Humphrey-Hawkins Full Employment Act
Encyclopedia
The Full Employment and Balanced Growth Act (known informally as the Humphrey–Hawkins Full Employment Act), is an act of legislation
by the United States government.
of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with private enterprise. Some Congressmen, dissatisfied with the vague wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy.
The Act's sponsors embraced conventional Keynesian economic theory
, which advocates aggressive government spending to increase economic demand. In particular, Keynesian theory asserts that the government can minimize the shock of business fluctuations by compensatory spending, intended to maintain or inflate investment levels by government spending.
Consistent with Keynesian theory, the Act provides for measures to create temporary government jobs to reduce unemployment, as was attempted during the Great Depression
.
Somewhat contradictorily, the Act also encouraged the government to develop a sound monetary policy
, to minimize inflation, and to push toward full employment
by managing the amount and liquidity of currency in circulation.
Overall, the Act sought to formalize (and to expand Congress's role in) the economic policy process, as governed by the Federal Reserve and the President.
created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter
on October 27, 1978, and codified as 15 USC § 3101. The Act explicitly instructs the nation to strive toward four ultimate goals: full employment
, growth in production, price stability, and balance of trade
and budget
. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. (An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal.) In brief, the Act:
The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals over time.
If private enterprise appears not to be meeting these goals, the Act expressly allows the government to create a "reservoir of public employment." These jobs are required to be in the lower ranges of skill and pay to minimize competition with the private sector.
The Act directly prohibits discrimination
on account of gender, religion, race, age, and national origin in any program created under the Act.
Legislation
Legislation is law which has been promulgated by a legislature or other governing body, or the process of making it...
by the United States government.
Impetus and strategy
Unemployment and inflation levels began to rise in the early 1970s, reviving fears of an economic recession. In the past, the country's economic policy had been defined by the Employment ActEmployment Act
The Employment Act of 1946 ch. 33, section 2, 60 Stat. 23, codified as , is a United States federal law. Its main purpose was to lay the responsibility of economic stability of inflation and unemployment onto the federal government...
of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with private enterprise. Some Congressmen, dissatisfied with the vague wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy.
The Act's sponsors embraced conventional Keynesian economic theory
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...
, which advocates aggressive government spending to increase economic demand. In particular, Keynesian theory asserts that the government can minimize the shock of business fluctuations by compensatory spending, intended to maintain or inflate investment levels by government spending.
Consistent with Keynesian theory, the Act provides for measures to create temporary government jobs to reduce unemployment, as was attempted during the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
.
Somewhat contradictorily, the Act also encouraged the government to develop a sound monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
, to minimize inflation, and to push toward full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
by managing the amount and liquidity of currency in circulation.
Overall, the Act sought to formalize (and to expand Congress's role in) the economic policy process, as governed by the Federal Reserve and the President.
Overview
In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator Hubert HumphreyHubert Humphrey
Hubert Horatio Humphrey, Jr. , served under President Lyndon B. Johnson as the 38th Vice President of the United States. Humphrey twice served as a United States Senator from Minnesota, and served as Democratic Majority Whip. He was a founder of the Minnesota Democratic-Farmer-Labor Party and...
created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...
on October 27, 1978, and codified as 15 USC § 3101. The Act explicitly instructs the nation to strive toward four ultimate goals: full employment
Full employment
In macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
, growth in production, price stability, and balance of trade
Balance of trade
The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
and budget
Balanced budget
A balanced budget is when there is neither a budget deficit or a budget surplus – when revenues equal expenditure – particularly by a government. More generally, it refers to when there is no deficit, but possibly a surplus...
. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. (An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal.) In brief, the Act:
- Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals.
- Instructs the government to take reasonable means to balance the budget.
- Instructs the government to establish a balance of tradeBalance of tradeThe balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
, i.e., to avoid trade surpluses or deficits. - Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability.
- Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the CongressMonetary Policy Report to the CongressThe Monetary Policy Report to the Congress is a semi-annual report prepared by the Board of Governors of the Federal Reserve and presented to the Congress of the United States...
twice a year outlining its monetary policy. - Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the PresidentEconomic Report of the PresidentThe Economic Report of the President is a document published by the President of the United States' Council of Economic Advisers . Released in February of each year, the report reviews what economic activity was of impact in the previous year, outlines the economic goals for the coming year , and...
and to suggest policies that will achieve these goals. - Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.
The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals over time.
If private enterprise appears not to be meeting these goals, the Act expressly allows the government to create a "reservoir of public employment." These jobs are required to be in the lower ranges of skill and pay to minimize competition with the private sector.
The Act directly prohibits discrimination
Discrimination
Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...
on account of gender, religion, race, age, and national origin in any program created under the Act.
Amendments
The language of the Full Employment and Balanced Growth Act was amended twice by riders attached to unrelated or distantly related legislation.- May 10, 1979: Public Law 96-10, attached to H.R. 2283, amended the Act to include Federal outlays as a proportion of the gross national product when calculating numerical goals.
- November 5, 1990: Public Law 101-508, attached to the Pollution Prevention Act, required the Economic Report to the President to be submitted within twenty days after the start of the session of Congress instead of within ten days after the submission of the annual budget.