This is the third part in a on-going series that I am writing about Deep Adaptation, Degrowth and related concepts, all of which are designed to provide some sort of pathway beyond the current mess that the world is in with respect to climate, inequality, poverty, excessive consumption, and excessive population growth. Today, I consider…
What is a Job Guarantee?
This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. The topic of this blog is the concept of employment guarantees as the base-level public policy supporting a return to full employment in Australia. We introduce the specific proposal – the Job Guarantee. In the next background blog we will see how much the Australian government needs to invest to make this policy improvement possible.
The complete suite of Fantasy Budget blogs are as follows:
- The indecent inconsistency of the neo-liberals
- Australia output gap – not close to full capacity
- Daily macroeconomic income losses from unemployment
- The Australian labour market – 815 thousand jobs from full employment
- What is a Job Guarantee?
- Investing in a Job Guarantee – how much?
- MMT Budgetary Principles
- The Fantasy Budget 2013-14
The recent background blogs (see links above), I provided some perspectives on how much capacity for real expansion currently exists in Australia. While these exercises involve considerable judgement, there is little doubt that there is significant idle capacity in the Australian economy.
The following (interrelated) conclusions emerged:
- Relative to the recent best unemployment rate period (February 2008) the Australian economy sacrifices $A77.4 million in lost national output and income every day as a result of the Government’s failure to attack the unemployment problem.
- Relative to what would be a fairer representation of the true full employment unemployment rate (2 per cent) the Australian economy is foregoing $150.5 million in lost national output and income every day.
- Trend growth in Australia is between 3.1 per cent and 3.4 per cent. The annualised quarterly real GDP growth rate in Australia (from the December-quarter 2012) is 2.4 per cent and falling. The annual growth rate for 2013 will be below that given a further deterioration in the economy.
- Relative to trend growth, the incremental annual output gap (expressed as a percentage of trend real GDP) for 2012 was around 3.9 per cent or $A60 billion. The gap for the December-quarter had risen to 4.3 per cent reflecting the slowdown in the economy over 2012.
- The total estimated labour wastage in Australia – taking into account unemployment, hidden unemployment and underemployment – is currently at 13.9 per cent of the available labour force.
- To get back to where the economy was at the start of the crisis in February 2008 would require some 398 thousand jobs to be created. This would ensure the unemployment rate was 4 per cent, the underemployment rate 5.9 per cent and the participation rate at its February 2008 level.
- But at February 2008, the broad ABS labour underutilisation rate was close to 10 per cent, which means the economy wasn’t at full employment then.
- If we define a reasonable full employment policy goal of 2 per cent unemployment, zero hidden unemployment and zero underemployment, then the Australian labour market needs to create a further 815 odd thousand jobs.
The question that arises is this: Can we create enough jobs within the estimated output gap so as not to push nominal expansion beyond the real capacity of the economy to absorb it?
In advocating further fiscal stimulus, it would be useful to directly target job creation. There are three broad ways in which this could be done: (a) expand the career public service; (b) subsidise private employers; and (c) create a new public sector buffer employment capacity.
While options (a) and (b) have advantages and disadvantages, the first step in restoring full employment should be option (c).
As the first step to restoring full employment, the national government should introduce an open-ended public employment program – a Job Guarantee – that offers a job at a living (minimum) wage to anyone who wants to work but cannot find employment.
While introducing a public sector job creation capacity to the economy, the Job Guarantee is actually a macroeconomic policy framework designed to ensure full employment and price stability is maintained over the private sector business cycle.
The Job Guarantee jobs would ‘hire off the bottom’, in the sense that minimum wages are not in competition with the market-sector wage structure.
By not competing with the private market, the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism, which attempted to maintain full capacity utilisation by ‘hiring off the top’ (i.e. making purchases at market prices and competing for resources with all other demand elements).
Job Guarantee workers would enjoy stable incomes, and their increased spending would boost confidence throughout the economy and underpin a private-spending recovery.
The Australian government could afford this program because it has has no financial constraint as the issuer of the currency.
|The only question is whether there is enough real capacity in the economy (available resources and output space) for the extra government spending.|
From our previous estimates of the output gap there would appear to be more than enough spare capacity in the economy to accommodate this policy shift.
The labour is available for work, and the government can easily supply the jobs. Few questions were asked when the government, in the early days of the crisis, instantly provided billions for the banks.
What is the Job Guarantee?
Between 1945 and the mid-1970s, western governments realised that, with deficit spending supplementing private demand, they could ensure that all workers who wanted to work could find jobs. Although private employment growth was relatively strong during this period, governments were important employers in their own right, and also maintained a buffer of jobs for the least skilled workers; for example, in the major utilities, the railways, local public services and major infrastructure functions of government. By absorbing workers who lost jobs when private investment declined, governments acted as an economic safety valve.
British economist Paul Ormerod (quote from the Death of Economics) noted that the economies that avoided high unemployment in the 1970s maintained a:
… sector of the economy which effectively functions as an employer of last resort, which absorbs the shocks which occur from time to time, and more generally makes employment available to the less skilled, the less qualified.
He concluded that societies with a high degree of social cohesion (such as Austria, Japan and Norway) were willing to broaden their concept of costs and benefits of resource usage to ensure that everyone had access to paid employment opportunities.
It is in that context that the Job Guarantee (JG) can be understood. The program has the following summary features.
The Government operates a buffer stock of jobs to absorb workers who are unable to find employment in the private sector. The pool expands (declines) when private sector activity declines (expands). The JG fulfills this absorption function to minimise the costs associated with the flux of the economy. So the government continuously absorbs into employment, workers displaced from the private sector.
The “buffer stock” employees would be paid the minimum wage, which defines a wage floor for the economy. Government employment and spending automatically increases (decreases) as jobs are lost (gained) in the private sector.
The JG works on the “buffer stock” principle. Recall the Wool Floor Price Scheme introduced by the Commonwealth Government of Australia in November 1970. The scheme was relatively simple and worked by the Government establishing a floor price for wool after hearing submissions from the Wool Council of Australia and the Australian Wool Corporation (AWC).
The Government then guaranteed that the price would not fall below that level by using the AWC to purchase stocks of wool in the auction markets if demand was low and selling it if demand was high. So by being prepared to hold “buffer wool stocks” in low demand and release it again in times of high demand the government was able to guarantee incomes for the farmers.
However, with some lateral thinking you can easily see that what the Wool Floor Price Scheme generated was “full employment” for wool! If the Government fixed the price that it was prepared to pay and then was willing to buy all the wool up to that price then you have an equivalent scheme.
This works just the same for labour resources – just unconditionally offer to buy all labour at a stated fixed wage and you create full employment. What should that wage be?
To avoid disturbing private sector wage structure and to ensure the JG is consistent with stable inflation, the JG wage rate is best set at the minimum wage level. The JG wage may be set higher to facilitate an industry policy function.
The minimum wage should not be determined by the capacity to pay of the private sector. It should be an expression of the aspiration of the society of the lowest acceptable standard of living. Any private operators who cannot “afford” to pay the minimum should exit the economy.
Australia has a well-defined minimum wage setting structure.
The Government would supplement the JG earnings with a wide range of social wage expenditures, including adequate levels of public education, health, child care, and access to legal aid. Further, the JG policy does not replace conventional use of fiscal policy to achieve social and economic outcomes.
In general, the JG would be accompanied by higher levels of public sector spending on public goods and infrastructure.
Note: that these supplements would be in addition to the scheme but not essential for the scheme to function effectively.
Family Income Supplements:
The JG is not based on family-units. Anyone above the legal working age is entitled to receive the benefits of the scheme. We would supplement the JG wage with benefits reflecting family structure. In contrast to workfare there will not be pressure applied to single parents to seek employment.
Again, note, that these supplements would be in addition to the scheme but not essential for the scheme to function effectively.
The JG would be funded by the sovereign government which faces no financial constraints in its own currency. In the context of the current outlays that are being thrown around in national economies, the investment that would be required to introduce a full blown would be rather trivial.
I will provide detailed estimates of the required outlays in the next background blog.
There is now an extensive literature within what is now known as the Modern Monetary Theory (MMT) tradition on how employment buffer stocks serve to control inflation while not sacrificing the full employment goal.
In brief, when the level of private sector activity is such that wage-price pressures forms as the precursor to an inflationary episode, the government manipulates fiscal and monetary policy settings (preferably fiscal policy) to reduce the level of private sector demand.
This would see labour being transferred from the inflating sector to the “fixed wage” sector and eventually this would resolve the inflation pressures. Clearly, when unemployment is high this situation will not arise.
But in general, there cannot be inflationary pressures arising from a policy that sees the Government offering a fixed wage to any labour that is unwanted by other employers. The JG involves the Government “buying labour off the bottom” rather than competing in the market for labour. By definition, the unemployed have no market price because there is no market demand for their services. So the JG just offers a wage to anyone who wants it.
In contradistinction with the NAIRU approach to price control which uses unemployed buffer stocks to discipline wage demands by workers and hence maintain inflation stability, the JG approach uses the ratio of JG employment to total employment which is called the Buffer Employment Ratio (BER) to maintain price stability.
The ratio that results in stable inflation via the redistribution of workers from the inflating private sector to the fixed price JG sector is called the Non-Accelerating-Inflation-Buffer Employment Ratio (NAIBER). It is a full employment steady state JG level, which is dependent on a range of factors including the path of the economy. Its microeconomic foundations bear no resemblance to those underpinning the neoclassical NAIRU.
It also wouldn’t be worth estimating or targetting. It would be whatever was required to fully employ labour and maintain price stability.
Workfare or Work-for-the-Dole:
Many people think that the JG is just Work-for-the-Dole in another guise. The JG is, categorically, not a more elaborate form of Workfare.
Workfare does not provide secure employment with conditions consistent with norms established in the community with respect to non-wage benefits and the like.
Workfare does not ensure stable living incomes are provided to the workers. Workfare is a program, where the State extracts a contribution from the unemployed for their welfare payments. The State, however, takes no responsibility for the failure of the economy to generate enough jobs.
In the JG, the state assumes this responsibility and pays workers award conditions for their work.
Under the JG workers could remain employed for as long as they wanted the work. There would be no compulsion on them to seek private work. They could also choose full-time hours or any fraction thereof.
The JG would be integrated into a coherent training framework to allow workers (by their own volition) to choose a variety of training paths while still working in the JG.
However, if they chose not to undertake further training no pressure would be placed upon them.
The existing unemployment benefits scheme could be maintained alongside the JG program, depending on the government’s preference and conception of mutual responsibility.
My personal preference is to abandon the unemployment benefits scheme and free the associated administrative infrastructure for JG operations.
The concept of mutual obligation from the workers’ side would become straightforward because the receipt of income by the unemployed worker would be conditional on taking a JG job.
The JG wage could be paid to anyone who turned up at some designated Government JG office even if the office had not yet organised work for that person.
I would also allow a person a short-period – perhaps two weeks – in between losing their job and starting a JG job – to sort out their affairs. This period would be covered by full JG pay.
For financial reasons explained below, the JG would be financed federally with the operational focus being local. Local Government would be an important administrative sphere for the actual operation of the scheme.
I would abandon the Jobs Services Australia Network and restore the Commonwealth Employment Service (CES), which would play and important role in coordinating the JG demand and supply with local level managers.
Local administration and coordination would ensure meaningful, value-adding work was a feature of the JG activities.
Type of Jobs:
Between 2005-2008, the Centre of Full Employment and Equity (known as CofFEE) – conducted a three-year study involving extensive interviews with Local Government engineers and managers in Australia.
Their final Report – Creating effective local labour markets: a new framework for regional employment policy – develops a new framework for the design of regional employment policy. It emphasises increased public sector infrastructure spending, the implementation of a National Skills Development framework and the introduction of a national Job Guarantee. The proposed new integrated policy framework would provide more effective ways to assist disadvantaged individuals into employment and advance sustainable solutions to persistent unemployment across regional Australia. In-stock products, short-term relief by the suppliers and nationwide solutions can bring this issue to our attention.
It also provides an exhaustive analysis of the community- and environmentally-based projects that could be completed at the regional level if Federal funds were forthcoming.
The JG workers would contribute in many socially useful activities including urban renewal projects and other environmental and construction schemes (reforestation, sand dune stabilisation, river valley erosion control, and the like), personal assistance to pensioners, and other community schemes. For example, creative artists could contribute to public education as peripatetic performers. The Report goes into much greater detail.
The buffer stock of labour would however be a fluctuating work force (as private sector activity ebbed and flowed). The design of the jobs and functions would have to reflect this. Projects or functions requiring critical mass might face difficulties as the private sector expanded, and it would not be sensible to use only JG employees in functions considered essential.
Thus in the creation of JG employment, it can be expected that the stock of standard public sector jobs, which is identified with conventional Keynesian fiscal policy, would expand, reflecting the political decision that these were essential activities.
Open Economy Impacts:
The JG requires a flexible exchange rate to be effective. A once-off increase in import spending is likely to occur as JG workers have higher disposable incomes. The impact would be modest. We would expect any modest depreciation in the exchange rate to improve the contribution of net exports to local employment, given estimates of import and export elasticities found in the literature.
The JG proposal will assist in changing the composition of final output towards environmentally sustainable activities. These are unlikely to be produced by traditional private sector firms because they have heavy public good components. They are ideal targets for public sector initiative.
Future labour market policy must consider the environmental risk-factors associated with economic growth. Possible threshold effects and imprecise data covering the life-cycle characteristics of natural capital suggest a risk-averse attitude is wise.
Indiscriminate (Keynesian) expansion fails in this regard because it does not address the requirements for risk aversion. It is not increased demand per se that is necessary but increased demand in certain areas of activity.
The JG is green.
It is obvious that this summary will not answer all your questions. More reading is provided below.
When compared to a policy that maintains persistently high levels of unemployment, which incur millions of dollars in lost output and income per day, the JG has to be a better alternative.
The private sector has never employed all the available labour force.
It is the time the Government acknowledged that and stopped lying about the state of the labour market.
For detailed analysis and answers to all the questions you might have please consult the following work.
- Creating effective local labour markets: a new framework for regional employment policy – this report was the result of a three-year study and extensive interviews with Local Government engineers and managers. It .
- Mitchell, W.F. (1998) ‘The Buffer Stock Employment Model and the NAIRU: The Path to Full Employment’, Journal of Economic Issues, 32(2), June, 1-9.
- Several blog articles available from this – Job Guarantee – archive
(c) Copyright 2013 Bill Mitchell. All Rights Reserved.
This Post Has 18 Comments
I find that the lost output has a bigger impact if you scale it up to annual figures, and if you express it in terms of days of work. It allows you to emphasise the billion.
For example, 1.5 billion days of output lost to the economy per year for no reason at all.
Very large number – immediately relatable by anybody to their personal experience.
You fail to answer the one crucial issue with job guarantees – what if the person given the job refuses to do it, or fails to work in a normal manner (consistently late, drunk, sloppy or negligent work, abusive to other work colleagues or superiors)? Its all very well saying a person will be given a job with all the usual legal protections, but what about the protections for the employer (the State in this case) to dismiss an employee who refuses to work or is actively disruptive or negligent? Are you prepared to dismiss people from their JG jobs and not give them another one?
Because in the UK there are vast swathes of the benefit claiming classes who are functionally unemployable. The concept of getting up for work every day at 8am and turning up on time, and doing a days graft without punching the supervisor (“bcos ‘e was looking at me funny, innit?”) is completely unknown to them. What do you do with such people under a JG scheme?
“Because in the UK there are vast swathes of the benefit claiming classes who are functionally unemployable.”
Any numbers on how many those “functionally unemployable” are and how and when that has been measured?
Dear Jim (at 2013/05/05 at 19:24)
Please provide official sources of data to verify the statement “in the UK there are vast swathes of the benefit claiming classes who are functionally unemployable”. How many are swathes?
Once we have verified the scale of the issue with robust research finding and/or official data then I might have a conversation with you about it.
It doesn’t matter whether there is one or 100 thousand of them. If one person acts badly, and is not in any way punished, and continues to get their pay regardless, then everyone else knows the score, and bad behaviour will multiply out of control. You are assuming that all people who get money from the State now for nothing actually do want to work. I do not make that assumption, indeed I would make the opposite position and assume that there will be a significant proportion who do not want a job at all, and design any scheme to take that into account. Any scheme must address that problem or face widespread p*ss taking. I mean, would you want to turn up for work on your JG site, knowing that some of your colleagues won’t turn up (but will still get paid), that you could be abused or assaulted by work colleagues (who could be drunk/high) and no action would be taken against them? That your safety could be compromised by negligent workers? That sexual harassment and bullying would be rife with no sanctions taken against offenders? Even the genuine people who wanted to work would soon get hacked off with it.
The Job Guarantee is a a job like any other. And you can be fired from it, subject to disciplinaries and all the rest.
It’s a job – with the wages paid for by the state.
As Bill mentions above:
” do not make that assumption, indeed I would make the opposite position ”
You can take that position. But it would be based on the fear and prejudice apparent in your post rather than any solid empirical evidence.
People who are abusive, unwell or incapable fall into the remit of the criminal, health and social care system and the sickness provisions of the job system just as it does in any other job.
And that leaves the Job Guarantee to deal with everybody else.
Let’s not forget that the Probation Services is able to get people to do community work *after* they have been convicted and sentenced to a Community Service Order.
So if you can get criminals to do unpaid work, then getting those who are merely unfortunate to do paid work is going to be pretty straightforward.
Having just read your blog I came across this piece in The Spectator magazine.
“My overriding impression of Japan was how very clean it was – the stations spotless, the streets litter-free. The Japanese seem to have come out of their ten years of stagnation in remarkably good shape. I have never seen so many cleaners, sweepers, gardeners and maintenance people. Everywhere there are minor officials in smart uniforms, bowing and smiling. How does the government afford them?
Diary: Anthony Horowitz*
The Spectator [Kindle Edition] 4 May 2013
I recall that Paul Ormerod made a similar observation in his ‘The Death Of Economics’.
*Note – Horowitz is the writer of the UK TV series ‘Foyles War’.
It does matter whether it is one or 100,000. If it is one, it can be classed as a kind of anomaly and dealt with accordingly along the lines suggested by Neil. But if it is 100,000, then there is something undoubtedly amiss in the social structure of the situation which needs to be addressed. And this has nothing to do with the JG; it could take place anywhere, like Bangladesh.
Jim:Because in the UK there are vast swathes of the benefit claiming classes who are functionally unemployable.
True, in the UK and everywhere else.
The concept of getting up for work every day at 8am and turning up on time, and doing a days graft without punching the supervisor (“bcos ‘e was looking at me funny, innit?”) is completely unknown to them. What do you do with such people under a JG scheme?
OK, except that they don’t punch the supervisors. They are the supervisors, the managers, the 1% and the 1% of the 1%, the banksters, the Wall-Streeters. A good JG position for them would be teaching seminars on con games and how not to be taken in by them. Their JG wages would initially be given to their students, to force the professors to show up to class, and the professors’ work would be to extract the loot from them. Everybody would have a lot more real fun in life that way than the current system, of letting these craziest inmates run the asylum, which is pretty silly after all.
The problems you fear boil down to fraud: the joker pretends to sell his labor-power to the state, but doesn’t really (intend to) keep up his side of the bargain. Just deal with them as fraud is dealt with in other contexts. The simplest and most effective is to simply not do further bidness with the inveterate fraudster. I.e. don’t give another JG job. Though the nice government should let things shake out for a while, because most will be able to find a suitable JG job after a few tries. I outlined above how to deal with the hardest cases.
Watch ‘The Day the Immigrants Left’, a BBC documentary that is ostensibly about Eastern European migrants ‘taking the jobs’ of native residents of Wisbech, Lincolnshire, and then let me know how the JG would deal with people like that.
Bill said ” it would be useful to directly target job creation. There are three broad ways in which this could be done: (a) expand the career public service; (b) subsidise private employers; and (c) create a new public sector buffer employment capacity.”
I can think of a fourth way that is applicable to the US — stop sending jobs overseas !
And a 5th way — stop importing foreign workers to take American jobs !
Here’s the deal — MMT supports free trade, which has resulted in millions of good paying skilled jobs being lost to 3rd world countries. And MMT’s response is “don’t worry, mate, we’ll replace your well paid skilled job with a minimum wage unskilled JG job. If you refuse the dead end JG job, then we’ll cut off your benefits — assuming you’re one of the lucky 13% of unemployed Americans who receive unemployment benefits.”
Remember, Stalin eliminated unemployment — point being, it’s not good enough to merely create something called a “job”. The “job” needs to utilizes the worker’s skills and aptitudes and provide some satisfaction to the worker. And it needs to be voluntary, otherwise it’s not a job, it’s slavery.
Bill said: “the government can easily supply the jobs.” Well…… it can easily supply UNSKILLED jobs. Specialized skilled jobs are not so easy to “supply.” MMT has not addressed this.
Bill said: ‘The JG works on the “buffer stock” principle.’ Buffer stocks work for commodities. Humans are not commodities, except perhaps for UNSKILLED labor, if even that.
Bill said: “This works just the same for labour resources – just unconditionally offer to buy all labour at a stated fixed wage.” So you’re going to stuff all this labor in a warehouse like bundles of wool ? “Labor” means skills and knowledge, sometimes EXTREMELY specialized skills and knowledge. MMT has no plan to deal with skilled labor.
Bill said: ‘The Government would supplement the JG earnings with a wide range of social wage expenditures, including adequate levels of public education, health, child care, and access to legal aid.’ I agree with those aspirations but the fact is they do not exist in the US. Further, the US minimum wage is not a living wage. So proposing to Americans that they accept a minimum wage job, without first addressing all those other things is not terribly appealing.
Bill said: ‘We would supplement the JG wage with benefits reflecting family structure.’ Specifics ? Why not just pay a living wage that does not require additional financial benefits ? In the meantime, the US safety net is a joke and proposing that unemployed Americans must accept a minimum wage job is not very appealing.
Bill said: ’employment buffer stocks serve to control inflation’ A JG would control the price of unskilled labor and not much else. When was the last inflationary episode driven by the price of unskilled labor ? WWII, if even that ??? What about the price of international commodities causing inflation ? If the wheat harvest fails in Russia, if the Sauds raise the price of oil, or if the Chinese bid up the price of metal, that may cause inflation regardless of the price of unskilled labor in the home country.
Bill said: ‘The JG would be integrated into a coherent training framework to allow workers (by their own volition) to choose a variety of training paths while still working in the JG.’ Specifics on this “coherent training framework” ??? Suppose the logical training path for an unemployed mechanical engineer is graduate school ? Are you going to pay him to go to graduate school ? Without specifics, your plan is not very convincing. (and yes I have read your 300 page proposal and was not impressed)
Bill said: ‘The existing unemployment benefits scheme could be maintained alongside the JG program ….. the receipt of income by the unemployed worker would be conditional on taking a JG job.’ So an unemployed skilled worker would have to either accept the dead end JG job or else face starvation and homelessness ? And you think that is humane and in the best interests of society ?
Yes, I did read your 300 page report and I was quite put off by it. Namely 1) no safety net for those who cannot or will not fit into the JG program, 2) it totally ignores skilled workers, and 3) there is no mention of the role of the individual’s educational achievements in determining what sort of job is “suitable.”
Here is what your 300 page report offers in the way of “skilled” positions:
Rail track worker
All of those positions are commonly performed by high school dropouts. They are not “skilled” positions. The report totally fails to address the unemployed skilled worker.
Bear in mind, I am writing from America, where only about 13% of the unemployed receive unemployment benefits and only about half of those below poverty level receive food stamps. Our real unemployment rate is around 12% and it affects all ages and skill levels, not just the young and unskilled. We have engineers delivering pizzas and PhD’s on food stamps. We have 50 – 60 year old unemployed people who are unemployable because employers prefer younger workers.
Your JG proposal, as it stands, would create unskilled jobs suitable for young, unskilled workers — and that’s a good thing as far as it goes — but falls far short of Minsky’s original proposal to create jobs that match the skills of the unemployed.
I cannot support your proposal as it stands. It is not realistic and it is not humane. Your attitude seems to be “if an individual cannot fit into our model, then there must be something wrong with the individual, because our model is perfect.”
I would support a JIG — a JG backed up by a no-questions-asked basic income guarantee. That way, individuals who do not fit into the low-skilled JG program would not face starvation and homelessness. That way the JG work would truly be a voluntary “job,” not involuntary Stalinesque forced labor.
Mind you, I find Minsky’s original ELR proposal quite appealing, especially the part about creating jobs to suit the individual’s skills, it’s just that no one, myself included, has figured out how to actually make that a reality other than for unskilled and low-skilled jobs. I suggest the MMT community needs to face up to that and deal with it.
Regarding inflation, since most inflation is driven by international commodities like oil, perhaps it would make more sense to have buffer stock programs for commodities, particularly food and energy, rather than a buffer stock of labor ?
Bill claims: “Under the JG workers could remain employed for as long as they wanted the work. There would be no compulsion on them to seek private work.” (I assume that what Bill meant there was not “private work” but “regular work”. That is whether a JG employee aims to ultimately get a regular private or regular public sector job is immaterial, far as I can see.)
Anyway . . . obviously we all agree there shouldn’t be “compulsion” in the form of being forced at gun point to seek regular work. But if there is no INDUCEMENT OR INCENTIVE to find regular work, then labour supply to the regular jobs market is constrained, which is inflationary.
E.g.where a JG employee has specific skills or experience that can be used in a regular min wage vacancy, and there is no inducement to move to the latter vacancy, the effect of is to reduce aggregate labour supply to the regular jobs market, which is inflationary.
And leads nicely into my second point . . .
Bill’s claim that JG is not workfare is debatable (under the heading “Workfare or Work-for-the-Dole”). In contrast, under the heading “Unemployment Benefits”, he advocates a system where “the receipt of income by the unemployed worker would be conditional on taking a JG job.” Well now my Oxford Dictionary of Economics defines Workfare in one sentence: “A system making income support for the unemployed conditional on their performing some form of work for which they are suitable.” There is a strong similarity there.
Of course there are differences between JG a la Bill and various worfare schemes. But then in the US every state that wants to implement workfare has its own scheme, and they are all different. Plus in the UK there is the Work Programme, which is workface on the above Oxford dictionary definition.
Rather than pretend that JG is not workfare, I think it would be better to admit that it is, and state loud and clear what the main advantage of the workfare element is, which is as follows.
If JG is PURELY VOLUNTARY, and those attracted to it are attracted by the wage and non-wage benefits, then ipso facto the RELATIVE ATTRACTIONS for them of regular employment will decline. And the effect of that is inflationary. Ergo there has to be an element of compulsion, or “workfare” as defined by the Oxford dictionary.
“But if there is no INDUCEMENT OR INCENTIVE to find regular work, then labour supply to the regular jobs market is constrained, which is inflationary.”
Same argument as against the minimum wage, and that has been shown empirically to have no discernible effect on the level of employment.
The incentive to provide ‘regular’ work comes from the private sector. They have to compete away people from the Job Guarantee by paying people more and offering better quality jobs and opportunities.
Why is competition for labour bad, when it is apparently such a great idea everywhere else? Are you saying competition doesn’t work to improve quality and efficiency?
And of course anybody who objects to better quality jobs for people can be immediately placed into the Niall Ferguson category.
Calling inflation every time somebody tries to suggest doing something different is a tired old argument that doesn’t stack up in reality. Because constraints are liberating – allowing innovation and improvement to processes and procedures to move to the fore.
Businesses always want cheap flexible labour in the same way that five year olds always want candy. And the response is the same in both cases.
Ralph you would find inflation in a bucket of cold sick
So comical that this discussion is so convoluted, yet the conclusion is a simple tautology, and inescapable logic.
Distributed engagement is the closed circle of fiat.
You can’t grow fiat without people expressing it.
Don’t get no simpler than that.
Said another way, fiat currency is the notation thrown off when real people execute real transactions.
When groups of people compound the fruits of teamwork, and generate the astounding return-on-coordination, unlimited amounts of fiat are automatically generated.
The sky’s the limit. IF the 1% don’t hold the 99% back.
“The Death Of Economics” gotta love it! 🙂
My feelings exactly!
Ms. & Mr. Electorate, Tear Down this Navel Blockade!
“How does the government afford them?”
Hilarious! How have we EVER afforded ourselves? Like bumblebees flying, we should never have happened. We were ALWAYS out of fiat! 🙁 Through min 200K years of evolution no less!
Regarding this statement:
“By not competing with the private market, the Job Guarantee would avoid the inflationary tendencies of old-fashioned Keynesianism, which attempted to maintain full capacity utilisation by ‘hiring off the top'”
This seems to imply that the ‘old-fashioned Keynesianism’ is liable to cause a “crowding out” effect of sorts. But if the economy is operating well below capacity, as Bill rightly says, then there should be no good reason for ‘crowding out’ or demand-pull inflationary effects to occur while the unused capacity remains.
The problem with my suggestion (above) is that ‘good reason’ assumes a broadly competitive economy which we don’t have. In the absence of strong, effective competition policy, inflation would occur as the benefits of rising demand are captured by corporate oligoploies and monopolies of which we have plenty.
All worthy stimulus proposals, the job guarantee included, need something solid to address the competition problem and they need it as a prerequisite.