mentioned that for the last 65 years (since 1933 - it's that precise) we have frozen the workweek around the 40-hour level, regardless of the work savings of all the waves of technology since then. This meant a huge increase in government and bureaucracy and red tape and taxes and government credit requirements.
The initial huge influx of all this socialism was very controversial at the time and was called the New Deal. The New Deal with all its programs and regulations had no other purpose historically but to stop the workweek from going down. That's right. FDR had no masterplan in mind except to go in the opposite direction of the Black-Connery bill that passed the Senate in 1933 and lowered the workweek for interstate trade to 30 hours a week. A number of frightened businessmen in Philadelphia and Chicago fllocked to FDR and pressured him to block Black-Connery in the House of Representatives, and to do anything he had to do to block it. "Anything he had to do" equated to the burgeoning programs, regulations, taxes and debt of the New Deal - none of which worked more than 40% until - you guessed it - World War II.
Businessmen in New England and Detroit did not participate in this self-hobbling crusade. Henry Ford had wanted his employees to afford their own products. Albert Deane of GM had come up with a social security plan that shared existing work instead of straining to create additional work. Ditto Governor John Winant with his "New Hampshire Plan." Ditto Hoover's Teagle Commission for work sharing instead of job creation. The difference is, work sharing adjusts to technology. Job creation creates jobs at an arbitrary level (e.g., 40 hrs/wk) permanently frozen regardless of all future technology, so technology never makes things better for everybody - it just makes all employees more and more superfluous.
All these plans were sidelined when FDR flipflopped, after pushing work sharing through the Senate, by blocking it in the House. And we got war. War's bittersweet boom lasted 25 years before the fundamental problem returned - no automatic mechanism for sustaining markets in the face of creeping peacetime technological displacement and labor redundancy. Now we're more than 25 years into this new, vehemently denied labor surplus with nothing but New Deal and Great Society and Pentagon bandaids and crutches and IVs and splints and transfusions and facelifts to fight it with - 65 years of economic life support and counting.
Gentlemen (for the vast majority of you are indeed white males), pick one:
P.S. THE book on all this is Ben Hunnicutt's "Work Without End" (Temple Univ: Philadelphia, 1988) - still available in paperback by special order from your nearest bookstore. And then there's Phil Hyde's new book, Timesizing, Not Downsizing - $14 from the Harvard Coop, 1400 Mass. Ave, Harvard Sq, Cambridge MA 02138, USA, 617-499-2000. Also at Harvard Books in Harvard Square. Also from the publisher, Groundwork Ideas Press, PO Box 117, Harvard Sq, Cambridge, MA 02238. Retailers can order the book from the distributor, Bryant Altman, Endicott St Bldg 26, Norwood MA 02062, USA, 781-762-3339.