The Employment Act of 1946: still working after 50 years

USA Today (Society for the Advancement of Education), Nov, 1996 by Murray L. Weidenbaum

The 1982 economic report highlighted the growing tendency to give greater weight to the limits of the effective role of government in the economy. For example, the mainstream of the economics profession now believes that government efforts to intervene directly in wage and price decision-making in the private sector usually are ineffective or inefficient. Moreover, government can not fully anticipate the future course of the economy. Neither can government direct economic outcomes with any degree of precision.

Modernizing the act

Annual economic reports, by advisers to Democratic and Republican presidents, usually now contain one or more chapters on microeconomic issues. Typically, these sections of the report focus on government regulation of private economic activity. Currently, there is an appropriate opportunity to raise the subject of employment again. What I have in mind is in the spirit of the opening policy declaration of the Employment Act, but consistent with a more modern interpretation.

Thus, I hope that, in the near future, a section of the council's report attempts to link the earlier concern with achieving "maximum employment" with the current emphasis on improving economic efficiency. Specifically, I urge some long-overdue attention to a phenomenon that can be called "the discouraged employer." This would deal with the many aspects of government regulation and ancillary activity that discourage employers from directly adding to their payrolls.

For instance, the effort to shield smaller businesses from often byzantine regulation of the workplace has resulted in the creation of serious barriers to expansion of an organization's workforce. Thus, some employers are on record that they will avoid hiring their 50th worker because of the onerous regulations that would be triggered by that otherwise desirable action. Such governmental obstacles to "maximum employment" deserve the attention of both of the agencies created by the Employment Act.

Taken as a whole, the Employment Act of 1946 has fumed out to be a durable contribution to government policymaking. From the act's passage, it signaled the notion that national economic policymaking is a continuing function of the Federal government. That this proposition so commonly is accepted as a matter of fact is a tribute to the workings of this compromise legislation. The fact that the two organizations established by the 1946 act remain alive underscores the point.

After half a century, should the legislation be revised? Personally, I think not. The experience of the Hutnphrey-Hawkins Bill is compelling. In effect, that was an attempt to expand the 1946 legislation into a commitment to undertake national economic planning on a formal basis. In practice, the compromise (enacted as the Full Employment and Balanced Growth Act of 1978) was a hodgepodge of wishful thinking and special-interest pleading, but without any real teeth in it. In recent years, the Council of Economic Advisers has ignored or soft-pedaled the mandate to forecast all the good things required by the law and particularly to set numerical goals for key economic indicators over a five-year horizon. Nobody seems to have missed that wheelspinning exercise.