On April 5, 1933, US President Roosevelt made an executive decision to create the -…
A Basic Income Guarantee does not reduce poverty
Poverty arises for a number of reasons but a lack of income has to be a central characteristic of someone who is poor. And notwithstanding the increasing tendency for people who work full-time to be found earning wages that place them below the poverty line, the major reason for people having a lack of income is unemployment. That typically makes poverty a systemic event rather than an individual failure because mass unemployment is easy to understand – it occurs when the system fails to produce enough jobs to meet the desires for work by the available labour force. Then, to understand why the system fails in that way, we know that once the spending and saving decisions of the non-government sector are made, if there is still a spending shortfall in the economy, which generates the mass unemployment, then it has to be because the net spending position of the national government is short. That is, either the fiscal surplus is too large or (usually) the deficit is too small. In that sense, the introduction of a Job Guarantee would eliminate poverty arising from unemployment and the working poor because the Government could condition the minimum wage by where it set the Job Guarantee wage. If it truly desired to end poverty among those in employment then it would set the Job Guarantee accordingly. Others argue that a more direct way of dealing with poverty and lack of income is to just provide the income via a Basic Income Guarantee (BIG). The BIG idea has captured the progressive side of politics and many on the Right. It is another one of those sneaky neo-liberal ideas that look good on the surface but are rotten not far below. Supporters of BIG are really absolving currency-issuing governments of their responsibility to use their fiscal capacities to ensure there are sufficient jobs created – whether in the non-government or government sector. They are thus going along with the neo-liberal attack on the right to work. Moreover, closer analysis reveals that the introduction of the BIG would not, under current institutional arrangements reduce poverty at all.
Note, I prefer it if commentators did not to consider this to be my only blog on the foibles of Basic Income Guarantees. Accordingly, I request that if your commenting finger is twitching to please refrain from claiming I have missed this or that.
I have written many articles and blogs about this topic. If you want to trace through the sequence of arguments please go to the Job Guarantee Category and read the blogs in order.
Then if you think I have missed something, by all means, let me have it.
The OECD has just released a technical briefing paper (May 2017) – Basic Income as a Policy Option: Technical Background Note Illustrating Costs and Distributional Implications for Selected Countries – which, as the title suggests, explores the consequences of an “unconditional transfer paid to each individual” (BIG).
It is a supporting document to a OECD policy brief (May 2017) – Basic Income as a Policy Option: Can it add up? .
The OECD now has a research program it is calling – Future of Work. It turns out that my next book (written with Joan Muysken and to be published in 2018) will examine this topic. I will have more to say about the research we are engaged in for that project in the coming weeks.
As before, you will be able to trace the notes I produce that will form the basis of this book via my blogs as the research process unfolds.
The Technical Background paper provides “a more detailed description of … [the] … analysis, and shows more comprehensive results …”
The OECD assumes that:
1. “a BI that would replace most cash benefits for working age households”.
2. “the provision of public services, such as health, education, care, or other in-kind supports is assumed to continue unchanged”.
They note that if a government was “to take existing cash benefits paid to those of working age and to spread total expenditure on these benefits equally across all those aged below normal retirement age” the “resulting BI amount would be very much lower than the poverty line for a single individual”.
Thus a “budget-neutral BI will be very far from eradicating poverty, whereas a BI set at the poverty line would be very expensive”.
They demonstrate this using their Figure 1 (which I reproduce). So to aid interpretation, you can see that for Spain, for example, a BIG based on per-capita benefit spending would come up to around 35 per cent of the poverty line only, whereas the current social assistance benefit level is closer to 60 per cent of the poverty line (For a single-person household).
In part, this arises as a result of the universality of the BIG. A targetted BIG is typically rejected by proponents. They add moral arguments to their narrative and claiming that a guaranteed minimum income is a right that all enjoy rather than only the poor.
The OECD conclude that:
… a BI at socially and politically meaningful levels would likely require additional benefit expenditures, and thus higher tax revenues to finance them. By taxing the BI alongside other incomes, its net value would fall for those in higher tax brackets, reducing its cost and making it more targeted to lower-income groups, who pay lower tax rates.
Assuming, of course, fiscal neutrality.
My reference to “current institutional arrangements” in the Introduction relates to this point. Most proponents of BIG adopt neo-liberal macroeconomic conceptions of the fiscal capacity of the government and thus fall into believing that there are financial constraints on government spending that can only be relieved with higher taxation or increased debt issuance.
Of course, those who understand Modern Monetary Theory (MMT) know, intrinsically, that a sovereign government is never revenue constrained because it is the monopoly issuer of the currency.
In that case, it could simple increase its net spending (fiscal deficit) to facilitate the introduction of a BIG. But, in that situation, there are new problems as I will explain.
Staying within the OECD’s neo-liberal frame, it notes that benefit systems and tax-free thresholds vary across countries, which means that a simple statement of who would win and who would lose by replacing benefits with a BIG is difficult to make.
In terms of their “revenue-neutral BI, adjusted amount” model, they note that (setting the BI = existing GMI levels in the income support systems for Finland, Italy, France and the UK):
1. “In each of the four countries considered here, the largest average gains from a BI would occur among the lowest-income households … This arises as those who are not covered by social protection in existing systems for whatever reason (not having sufficient past contributions to qualify or non-take-up of benefits) and who hence have the lowest incomes would gain from the introduction of a universal BI.”
2. “The richest income group would lose overall in each country too” for various reasons pertaining to each country.
3. “in many cases those in work would see the amount they receive from the BI offset by higher income taxes as tax-free amounts were abolished. This is the case in Finland, the UK and the USA for example”.
4. “In France, those on higher incomes would actually lose between 5% and 10% of their income as the value of the zero- tax band is greater than the BI amount at these income levels, but those with lower earnings would gain.”
5. “In many other countries, however, a single person without children would see (often quite substantial) gains at all income levels … In these countries, gains generally increase with earnings for lower earnings ranges: the BI would not be means tested away, and peak at the point where entitlement to existing means-tested support expires.”
6. “Gains remain substantial in Japan and the Netherlands, however, as the BI amount still exceed additional tax payments made even at relatively high earnings levels.”
7. In Italy, “introducing a BI would involve very large percentage changes in incomes at low earnings levels, but … changes are small for those with higher income levels.”
8. “In Finland, France and Italy, large losses would occur among those who receive unemployment insurance benefits or early retirement pensions … The pattern in the UK is different: as the revenue-neutral BI amount is lower than the value of GMI benefits, lower-income groups often lose.”
8. “The extent of gains … suggests that replacing existing social protection systems with a BI along the lines described here would not be budget-neutral.”
They provided Figure 4 to show the distributional consequences of a BIG (winners and losers by decile). The explanation for the patterns is complex and arises from the differences in the structure of tax and welfare systems in each country.
I will leave it to you to examine each nation’s results if you are interested in more detail.
The other approach they analysed was a “revenue-neutral BI, adjusted tax rates” – in other words, a higher BIG matched with revenue from varying taxes (up or down – depending on the current situation).
They note that setting the BI = existing GMI levels in the income support systems:
1. “In Finland and France, this is little different from the previous variant” given the nature of the existing support structures.
2. “In Italy, this variant involves a big reduction in income taxes, which significantly benefits richer households but does little to increase the incomes of many poorer households”.
3. “The opposite is the case in the UK.” The poor and the middle income groups see no change but the highest income groups “would lose significantly”.
The OECD Figure 7 (reproduced next) shows the winners and losers in detail across the income distribution.
The columns show the shifts (up and down) from BIG, tax rises and benefit losses. The diamonds show the net result in absolute terms.
The loss of benefits and increased tax burdens typically offset (or nearly) the benefits of the BIG for many cohorts.
In both models, the OECD provide more detailed results of the winners and losers by family size and structure and age breakdowns.
But the aim of the exercise was to establish the impact of the BIG on poverty?
The OECD conclude that:
1. “Although there would be more winners than losers among low-income groups under a BI … it would not prove to be an effective tool for reducing poverty”.
2. “In Finland and France, relatively good benefit coverage among poorer households means that poverty would be higher under both BI variants considered here as, despite benefit spending being much higher with a BI, it would be much less well targeted.”
3. “Even in Italy, where existing benefit spending is not well targeted on poorer households, poverty would be roughly the same in the case where existing spending was used to give everyone a BI rather than targeted on specific groups.”
4. “In the UK, the revenue-neutral BI amount is significantly below the level of existing GMI benefits, so it is perhaps unsurprising that this leads to much higher levels of poverty. However, even in the case where taxes are raised significantly to pay for a BI at the level of GMI benefits, the BI does not significantly reduce poverty.”
5. “Rather than reducing the overall headcount of those in poverty, a BI would change the composition of the income-poor population … In all countries, a reduction in poverty among those currently not covered by social protection systems would be offset by some of those who are covered by existing social protection systems and who lose out from the introduction of a BI moving into poverty.”
So there you have it. A BIG as is typically proposed is not a magic cure for poverty.
Under fiscal neutrality, the maximum sustainable BIG would be modest. Aggregate demand and employment impacts would be small, and even with some redistribution of working hours; high levels of labour underutilisation would persist.
Overall this strategy does not enhance the rights of the most disadvantaged, nor does it provide work for those who desire it.
It is obvious that persistent unemployment could easily be avoided by the introduction of the BIG if it was accompanied by a net government stimulus (deficit).
This recognises that at all times, given the spending and saving decisions of the non-government sector, the existing unemployment level is the choice of the currency-issuing government – in other words, mass unemployment means that the deficit is too small relative to non-government saving desires.
Without an appropriate fiscal stimulus, the basic income proposal would achieve full employment by persuading the unemployed to drop out of the labour force upon receipt of an income guarantee.
The economy would move towards full employment by stealth – pushing workers out of the labour force rather than providing work for them.
But the value of the currency would then fall given that nothing is provided in return for the government spending.
The resulting inflationary bias would invoke interest rate adjustments (given the current inflation-first approach adopted by central banks) that would constrain the economy from achieving sufficient growth to offer real employment options to all aspiring workers.
But then a further quandary emerges. The more generous BIG, would probably stimulate total spending such that there would be a shortage of labour at ‘full employment’, resulting from the artificial reduction of the full employment level of employment, which then compounds the inflationary pressure.
The alternative is that the excess demand for goods would be increasingly met via imports with consequential effects for the exchange rate and the domestic price level, which would accentuate the inflationary pressure.
Thus the introduction of a BIG policy is likely to be highly problematic with respect its capacity to deliver both sustained full employment and price stability.
A sound policy also has to be viable if the extremes of that policy are encountered. It is obvious that the basic income proposal does not satisfy that requirement.
As more an more individuals opted for the basic income without work, output would drop dramatically and material prosperity would be violated. Leisure and consumption are closely related.
Further, given the logic employed by the basic income proponents that the government providing the basic income is financially constrained, the logic means that as increasing numbers of workers ‘liberated’ themselves by taking the basic income, the capacity of the government to sustain it would diminish.
In other words, on its own grounds, the basic income proposal is limited in scope.
What about an MMT-style BIG? That is, one that recognises that the government would have no need to increase taxes to facilitate the introduction of the BIG.
If there is mass unemployment, then the solution is for the government to expand its net fiscal impact (spending over taxation) and allow the deficit to rise.
So shifting from a state of mass unemployment to the introduction of a basic income guarantee would require a net government stimulus (that is, an increasing fiscal deficit).
In this regard, the basic income guarantee (funded by an increasing fiscal deficit) constitutes an indiscriminate Keynesian expansion and as it lacks any inbuilt price stabilisation mechanisms, inflationary pressures would result.
Workers who draw income from the production cycle have also added output (via their labour) to that cycle. For a given level of productivity (output per unit of input), the more people that have access to income, spend that income at market prices, but do not add to output (that is, are supported in real terms by the production of others), the greater the inflation risk.
Further, the greater the share of income generated in any period that is received by people who offer nothing in return, the higher the inflation risk.
Under these circumstances, the more people pursue the ‘freedom’ on non-work under the basic income guarantee, the worse the situation becomes because for given productivity, this would mean the supply side of the economy keeps shrinking, while the demand side remains stable (depending on the level of the stipend).
So we come back to the point that to minimise the inflation risk, the basic income stipend has to be small, which then, in turn, means the scheme hardly addresses the dignity of an independent existence. People have income security but are in poverty.
We can explore this vulnerability further.
If the government increases net spending (its deficit) to fund a generous basic income stipend then the demand for labour rises in response to the higher aggregate spending in the economy. Clearly, labour demand would higher than under a fiscally-neutral introduction of a basic income guarantee.
The real issue is what happens to labour supply.
If the stimulus was wrought via the payment of a generous basic income stipend, then it is reasonable to surmise that total labour supply would decrease.
In other words, the level of employment that coincides with ‘full employment’ where everybody who wants a job can find one is artificially reduced in the presence of the basic income guarantee (if sufficiently generous).
The real resource space available for the stimulus is thus reduced. The more people who took the stipend and withdrew from the labour force, the less real capacity there would be in the economy to respond to nominal spending growth.
With less productive workers available, the stimulus would cause what economists call ‘demand-pull’ inflation. The inflation rate is pulled up by an incompatibility of nominal spending relative to productive capacity.
Firms would compete for increasingly fewer workers and drive up wages, which would have the consequence of making the basic income stipend less attractive at the margin.
Some ‘Malibu surfers’ might decide to resume work again. The government might respond by raising taxes and/or reducing government expenditure, which would tend to raise unemployment.
The central bank, under the current regime that governs monetary policy, would also respond by raising interest rates.
The combination of these policy responses would reduce the demand pressure, but to the extent that the inflationary process had assumed a cost-push form (distributional struggle over available real income), wage and price inflation may only decline slowly.
It is thus possible that an unsustainable dynamic could be generated in which there are periodic phases of demand-pull inflation and induced cost-push inflation at low rates of unemployment, followed by contractionary policy and high rates of unemployment.
These economic outcomes are consistent with indiscriminate (generalised) Keynesian policy expansions of the past.
Our conclusion is that the introduction of a basic income guarantee which is designed to also sustain full employment (that is, to give all those who want to work the opportunity) is likely to be highly problematic given the likely inflationary consequences.
Conclusion
The guaranteed path to poverty reduction is to just make a job available to anyone who wanted to work but who could not currently find work at a wage that was socially inclusive and above the poverty line.
Then, if a person was fit to work and chose not to take the job under the Job Guarantee, they either had alternative income or would be poor by choice.
Poverty by choice is not a problem in my world.
British Tories looking to the future …
I thought these captures were excellent.
Its either a bitter future under the Tories or …
You are required to submit to torture.
Sydney event – August 24, 2017
For Sydney readers, here is some advance notice of an event I will be speaking at on behalf of the Unemployment Workers’ Union and the NSW Trades Hall Council.
It will be a debate between myself (proposing the superiority of employment guarantees) and Eva Cox (a long-time supporter of BIG).
It will be a free event and open to all. It will run from 14:00 to 16:00 at the Auditorium, Trades Hall, Sussex Street, Sydney.
Style Note
I increased the font size on the main pages of my blog today by 1px. It seems to read better.
That is enough for today!
(c) Copyright 2017 William Mitchell. All Rights Reserved.
I’ve just done a bit of work on basic income (by reading Van Parijs Basic Income book). A few things leap out and can be added to the evidence against BI.
– under a basic income, the shortfall in willing labour is provided via a multi-year year (usually five) ‘qualification’ period for immigrants into your currency area. So you have a rolling supply of third world slave labour to do the menial stuff at slave wages, on the promise of a ‘Malibu Surfer’ lifestyle in the future. BI proponents do a good job of hiding this Ponzi Scheme in their platitudes.
– or you are part of a common currency area/fixed exchange rate and therefore have lots of other areas not receiving a Basic Income to supply you with the slave level output. Hence how city level/state level/Finland basic income expects to work – and also why such schemes rapidly get shut down politically.
– GDP will always be lower under an income transfer scheme than a Job Guarantee – by definition. This is because income transfer schemes do not add the initial payment to GDP, but Job Guarantee schemes do – since they purchase actual output. It follows that, GDP per per capita is going to be lower.
– the majority of proposed Basic Income schemes are just ‘unemployment benefit for all’. The amount paid is insufficient to live on long term because you cannot replace capital items with it. If you want clothes, cars, houses or education, you still have to work to ‘top up’ the income, and yet there will still be a systemic shortage of work. There seems to be a general idea that people will only work to replace capital items and then go back to ‘surfing’ because work is distasteful and people want leisure. Thus the available work will be job shared amongst the population by the magic of the market. They cannot comprehend that people like work and actually want to continue doing it.
– As Beveridge pointed out enforced idleness is a different evil to want. The whole BI concept denies the intrinsic value of work as an antidote to the evil of enforce idleness. In fact the damage caused by enforced idleness is not even acknowledged.
– If you give people money and then take it away again you create a resentment in the individual that is much greater than if you hadn’t bothered in the first place. This is the well known psychological phenomenon of loss aversion. The Basic Income triggers it. The Job Guarantee does not.
Reading the proposals just makes you realise what an extreme individualistic, anti-social, neoliberal concept Basic Income is. So I wasn’t surprised to hear that Zuckerberg is a fan. The tech industry has always been fond of anarchy.
“Then, if a person was fit to work and chose not to take the job under the Job Guarantee, they either had alternative income or would be poor by choice”
And that alternative income can be provided by Basic Income fans. The charity donations to fund such an operation would likely be tax deductible as well.
Win-Win all round.
Wish supporters of the UK Green Party would do some research here, given that No1 of their policies for a green economy, as a means to increase ‘security’ and avoid the poverty trap, is a UBI.
Well written! Well done!
Please, help me here:
I –
[Of course, those who understand Modern Monetary Theory (MMT) know, intrinsically, that a sovereign government is never revenue constrained because it is the monopoly issuer of the currency.] The monopoly has one major constraints which shows up possibly in two forms:
a). Inflation of goods when to much money is chasing a limited amount of goods and services (Venezuela…)
b). Bubles when the money goes to capital markets or real estate (USA 2007…)
c). More tax for the domestic tax payers when the money goes to loan/equity foreign banks which end up with a) and/or b) (Germany to avoid its tax payer imposed troika in the others…)
II – We homo sapiens sapiens obey to normal curve. Malibu Surfers or sick people is not enough reason to avoid to do the right thing. ☺
III – BIG/BI/whatever might be more to keep an ossified update of slavery than something else. In the slavery time after a while they allow the slave to have their on plot of land to produce something for them. So many tricks they used before updating the slavery to substance salary, to debt dependency… Maybe is about time to try something radically new! ☻
Maybe BIG should be relabled ‘Blackmarket Initialization Guarantee’. Oh, but I forgot, along with the adoption of BIG comes the elimination of cash.
“With no trouble at all I can give examples of unpaid work that is hugely beneficial to the community”
In which case you can ask the community if that can be your job, and you’ll get a Job Guarantee wage for it. Problem solved.
“the JG perhaps should be geared towards creating new ways to work”
I take it you’ve not read the JG work before posting that. (There’s a link on the right hand side —->). The literature is replete with such examples.
A JG job is a negotiation with others in your peer community who are the ones who decide if something is worthwhile or not. It goes something like this:
You: I was thinking about doing X as a job
Others: That sounds great. We’ve got just the place for you where you can do X and its very near where you are. When can you start.
You: I’ll be there on Monday
Of course it is a negotiation, so you may not get your first choice:
You: I’d like to do Y as a job
Others: That’s an interesting idea, but Y isn’t something that people are happy with on the Job Guarantee. Do you have a second choice?
You: Well I suppose I could do X.
Others: That’s great…
You’ll notice this is completely different from a normal private sector job. Normally, a task needs to get done, a job is designed around that and a person found to fit the job.
With the Job Guarantee it is the other way around. It creates Jobs for the People.
Prof. Mitchell’s point about import dependency remains true though. If, hypothetically, a society needs rubber flip-flop sandals, and the society is producing daycare, then the flip-flop sandals have to come from somewhere.
Bill argues that JG reduces poverty because the JG wage can be bumped up to any level we like. True. But exactly the same applies to BI: weekly pay / income can be bumped up to any level we like!! Of course that has an obvious downside: the disincentive to work. But same goes for almost any benefit, including unemployment benefit.
Neil Wilson makes much of an idea which is new to me, namely that BI advocates argue for immigrants making up for the loss of GDP that results from BI. Well clearly that’s a possibility. But equally BI would be possible in a “zero net immigration country”.
Neil then says “GDP will always be lower under an income transfer scheme than a Job Guarantee – by definition.” Probably true, though it would not be impossible for the administration costs etc of JG to exceed output of JG people. In that case the effect of BI and JG on GDP could be similar.
Next, Neil says “the majority of proposed Basic Income schemes are just ‘unemployment benefit for all’. The amount paid is insufficient to live on long term because you cannot replace capital items with it.” Well that depends on how generous BI is, doesn’t it.!!!! Some existing benefits in the UK are not sufficient to pay for replacing capital items.
And finally we already have BI in the UK in the sense that anyone with a small amount of ingenuity can spend decades on end living on benefits for dubious reasons. I know several people who have done that.
“In that case the effect of BI and JG on GDP could be similar.”
Nope. The JG causes more spend and that causes GDP to be higher because more stuff is bought. You need to look up how public sector productivity is measured for GDP purposes. You’ll find that it is an outputs=inputs basis.
In a very recent blog Mr Mitchell stated unemployment is due to inadequate aggregate demand period.
But today we have the neo liberal mantra that welfare creates unemployment.
Where is the evidence?
Welfare is prevalent across the globe where is the data that money for activity that does not increase
output directly is inflationary? What goods and services would buffer jobs create for sale?
Inflationary bias is cost push not demand pull.
If we are talking about minimum wages or minimum welfare income we are talking about poverty.
Neither are any kind of a goal but both can be means for increasing income at lower levels.
If we set this level of relative poverty too high then either could raise subsequent spending to levels
which have the potential to increase prices in markets which supply could not be increased.
But as Mr Mitchell has explained again and again it is the spending itself not the source of the
spending which has the potential to be inflationary .If we combine increased spending with increased
costs Paticularly ubiquitous costs such as wages than inflationary pressures would increase.
The one partial truth which can make welfare make people less likely to take up work is
the barriers and delays which mean testing puts in the way of people moving between welfare and work.
By the way I do agree with the analysis that fiscally neutral BIG neo liberal plans are of little use
and could be used to cut the income of the most disadvantaged but a neo liberal job guarentee could
provide greedy bosses with cheap labour .Your point is ?
Kevin Harding,
If BIG gives an amount that is too large, then it will lead to people taking it and dropping out of the labor force.
This blog is saying that low level BIG is worse than current safety nets because it doesn’t give enough help to people in need. We are only discussing between a generous BIG and JG.
Your question about evidence is a fair one. I’m sure there are examples of giving people too much welfare and people would rather take that than working. I have heard that Communist China had a similar problem. However, I tend to be distrustful of mainstream media/history about foreign countries because, as an example, facts we know about the early American free trade and reasons for the civil war are simply false. Anyway…
MMT people stress that private employers do not hire people who are out of work for a long time. With a job guarantee, you are giving people a chance to prove themselves.
If supply is the same, but demand is higher. Then price goes up, right? BIG increases demand without increasing the supply, so there is much more risk for inflation than JG, right? It would be nice if someone can give a concrete example. I know that In Zimbabwe, printing more money only led to hyperinflation because their food supply was still inadequate to meet demands.
I don’t think there is anything neoliberal about not having a BIG. Yes, neoliberals CAN’T STAND giving people something for free, even though that something may be a human right (USA healthcare). They are obsessed over meritocracy/discipline and are certainly hypocrites when it comes to their military/healthcare/insurance friends. However, here, we are saying that we expect people to work and contribute to society to get a wage. We give people a chance and they will contribute. They get some points as reward for their work that benefit the community-which is something that BIG can never bring about. I don’t think not having a BIG is a neoliberal mantra, but a fair treatment. What do you think?
We have done a JG before. It’s the New Deal. It worked before until liberals listened to whining conservatives, so why go into some unknown territory?
Also, it is the ultimate mission of Conservatives to make life a living hell for the entire world population. I think it’s not insignificant that some of them support BIG as Dr. Mitchell has stated.
I don’t think Job guarantee will have greedy bosses. Now, I admit I haven’t read much of the JG literature, but I suppose you will have managers in JG. These managers will get paid a wage for doing what they do. People would know something is wrong if these managers try to enrich themselves. I can’t imagine some employer quit their own position in private sector, join JG as manager, somehow enriching themselves, and people won’t find that out. The good a government does with a JG eclipses over the few rare cases of personal enrichment.
Neil Wilson at 0:09: the comment you replied to was deleted, so let’s see if I can respond.
Your discussion-style introduction to how JG would be practically implemented was helpful, if not convincing. Public dissemination of the JG idea on a blog would benefit greatly from something similar, as well as a simple point-form summary and/or an infographic in a prominent position. If I’m saying ignorant things here, it’s partly because I’m an interested novice who finds millions of words interspersed with dense economic analysis bewildering. The brief 24 page “operational design proposal” will have difficulty winning hearts and minds: http://e1.newcastle.edu.au/coffee/pubs/wp/2006/06-15.pdf
After reading a selection of overviews written over decades by the owner of this blog, I’m still trying to work out my source of disquiet. Other than the childcare/elder care/environmental remediation jobs the JG proposes as its permanent jobs – which are just jobs the private sector could fill now if a public payer paid more – the underpinning features of the JG in its current form are a)non-compete with private enterprise; b)skill-up unskilled workers for private workforce needs; and c)be a publicly-maintained reserve of these workers for when private jobs start picking up again. Which makes it an adjunct to market capitalism. The skills taught will be determined by neoliberal market forces. For all the bashing of a Universal Basic Income as a neoliberal plot, the JG will be used as a neoliberal holding tank for surplus stock. It’s inevitable.
If the JG were to be marketed to the public the way it is currently designed, a great many people would balk at its institutional nature. Basic Income proposals are popular with people because they have ‘freedom’ built-in as a no-cost marketing strategy. I understand the angst coming from this camp. I’m not a proponent of either, and I like MMT. But I’m drawn to a basic income strategy as the basis of a free-form JG. I’ll refrain from commenting here further.
Travelling, so unable to contribute to discussions as much as I would like, but here is free link to a great book with much history of the WPA, the US’s near-JG, and imho a better grounded history of the politics and economics of the day than many later, supposedly scholarly revisionists. A great best-seller in its day that doesn’t seem to be in any MMT academic bibliographies that I’ve seen.
See who was the MMT forebear who was instrumental to getting the work programs enacted. IMHO accurate history shows the superiority of WPA / JG over “Relief” / BIG – the New Dealers & most Americans then thought so. And it refutes- and shows how decrepit the usual criticisms of the JG are.
Robert Sherwood- Roosevelt & Hopkins: An Intimate History, revised edition, Grosset & Dunlap (1948)
Dear MarkH (at 2017/06/01 at 2:25 pm)
Your first comment was deleted because it rehearsed claims that I have previously addressed (several times) in the past. I had noted that I wasn’t interested in people coming into yesterday’s blog as if it was the first statement I have ever made on the subject and bringing up the usual issues that we have dealt with previously.
best wishes
bill
No. A living wage can be set higher than a BIG because the wage is linked to production. The workers are adding to output, not just consuming it. A JG therefore has a price stability mechanism built into it. A BIG doesn’t. This is a big problem with BIG.
Bill, the fact you deleted Mark’s comment and the only way we can see his input is via a reply before it was deleted is really frustrating. If we can’t discuss MMT openly here then where the f%#k can we?
There’s enough censorship and fake news out there and I appreciate where you’re coming from but if we are to win this fight then any discussion here is going to be a condensed and more enlightened discussion than it will be in the public political discourse someday hopefully. Yes trolls etc need stopped but can’t we at least get to know legitimate concerns surely? At the very least a reply by you saying it’s previously discussed issues would be more useful wouldn’t it? Many of us may never have read all of the previous comments on articles but only your articles.
Dear Jason H (At 2017/06/01 at 8:09 pm)
There was no censorship at all involved in deleting a redundant comment. I pre-warned readers that I didn’t want to entertain arguments that we have been through previously and invited those who were in doubt to take some time and see if the discussion had already been had.
If they had something new to say then I also indicated they were free to do so. But just as I have invested time in developing a body of knowledge, I expect readers to invest time in educating themselves on the range of issues already dealt with.
My blog is not venue for commentators repeating, ad nauseum, matters that have been dealt with several times in full.
best wishes
bill
Re MMT forebears Roosevelt and Hopkins: not disputing the value of the New Deal, but can they be ancestors of MMT (rather than Keynesians)? Does MMT mean anything with gold-backed money?
Mel – By MMT forebear I meant an economist back then who has been called a forefather of MMT; it was the one of whom Keynes said “There seems to be no other economist with whose general way of thinking I feel myself in such genuine accord.”
As for gold:
(a) Scott Fullwiler, discussing this with me and others at Naked Capitalism some time ago noted that the US has essentially been “monetarily sovereign” with “fiat money” since FDR, and behaved that way. What Nixon did was just the last step.
(b) A gold standard isn’t gold backing money – it is “fiat” money backing gold. The MMT approach applies there just fine, it is just as meaningful; it just may be a little bit harder to analyze, to translate concepts, to say things well.
Differentiating between MMT & (real) Keynesian is imho not very productive. In any case all MMTers look upon the New Deal, the work programs and the WPA in particular as very important, very large scale tests of their theories. As Sherwood notes – Hopkins was in charge of spending more money and employing as many or even more people than the entire US WWI effort did. There were about a million WPA projects over its history. So the difficulties in running a JG are grossly exaggerated by many, especially those who daydream about the illusory benefits of BIGs.
The relief programs and the later veterans bonus were “BIGs” to the work programs’ “JG” and I think it is fair to say that the work programs succeeded substantially better (e.g. in stimulating secondary, private investment, macroeconomic stabilization and betterment of human welfare) and were therefore more popular, then and later.
Tom I am firmly in favour of full voluntary employment.
But unemployment is either caused by inadequate demand period as Bill has stated
when not discussing BIG or it isn’t.
If it is then BIG in a fiscal stimulus context will increase employment.
Increased demand will increase supply.
If you can raise BIG to levels which stop people working then you can raise a”living wage”
JG to levels to stop them taking other jobs effecting supply too but such an outcome is
based on not understanding wealth and poverty are relative just like everything else in the
universe.
A minimum income wherever it comes from is poverty .You can re brand minimum wage
a living wage like the UK Tory government but a rose is a rose by any other name.
Yes it is a good idea to raise the level of relative poverty and raise minimum incomes I
think the best way to do this is for full employment with negative income tax at the
bottom via a BIG which is also a fall back for those in full time education , caring for
relatives or any other reason to be between paid employment.
The fundamental mistake in this analysis of BIG that it encourages people to drop
out of work and raise demand without supply is the same fundamental problem
as the neo liberal claims about welfare in general that is that a significant amount of
people will choose poverty.As I said there is no evidence for that claim.The vast
majority of people for the vast majority of their life will seek to add to their income
the universal nature of BIG will make it easier for them to do this than current welfare.
Yes until full voluntary employment can be established targeted welfare may still be
necessary.
BIG is not an alternative to full employment it should be regarded as a part of a
progressive taxation policy which redistributes money tokens in this fundamentally
unjust system as well as undermine the neo liberal divide and rule narrative on welfare.
“If it is then BIG in a fiscal stimulus context will increase employment.”
Only if you are a neo-liberal and believe in magic markets.
The fundamental issue at stake is one of involuntary unemployment. The one Keynes came up with decades ago.
Very few people get the issue.
But it is really simple.
In a market the involuntary unemployed have *no mechanism* by which they can impose their employment preferences on job creators.
In classical terms there are plenty of people on the unemployment queue willing to work for less, but nobody is bothering asking them. That is, essentially, the difference between *aggregate demand* and *effective demand*.
BI addresses aggregate demand in the mistaken belief supply side auto adjusts dynamically. The Job Guarantee addresses effective demand knowing that the supply side does not auto adjust dynamically.
The Job Guarantee is specifically designed so that the unemployed can impose their employment preferences on job creators. You then get the wage *and* the public output that justifies that wage in the eyes of the wider public.
It is designed to provide Jobs to the People, not fire up a list of jobs and hope there’s somebody matching it (and if not you ask for an immigrant Visa).
It then doesn’t matter that profit seekers can’t see the future. Wherever their intuition stops, the Job Guarantee picks up the slack.
The world is full of people, not mathematical formulae with infinite foresight. So you have to engineer a solution that works for human beings – limited creatures with a bundle of prejudices and fallacies. There is no more a labour market than there is an education market. Everybody needs and should have something worthwhile to do for others, just as everybody needs and should have an education. No deal isn’t an option.
“Basic Income proposals are popular with people because they have ‘freedom’ built-in as a no-cost marketing strategy.”
Freedom for whom? Certainly not freedom for those growing the carrots you take for nothing material in return.
Everybody loves a bung. And the individualistic nature of the BI plays to that. But the politics are not about what you want. It is about what other people expect you to be doing. So if you’re enjoying your ‘freedom’ playing Xbox and drinking beer then everybody else will politically agitate and have your income removed from you.
Basic income fails because it allows certain people to get paid twice in real terms. Once in the free use of their own time, and again in the time of others they take in the goods/services they buy with their worthless money. Those doing the producing work that out and have it stopped. We see this time and again – student grants cancelled, unemployment benefit cut, pension age continuing to rise despite the lack of jobs.
The majority of the population are matchers. They expect you to give up time for others – because Service to Others is the price you pay for your room here on earth. You don’t get to decide entirely on your own what you get to do in life. The opinions of others get a look in as well because they have and create the stuff you need to live. Your freedom is tempered by the fact that other people have freedom too and your rights are no greater than theirs. We have society to rectify that fundamental conflict. “How would you like it if…” is how we teach children to recognise the needs of others.
So you are required by society to give up time to the service of others, and then you will get your share of spoils created by others doing the same. We call that a job and a wage – paid in arrears.
Tom’s comment explains very well why our current neo-liberal world falls well short of what could be achieved with MMT fiscal stimulus and a JG.
“it is the ultimate mission of Conservatives to make life a living hell for the entire world population”
Sharpen the guillotines.
This took a bit to write, and I need to respond. Please don’t delete.
Neil @ 17:39,
I find that worldview utterly repellent. If that is an accurate underlying philosophy of the Job Guarantee as envisaged by MMT then you have saved me a great deal of time.
MMT is bookkeeping applied to national accounts. I like that. Simple. No moral arguments at all. Your descriptions of Basic Income and the JG are the opposite of that. A zero-sum cosmology, bookkeeping for human action. There is no opportunity for art, invention or novelty of any kind, because these things are emergent properties of wasteful idleness. Pursuits of the rich. No wealth building, just the churn of muscle. Where’s the risk capital? Where’s the opportunity for the emergence of new things? Your population of ‘matchers’, people who require an honest day’s work for an honest day’s pay and base every political opinion on the enforcement of that rule, have completely missed the boat to where wealth comes from. Such ‘welfare’ spending will always get a dismal return on investment.
The way I see it, the single most important thing that government can contribute to the wealth of nations is to underwrite risk taking. If the JG and BI have any philosophical purpose, past the one you’ve outlined of course, it’s to emancipate the creation of new things. Your matchers won’t be paid back eight hours of minimum wage labour, all tallied up neatly against each person’s name. They’ll often be paid back a big fat nothing, just as venture capitalists often lose their initial investment. Occasionally, their investment will strike it rich. The prospect of that will dispel any anxiety of being duped by welfare scroungers. I think the JG has great potential if it can do the things neoliberalism can’t, rather than just the nasty things it won’t.
“There is no opportunity for art, invention or novelty of any kind”
Where do you get that from?
There’s plenty of opportunity for art and invention under the JG. What do you think working for others is? The patronage of the Job Guarantee allows art to flourish because we are constrained only by what other people consider useful and interesting, not what private profiteers think they can sell.
More open air concerts, more dramatic art in the street – a far more beautiful world. All because we have people working for the public good who would otherwise be engaged in something they hate doing. That is what increased liquidity in the job market means – a better match of talent to craft.
What is created enters the public domain for others to riff off – because it is bought for the public good. You can think of the Job Guarantee as a near endless Arts Council grant mechanism. The limits are only what others consider worthwhile.
Similarly if you want to start your own business, then the Job Guarantee will help you on your way for a while in the manner of the old Enterprise Allowance schemes. After all who would object to helping if you said you wanted to start your own business.
If you engage with others and work for the common good you will be supported.
Do you have such a downer on the sensibilities of your fellow members of society that you refuse to negotiate a fair deal with them?
MarkH: Basic Income is not popular with ordinary people – because they are better at economics than BI supporters. It is popular with people who think they are smarter than ordinary people. That they support BI shows they are not. 🙂
Switzerland is probably the country in the entire world where a BI would take the longest to show its destructive effects, the longest to inflate. But the Swiss voted down in one of their many referendums. But BI supporters never think that just maybe, the Swiss might be right. BI is a stupid idea, even an evil idea that cannot and will not work.
You are right to mention freedom. BI holds out a false promise of false freedom.
The most fundamental reason to loathe BI, as I do, is because of its similarity to slavery. The most fundamental reason for the JG is that it promotes freedom, the way that the BI only promises to do.
As Samuel Johnson said “How is it that we hear the loudest yelps for liberty among the drivers of negroes?”
BI – surely unwittingly on the part of most but not all of its supporters – is very close to the arguments of the pro-slavery intellectuals. BI is soooo generous with the labor – of other people. Most – but not the billionaire supporters of BI who are fondling their mustaches as they support it and the sucker “intellectual” daydreamers – simply do not see the “negroes” who the BI would be “driving.” MMT & the JG are the modern abolitionists. A good book to put one in the right frame of mind to see these things – to see both the pro- and anti- freedom strands of liberalism is Domenico Losurdo’s Liberalism: A Counter-History.
“Your matchers won’t be paid back eight hours”
The matchers represent about 52% of the population. Those who take without giving back about 19% of the population. Only about 25% are prepared to give without receiving anything in return.
That’s according to Organisational Psychology research into the way people see others.
So there is a majority that require quid pro quo, and that means they will win any election. And about a fifth of the population will destroy any income guarantee or anything else that depends upon people ‘doing the right thing’.
That’s the reality of the situation. The Job Guarantee works with the reality of the world as it is.
Very well said Neil.
MarkH I understand your concerns but as Neil explained a JG is only limited by our imagination and priority of values. That I think gets to the nut of the problem; we are all constrained by the current neoliberal paradigm. We can only truly progress once it’s removed.
So Neil just to get this crystal clear you do not accept Billl’s assertion
that unemployment is down to inadequate demand period?
Or as Bill put in his blog on 29 th may
“A shortage of jobs is due to a lack of total spending in the economy.
End of story.That is categorical.”
Of course we saw frictional rates of unemployment in many countries for many years
in the post war period without job guarentees.
Personally I am in favour of job guarentees as well as universal BIG.
Kevin,
The shortage of jobs is caused by a lack of spending. The right kind of jobs in the right location to avoid price rises requires a Job Guarantee. That’s why he invented it.
I would like to better understand both sides of the discussion on universal basic income. How do arguments against universal basic income stand up, in relation to pilot test results from India as commented upon by Prof Guy Standing, which have apparently showed that peoples’ lives were improved on various levels, that labour participation actually increased, and those who gained the most beneficial effects were – women?
[Bill notes: I edited out a link I do not wish to promote]
Thank you for this discussion.
I understand theory of the JG.
We can debate the right kind of jobs in the right place at the right price.
For me the priority is well paid government jobs in Health,education,housing and non
co2 producing energy .Millions of them!
As I have said before neither BIG or JG would be my priority of choice for government
but the challenging logistics of directing real resources for public purpose .
I feel obliged to comment on BIG blogs because of the different set of analysis
and opinions MMT iers use when discussing BIG to other topics.You seemed to be denying that
extra spending in the economy would create more jobs not that it would cause the
wrong type of lobs.
Neil: “Only about 25% are prepared to give without receiving anything in return.”
What proportion of the 52% of matchers own shares and collect dividends? Public spending on the bottom of the labour market isn’t ‘giving’. It’s not charity, any more than buying stock in a low priced and struggling company is charity. The difficulty I’m having looks to be with imagining how a modern implementation of the JG will look, rather than with the philosophy. I like your most recent description much better than your previous one, and it at least partially meshes with what I’m envisaging. There’s an ad for one of those online freelance job matching businesses where an elderly woman is shown subjecting her hired task monkey to a variety of degrading dance moves. That’s what I see whenever anyone makes a market case for bottom-of-the-market work. My one gripe with your model is that it’s market driven – ‘what the community wants’ requires the community to first know what it wants. That’s a demand-driven market. “The Cathedral and the Bazaar” model of open source software shows that the market never knows what it wants when it comes to the most important things. It has to be shown, and shown again, and that takes risk. Academic research is the same. You won’t convince the community that it needs more entrepreneurs, whether social or scientific or financial, you can only entice them with the lure of future profit.
Jason H: “we are all constrained by the current neoliberal paradigm. We can only truly progress once it’s removed.”
I think it’s better if we all pretend that’s not going to happen. It may be unwise to hand over the keys to the kingdom to the wisdom of markets, but markets themselves, and market-oriented thinking, can be an opportunity and not just a constraint. Working with neoliberal thinking rather than grumbling in the corner about the coming revolution may be a better strategy. Thanks for the support earlier 🙂
Is the research which claims that human identity, wellbeing/happiness is derived ‘from’ work – atheistic or a religiously influenced (eg. ‘Protestant Work Ethic’) masculine ‘left-brain’ dominant worldview? Research in fields such as transpersonal/spiritual psychology and the writings of various contemporary spiritual non-religious teachers (also articles below from Psychology Today) seem to indicate that defining our identity and sense of worth ‘from’ work/our achievements/job title etc, is an imbalanced understanding of human existence, but yet which we are taught via social conditioning from early childhood and by society at large?
https://www.psychologytoday.com/blog/anxiety-files/201302/you-are-not-your-job
https://www.psychologytoday.com/blog/wired-success/200905/you-are-not-your-job
*Does this explain why results of Universal Basic Income pilots in places like India, have apparently shown that ‘women’ gain greater overall benefits (including increased labour participation) than men? Are concerns about Universal Basic Income thus potentially influenced by a masculine left-brain dominant belief system, which might say that a ‘human being’ is less worthy than a ‘human doing’? Thank you again for these important articles and the opportunity for public questions and respectful discussion.
Magdalene fair points but it’s important not to se that work is what gives you self esteem but the overall actions that do. It’s a subtle difference but can be seen by extremes such as workaholism being as bad as addiction. It’s important psychologically to always esteem from within rather than from outward things that can’t be depended upon. Good quality service or “work” that suits a person allows esteeming from within. The current neoliberal workforce I would argue forces people to esteem from
their actual job especially when it involves massive debt forcing people to work against what their instincts would decide. Hope I made sense but it’s a bit hard to explain in a short comment. This difference to me is why I’m a strong supporter of a JG rather than a UBI. For practical real world and political purposes to appease UBI supporters I would argue a UBI should only ever be introduced with a JG not just by itself.
Dear Jason,
Thank you for your helpful reply.
Yes it does seem that people have been and are forced to measure their worth as human beings, from their job/what they ‘do’ – rather than from their inherent innate worthiness within, regardless of whether or not they do paid work/or are employed in a paying job.
If the aim is to discourage human beings from being forced to derive their sense of worth from a paid job, then how does a job guarantee (JG) achieve this?
There appear to be feminist and other scholars (such as David Graeber et al) who also question how we define ‘work’ that is deserving of payment/an income?
Although much of what many people ‘do’ and contribute to our world, is essential for our communities’ existence and survival, it is not classified as ’employment’ or as a ‘job’ deserving of payment, so is thus not valued by society as deserving of a financial reward to cover basic things like: food, shelter, clothes, education, health care (eg: domestic chores and duties in the home? Caring for parents and/or for children, supporting friends and colleagues who are in grief or distress by giving them our time without charge or favour, volunteers, spiritual/pastoral counselling etc?).
Instead, as David Graeber has written – has (rentier) capitalism created pointless jobs?
http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/
Would a JG address these issues better than a UBI? Any suggested articles (including re-direction to prior blog posts) that answer these questions would also be much appreciated.
Thank you again for this discussion.
Magdalene
Just found these interesting videos by David Graeber (London School Economics) below on the peversion of the value of ‘work’ and how important work by those in areas such as our caring professions, the arts, and in teaching – have apparently been made unvaluable by (neo-liberal?) capitalism:
https://www.youtube.com/watch?v=tpoJIkqEXYo
https://www.youtube.com/watch?v=kehnIQ41y2o
Noting what Graeber observes, would a ‘meaningful well paid job guarantee’ (MPJG) be preferable to a ‘job guarantee’ (JG)?
Thank you for the opportunity to ask questions on this forum.
Final question? Are we sure that the desire/and research for a Jobs Guarantee (JG) is not emanating from an unconscious Protestant Work Ethic that is apparently socialised into all us (men and women) from very early childhood and enforced by sanctions throughout life?
eg: http://www.independent.co.uk/news/science/the-protestant-work-ethic-heaven-knows-im-miserable-now-8563139.html
If so, how does a JG and/or a UBI address or help to change this culture? Could a (‘meaningful and secure well-paid) Jobs Guarantee (JG) ‘and’ a Universal Basic Income (UBI) work together?
Any research citations or article links that might answer these questions would be much appreciated. Thank you again.
This is my favourite blog critique of BI so far-addressing concerns of falling output and cost push inflation.
What we need to be doing is expanding the capacity and productivity efficiency of the supply side(both non-JG public sector and private sector) to increase living standars and wealth.once we the cost of producing output of goods and services is near zero (which we are millenias away from) then these sort of proposals may have less potential downsides.
@neil at your first comment all your points were valid;but the idea that a lot people wouldnt be happy living off a BI then topping up with work for capital expenses occassional is remarkable.providing it didnt cause any distortionary supply issues it would suit a lot of people.And considering the amount of people who live off idle unearned income without contributing to output I would recommend that they should entertain little qualms about doing so.
More generally I don’t know whether our currenct system rewards those who create real vital socially neccessary output are rewarded.We need food, energy, basic materials, goods, human services, healthcare, education…..we need to figure out how to produce these things as cheaply (whilst improving quality) to achieve an abundant supply which makes them accessible to all,however we distribute the purchasing power required to aqcuire them.
We live in a world where the wealthy extract economic rent without contributing to output.we also live in a world where athletes are paid fortunes,how essential is their contribution to output of socially vital goods and services?We also live on a world where teenagers become millionaires posting videos of themselves playing video games.How much of people working actually contribute to vital output??Could this even be measured accurately??
Magdalene: for me, “Protestant Work Ethic” neatly sums up the core philosophy here. I’m looking for a political framework which accounts for human weakness as a feature, not a flaw. The one the world has now, same as it ever was, is based on punishment and class: personal responsibility and to-the-penny accounting demanded and extracted from those at the bottom of the pile, wanton excess and financial engineering magic for those at the top. When the JG is described earnestly as a means for a person to justify his existence on Earth, to himself and to the people whose work feeds him, that is pure Calvinist theology. If you’re brought up in that tradition it may look like an obvious and necessary worldview. It’s really work as worship, a nebulous religious ideal rationalised as economics. I’m trying desperately to avoid economic religionists – I reject rule-by-market, I reject rule-by-false-meritocracy, and I reject rule-by-barely-concealed-protestant-dogma.
The Buckminster Fuller quote concerning drudgery sums up, for me, a valid philosophical starting place for an economic treatment of work. Basic Income proposals have that as their seed. If the implementations as offered are shithouse, then that’s an opportunity for redesigning them properly. The ultimate goal is a world that works without even the need to appeal to personal financial responsibility. There’s none at the top, so if it’s folly to try to fix that (and it is) then there should also be none at the bottom.
Magdalene D’Silva- Your questions are worth answering; many have asked similar ones before.
Today, first some serious misconceptions:
Does this explain why results of Universal Basic Income pilots in places like India . . .
There have been no pilots of Universal Basic Income in India. The nearest things to UBIs in the real world, decent models for it- (petrostates) are not a pretty picture. Just because people say “I propose the UBI, defined so” & “This is a pilot UBI” does not mean “The Pilot UBI” fits the proposers’ definition by any stretch of the imagination. They do not. From your description, it sounds like the Pilot (Not-)UBI is a Good Thing, because it is targetted welfare spending, which all JG-loving MMTers love. The basic thing the Pilot seems to show is that it is better to have more money than less. True, but even though one might have thought this needless to test, it might not be, considering the craziness of most modern economics. Again, “Pilot UBI” good. Real UBI bad.
A real test of a UBI or BIG must be national. Otherwise it is not a BIG or UBI. U stands for “universal” & “G” for guarantee. The problem – clearest with the UBI – free money for everyone – is that it just ain’t possible. There is no way for any economic system to withstand the massive flood of UBI money. To put it in terms which Bill might not like, but are accurate enough – there just isn’t enough money for a UBI. No nation will ever have enough money for a real UBI. Money that is worth anything, that is. At best, UBIs or smaller, more targetted BIGs do – nothing at all, overall. The small number of people helped will be balanced (usually much more than balanced) by the people they hurt. The amount income guarantees give will just become the entry fee of hoi polloi into the monetary economy. It will be eaten up in prices paid to guess who. Which is why there are so many billionaires asking for the programs.
Would a ‘meaningful well paid job guarantee’ (MPJG) be preferable to a ‘job guarantee’
That is like asking would $200 be preferable to $200? The question makes no sense because they are the same thing.
The JG proposal in theory (MMTers) & practice (the New Deal, WPA, Scandinavian Active Labor Market Policies (ALMP) etc) has always been for good pay for meaningful work.
That is how they have worked out. They have always worked and greatly improved human welfare. And usually been fought tooth and nail by the wealthy.
BIG schemes have basically never worked out. Never made any substantial improvement anywhere.
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
The UBI / BIG is essentially about forcing people to work: Not groovy. Divisive. Distorted “work ethics” & servile pauperism on the other hand.
Any good they could do could be done better in other ways. Most importantly by far, but not solely by:
The JG, which is about allowing people to work when they want to: Groovy, the people united, liberated from artificial “work ethics”.
One should suspect this by the basic nature of UBI vs JG transactions. The UBI means the society = your neighbor gives you (presumed valuable) money, for nothing. You spend it – on something society, your neighbor does for you. The neighbor loses no money, but has spent his labor for nothing from you. You are a master. He is your slave. You have ripped him off. And this is how we educate people on the virtue of generosity, of charity – by ripping them off?
On the other hand, the JG transaction is about “one hand washes the other” (Epicharmus). You do work for society, your neighbor through the JG. You get money. You spend it on the neighbor’s services as before. No monetary change, as before, but what has happened is the two have cooperated on common goals by contributing their labor partly or wholly through the JG. The JG is groovy, hippie slackers on a commune sharing and playing nicely with each other.
If so, how does a JG and/or a UBI address or help to change this culture?
So the answer to your question on what the UBI / BIG does vs the present Protestant Work Ethic / capitalist culture is: The UBI/BIG pushes the culture backwards, toward slavery or at best feudalism, where the fates of the many are decided by the few, the economist, administrator, legislator, businessmen lords deciding on the UBI/BIG pittance. And the lords would never run things for themselves and screw the commoners. Never happened, no never. Isn’t happening right now in our neoliberal world. Yeah, right.
The JG pushes the culture forwards to the glorious socialist (or if you like, capitalist) utopia. To an improved version of the postwar era, which for those too young to remember – really was better than now, where the politicians occasionally did respond to the commoners rather than spending all their time on serving the revolting whims of the plutocracy. ANd where basically everywhere there was much more of a true “right to work”, right of full employment, whose best expression is the JG. This nationally-decided JG-oid full employment caused the postwar prosperity. Among the nations that have decided to have fullish employment now, it is causing their prosperity. We can just decide to have this permanent quasi-boom everywhere again. We can build it, we have the (social) technology. It is called MMT ( & applied MMT = the JG).
MarkH:When the JG is described earnestly as a means for a person to justify his existence on Earth
Well it shouldn’t be. The problem is that so many everywhere have “neoliberal” thought patterns so drilled into them that they can’t see they are thinking in a backwards, neoliberal way. Even your discussion with Neil above is in a looking-glass world. Each of your reasonings, arguments usually supports the other’s positions! People’s resentment of UBIs, BIGs, of free rides, psychological reasons- are not the reason why income guarantees are bad, don’t and can’t work. This resentment, desire for “matching” makes income guarantees work better. They don’t work because they don’t work in reality, for real, economic, price of eggs, size of paycheck reasons. Like the ones Bill & other MMT thinkers sketch in this and other posts and papers.
Great discussion here I’ve finally caught up on.
Magdalene Someguy wrote a good detailed reply. One thing I’d add that might help MarkH and yourself would be to think about people who are born into wealth. They work when they want as they have no financial limitations like the vast majority of us. A JG should act the same way in that we decide how much we want to work and how much extra wealth we want to accrue. Thinking from that perspective may help mentally reframe a JG and help to unshackle the brainwashed perspectives we have that we can’t even see affecting us.
MarkH pleasure to provide support for vigorous discussion and personal critique :-). I know none of this is easy at all and may never happen within my generations or generations but I still think it’s important to spell out the end goal so it’s crystal clear. That way it’s easier to work out the obstacles and what concessions can and need to be made along the way to help achieve that end goal. I’m certainly not thinking we can just jump to the end game right now but it’s really important to know what the end game is of a JG (and even some BIG possibly if we get to mass automation) utopia with little inequality and creative capitalism that benefits society greatly and aims to preserve our one and only planet from our destruction of its ability to harber humans.
Some Guy: “One should suspect this by the basic nature of UBI vs JG transactions. The UBI means the society = your neighbor gives you (presumed valuable) money, for nothing. You spend it – on something society, your neighbor does for you. The neighbor loses no money, but has spent his labor for nothing from you. You are a master. He is your slave. You have ripped him off. And this is how we educate people on the virtue of generosity, of charity – by ripping them off? ”
I’m not a UBI fan (or JG, tbh), just someone who sees the novel features of the idea(s) as a refreshing change from business as usual. The simplified transactional description you’ve provided, one I keep reading from other people, irritates me because it models a national economy like it’s a wild west prospecting town. Everyone in that town is either an active economic participant or a vagrant, and every business is a micro business whose existence relies on exploiting a vacant market opportunity. The real world is owned by corporations who don’t only accumulate the bulk of all capital, they monopolise the market niches that could be filled by small businesses. Ripping them off is a completely different moral dilemma to ripping off the little old lady who grows your carrots, and in a different economic category. Ripping them off and then using the stolen money to add back the opportunity in the world that has been soaked up by the rich – that’s a crime worth contemplating.
Jason: that end game is the one Buckminster Fuller talked about. It really is an obvious dream for anyone who isn’t a sociopath. I suspect I’d be totally on board a JG if the definition of ‘job’ was deliberately made to be very broad, and if it defended the right of those at the bottom of the market to create economic opportunities, not just consume them. The ‘service to the community’ mantra starts to wear a bit thin after a while – the community doesn’t know what it wants, and that vacuum either gets filled by scrappy entrepreneurs testing their ideas on shoestring budget (provided by the community sight unseen), or it gets filled by mega businesses using ‘community’ as a front for exploitative drudge work. I know which one I want, and I can see the other one happening too easily.
MarkH with any JG in a democracy it will be tweaked by political parties im sure and waver between the perfect setup and something not so perfect. Unfortunately that’s politics in the best version we have. But like Medicare/NHS and similar schemes ideally once in place it will become almost impossible for a political party to remove as the majority of voters will want it to stay. A BIG I feel would quickly end up being withered away and eventually scrapped due to its cost and “freeloaders” (not a moral judgement by me just imagining how media would frame it).
There is a natural element of human idleness (laziness?) that will always be an issue but as you’ve said that idleness is when we can be creative so a true value may not be possible.
Just to be clear JG advocates like myself will say it takes some common payback with service for you to have the luxury of time to think and be creative. In some ways a JG could be renamed a “citizen service obligation” with an emphasis on service but it’s probably not a name that would stick as it could have multiple meanings.
P.s. Bill the math question if not answered just says “internal server error”. It took me a few goes to work out I missed it unlike the old message FYI.
Re: a UBI and its degradation through political malice and entropy: if I remember correctly, a cornerstone of the neoliberal enthusiasm for Basic Income was Milton Friedman’s negative income tax proposal. Which was *always* meant to be temporary. It was the first prong of a possible attack on welfare – 1)replace welfare bureaucracy with existing tax bureaucracy; 2)gradually wither away tax refunds for the lower tax brackets. It’s pretty clever – if if we ever fall for the first part, nobody is ever going to pick a fight with revenuers for being unfair, because duh.
Re: “it takes some common payback with service for you to have the luxury of time to think and be creative”
I think it’s important for that sort of thinking to die, and die quickly. It’s totally backwards. The framework should be “how is [your nation] going to generate wealth in the coming decades”, not “how does an individual earn the privilege of being productive”. Nations should be throwing everything at the very real existential problem of being left behind in a rapidly changing world. The only strategy is to change quicker, and to drive the change. Otherwise we’ll be like, well Australia now – wheat, sheep, coal and iron ore will only be profitable for so long. We should be treating people like undeveloped real resources, not costs to be tolerated and minimised.
I do like the idea of UBI but (grudgingly) can see the JG is probably better in the long run.
A couple of questions if I may:
1) If a JG is about creating jobs for people, what will it do for people who are too sick or disabled to work? Would they still receive Disability Living Allowance (or whatever it has been renamed as in the future)? Are benefit payments not essentially a UBI in this scenario? Could a JG and UBI not be coupled together to allow a market of jobs with social value to be created while also allowing us to start working fewer hours/days per week?
2) In reference to Neil talking about JG as a permanent Arts Council grant, would this allow a musician to receive a wage for creating an album (the Norwegian government currently subsidises their black metal scene as it is a cultural export)? Would they have to justify the genre they play? Or would they be told ‘no, you have to do that on your own time’ until they write something deemed popular enough to justify a wage? I can think of numerous metal bands that will never be played on the radio but can still eke out a living because enough people worldwide buy their work, but by no means are they ‘popular’ in the traditional sense. Where do you draw the line?
“Poverty arises for a number of reasons but a lack of income has to be a central characteristic of someone who is poor. And notwithstanding the increasing tendency for people who work full-time to be found earning wages that place them below the poverty line, the major reason for people having a lack of income is unemployment. That typically makes poverty a systemic event rather than an individual failure because mass unemployment is easy to understand – it occurs when the system fails to produce enough jobs to meet the desires for work by the available labour force.”
Dear Bill,
I wanted to ask you why no economist today seems to factor into their thinking and their ‘solutions’ to poverty the envy factor of workers in relation to those who earn passive income? I have tried to understand where you are coming from, such as the JG program, but what I don’t see from anyone is that it is inevitable that those who earn active income are always at risk of becoming envious of those who earn passive income, largely a result of the fact that many people don’t enjoy working a job for someone else and there is always risk of health issues, stress, being injured or killed at work, or worse accidentally hurting someone else (risks which passive income earners do not face). Whilst in hard times there are less who will think this way and are more grateful to find any form of work no matter how debilitating it is, when times get better, many will seek to shift some or all of their active income into passive income – a result which has two profound effects. The 1st is that as the PI:AI ratio increases so too does the required productivity of the remaining active income workers who then question why they should be having to work harder and longer, which feeds the envy factor even more; the second effect is that as the PI:AI ratio increases, the available means of production then decreases, especially in the form of available labour due to the load of debt being carried, which also increases the required productivity of the remaining active workers. This envy cycle exists not just in the normal business cycle of say 7-12 years, but also in a grander cycle, for instance when I was a kid, there need be only one bread winner who could retire at 55 or 60. Today, each household needs at minimum two bread winners, the young are forced into work at an earlier age, and the retirement age keeps going up. To me, as long as this envy factor exists (and provided there is always risk of health issues from working a job) I can’t see how it is mathematically possible for there to be full employment, nor for any level of employment to remain there permanently (i.e. it must always fluctuate), nor for any income or job guarantee program to succeed whilst money is seen as the only means by which to access needs because money (and property) can always be converted into PI if the will and desire is there. From my own perspective, the attraction of PI for me is because from my own perspective I do not like competing against others for means of survival, and although a JG program might take away that need to compete, it then puts those relying on it in the position of feeling they are relying on others, a position many do not like being in because those who think they are the source of everything (i.e. those who own the means of production) will always be berating them or calling them useless because they lack the strength or desire to compete.
Anyway, just wanted to see what you think on this ‘envy’ factor
I don’t understand how a job guarantee avoids inflationary consequences. I understand that participating individuals are working instead of just existing, but most of the jobs I’ve read MMT proponents support include environmental clean-up and public services. It’s not clear to me how these jobs would absorb consumption in a way to prevent inflation. In other words, the recipients are still receiving and spending the wage they’re paid by the government, but the job they’re performing doesn’t necessarily create anything purchasable.
DZ, part of the idea is that people in the Job Guarantee jobs are by definition working at something, even if their particular job is not adding supply that would normally be purchased. But they are showing up every day for work, and are part of the labor force, and therefore are in a better condition to act as part of the labor supply than those who have given up looking for work a long time ago, especially considering how reluctant private firms are to hire the long term unemployed or those without recent work history presently. The JG jobs are not meant to be careers, they are meant to be compensated at some minimum standard of decency given the standards of that country. So the idea is that most people on the Job Guarantee will be desiring to find other employment as it becomes available. So there is a supply side increase in the available ‘hirable’ labor force with a Job Guarantee, which will pose a more credible anti-inflationary alternative for employers looking to hire even if none of the work currently being done by JG workers added to supply. That’s my understanding of it at least.
Dear Jerry Brown (at 2018/05/31 at 6:57 am)
1. Imposing the concept of a career or not on the JG is incorrect. For some, the JG could easily be a ‘career’, whereas for others not. Saying “JG jobs are not meant to be careers” stigmatises them.
2. There is no suggestion that “the idea is that most people on the Job Guarantee will be desiring to find other employment as it becomes available”. The only motivation ascribed to individuals entering the JG is that they are unable to find a job elsewhere and desire to work and earn a stable income. What happens next depends on a multitude of things.
It was never my idea when I developed the buffer stock concept in the late 1970s that there was a primacy of private employment over public buffer employment.
3. The price stabilisation qualities of the JG have nothing to do with the “supply side increase” as you assert.
Rather they arise because the government is hiring off the bottom at a fixed price and not competing in the market for labour. Search NAIBER and earlier JG posts to learn about that.
Offering an unconditional job at a fixed price and redistributing labour resources from an inflating sector the fixed price sector has to stabilise price inflation.
best wishes
bill
Thanks for the correction and I am sorry my answer was wrong. It was not my intention to misinform people about your plan. Apparently I don’t understand parts of your plan either and have some questions myself- one is how is it that a Job Guarantee program redistributes resources from an inflating sector to a fixed price sector? I’m not understanding that at all.
Another question – is what I told DZ categorically wrong or is it just sort of not how you would rather explain your JG proposal? I mean do you reject the idea that people in the labor force because they are working at a JG job pose a more credible addition to labor supply when other employers seek to hire than people not currently considered in the labor force now because they gave up looking? That’s really not part of how a JG would help limit inflation?
And Bill, I never mentioned anywhere prioritizing private sector jobs over public sector jobs. But a Job Guarantee job by definition is going to be (originally at least) something that no private sector employer is willing to pay the costs for at that particular time, and something that the citizens (or their government, at least) have not been willing to pay for up until that time. Supposing that permanent careers doing jobs not considered all that critical, or not necessary enough to have been paid for previously will be actually be supported by the rest of society is a very ambitious proposition in my opinion. And even if society is somehow willing to bear the costs, how is a Job Guarantee job that a lot of people are happy to make a career out of supposed to temper inflation in any sense at all? Anyone perfectly happy with their JG job and salary is no longer functioning much to control inflation as a side benefit of the policy. That might be a really good thing, for a lot of people, but it doesn’t do much for the inflation argument. The government can’t just ‘sell’ people into the labor market whenever it wants to, at least not anymore.
In other words, the recipients are still receiving and spending the wage they’re paid by the government, but the job they’re performing doesn’t necessarily create anything purchasable.
The cost of a good would include indirect costs, such as infrastructure and maintenance. We don’t argue about hiring janitorial staff, yet we have an objection to hiring people to maintain services that the public uses?
These types of added costs don’t sound like inflation to me.
Robert – I’m trying to reconcile the inflationary bias between the BIG and the JG. If the wage from a JG is not inflationary, then why would the stipend from the BIG be?
With that said, having read several more of Bill’s articles, it seems [one] answer may be the cyclical nature of the JG vs. the static nature of the BIG. As demand falls and unemployment rises, the JG wages would increase at the same time as deflationary (or disinflationary) pressures kick in. The opposite would occur in a heated economy. This seems to be the best support I can find.
[“how is it that a Job Guarantee program redistributes resources from an inflating sector to a fixed price sector?”]
This is either a different way of describing what I stated above, or I don’t understand either.