UK workfare plans just show how mean-spirited and ignorant we are

The UK Chancellor George Osborne told the delegates at the 2013 Conservative National Conference in Manchester yesterday that he was ending the culture of getting “something for nothing”. In his – Speech – the Chancellor claimed that “no one will get something for nothing” from now on, in reference to the “Help to Work” program, dubbed a new approach, that would see “(f)or the first time, all long term unemployed people who are capable of work will be required to do something in return for their benefits, and to help them find work”. We should immediately challenge the claim that the unemployed are doing nothing. An appreciation of the function that unemployment buffers plays in the capitalist system would tell one that the people who are forced to be in that buffer are certainly very active and protect the rest of us from the damaging consequences of poorly crafted macroeconomic policy. But beyond that, the evidence is clear – workfare schemes are not effective ways to provide pathways to more permanent employment. They are poorly disguised compliance programs designed to let the most disadvantaged workers in our society know that we resent their existence and, like the usurer in the Merchant of Venice, we want our “pound of flesh” in return for the pittance we provide by means of income support. These programs shine a dirty light on how mean-spirited and ignorant we are – in believing that mass unemployment is anything other than a systemic failure of the economy, in the face of deficient aggregate spending, to produce enough jobs and working hours. They are the means by which we indulge in our neo-liberal delusions – until, of-course, the times comes for you or I to face the sack next!

My first observation when these sorts of rabid plans are announced is to point out what the unemployed actually do. The neo-liberals claim they are doing nothing and being supported to do nothing by the rest of us.

Think about it this way.

The major shifts in unemployment are dominated by shifts in aggregate demand. Now, yesterday, always. There is no convincing evidence that supply-shifts (workers becoming lazy etc) account for the dynamics of unemployment.

The major reason why unemployment has remained high for so long in many nations, including the UK is that these economies have failed to produce sufficient aggregate spending to create the output levels that, at current productivity levels, will generate sufficient hours of work to match the preferences of the workers for such hours.

The battery of supply-side measures (training, harsher work tests, and the like) has failed to break the inverse link between the economic cycle and long-term unemployment.

Private sectors in most countries do not provide enough employment to meet the growth in the labour force. A major explanation for the persistent unemployment over the last 35 years lies in the failure of the public sector to maintain their share of employment.

So what are the unemployed doing? They form an involuntary buffer which rises and falls in tandem with the economic cycle and insulates the rest of us from the vicissitudes of joblessness and poverty.

That is, the unemployed, who are disproportionately drawn from specific (disadvantaged) demographic cohorts perform a significant function – they take the fall for the rest of us when we allow governments to maintain macroeconomic policy that deliberately undermines aggregate demand in the economy.

Those of us who remain employed when the government is running such deficient macroeconomic policy should be thankful that we are not taking up the slack. We “pay” the unemployed pitiful amounts for saving us all “massive” amounts of lost income.

The unemployed also spent their days in ignominy, face serious social dislocation, become sick (physically and mentally), are exposed to the heightened risk of alcohol and substance abuse and family breakdown, and have to see their children inheriting the disadvantage that the system has imposed on the family because there are not enough jobs created.

That is what the unemployed do. From where I sit each day – behind a desk in a safe, well-paid job – that tells me the unemployed are very active and do a lot. The problem is that the systemic failure to create enough jobs forces them to spend their time in a destructive rather than constructive way.

In his Speech, George Osborne outlined the basics of the new labour market policy, which will ensnare several hundred thousand unemployed workers forced to live on income support as a result of the poorly crafted macroeconomic policy:

They will do useful work putting something back into their community.

Making meals for the elderly, clearing up litter, working for a local charity.

Others will be made to attend the job centre every working day.

And for those with underlying problems, like drug addiction and illiteracy, there will be an intensive regime of support.

No one will be ignored or left without help.

But no one will get something for nothing.

Help to work – and in return work for the dole.

Because a fair welfare system is fair to those who need it and fair to those who pay for it too.

The objections to such workfare and intensive assistance plans are many but the UK Government might have been guided by its own Department of Work and Pensions which commissioned an independent study on whether work-for-the-dole schemes actually increased the changes of the participants finding work. The study focused on the US, Canada and Australia.

The August 2008 Report – A comparative review of workfare programmes in the United States, Canada and Australia – does not provide a glowing testimony for the type of scheme the UK Government is now introducing.

It studied the effectiveness of workfare in “reducing welfare caseloads”; in “improving employment outcomes”; and in improving the lot of “clients with multiple barriers”.

In relation to the first objective, it found that:

1. The “dramatic reductions in welfare caseloads” (in the US and Canada) “cannot be attributed to workfare alone”. They found that harsher rules regarding time limits and claim eligibility as well as stronger economic growth which “enabled recipients to find work” were instrumental in the falling caseloads.

Which is what we expect. First, reduce the caseload by forcing people out of the eligible category in any way you can. Second, create employment growth which allows people to get jobs and reduces hiring standards because employers are forced to be less choosy in who they recruit.

2. People were forced off income support “before the workfare phase” became mandatory, which of-course reduces the caseload.

In relation to “improving employment outcomes” it found that:

– There is little evidence that workfare increases the likelihood of finding work. It can even reduce employment chances by limiting the time available for job search and by failing to provide the skills and experience valued by employers.

– Subsidised (‘transitional’) job schemes that pay a wage can be more effective in raising employment levels than ‘work for benefit’ programmes.

– Workfare is least effective in getting people into jobs in weak labour markets where unemployment is high.

– Levels of non-participation in mandatory activities are high in some workfare programmes.

In relation to the third area of concern – improving the lot of “clients with multiple barriers” it found that:

– Workfare is least effective for individuals with multiple barriers to work.

– Welfare recipients with multiple barriers often find it difficult to meet obligations to take part in unpaid work. This can lead to sanctions and, in the most extreme cases, the complete withdrawal of benefits that leaves some individuals with no work and no income.

– Some states in the US have scaled down large-scale, universal workfare programmes in preference for ‘softer’ and more flexible models that offer greater support to those with the most barriers to work. This includes a greater reliance on subsidised jobs that pay wages rather than benefits to participants.

The lessons are many but some key conclusions are found repeatedly in these types of studies.

Work-for-the-dole is an “ineffective” way to help “participants find sustainable employment”. I have written a number of evaluative papers on this topic in response to Australia’s history of these sort of schemes.

We have consistently found that the poor results for these type of labour market programs beg the question as to why should we expect anything better in the absence of policy measures designed to address the quantum of jobs and issues of job security?

Improving employability does not increase the level of aggregate labour demand.

We found that schemes based on “intensive assistance” of welfare caseloads (attitudinal counselling, training etc) produce poor outcomes. The churning of the unemployed through training programs (usually divorced from the paid-work environment) fail and point to the futility of training the unemployed for jobs that are not there.

Typically, training providers face contractual payments which distort their choices with respect to their caseloads. In Australia, it has been found that such payment structures have led to a substantial proportion of intensive assistance participant being ‘parked’ (held on books but with no assistance being given) while providers concentrate their efforts on job seekers who are easier to place in employment.

We have found that outcomes for the various Work for the Dole programs introduced in Australia are poor with only a small proportion of participants finding full-time work or, indeed, any form of employment.

In isolation, supply side measures merely shuffle the jobless queue. The clear danger of this kind of zero-sum redistribution is that policies achieve tentative reattachments to the labour force at the expense of deepening employment insecurity.

Labour-market instability, poverty and indeed welfare dependency are not solved by such measures; they are simply redistributed amongst the same at risk groups.

Upward mobility and absorption of the long-term unemployed into paid employment is most effective when overall employment growth is strong. Supply-side schemes fail when employment growth is weak or negative.

So-called structural reforms only really work when the fiscal environment is strongly supportive of economic growth. They just compound the costs associated with a weak economy, when the government macroeconomic policy is undermining growth.

The language of employment policy and active labour market programs under neo-liberalism, which is exemplified by the UK “Help to Work” approach and the rhetoric in the Chancellor’s Speech, is is that of a society that has abandoned the goal of full employment and now pursues the diminished goal of full employability.

The government no longer ensures that employment growth matches labour force growth but focuses, instead, on getting individuals ‘work ready’, should there be jobs available.

It is the demand-side that tells us how many jobs are available, yet these approaches focus on the supply-side while undermining the demand-side through fiscal austerity.

Nations that adopt this activist bent effectively jettison essential and sustaining conditions for a social democracy and, in doing so, systematically breach human rights.

So the Chancellor’s boast that punitive action will accompany the work-for-the-dole scheme to enforce compliance without a guarantee that there will be sufficient paid work created violates human rights.

Neo-liberal attempts to recast full employment as being consistent with high levels of ‘natural rate’ unemployment are erroneous and anathema to social democratic ideals.

A fully participative social democracy requires that full employment be achieved – meaning that there are enough jobs (and hours of work) to match the aspirations of the labour force.

This places requirements on federal government to use fiscal policy to maintain adequate levels of aggregate spending in the economy. This essential fact is the foundation of macroeconomic theory and requires that the federal government understands the power that derives from its currency-monopoly. It has been ignored by neo-liberalism.

Systemic (macro) failure cannot be speciously ascribed to structural change (in industry employment or labour force composition) or to increased global competition in trade and financial markets. The alleged competitive challenges posed by globalisation have not diminished the power of government to engineer full employment.

These claims are made by neo-liberals who are eager to pin the blame for the persistently high unemployment on the attitudes and motivations of the unemployed.

However, the blames lies squarely on the conduct of macroeconomic policy, and globalisation, by freeing exchange rates, has enhanced the Federal government’s capacity to run independent fiscal policy. While monetary policy is the other arm of macroeconomic policy there is no clear evidence that lower interest rates are significantly stimulative and vice versa.

In the midst of the on-going debates about labour market deregulation, minimum wages and taxation reform, worker attitudes, welfare eroding incentives etc, the most salient, empirically robust fact that has pervaded the last three and a half decades is that actual GDP growth has rarely reached the rate required to achieve and maintain full employment in most OECD nations.

Job Guarantee is not Workfare

Regular readers will know that a major component of Modern Monetary Theory (MMT) is the recognition that the use of employment buffer stocks rather than unemployment buffers (accompanied by workfare schemes) is a superior way to manage the flux and uncertainty of the economic cycle.

We characterise the employment buffer stock approach as the – Job Guarantee – and show how it directly addresses the cause of unemployment and income inequality by requiring the State to use its power as the issuer of currency to maintain full employment and inflation control.

The Job Guarantee requires the public sector to maintain a ‘buffer stock’ of minimum wage jobs that would be available to anyone willing and able to work.

Under the Job Guarantee model, full employment is attained by the guaranteed provision of a public sector job to all workers unable to find a job in the private sector.

It does not rely on engineering labour supply adjustments by paring back returns for those at the bottom of the earnings distribution.

By setting the Job Guarantee wage rate at the level of the national minimum wage, the private sector wage structure is not disturbed and workers cannot be played off against one another to the detriment of their bargaining position.

In recognising that unemployment is not a behavioural dysfunction, but a failure in the conduct of macroeconomic policy, the State can address the problem at its root cause by maintaining full employment and a decent wage floor.

As its name suggests, the Job Guarantee model delivers employment outcomes rather than relying on real wage cuts to generate an unknown quantum of jobs.

Unlike workfare schemes, the Job Guarantee is a policy approach that does not require us to jettison economic security, social justice and the traditional objectives of wage setting in order to build an efficient and productive economy.

The Job Guarantee is 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 Job Guarantee, the state assumes this responsibility and pays workers award conditions for their work.


As I write this blog, the US Congress impasse has continued and the New York Times is reporting that “that 800,000 federal workers were to be furloughed and more than a million others would be asked to work without pay”.

That is a lot of income and spending that will be immediately lost to the economy. The budget deficit will likely rise on the back of the lost tax revenue as the multiplier effects of this negative spending shock reverberate throughout the economy.

Mindless vandalism.

In the UK, they are undermining prosperity in more targetted ways – punishing the victims of austerity with these ineffective workfare schemes.

The motivation is clearly political and aims to develop a “them” (lazy bludgers) and “us” (hardworking taxpayers), divide-and-conquer strategy in order to win the next election which on the basis of their performance since 2010 they face a resounding loss.

But then the UK Opposition is largely spineless and voiceless in all of this. Its major contribution is to claim it will impose austerity in a fairer way.

The problem is that when economic growth is undermined it is always the most disadvantaged and defenceless that bear the brunt. Workfare, unemployment, poverty – there is nothing fair about any of that.

Happy Birthday

To any one having a birthday today – cheers! xxx

That is enough for today!

(c) Copyright 2013 Bill Mitchell. All Rights Reserved.

This Post Has 36 Comments

  1. Of all the sites I visit each morning this is the best at explaining things in a logical and understandable way. I just wish that I could convince more people to read it.
    By the way, the right wingers say that shutting down the US government won’t harm a thing and in fact will be beneficial. As I understand Ted Cruz is a hero.

  2. Not sure if you’ll want to link to this piece of free market propaganda, but it is instructive in showing the political challenge that we face in providing a decent Job Alternative to all.

    The poll, and the leading questions within it, attempt to show that people want the unemployed to work for their benefits rather than being provided with a job by the public sector. Even though functionally they are one and the same thing – leaving aside the intention to punish and wage differences for a moment.

    Worth a read I think to see how the other half think.

  3. Eric Pickles, currently the Secretary of State for Communities and Local Government, made a statement to the press that working for nothing was good for you. It gave you a structure, helped you get up each day, and the like. What he failed to mention was that this unremunerated activity would seriously interfere with the person actually getting a decent paying job, were there even one available – s/he would have less time to check the job ads, write the necessary letters, and go to interviews. What a putz.

  4. Dear Bill

    Shouldn’t the wage paid by the Job Guarantee Plan be set lower than the minimum wage? That way people have an incentive to leave. The Job Guarantee could pay something like 85% of the minimum wage. Of course, the minimum wage should not be set at a ridiculously low level.

    Regards. James

  5. There isn’t much difference between JG and workfare (depending on your definition of workfare). Workfare is defined in the Oxford Dictionary of Economics as “A system making income support for the unemployed conditional on their performing some sort of work for which they are suitable.”

    So both workfare and JG consist of subsidised jobs or jobs specially set up for the unemployed. The only difference is that workfare involves a sanction, i.e. threat of benefit withdrawal for those that refuse the work, whereas JG is voluntary.

    On the other hand there are JG advocates who claim some sort of sanction is in order, in which case there is no difference in principle.

    And there is a good reason for a sanction, as follows. If the unemployed are drawn to temporary subsidised jobs by the attractive pay and conditions of such work, then the relative attractions for them of regular or unsubsidised work is ipso facto REDUCED. And that cuts aggregate labour supply.

    That doesn’t matter if the economy is working at well below capacity – there won’t be inflationary consequences. But in that scenario, JG is not a logical way of creating jobs: a straight rise in aggregate demand is better.

    Alternatively if the economy is AT CAPACITY, then the above reduced attractions of regular work DO MATTER – a cut in aggregate labour supply is inflationary.

    The latter point about the attractions of regular work was set out by me and Lars Calmfors, a Swedish economist about 20 years go. Unfortunately 95% of those who engage in the JG debate just don’t get the point. As far as I can see the standard of debate on this issued has not improved in the last 2,500 years, when Pericles first put the JG idea into effect in Ancient Greece.

  6. “Shouldn’t the wage paid by the Job Guarantee Plan be set lower than the minimum wage? ”

    The minimum wage becomes redundant once you have a Job Guarantee plan in place. The differential needed to encourage people to leave the JG will then be set by those famous ‘market forces’ via competition for labour. It may be wider or narrower depending upon the state of the private economy.

    The Job Guarantee remuneration should be set at the social minimum the society is prepared to accept, and that should provide for a dignified existence.

  7. “So both workfare and JG consist of subsidised jobs or jobs specially set up for the unemployed.”

    I think perhaps time to re-read what BIll has written about the JG.

    The Job Guarantee requires the public sector to maintain a ‘buffer stock’ of minimum wage jobs that would be available to anyone willing and able to work.

    The JG is an *alternative job offer* available to all at the living wage from the state. You can choose to take it any time you fancy.

    It has *nothing to do* with being ‘unemployed’ – and therefore nothing to do with compulsory Workfare concepts. No Jack boots or whips required.

    ‘reducing labour supply’ to the private sector is precisely the point. It now has to compete for access to scarce labour resources – and that helps drive the capital development of the economy from the bottom up. Unless you disagree with the proposition that competition improves efficiency of outcomes.

    Labour should be relatively expensive, the private sector should prefer not to use it and the government should not have to get upset if the private sector chooses not to use it. That way we get machines and productivity progress.

  8. Ralph, puhleeze. Bringing Pericles into the debate only serves to cloud the issue. His situation and that of Athens are not comparable with ours. And the best information we have about him comes from Thucydides, who refused to criticize anything he did, and Plutarch, who wrote about 500 years later. The Greeks innovated a great deal in many fields, but I don’t think it a good idea to emulate their type of democracy or hold it and some of its functions up as exemplars. While we may not have improved much on Archimedes’ notion of the lever, I think it reasonable to contend that improvements have been made in democratic institutions, including the JG, since Pericles’ time.

  9. “The definition of insanity is to repeatedly try something that doesn’t work expecting a different result each time.”

    An overlooked fact about workfare is that the benefit to welfare recipients is far below what is required to live independently (In Canada at least). This means that welfare recipients are spending all they receive just to survive. They must share living space with others because rent is higher than the allowance. They do not typically have a washer or dryer in the apartment so they must use a laundromat. They can’t carry groceries home because of the distance so they require a combination of bus or taxi. The list of things they must spend the pittance they receive on is long.

    None of the “jobs” specified in the workfare program in one Canadian province was actually a job. The work was typically that done by volunteers for charities etc and even then it was difficult to find placements. Few if any of these placements would have led to a true job paying a living wage. It’s easy to see that just getting around is a job in itself for a welfare recipient.

    The lack of basic life skills seen in those born into welfare is so severe many are essentially unemployable and the branding as a welfare recipient itself makes securing employment almost as difficult as a criminal record.

    Workfare is a completely evil concept reminiscent of things Dickensian. Unfortunately, it only takes one or two authoritarian case workers in a municipality who believe their mission in life is to save the taxpayers a dollar by denying benefits on the basis of inappropriate creative legislative interpretation, to make full use of the new latitude workfare legislation provides.

  10. “Private sectors in most countries do not provide enough employment to meet the growth in the labour force. A major explanation for the persistent unemployment over the last 35 years lies in the failure of the public sector to maintain their share of employment.”

    That seems a good way to argue it. Thanks Bill.

  11. Larry,

    Given the unreliability of stuff written 2,000 or 2,500 years ago, of course it’s hard to be sure EXACTLY what Pericles’s JG consisted of. But my source is Plutarch who said “Pericles undertook vast projects of buildings and designs of work, supervised by the sculptor Phidias, it being his desire and design that the undisciplined and mechanic multitude… should not go without their share of public salaries, and yet should not have them given them for sitting still and doing nothing”.

    That amounts to all intents and purposes to the same thing as JG: i.e. creating public sector jobs for the unemployed. There is also a hint of workfare in the above passage from Plutarch: i.e. it rather looks like Pericles didn’t want to hand out dole money and get nothing in return.

    So what “improvement” or advance have we made on Pericles’s basic JG idea? None that I know of. Or to be more accurate, the only improvement I know of are two ideas of mine.

    First I’ve set out some theoretical reasoning behind the idea that JG should be in the private and not just the public sector. Secondly, I’ve set out theoretical reasons for thinking that the subsidised jobs should be with EXISTING employers, not on specially set up schemes as was the case in the WPA in the US in the 1930s, and as rather looks like it was the case in ancient Greece. See:

  12. Neil Wilson,

    “Shouldn’t the wage paid by the Job Guarantee Plan be set lower than the minimum wage? ”
    The minimum wage becomes redundant once you have a Job Guarantee plan in place.

    If that’s so, shouldn’t the wage paid by the Job Guarantee Plan be set higher than the minimum wage?

  13. Neil,

    Re the first half of your above comment, you say JG has “*nothing to do* with being ‘unemployed”. That rather sounds like under your ideal JG scheme, that those already in work would be tempted by JG work. Strikes me that’s the last thing we need. The fact is that under the WPA in the 1930s, WPA jobs, as is almost entirely predictable, were not as productive as regular jobs. (I got that from a book called “Creating Jobs” published by the Brookings Institute.)

    Re the second half of your comment and claim that relatively high JG wages will force regular employers to up productivity so as to compete, I don’t see how that works because regular employers ALREADY HAVE a motive to create as productive jobs as possible. E.g. if I’m an employer paying people £5/hr and I spot a way of doubling their output, why on Earth would I desist from creating £10/hr jobs? My employees would be happier. And assuming my profit relative to my business’s turnover remains constant, then my take home pay rises as well.

    You could argue that high wages on JG schemes would concentrate the minds of SOME EMPLOYERS who were making no effort to improve productivity. But any bone idle employers of that sort face being competed out of business by new entrants into their line of business ANYWAY. So I don’t that’s a strong effect.

  14. Cameron seems to be losing the plot under pressure at the moment. He made a couple of weird statements today.

    Firstly using the US government shutdown as a justification of the austerity program – describing it as showing the need to control government deficits. But the shutdown is a political argument, not an economic one. He must be confusing it with the debt ceiling deadline in 17 days time.

    Then, wilting a bit after Osborne’s announcement of continuous austerity in order to create a government surplus, he declared that this would not necessarily mean more cuts if growth continued. But this is precisely the argument that they opposed in order to introduce austerity in the first place.

  15. Gastro,
    I’ve racked my brains thinking about how the UK government could possibly achieve a surplus by 2020.

    The various “Help to Buy” and “Funding for Lending” schemes are obviously unsustainable in the long run, and yet it is possible they could be sustained until 2020 I suppose.

    They would still have to (at least) balance the current account, and I find that unlikely.

    If the various lending schemes cause asset bubbles, the Bank of England would surely act to prevent this as Mark Carney has said. This would make it very difficult for the government to achieve this ambition.

    Kind Regards

  16. Ralph

    Marginal arguments again. The real world doesn’t work like that. There is undercutting everywhere, and abuse of manpower – which damages legitimate businesses. Gresham effects abound.

    Larger businesses persist regardless of inefficiency and exploitation of labour. Oligopoly is the natural state that market forces creates.

    The evidence over the last thirty odd years is that productivity is not shared ‘according to contribution’ between capital and labour.

    Pretending otherwise is just delusional.

    Job Guarantee stops the exploitation game dead. By introducing genuine fixed price competition at the bottom end for labour and giving labour the ability to say ‘no’ to the private sector.

    And objecting to that is to say that competition doesn’t work.

  17. I am always amused by the line “no one will get something for nothing”. Capitalists and rentiers just hold shares and own property derived from inheritance or from exploitation of workers if they are new on the rich list. They do nothing all day and get huge amounts of income. They certainly do get something for nothing.

    “The number of billionaires in the UK has increased ten-fold since the Sunday Times Rich List was first published in 1989, shooting from nine to 88. There were 77 last year.

    According to the list, the 1,000 richest people in Britain have wealth totalling almost £450 billion.” – Sunday Times.

  18. Dear Ralph (at 2013/10/01 at 22:38)

    You said:

    There isn’t much difference between JG and workfare (depending on your definition of workfare). Workfare is defined in the Oxford Dictionary of Economics as “A system making income support for the unemployed conditional on their performing some sort of work for which they are suitable.”

    You obviously haven’t studied the operation of work-for-the-dole programs much Ralph nor do you understand the the literature that outlines the Job Guarantee to say this.

    The two “programs” are like chalk and cheese.

    Please read the literature a bit more before making these sorts of comments. They only make you look silly.

    best wishes

  19. Ralph,
    “But in that scenario, JG is not a logical way of creating jobs: a straight rise in aggregate demand is better.”

    JG is not intrinsicly a stimulus measure. It is there to prevent monetary or fiscal contraction damaging the long term health of the econbomy by causing unemployment.

    Having said that, it can be configured as a stimulus, but that is a seperate issue.

  20. Neil and Ikonoclast have hit 2 very important nails straight on the head. Due to inheritances and in many cases a winning set of numbers in the genetic lottery, those who get the MOST for nothing are not only at the other end of the wealth scale, but they also seem to have the most opinionated views on how the poor should get next to nothing for countless hours of back-breaking work (Gina ***king Rinehart and Rupert Murdoch are prime examples of this disgusting set of behaviours). JG at a decent wage would at least provide a large enough road block for these pathetic, unfounded opinions to seep through into political conversation.

  21. Dear Neil

    You made a valid point. A job guarantee can be seen as a substitute for a minimum wage. If the Job Guarantee offers 15 dollars per hour, then any private employer who offered less would not find many takers.

    Regards. James.

  22. Ralph, you are neglecting one important factor concerning Pericles’s Athen’s, and other cities’, work forces – they were made up substantially of slaves. Now, if you wish to equate workfare with some kind of modern form of slavery, as for myself I am prepared to consider it.

  23. The government is subsidising work. Corporations do not want to pay wages and the government help companies to subvert minimum wage laws.

    I really like the dynamic of this scheme. Inflate the economy through monetary stimulus and deflate the wages.


  24. “I am always amused by the line “no one will get something for nothing””

    The best put down of Osborne yesterday related to that:

    ‘No-one will get something for nothing” said the man who got everything for nothing.

  25. “If that’s so, shouldn’t the wage paid by the Job Guarantee Plan be set higher than the minimum wage?”

    The minimum wage is, or should be, the minimum amount necessary to live a meaningful existence in your society.

    For me the minimum wage should be a living wage – otherwise what is the point of it?

    And once a JG is in place, then it is not just the wage that gets a floor put under it, but the type of job, conditions, holidays and sickness benefit (and in primitive countries healthcare cover).

    There is a charter of Universal Human RIghts for a reason. That is us as a species saying that these are the minimum standards we expect as human beings.

    The Job Guarantee is the solution to providing those minimum Rights in the area of work and income.

  26. Ultimately will it not be the case that with improving productivity we will need less and less people to work, and so the problem will be whether to give some people work simply for the sake of it or just give them money for “nothing”. After all is that not what happens if you inherit wealth! Is this not the goal of productivity growth to make things so productive that no one really has to work. What happens when things are so productive that it is physically impossible for everyone to be employed, will we still demand that these people “beg” for money and jump through various artificial syzyphean hoops just to prove their right to live.

  27. Neil,

    Re Gresham etc, I think what you’re saying that real world market forces work in a highly imperfect way. That’s been confirmed by research: i.e. the evidence is that the wage paid to people with given skills and experience varies WIDELY even with a small geographical area. And as regards the low paid, those imperfect market forces enable some employers to pay ultra low wages. I agree. Plus I agree that something like minimum wage laws and/or JG is needed so as to deal with that.

    But what I don’t agree with is that a relatively generous min wage or JG scheme will raise the AVERAGE REAL OUTPUT of the low paid to any significant extent.

    One reason I say that is the above market imperfections effect semi-skilled and highly-skilled employees just as much as the unskilled or low paid, and if your “raise the average real output” point works in the case of the unskilled, why don’t we apply the same idea to the workforce as a whole? I.e. why don’t we have super generous minimum pay for computer programmers, plastic surgeons, nurses, plumbers and so on? You’d presumably claim that would raise the real output of those people. My guess is that the only effect would be inflationary.

    Gastro George and Charles,

    I agree Cameron and Osborne are round the twist with their surplus idea.


    Re your instructions to me to read more of the literature, I see no evidence that you’ve read any of studies into JG type schemes and workfare schemes that have been done in Europe over the last 30 years.

    So, rather than issue insults like “your comments make you look silly” can you point to any actual mistakes in my comments?

    Charles J,

    I wasn’t trying to suggest that JG is “intrinsically a stimulus measure”. My point was that given grossly excessive unemployment, or put another way, where the economy has far too much spare capacity, a straight rise in demand is preferable to JG. That rise in demand would create more regular jobs, not JG jobs.


    Re slavery in ancient Athens, I’m not sure how that tied in with Pericles’s JG scheme. I haven’t read a huge amount about Ancient Greece. But I’d guess the “public salaries” to which Plutarch referred were paid to normal or FREE citizens. In contrast, slaves would have got nothing apart from board and lodging – that’s more or less the definition of the word “slave”.

    So my (rather tentative) claim is: “Pericles’s JG scheme and his “public salaries” were equivalent to present day JG schemes, while slaves were a separate issue.”

  28. Ralph,

    You’re essentially saying that competition doesn’t work unless I say it does. Which is a nonsense argument.

    If competition works to improve output, then private sector employers having to fight for staff will improve productivity.

    If competition doesn’t work to improve output then why are we bothering with a capitalist system?

    You can’t have your cake and eat it.

  29. “What happens when things are so productive that it is physically impossible for everyone to be employed, ”

    Your always employed doing something. That is how you pass your day.

    This idea that leisure is something different to work and magically appears, with no impact on the rest of the economy, if you just let it, is a very strange concept indeed.

    Leisure requires servicing for the most part. That’s why we have leisure centres – staffed with people who are working.

    As society matures the definition of what is ‘paid work’ will have to widen.

  30. Bill,

    How could the UK introduce the JG when part of the EU common labour market? UK is still perceived (rightly or wrongly) as a job market for desperate unemployed/poor .

  31. “How could the UK introduce the JG when part of the EU common labour market? ”

    Leave the EU, or derogate the freedom of movement part and see if the EU has the guts to chuck the UK out.

    Since the population largely wants to leave the EU, it’s not going to be a difficult sell.

  32. “How could the UK introduce the JG when part of the EU common labour market? “

    How about just doing it? What is the problem? The problem is seeing a nonproblem – in many, most ways a benefit, not a cost – as a problem. So lots of people – most healthy, young and willing to work hard, would go the UK and be willing to trade their scarce and valuable labor for pounds the Queen can create at will. Show me the problem.

    Consider the title of Bill’s next blog.

  33. “Show me the problem.”

    Overloaded public provision and housing infrastructure. We’re already out of primary school places in many British cities, if not most of them. The health care systems are straining and public housing barely exists.

    That’s the reason why you need to control the inflow. Those things take time to fix. And we’re not a particularly big country with a large food growing reserve. So we have to be careful how much more land is given over to housing the population, and of course nobody really wants to live in skyscrapers.

    Immigration is fine. It’s the knock on effects that’s the problem. They can’t be fixed instantly.

  34. Those things take time to fix. It takes much, much less time to fix such “real” problems, which are thus basically imaginary, than to fix the entirely imaginary problems created by bad economics, which become very real, very soon. It’s been five + years since the financial crisis. Great wars have been won and greater, harder things have been done in less time.

  35. “Great wars have been won and greater, harder things have been done in less time.”

    You can’t fix the problem of insufficient land. They don’t make it any more.

  36. Ralph: the reason workfare in the UK isn’t a Job Guarantee is:

    * It’s only available to those who have been unemployed for a certain number of weeks.
    * It’s temporary, maybe 8 weeks and then you are expected to go back to job seeking.
    * You’re paid about 11 hours of minimum wage a week for 40 hours of work so there’s no increase in aggregate demand.
    * You’re paid the same amount as you were under the benefit.
    * Your labour is being sold to the private sector very cheaply, which means they have less of a need to actually hire people.

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