The Job Guarantee is more than a Green New Deal job creation policy

Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.

Green New Deal and the Job Guarantee

There has been an increased promotion of the idea of a concept of a so-called – Green New Deal – over the last decade or so.

I have seen Tweets over the last recent period (especially since the mid-term elections in the US) that have equated a ‘Green New Deal’ with a ‘Job Guarantee’.

And, relatedly, that a ‘Green New Deal’ will require a ‘Just Transition’, which will be served by the introduction of a ‘Job Guarantee’.

I am a Green New Dealer.

I am also a long standing advocate of the introduction of a ‘Just Transition’ framework to ensure society deals with structural change, especially policy-induced changes, in an effective and equitable manner.

I am also one of the major authors expounding the Job Guarantee within Modern Monetary Theory (MMT).

But, I have to admit to be somewhat disturbed by the social media treatment of these issues and this blog is about disabusing notions that all we need to do is introduce a Job Guarantee and all will be well.

It is, as you would guess, much more complex than this and a national Job Guarantee, might in fact, be only a small part of a Just Transition framework to deal with climate change.

Further, we have to understand that the Job Guarantee is not just a job creation program.

In MMT, the Job Guarantee provides macroeconomic stabilisation which is defined in terms of ‘loose’ full employment with price stability.

In normal times, it might not create or sustain many jobs at all.

And, importantly, it might not be part of a fiscal ‘stimulus’ program.

As Randy Wray and I wrote in a paper published in 2005 in the Journal of Economic Issues (Vol 39, No. 1, March) – In Defense of Employer of Last Resort: a response to Malcolm Sawyer:

The ELR approach is not equivalent to pump priming … with the ELR program in place, “loose full employment” is maintained no matter what the level of aggregate demand happens to be. (The implications of “loose full employment” are discussed later.) We thus reject Sawyer’s claim (2003, 884) that the “ELR scheme seeks to remove demand-deficient unemployment through the provision of required aggregate demand” as overly simplistic and misleading.

At that time we used the term ELR (Employer of Last Resort) because we were responding to a critique of the Job Guarantee idea.

Randy and I agreed soon after to dispense with the ELR terminology. I had objected to it on the grounds that the ELR term was an extension of the LLR (Lender of Last Resort) capacity of the central banks. Money is inanimate, people are not!.

We continued:

Importantly, one could envision a deflationary government policy (increased taxes and/or reduced overall spending) accompanying the introduction of ELR to reach and sustain full employment. We do not recommend such a policy (unless there were excessive overall demand), but it shows that Sawyer has mistakenly conflated ELR with Keynesian pump priming.

The Wikipedia page for the ‘New Green Deal’ says that it is a “a proposed economic stimulus program in the United States that aims to address both economic inequality and climate change.”

And those that equate the inherent Just Transition framework with a Job Guarantee thus imply that the Job Guarantee would be central part of that stimulus program.

Which really abstracts from the fact that the Job Guarantee as a macroeconomic stabilisation framework.

The Green New Deal idea deliberately associates with the New Deal that was introduced during the Great Depression by US President Franklin D. Roosevelt.

But, FDRs New Deal was really a cyclical program designed to deal with a collapse in non-government spending. It was not designed to be a structural revolution although it did contain aspects that were designed to change the way the financial system operated.

The various components of the New Deal were designed to advance what were referred to as the 3 Rs:

Relief – Measures to help the millions who were unemployed and homeless

Recovery – Policies to rebuild the economy that had suffered due to the Depression

Reform – Legislation and laws to create a fairer society

The reform component was largely in relation to the financial sector, which had created the Depression as a result of its poor performance.

The relief and recovery elements were what macroeconomists refer to as ‘counter-cyclical’ fiscal programs – working to redress non-government spending shortages, which leads firms to lay-off workers.

These expenditure initiatives are not intended to be permanent supports to regions and communities and as non-government spending returns, the fiscal intervention is withdrawn.

But, while the details are to be provided, the ‘Green New Deal’ proposal is not really (primarily) about resolving a cyclical shortfall in aggregate spending.

Rather it is a structural program designed to significantly change the patterns of industry output, employment and the consumption patterns of households and firms.

And further, it is about fundamentally altering the shifting the line between government and market responsibility for resource allocation both in aggregate but also spatially.

This shift would go much further than a stimulus package for some regional areas.

It would involve a fundamental reconfiguration of the concept of government in the US context, going against the historical norms that have dominated American society since its inception.

I am interested in spatial elements and have done a lot of work in that area – tracing how the macroeconomics drills down into regional impacts.

It is one thing to advocate macroeconomic interventions but another to understand how they will impact at the spatial level and what is required to advance efficiency and equity at that disaggregated level.

The spatial scale

It isn’t easy calculating how many jobs are involved in the fossil fuel sector in the US (or anywhere).

First, we can fairly accurately count the number of workers actually engaged in ‘extraction’ or ‘production’ activities associated with ‘carbon’.

Second, but the total number of jobs has to also include those that are dependent on these primary activities. So it is not just a matter of counting how many coal miners there are employed at any point in time. There are support jobs, administrative jobs, petrol station attendants etc.

Third, given the spatial concentration of fossil-fuel employment, what about the communities that are involved – doctors, dentists, retail shops, etc? Should they be counted given they will become nonviable if the primary activity is ended?

The US Department of Energy report – U.S. Energy and Employment Report – January 2017 (latest available) – provides some good data.

They conclude that:

1. In relation to “Electric Power Generation and Fuels technologies”, 55 per cent of “employees worked in traditional coal, oil, and gas”.

2. “The solar workforce increased by 25% in 2016, while wind employment increased by 32%.”

3. “about 2.3 million jobs in Transmission, Distribution, and Storage, with approximately 982,000 working in retail trade (gasoline stations and fuel dealers) and another 830,000 working across utilities and construction.”

4. “The Motor Vehicles and Component Parts industry employs just over 2.4 million workers, exclusive of auto dealerships. Currently, more than 259,000 employees work with alternative fuels vehicles, including natural gas, hybrids, plug-in hybrids, all electric, and fuel cell/hydrogen vehicles, an increase of 69,000 jobs in 2016.”

While there is a substantial shift going on already in the US towards energy efficient activities (and employment) there are still many American communities dependent on exploiting fossil fuels.

The spatial distribution of fossil jobs is also very concentrated and often located in sparsely-populated regions that pay well below the national average pay.

This map from the US National Institute for Occupational Safety and Health (NIOSH) for employment in the Coal Industry Sector in 2015 is representative of the spatial concentration and the problems that this brings.

The US Bureau of Labor Statistics shows that in November 2008, coal mining employed 86.1 thousand workers in the US. 10 years later, total employment had declined to 53.2 thousand, a fall of 38.2 per cent.

In terms of overall jobs, the coal industry accounted for only 0.04 per cent of total employment, which means it is a very small sector overall.

But in terms of the regions it is located in, the coal industry becomes more important, although still not large.

Market solutions will not work

Some years ago, I was on a panel at a forum on the future for Australian coal in Newcastle. Note that Newcastle has the largest coal export port in the World.

You can find a short film extract (13 odd minutes) from the Forum HERE and you can listen to the full 35 minute segment that they created from a meeting which lasted around 90 minutes HERE.

Here are two YouTube videos from the event:

My input to the forum was as an antagonist to the mainstream views being presented by the Federal Minister at the time, a union official, and an electricity industry representative.

I provide a full account of that event in this blog post – Australia’s response to climate change gets worse … (November 15, 2009).

Market-based solutions to climate change were all the rage then – carbon taxes, trading schemes etc.

The point I made was that:

1. Market-based schemes are neo-liberal constructs which start with the presumption that a free market is the best way to organise allocation.

2. Emmission trading schemes amount to nothing more than a privatisation of the commons asset which we call the atmosphere.

3. There is ample evidence of the projects linked to credits as having disastrous effects in poor countries and regions.

4. Market-based systems are insensitive to equity issues. The proposed ETS will hand out property rights to big polluters but there is no equity considerations built into this approach which is no surprise because markets are not equitable.

5. Markets are insensitive to biological systems. The mainstream economics approach is that you can pay for pollution through more growth. We have to generate wealth before we can clean the place up. There may be a point – that we certainly cannot predict with any accuracy – beyond which there is no trade-off between pollution and other goods and services. After that point the planet dies.

6. If the science is right major changes are required now and thus require a regulative, rules-based approach. Governments should impose sunset conditions – industry closure regulation on polluting industries.

The Just Transition framework

Which brings me to the concept of a – Just Transition – which is not a new concept despite the fact that many ‘New Green Dealers’ might think it to be.

I discussed the concept of Just Transition framework in these blog posts (among others):

1. The Budget (what else) and a parrot or two (May 12, 2009).

2. Australia’s response to climate change gets worse (November 15, 2009).

3. When jobs are being lost think macro first (January 21, 2013).

In the past, I have done detailed modelling of shifts to renewables within Australia and promoted the Just Transition approach to structural change.

For example, see A Just Transition to a Renewable Energy Economy in the Hunter Region, Australia (published June 2008).

We have done more recent estimates but they are not publicly released at this stage. They more than support the earlier findings we produced.

The title of that paper reflected developments in the 1990s in Canada.

On December 5, 1996, Brian Kohler, from the Communications, Energy and Paperworkers Union of Canada gave a presentation to the Persistent Organic Pollutants Conference in Chicago.

The presentation – Sustainable development: a labor view – carried the sub-title:

The real choice is not jobs or environment. It is both or neither.

It was a visionary statement from a trade unionist at the time (22 years ago).

He began by posing a dilemma where a long-time worker in a chemical plant is confronted with a situation where the plant has to invest to survive (and that means the workers keep their well-paid jobs with secure pensions etc) but an “environmental group has won a court order halting the new production facility from being built.”

The question is: “How would you react?”.

As he noted, this is in part about “who is right, and who is wrong” in terms of the environmental/economic impacts. That is, a separate discussion.

But as he noted:

Much more fundamentally, it is about how society will make decisions about sustainability, and who will pay the price of those decisions. Will it be those who have the deepest pockets or will it be those who can get the best press?

The climate change debate, to this day, forces workers into difficult alliances.

They know full well the toxic implications of their work.

But it is their work and future and as Brian Kohler wrote:

… if you attack us in our workplaces, if you fail to understand the jobs issue, you will create a confrontation that you cannot win. You will force us into an alliance with our employers and you, we, society and the environment will all be the losers.

He also had a message to the bosses:

We understand that as long as there is industrial activity, there will be an environmental impact: There is no “clean” production; only “cleaner” production… the second law of thermodynamics will get us in the end. However, if you continue to treat us as commodities instead of human beings, if you continue to shed jobs at every opportunity using the excuses of globalization, automation, downsizing, mergers, and contracting out; if you continue to poison our bodies and then fight our attempts to obtain even workers’ compensation in return, you will have to forgive us for being somewhat skeptical when you promise to save our jobs.

Brian Kohler was essentially arguing that workers cannot take one side over the other – environment versus jobs.

They had to work to protect their “own legitimate perspective” which has to embrace both a responsibility for the global environment and the preservation of the “economic and social needs”.

Failure to fight for both would lead to a “catastrophe” for workers of one sort or another.

This sort of logic led his union to propose the “Just Transition Program” to serve as a model for societies that had to:

… make some tough choices about which economic activities we are willing to continue and which we are willing to forego, a structured transition or “just” transition program is necessary, if the costs of those decisions are to be shared fairly. For it is absolutely clear that without such a plan, the people that will pay 99 percent of the price of change will be the workers in the affected industries and the communities that rely on the income of those workers. Capital can write off losses, collect insurance in some cases, and re-invest elsewhere. Workers do not have these kinds of options. Without a “Just Transition Program” you guarantee conflict, and possibly violent conflict.

Brian Kohler outlined the fundamental characteristics of the Just Transition framework:

1. “Protect the purchasing power of workers and their families”.

2. “Facilitated transition of environmentally displaced workers to new employment”.

3. “A redefinition if necessary, of the term employment to reflect the principles of sustainability”.

4. “Support for communities dependent on sunset industries”.

The Canadian Labour Congress (CLC) published a paper in April 2000 – Just Transition for Workers During Environmental Change – which elaborated on the ‘Just Transition’ concept.

It noted that:

Just Transition is the flip side of Green Job Creation: when we create Green Jobs, there will be an industrial transition – this means that workers in traditional industries must be protected.

It made it clear that “Workers cannot be simply thrown on the scrap heap as a sustainable economy”.

Simply thinking that a Job Guarantee will provide a ‘just’ and ‘equitable’ employment solution to the massive dislocation that a ‘Green New Deal’ will bring is disingenuous.

At the heart of a ‘Just Transition’ is the notion that the “costs of environmental change will be shared fairly” such that “workers in targeted industries and their communities” will not endure the costs that benefit us all.

They provide the following definition of Just Transition:

Fairness: – Just Transition is the fair treatment of workers and their communities when employers close facilities for whatever reason. It is a moral and political imperative.

Re-employment or alternative employment: – The prime aim of Just Transition is the continuation of employment without loss of pay, benefits or seniority. Job equity is at least as deserving of preservation as the equity of corporations.

Compensation: – Where continuation of employment is not possible, just compensation is the next alternative.

Sustainable Production: – Just Transition is essential to the move to more sustainable production methods and the service sector which supports it.

Programs: – Just Transition will express itself in a variety of ways, according to the issue, but there must always be a program, suitable to address the environmental change that is about to take place.

It is clear that the need to provide “Re-employment or alternative employment” go well beyond what we think of as the Job Guarantee, which is a buffer stock job to deal with spending fluctuations.

A Just Transition ensures that the costs of economic restructuring and the shift to sustainability do not fall on workers in targeted industries and their communities.

A just transition in any threatened region requires government intervention and community partnerships to create the regulatory framework, infrastructure and market incentives for the creation of well-paid, secure, healthy, satisfying environmentally-friendly jobs with particular attention to appropriately meeting the needs of affected workers and their communities.

The support from Government must include:

1. Transparency and Planning – adequate notice of workplace change and closures to workers, communities and employers. Consultation and full engagement of relevant unions.

2. Funding and logistic assistance – for both displaced workers and for contractors. This would include income maintenance, redundancy entitlements and retraining allowances.

Further compensation and equipment buy-outs for contractors would be required.

3. Redressing financial barriers – to ensure that start-up renewable industries do not fail due to lack of capital. The currency-issuing national government has the financial capacity to ensure funds are available through an appropriate funding mechanism such as a renewable energy fund.

This would include the provision of cheap loans and subsidies for new industries and employers.

4. Removing price distortions – when the costs and benefits are not reflected in the final price of a good or service then under- or over-investment in various related activities can occur. Taxation and subsidies are valid policy tools to ensure resource usage is properly appraised in this regard.

5. Research and development – Government should increase the scale of its research funding to universities and related institutions to conduct research and development, which will further lower the costs of renewable energy technology.

6. Skill development – new training courses in renewable energy, with linkages into schools and potential employers. A significant boost in funding is needed to support quality teaching, to attract students and engage employers.

Special targeted support for older, disabled and less educated workers will be required.

7. Relocation support – funding to help ease housing and transport issues should a worker nominate to relocate.

8. Creation of public enterprises and partnerships with local not-for-profit co-operatives – in most societies there is so much need in the area of personal care and environmental care services as populations age and the environmental damage of our past thoughtless industry and farming practices mount, that there is more than enough public sector work to be done to absorb displaced workers should that be required.

Support for innovation and partnerships for new local industries, research and development and infrastructure investments

9. Job Creation – new public sector jobs to be created in renewables in all aspects of the sector – primary industry, design, manufacturing, sales, administration, maintenance and support, etc – this is the way communities can retain pay levels, benefits and seniority.

These sort of adjustments, require government support and intervention to ensure that displaced workers are able to transit into the new industries and jobs quickly.

10. Job Guarantee – supplements the other policies to ensure there is a jobs safety net at the bottom of the labour market – for the least skills.

On the question of incentives, I generally do not favour handing out public incentives to private firms. I see this as a denial of ‘capitalism’. If private firms want the returns then they should take the risk.

However, I do support public enterprise and partnerships with local not-for-profit co-operatives. There is so much need in the area of personal care and environmental care services now as populations age and the environmental damage of our past thoughtless industry and farming practices mount, that there is more than enough public sector work to be done to absorb displaced workers should that be required.

Further, many new jobs in these ‘smart’ manufacturing processes will be taken by robots, which will also increasingly provide services as they become more intelligent and dexterous.

The public sector will have to play an increased role also in providing high skilled work for those who are displaced by robotic innovations.

The challenge of government is to ensure the distribution system maintains the capacity of workers who do not work in these high productivity sectors (where productivity is narrowly defined here) to enjoy real wages growth.

A Just Transition framework will also provide the opportunity to move beyond the old definition of gainful labour that was biased towards activity that supported private profit generation within labour intensive, large-scale assembly production models.

We will need education to ensure that our new jobs allow workers to engage in meaningful work that both provides them with income security but also ensures that income and wealth inequalities are reduced.

This is a major future government challenge within a ‘New Green Deal’ narrative.

Conclusion

A Just Transition framework is very complicated and comprehensive.

A Job Guarantee is just a small part of the story and should rather be advocated for as a base case macroeconomic stabilisation framework rather than being tied up in the transition towards a Green economy.

Even if there was no environmental imperative, we would enjoy dramatic gains by substituting and employment buffer stock approach to price stability for the current, very damaging unemployment buffer stock approach.

I would prefer the Job Guarantee to be seen as something quite separate to the complexity of a Green New Deal implementation.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.