This file is a single polemical economics essay from The Freeman, with an inserted notice for a related debate booklet. Sennholz writes against the 1984–85 high-school debate resolution proposing federal employment for all employable poor citizens. His thesis is that an “employer of last resort” policy mistakes government for the cure when, in his account, government intervention is a leading cause of unemployment and poverty.
The essay opens by placing the debate in a longer political sequence: Roosevelt’s New Deal, Johnson’s War on Poverty, and Carter-era anti-poverty politics. For Sennholz, their continuity is itself evidence against federal remedies.
And yet, the poor are still with us.
His first conceptual move is to contest the category of American poverty. He argues that official measures reduce poverty to an income threshold and thereby confuse relative inequality with destitution.
American poverty statistics are built on levels of income.
Against this, he contrasts American living standards with global poverty and cites homeownership, savings, appliances, and cars among households classified as poor. The point is not merely statistical but definitional: if poverty is defined as the bottom segment of an income distribution, then poverty can never disappear.
In fact, the concept of inequality of income and wealth always comprises the poor.
The essay then shifts from poverty measurement to unemployment causation. Sennholz’s central reversal is that federal employment proposals treat symptoms while intensifying the disease. He argues that unemployment is not created by business withholding jobs but by political increases in the cost of hiring.
Most government programs seeking to alleviate poverty are treating the effects of unemployment; they never touch the causes.
This leads to the essay’s core economic claim: employment is governed by costs and productivity. Taxes, mandates, union privileges, minimum wages, and monetary cycles all raise labor costs or distort production, producing joblessness among workers whose output cannot cover mandated compensation.
They do not understand that employment is a price and cost phenomenon, and that mass unemployment is the inevitable effect of any government measure that directly or indirectly raises labor costs.
Minimum wage law becomes his principal example. Sennholz argues that young and unskilled workers are priced out of work not by employers’ hostility but by legal wage floors and required benefits.
If a person does not add this amount to production, if he fails to cover his employment costs, he is a candidate for unemployment.
The next section rehabilitates business as the real employer. Firms hire, in this view, when labor adds more value than it costs; government and unions raise costs, while business continually adjusts to avoid layoffs.
In reality, business is the only genuine source of production, employment, and income.
The “employer of last resort” proposal is therefore, for Sennholz, a perverse solution: it gives more authority to the institution he identifies as the culprit. Public works and make-work programs may visibly hire idle workers, but they sustain wage levels above market-clearing rates and transfer resources away from private production.
To make government their employer of last resort is to put the culprit in charge and urge him to continue his transgressions.
His financing argument is equally direct. Since the state has no independent productive fund, public jobs must be paid for by taxation, borrowing, or inflation, each of which reduces private consumption or capital formation.
Government has no source of income and wealth of its own. Every penny spent is taken from someone.
The final section broadens the claim from employment programs to the transfer state. Sennholz lists federal cash, medical, food, housing, educational, military, and civilian payroll supports to argue that tens of millions already depend on tax dollars. The burden, he concludes, lowers living standards for producers and eventually undermines the very production on which redistribution depends.
All transfer systems have limits beyond which economic production is bound to decline and poverty is certain to multiply.
The essay’s relevance lies in its compact free-market critique of job-guarantee proposals. Its structure moves from historical framing, to poverty measurement, to labor-cost theory, to minimum wage and union criticism, to the fiscal critique of public employment and welfare dependency. Its governing move is causal inversion: where advocates see federal employment as humanitarian relief, Sennholz sees state intervention as the mechanism that prices workers out of employment and then expands dependency in response.
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