Today (November 14, 2024), the Australian Bureau of Statistics released the latest - Labour Force,…
The Green New Deal must wipe out precarious work and underemployment
I was coming through the streets of inner Melbourne the other night after playing in my band. I couldn’t believe how many little scooters with those big boxes on the back were buzzing around, in and out of traffic, turning here and there, presumably, delivering food to people who preferred to stay in from the cold weather. I had sort of noticed these ad hoc cavalcades of cheap scooters before but never really assessed the extent of the proliferation. It represents an amazing and highly disturbing trend in our labour market. Okay, that sounds like something someone from another (older) generation might say. He who grew up when there was secure employment and wages and conditions were more tightly regulated. And I have seen Tweets from young people telling us ‘oldies’ to step aside. But what the scooter riders don’t realise is that they will get old themselves one day. And secure, well-paid work coupled with a broad spectrum of high quality public services is what makes that transformation liveable. In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why.
Precarity
I don’t need to document the rise in precarious work around the globe. In advanced countries, this trend has been one of the characteristics of the neoliberal era, where the business model for particular sectors has been developed to transfer the risk of enterprise onto the worker rather than the entrepreneur.
The ‘free market’ gang continually talking about the need for government to get out of the way of the innovative entrepreneurs but all that has really meant is that the safeguards, security and pay arrangements that evolved over many decades as workers struggled against capital have been steadily eroded by legislative changes and deregulation.
As we explained in – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – the state is still central in a monetary system – it has not ‘gone away’ or become irrelevant.
Rather, it has been co-opted and reconfigured in this neoliberal era to more closely serve the interests of capital with the workers being the losers.
In Australia, the Australian Bureau of Statistics notes that “One of the main indicators for casual employment is whether an employee is entitled to paid leave, such as paid sick leave or paid annual leave. These entitlements are usually reserved for non-casual or permanent employment.”
The most recent data – Characteristics of Employment, Australia, August 2018 – show that:
25% of employees were not entitled to paid leave (2.6 million). Of those who work part-time in their main job, 53% were not entitled to paid leave (1.8 million).
Within that group:
– 24% have earnings that vary from one period to the next (excluding overtime payments) (2.5 million);
– 21% do not usually work the same number of hours each week (2.2 million); and
– 19% do not have a guaranteed minimum number of hours each week (2.0 million).
The youth bear the brunt of the casualisation (the ‘scooter riders’) and increasingly males are enduring these changed work arrangements.
The employers and most mainstream economists construct these trends in terms of individual choice and flexibility.
We have been berated with the work-life balance nonsense for decades now where women are meant to be happy working in precarious, low-paid jobs because it allows them a bit of flexibility to also do all the housework, run around after the kids and whatever else they might do.
They also continue to lie about the state of so-called ‘casual loadings’ where the casual worker is alleged to be paid an hourly premium commensurate with the loss of entitlements normally enjoyed by a worker (holiday pay, sick pay, etc).
The evidence is clear – the loadings are inadequate by a stretch.
While Australia law specifies that “Casual employees covered by the national minimum wage also get at least a 25% casual loading” (Source), the reality is different.
The excellent research paper by Ian Watson – Contented Workers in Inferior Jobs? Re-Assessing Casual Employment in Australia – published on December 1, 2015 in the Journal of Industrial Relations – found that:
1. “part-time casuals earn a wages premium of approximately 10% (males) and 7% (females)” – a far cry from 25 per cent.
2. “There are some wages penalties for employees working longer hours, particularly among women fixed-term contractors. For example, for those working more than 49 hours a week, the penalty is 14%.”
3. “If we wish to compare them with permanent part-time workers, on the grounds that this is a more relevant comparison, we find a wages premium of 5% for men, and either 4% or 3% … for women.”
These results have been supported by several subsequent studies.
Further, there are other costs involved in being a casual worker that other workers avoid.
First, precarious workers face a life of uncertainty. Many do not know for sure what hours they will work in a week or the pay they will receive, which makes planning and risk management impossible.
They also face being sacked without notice and are typically the first to go in an economic downturn.
Second, the capacity for personal management is further exacerbated by the fact they have no set holidays or sick leave. There is strong evidence that employers pressure casual workers who want to take time out for holidays. The ‘scooter kids’ also have to put aside their low pay into savings to fund breaks whereas for other workers the payments are entitlements.
Third, people with children often find it impossible or costly to align their casual work commitments (and demands from employers) with their family duties, particularly during school holidays when young children are involved.
Child care is typically very expensive.
Fourth, precarious workers find it hard to access credit to purchase housing. So in addition to enduring low pay they typically are unable to accumulate wealth (in the form of a house/apartment) which will make their retirement more comfortable in material terms.
Fifth, most superannuation (pension) schemes are not set up to cater for casualised workers. So the other main source of wealth accumulation over the working life is denied to these workers.
Sixth, these workers are typically denied access to career-advancing training and skills development.
Hence my concern for the ‘scooter kids’ as they age.
The other aspect of precarity is time-based underemployment.
This form of underemployment arises when workers who are classified as employed by the national statistician (that is, they are working at least 1 hour a week) desire to work longer hours.
In Australia, underemployment is 8.2 per cent (1,112.3 thousand workers) and first became a major issue after the 1991 recession.
The following graph shows the history of underemployment in Australia since January 1980.
The growing rate of underemployment is testament to the fact that workers are not choosing this state or find it desirable.
The ABS data release – Participation, Job Search and Mobility, Australia, Feb 2019 – compared the first underemployment survey (May 1985) with their most recent survey (February 2019).
They found that:
1. May 1985: “Underemployed part-time workers who had been looking for work with more hours and were available to start such work within four weeks reported that they would prefer to work an average of 20 extra hours. The total quantum of underemployment for these persons was 1,785,500 hours per week”.
2. February 2019: “The average number of extra hours that part-time underemployed workers were looking for was 15 more hours per week”. So around 16,684,922 hours per week.
Thus, around 9 times more working hours are being lost to underemployment now than in 1985.
A massive waste of potential and desire.
The Foundation for European Progressive Studies (FEPS) has recently been doing work on the ‘platform’ economy.\
On July 24, 2019, they released a Report – Tackling social disruption in the online platform economy – written by lawyer Sacha Garben.
A summary version appeared at Social Europe (July 31, 2019) – Tackling precarity in the platform economy-and beyond.
The argument presented is that “online platforms” (Facebook, Airbnb, Uber, Deliveroo, Amazon Mechanical Turk, etc) have raised awareness of the “labour status of those working in the online-platform economy”.
The various occupations involved:
… drivers, riders, cleaners, designers, translators, technicians and others are often formally contracted as independent and their working arrangements tend to exhibit features which are difficult to square with the traditional employment relationship. These include use of their own materials (such as the driver’s car), autonomy concerning working hours (logging into work via a smartphone app), the short duration of the relationship (translation of perhaps a single sentence) and its multilateral character (the platform linking the producer and consumer).
In many cases, the “independent status”, which allows the capitalist hiring the labour to dodge statutory regulations with respect to working conditions and pay thereby pushing the risk of enterprise onto the worker – what I call ‘sham entrepreneurship’ – is questionable.
The workers exhibit many characteristics of an employee, but because lax laws and lack of regulatory oversight, the boss can construct the relationship as that between independent contractors and thus the workers:
… lack the benefit of the social, labour, health and safety protections which in most countries are connected to an employment contract – even if their precarious working conditions and socio-economic position very much require such protection.
This sort of scam hiring practice has evolved under the neoliberal era into an art form.
The point of the FEPS work is that the “challenges” of platform economy work “do not seem to be unique”.
They fall within the general trends I discussed earlier of an increased “use of non-standard forms of employment and work: casual work, on-call work, temporary agency work, informal work and dependent self-employment” as the balance of bargaining power in the labour market has shifted to capital.
This shift has been engineered through the state – the state has been coopted to facilitate it.
There is no particular technological imperative for it despite what the ‘hot deskers’ might have us believe. It is about cost cutting, risk shifting and capitalist hegemony.
Working on a computer all day is still a process and still work. Just like the old-fashioned bank teller.
With the assistance of the state, these new anti-worker business models have emerged which thrive on the precarity of work.
The FEPS Report documents moves within the EU to regulate the platform economy.
The initiatives include:
1. “directives on predictable and fair working conditions and on work-life balance”.
2. “a minimum wage and unemployment-benefit scheme, as well as a child guarantee and investment in education.”
We will wait and see what transpires in that space.
But the important point the FEPS article makes is that:
When it comes to the platform economy more specifically, a fundamental shift in narrative is in order. Instead of treating it as something precious, unique and tender – which needs to be cradled and protected from intrusive rule-making -it should be recognised as featuring (as a rule rather than the exception) harmful trends and practices which demand regulation, with minimum standards at EU level.
The labour market that has evolved (and been engineered) to make profits for operators in the platform economy is not a sign of technological innovation.
Buzzing around on a cheap scooter, exposed to massive risk of accident, poor weather and low, unpredictable pay looks more like a race-to-the-bottom than a signal of “new, innovative and better-quality services for the benefit of customers”.
If decent working conditions were enforced, proper risk assessments of these delivery workers, appropriate outlays by capital for the provision and maintenance of the scooters and related equipment, proper uniforms (rain gear, bike armour etc) then the price of a pizza delivered would rise beyond the level that would leave the consumer indifferent to shopping personally or accepting delivery.
So what can be done?
As part of Green New Deal, precarious work and underemployment has to be eliminated without qualifications.
1. All jobs should be subject to minimum standards with respect to pay, paid leave, sickness benefits, superannuation, dispute resolution, etc.
2. The scam of calling an employee and ‘independent contractor’ to evade statutory obligations has to be abolished by law. Lawyers can come up with the fine print about what constitutes a ‘dependent worker’ but the state could go a long way by forcing so-called employers of independent contractors to pay the full entitlements applicable to the task no matter what the working arrangement is.
3. There is a need to address the complexity of supply chains where the direct employer may be subject to power relations further down the chain with respect to their capacity to negotiate pay deals with workers.
In this case, the legal structure has to ensure that so-called “multi-employer agreements” are used to regulate all influences down the supply chain.
The law would thus get to the power source in the supply chain and bring them under the minimum standards rules.
4. Workers in casualised environments would have the right to permanency (and entitlements) after some short period of engagement. A worker could not be forced into a permanent casual relationship with an employer unless they chose that outcome.
5. Casual, precarious work would be banned by law where the work was performing what has been called ‘permanent functions’.
6. So-called ‘labour hire firms’ who blur the legal status of who the worker is actually working for would be obligated to ensure all protections under the law are afforded to the worker.
This would eliminate the ridiculous practice of the principle firm using labour supplied by some ‘hire firm’ (which may be a subsidiary of the principle firm, and if things go awry, the hire firm can declare bankruptcy and the workers lose out while the principle firm avoids all obligations they would incur if they employed the workers directly.
These sorts of evasion structures would become illegal.
Role of a Job Guarantee
I will write more about this topic in the future.
I last wrote about it in this blog post – The Job Guarantee is more than a Green New Deal job creation policy (December 17, 2018).
I keep reading so-called Green New Deal proposals that put the Job Guarantee at the centre of the employment considerations of the concept.
I think that is unfortunate.
We must understand that the Job Guarantee is a very specific approach to maintaining loose full employment and price stability.
At its heart it is a buffer stock mechanism rather than a job creation structure.
Sure enough, it creates jobs on demand by workers who want to work but cannot find work elsewhere.
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 I explained in the blog post cited above, there would be times when the government was adding to the Job Guarantee pool while engaging in contractionary fiscal policy.
The Job Guarantee is about providing work to people when the non-government labour market is weak. It will certainly help wipe out precarious work and underemployment.
Private employers will have to restructure their workplaces to offer better pay and conditions or risk losing their workforces to the Job Guarantee.
The Job Guarantee will become the minimum acceptable standard – in pay, conditions, entitlements, superannuation, quality, certainty etc.
The Green New Deal will require a massive fiscal stimulus and many new job categories created and filled.
The role the Job Guarantee will play in that transformation is to ensure all workers have access to work as part of a Just Transition.
But the extra employment that the Green New Deal will spawn will be more regular public sector jobs – design, engineering, manufacturing, sales, technical support, maintenance etc – which will require a significant education and skills development investment.
As carbon-intensive sectors are closed down by regulation, the affected communities will transit into new activities and new employment opportunities.
Underpinning it all will be the Job Guarantee safety net for those workers with a need for a minimum wage job.
But the scale of the investment and skill development required will see massive shifts in workers between industries, occupations and sectors (public and private).
The Job Guarantee will only be a small part of those shifts and should not be seen as the employment solution to the disruption that the Green New Deal will generate.
I will write more about that in due course.
Conclusion
This blog post is part of an on-going series of explorations into what I think a Green New Deal will embody and require.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.
All good. Both of the main political parties won’t implement this. Most of the electorate will never know of such good policy. Try to explain such policy to others and you are seen as a fool or a menace.
Much of the Australian electorate are ignorant, selfish, racist, sexist bigots indoctrinated for decades.
The corporate oligarchy run most of the media and employ or control the duopoly. The nominally progressive state owned media presents a spectrum of views but economically still remain neoliberal.
Other nations will unfortunately have to lead.
Hi Bill
I see that your work on the Job Guarantee is having a big influence on other thinkers in this area.
For example, Mark Blyth has a lecture on Youtube, part of the McMaster Department of Philosophy’s Summer School in Capitalism, democratic solidarity, and Institutional design.
Title “Mark Blyth – So can we have it all?” Channel “McMaster Humanities”
He seems to be closely aligned with MMT but he also includes caveats around monetary sovereignty and other issues.
Anyway, I mention him because he uses some techy terms that I think are meant to appeal to the academician’s sense of importance:
“Open Market Labour Operations”
“Active Labour Market Policies”
He really seems to mean the Job Guarantee.
Despite the re-labelling, I see it as a positive sign that MMT / Job Guarantee is gaiinng broader currency.
The Overton Window is shifting. let’s get the political parties to get fully on board.
So long as precarity and unemployment are problems that affect a minority of people, it will be difficult to convince the un-affected that change is needed. Hence the term, marginalized.
The “underemployment” graph in this post is exactly what I was asking about a few days back (in the latest post in the series about Australian employment statistics), so thanks for that.
Does anyone know whether or not the US and/or Canada also produce this “underemployment” statistic and if so where it might be found?
“This sort of scam hiring practice (substituting precarity for stability) has evolved under the neoliberal era into an art form. …This shift has been engineered through the state – the state has been coopted to facilitate it.” If we are to reach the masses with the message of MMT, here is where the rubber (on the tires of those “motor scooters”) meets the road. Ordinary citizens know what has happened to them during the last 40 years or so, but they have no handle on why it happened. Largely oblivious to the neoliberal co-option of the state, they tend to view the employment devolution from stability to precarity as an act of God, the result of a force of nature called globalization, akin to an earthquake, to which they must struggle to adjust in order to survive. Will it not be this emerging proletariat of what Bill calls “the scooter kids”–the current and coming generations of precarious, exploited, and demoralized workers–which will demonstrate once and for all whether Marx was right in believing that the working class would rise up in revolution? Russia, China, Cuba, etc., in which revolution was forced top-down on peasant populations, was the polar opposite of Marx’s model. He further failed to anticipate how capitalists, for several post-WWII decades, would find it in their self-interest to share a portion of their increasing profits with the working class. But NOW at this neoliberal apex, when the capitalist vise-grip has been tightened to the point where the vast majority of workers are riding their respective “motor scooters,” we will find out whether Marx’s faith in the tenacious courage of the human spirit was justified. Indeed, those MMT economists willing to draw upon Marxist political theory may well become the new vanguard that mobilizes the masses to finally bring about the first authentic communist revolution. Behind all their dismissive and distorted rhetoric against MMT, might this possibility be what neoliberal elites, consciously or unconsciously, sense and fear?
Bill, Since posting a message about James Montier yesterday, I’ve found that he’s been an enthusiastic follower of MMT for some time. In 2016, he wrote the attached report, which refers to you and your work (on page 7). It’s not everyday you get compliments like that, so thought you’d like to know (if you didn’t already).
https://www.advisorperspectives.com/commentaries/2016/01/22/market-macro-myths-debts-deficits-and-delusions.pdf
Re eg @23:52:
Canada broad unemployment rate: U8
US broad unemployment rate: R6
Newton finn,
I think we need to recognize that change doesn’t come from nowhere. We need to force it. Not all people can be like us and seek out answers through careful analysis and be able to foster interest and learn economics. People get indoctrinated, too, as we say.
It is up to us to wash away the indoctrination–one person at a time.
AOC won her seat because of organizing — Day-to-day face-to-face organizing.
At the university of California, our union just won our best contract against our university employer in years through organizing. Talk to people face-to-face, fire them up, check back using contact lists by text and phone.
I believe that we need to educate ourselves and then others, which is what you are doing right now. We just have to keep at it. We have no choice really. Can’t really give up.
Great article this one. It really helps me to form some witty arguments to impress the ladies.
My favorite point:
Instead of viewing the latest platforms as innovation, the professor suggests that we look onto the precarity of work and type of risk involved. It is more like a race-to-the-bottom. If the worker had been a real employee with proper tools, then people would just go to the pizza place. The advantage offered by pizza delivery boy buzzing around is simply advantage by bypassing laws and regulations won by labor struggle, not some innovation.
Reality is that Uber and lyft are not even profitable now. They have never made a profit I believe (same as Tesla, snapchat instagram whatever those are). If they are subjected to labor laws, they won’t even be able to operate. Taxi drivers won’t have to kill themselves if uber and lyft didn’t were allowed to bypass labor laws. However, the state to abdicated responsibility in providing full employment. A mess all around.
Again, everything has to be seen in the context of a largely parasitic FIRE sector.
@Steffen, re Mark Blythe, this is a comment on the MMT & The Labour Party FB group referencing Mark Blyth on Macro N Cheese podcast, from one of our more ‘robust’ friends:
“Hmm.. well, as far as I can tell, in his rather garbled monologues, Blyth doesn’t understand the monetary system properly, talking about interest rates as if its a ‘market’ phenomenon, not a Gov/CB choice, and then craps on about US$ as reserve currency being the only difference to Venezuela because ‘sovereign issuer’.
Still, well done Steven for revealing Blyth as another ignorant flanneller, who also happens to be politically on the ‘left’.
I doubt Blyth even realises himself just how much he scrambles up politics into flaky, largely mainstream technical macro.
‘Public debt’ as a ‘intergenerational savings asset’ (paying interest etc.) in Japan… what an idiot. It’s just a safer place to keep aggregated finance sector Yen funds than a bank deposit account!
(He implies public debt has some intergenerational aspect elsewhere also.)
Sorry, but Blyth equals total clown imho. Very orthodox in his technical views, total bullshit, no idea.
I have to suggest that Bill Mitchell is misguided on some recent stuff. Which I don’t see being picked up by other MMT thinkers. For instance: “There is only one Job Guarantee.” or misguided or factually inaccurate critique of the Green New Deals like Ted Nordhaus’s (or Cory Morningstar’s cited by a commenter).
On the JG:
“At its heart it [the JG] is a buffer stock mechanism rather than a job creation structure.”
That’s a distinction without a difference. The job creation structure is the mechanism that creates the buffer stock. It’s like saying – at its heart 🙂 – a heart is an oxygenated blood equalization mechanism, rather than a muscle hard at work.
The Job Guarantee is not the property of any or all the MMT thinkers. It’s been around for ages. As prime minister of France, Necker argued for it before the French Revolution. Unfortunately, he didn’t have a Job Guarantee from Louis. Millennia ago, Jesus proposed “the” Job Guarantee – fixed wage employment open to all!
The great, original contribution of MMT and Bill in particular has been to clearly, quantitatively see and prove that this ancient idea, rather than being inflationary, provides a buffer-stock mechanism against inflation. Again, a (great) sharpening and improvement of previous, vague understandings.
I agree with what Bill says after about the sentence quoted above on the JG properties and its workings. But disagree on its special relevance to the GND, or the political wisdom of this trend of thought about the JG & the GND. And disagree in the strongest terms about elevating such particular tactics or details – Bill’s OR mine OR anybody else’s, MMTer or not – into matters of strategy or theory. The progressives, the left and the people have suffered enormously from this kind of penny-wise and pound-foolish obsession with details and tactics.
The devil is NOT in the details. The devil is in the decision, in actualizing the principles. The Job Guarantee part of the ND in the GND, irrespective of how large it is in the mix, is more important than everything else there put together. Delivers more benefits to everyone, employed in it or not. Really, how big a part it is, how much the JG workers should be paid and therefore the difference between it and “regular public sector employment” is a matter of local choice, not economic theory. If a country wanted, their JG and its fixed wage could be the ONLY employment offered by the state. Why not?
I disagree somewhat, Some Guy. At least on one thing. There is a distinction between the buffer stock aspect of the MMT Job Guarantee and having the government seeking to create full employment by offering jobs that compete with the private sector. Sure the government could create jobs and maybe reach full employment by building many more ballistic missiles- but what would inflation be at by the time the last unemployed worker got a job? (I can’t remember if that is from Dean Baker or Randall Wray, but you had made pretty much the same point to me years ago.)
And politically, the relative importance of the ‘Green’ part of the GND to the ‘New Deal’ part is going to depend on which is viewed as the bigger problem- climate change or unemployment. If the worst case scenarios of climate change are true, then even unemployed people would agree it is the bigger problem. That’s just my opinion of course.
Lifting labour productivity growth is central to improving everybody’s living standards. Of course, by itself this is not enough – we also need big improvements to distributional issues to ensure that the increased prosperity is widely shared.
If we apply this five point plan we will increase labour productivity growth.
1. Investing heavily in public services and public infrastructure that maximize social wellbeing and environmental sustainability.
2. Guaranteeing that everyone who wants a job has a job. The mass labour wastage that we currently suffer from deprives millions of people of the right to contribute, belong, enjoy mastery experiences, and have social interactions in a work context. In Australia we have 700,000 unemployed, 1.1 million under-employed, and 1.1 million marginally attached to the labour force. With appropriate fiscal intervention by the federal government, which must include a Job Guarantee and must also include expanding the regular public sector, there is no excuse to have any under-employed people; there is no excuse to have any people who are marginally attached to the labour force; and there is no excuse for an unemployment rate above 1 or 2 percent (wait unemployment and frictional unemployment).
3. Increasing wages to make up for the fact that wages have fallen far behind labour productivity growth during the past fifty years. The minimum wage in Australia needs to be lifted from $19.49 per hour to $25 per hour to reflect average labour productivity growth since 1970. This is according to Steven Hail of the University of Adelaide.
4. Why does increasing wages, especially the minimum wage, improve average labour productivity? Because it encourages firms to invest in productivity-enhancing automation. When labour is artificially cheap, as it is now, firms have no incentive to invest. Automation is not a bad thing, particularly when the federal government guarantees everyone a minimum wage job whenever they want it, and when the federal government invests appropriately in regular public sector job creation as needed. Automation changes the nature of the work that people do. It doesn’t reduce the overall need for human workers in the economy as a whole.
5. Moving to a production-based economy instead of a speculation-based economy. The financial services sector is far too large. Much of its activity is purely speculative and adds nothing to productive capacity. The government should ban financial activities that do not add to or enhance the nation’s productive capacity.
Super comment Nicholas.
I would like to add that human creativity, innovation, curiosity and enterprise are our major resources rather than just the more narrow term productivity but they are clearly related.
The mainstream progressive parties of the Anglosphere were equally complicit in implementing the 40+ year neoliberal scam, in fact they pioneered it but also the earlier phases did offer some benefits such as opening up excessively protected markets to import competition, the working class suffered the most but now it is the middle class that is also being eviscerated.
In addition to a return to full employment, an MMT compliant JG buffer stock mechanism and the essential transition to environmental sustainability, I feel politically and economically it is essential that the working class be promised that MODERATE TARIFFS WILL BE RESTORED in some key economic sectors like steel, chemicals, automotive, domestic appliances and some textiles, clothing and footwear; on imports from low wage and high tech supplier nations to factor out their lower labour cost competitive advantage. Bernie Sanders and Jeremy Corbyn should promise now that they plan to put in place moderate tariffs and a raft of support measures and incentives to reinvigorate their respective national heavy industrial, manufacturing and value adding economic sectors.
For example car manufacture is highly automated and a 15% tariff can suffice to factor out the labour cost disadvantage the US or Europe or Australia has in comparison to China or Mexico or Thailand for example.
Such a policy is not unjust to these hyper competitive nations as they should be encouraged to develop in the same way and raise their wages and conditions to increase local material living standards and sales. In this way all boats rise rather than the current race to the bottom where only the multinational corporations, local oligarchs and developed world retailers benefit.
Excessively closed markets lead to economic stagnation and high priced and shoddy goods whilst excessively open markets lead to production in the lowest labour cost and working condition supplier nations that minimises labour’s share of the global economic resources. The Goldilocks point of not too hot or too cold will deliver the best overall outcome for all.
Tariff revenues can offset other taxes, competition with local suppliers forces importers to cut margins, having both local and foreign suppliers increases consumer choice and a better balance of trade appreciates the currency; so consumers are not unduly affected by moderate tariffs but the benefits of having these substantial manufacturing supply chains are many. For example Steve Keen has written about economically complex nations like Germany and Japan having a competitive advantage with developing spin off industries from their many complex existing industries.
I feel the Japanese approach to economic development during the post war period where the Ministry of Economy Trade and Industry adopted a whole raft of measures to assist with the establishment and development of economic sectors in the face of tough competition from the US initially, is a very worthy approach for most nations. Combine this with a Scandinavian approach to social welfare and most of the puzzle is complete.
Professor Goran Roos who was engaged by the previous South Australian Labor government has developed a number of worthy strategies that nations can adopt to develop and foster their high value adding economic sectors in a productive way. Such strategies must be in parallel with reducing our collective environmental burden and the transition to global environmental sustainability as well as transitioning to a more equitable and socially just world so this must be an enlightened government guided strategy by necessity.
The small government free market dogmatists must be purged from all levels of government and marginalised in the academic world as well. No more state funding or tax deductions for such horse shit that has caused us all so much harm.
Japan has very few natural resources so must be a substantial exporter of high value goods and services, the same applies to South Korea, Taiwan, Germany and the UK for example. The US, Canada, Australia, Brazil, Russia and South Africa for example do have substantial raw material exports and so do not need to be as focused on the development of their high value adding economic sectors but should nevertheless aim to meet a target percentage of local demand from local production. For example Australia should in my view aim to meet 50% of local manufactured goods demand from local sources rather than the current trend which is heading rapidly towards zero. The US must maintain a substantial military as a counterbalance to China and Russia and having a substantial manufacturing sector remains a cost effective geopolitical necessity, rather than relying in the current bloated defence budget alone, so an applicable target could be 75% of manufactured goods from local sources for example with the automotive sector at 90%.
Local ownership of manufacturing or other value adding enterprises is also beneficial especially when government incentives and trade protection are offered. Again the Japanese approach is in my view a good one. Building up local capital and wealth is beneficial. That capital and wealth must be much more widely spread than now but true equality in my view is a distant and probably counter productive dream.
Alternative ownership models of productive enterprises is well worth pursuing. In some cases state ownership is best such as most utilities. The corporate model still has a place in my view as in a competitive global market like the automotive sector margins are tight and price gouging, apart from parts and servicing, is rare. Worker owned enterprises, cooperatives, privately owned enterprises, non-profits, semi-government enterprises should all be allowed to find their place and an organisation like METI could be used to foster more democratic and socially just enterprise models.
We first need to take our democracies back from the hard right oligarchies who have treasonously stolen them from us and the global warming crisis more than anything else means this must be within the next few years. If the oligarchy retains control then it will by necessary to adopt other means.
Keith Newman @3:06
Much obliged — I will see if I can find sources for them.
For clarity, do these measures isolate for underemployment, or are they a summation of unemployment + underemployment?
Thanks again
For those interested in these measures of labor underutilization, it is actually U6 in the US and R8 in Canada:
https://www.bls.gov/news.release/empsit.t15.htm
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410007701
And looking at the definitions of the measures, they include the posted unemployment rate (as opposed to representing an entirely separate measure) in answer to my query above.
@Andrea
On that note: https://billmitchell.org/blog/?p=41343
(I still have to read “the case against free trade” posts)
> In his 2007 book – The Myth of Free Trade and the Secret History of Capitalism (London, Bloomsbury Press), Ha-Joon Chang wrote that:
[…other quotes…]
Also, @bill, sorry for the request, but is there a WordPress plugin that can you can install to make text formatting in comments easier? It’s hard to remember what works and doesn’t work, and there’s the other times people write a < and a bunch of text doesn’t show up.
Andreas Bimba,
I largely agree with what you have written.
But Is tariff really the way to go?
If one were to increase tariffs, all one probably does is driving up prices as it is happening now with Trump?
Factories are not coming back because it takes years to build infrastructure, transportation, and skills. The private sector won’t go into these things and the state has abdicated responsibility in providing good citizen outcomes.
Problem with USA is how heavy the dead-weight is, namely the housing costs, FICA tax withholding, transportation costs, fuel costs.
We also have a deadly religion called economics that locks in our high cost economy.
Tom, I believe tariffs are a fundamental requirement for good economic policy in the US and all developed world economies that seek to retain and develop a manufacturing sector. In addition tariffs are potentially the main vote winner in blue collar states which is Trump’s base and that are the essential swing states that decide presidential elections. Trump and all Republicans MUST be defeated decisively if a majority is to be attained in the House and Senate which is an essential first step in unwinding the neoliberal era, taking on the corporate oligarchy and the existing establishment (both hard right or nominally progressive), adopting full employment policies, providing adequate government services and rapidly implementing a Green New Deal.
Electorally tariffs can be understood and accepted by blue collar voters and white collar voters that also work directly or indirectly for the heavy industrial, manufacturing and other value adding sectors that are subject to import competition and are likely to be more popular than the poorly understood JG, other social policies such as universal healthcare, writing off student debt, free college education, much more infrastructure spending and a GND.
Only highly automated, capital intensive or knowledge/skill/design intensive manufacturing is worth retaining and developing in advanced countries and these only require a moderate tariff to factor out the relative labour cost and other government imposed cost disadvantage. Some industries like aerospace in the US do not require tariff protection and existing support measures such as government contracts and R&D support will suffice. Car manufacturing is however extremely competitive and tariffs are a better alternative than subsidies politically and also economically as they are industry wide and more just, more transparent and usually more stable, making investment decisions more likely. Car manufacturing is also a huge industry that is simply too big and too dynamic to abandon, as Australia has recently so foolishly done. The era of new energy vehicles has arrived and it would be absurd to leave this promising industry in the main to Japan, Korea, China and Germany.
Michael Moore being from the rust belt understands this dynamic and warned about Trump taking advantage of blue collar grievances in the 2016 campaign which Hillary Clinton and the DNC machine was hopeless at addressing. Moore was a strong supporter of Bernie Sanders who was as popular as Trump in the rust belt and Moore concluded Sanders would have won in 2016 if he wasn’t blocked by the progressive establishment.
Trump is right to impose tariffs on China and to allow the federal deficit to grow. This is a break with the neoliberal policy direction of the past 40 years and it took courage. Trump is however overly provocative and should have just imposed a 15% tariff on most manufactured goods imports from low wage and technologically capable nations. His tax cuts for the wealthy and nearly everything else his administration has done has been disastrous.
A 15% tariff does not mean a 15% cost increase for consumers for the reasons I gave in my previous comment.
“Tariff revenues can offset other taxes, competition with local suppliers forces importers to cut margins, having both local and foreign suppliers increases consumer choice and a better balance of trade appreciates the currency; so consumers are not unduly affected by moderate tariffs but the benefits of having these substantial manufacturing supply chains are many.”
In a full employment economy one can argue, like Warren Mosler, that it makes more sense for citizens to pay fiat generated currency for the real goods from other nations but what is perhaps more important is that in a full employment economy with a socially and environmentally progressive government, it becomes possible to decide the optimal economic structure for each nation.
I would argue that high tech manufacturing, heavy industry and value adding industries are a desirable component of nearly all advanced countries. Relatively well paid and stable employment is offered to semi skilled workers as well as technicians, professionals, administrative, managerial and high end academic personnel throughout the supply chain even when the factories are highly automated. Human creativity is limitless but one can usually achieve more in the appropriate environment such as in an already advanced country. As I previously mentioned worthy spin off industries are more likely to arise in complex and diverse economies and opportunities will often never be seen remote from existing industries or the supply chain. New industries usually arise from collaboration between inventors, researchers and innovators and those with expertise in existing industries. There are also geopolitical implications.
The fiscal headroom available for additional national government spending also increases as a national economy becomes larger and more productive which is itself largely determined by the value and future prospects of traded goods and services. The aim should be to maximise genuine human welfare as well as the welfare of the other species and ecosystems we share this planet with. Innovation, economic dynamism, value adding, maximising the economic value of work and our collective endeavours remains vitally important but I concede an isolationist nation that is fully self sufficient and even trades little within its borders could theoretically attain a high level of social wellbeing and happiness for its citizens?
Re Andreas Bimbo: I agree that high-end manufacturing should be maintained and encouraged in developed countries. There should be a mix of ways to do so: local procurement, financial and technical assistance to local producers, other measures I can’t think of at the moment, perhaps tariffs. But I have a caveat. Over-protection is not good either. I live in Canada and remember when our car market was heavily protected and almost the only automobiles we could get were US models, manufactured in the US and Canada. They were of very poor quality. Only once Japanese cars were allowed in were we able to buy good quality cars.
Andreas Bimba,
I agree with what you wrote. I have no problem with tariffs.
Its just that I don’t see any of manufacturing happening without government direct involvement and drastically reducing costs of the economy.
It simply costs too much to hire and firms nowadays just don’t invest in capital.
90 percent profit went into stock buybacks for a decade.
its silly to let the private sector do stuff. They won’t.
@Carol Wilcox re Mark Blyth:
Sorry Carol (+ Bill) to have cluttered the discussion with the Blyth sideline.
I’ve had a chance to watch the lectures fully now and I see what you mean.
He’s a showman with a few insights plus a few well-worked one-liners that he hangs together as a narrative. His show works because he plays it for laughs much of the time!
I see Blyth as burdened by many years of the mainstream macro mindset – a lot of which he knows is bulls**t. He can highlight mainstream nonsense and get some laughs out of it, BUT:
– his overall analysis is still hobbled by that mainstream background,
– he is garbled on MMT
(he thinks only US + China can really “do” MMT whilst also acknowledging that MMT does accurately describe how such monetary systems work).
I get the sense that Blyth knows the Green New Deal and Job Guarantee are the way to go. He points out many of the good points of JG and MMT. He also knows mainstream macro is fatally flawed and that it needs a reboot. I hope he’ll recheck those mainstream biases and come around to an MMT perspective for a clearer understanding.
My guess is tariffs have been around all the time, if only by other names (embargos and sanctions). They are only a problem when they target the “wrong” countries or corporations.
It is clear that most commenters speak from the perspective of the advanced economies that bled out manufacturin jobs in the las decades, but that is not the whole story. The lost of those jobs, eg. in the US is certainly a tragedy for those laid-off, but they go hand in hand with the economic exploitation of the countries those jobs went to. For example, the amount of manufacturing jobs created in Mexico because of NAFTA doesn’t come close to the number of jobs in agriculture that were destroyed because of it. Simply seeking to repatriate those jobs without offering any relief or opportunity in exchange will only leave the Mexicans without a manufacturing sector AND with an unsuitable agricultural sector that morphed into a producer of avocados and fruits, fit for export purposes but not to feed an entire population. In this case, short sighted tariffs would only lead to an increased push for migration to the US among the laid-off workers, while at the same time the country is bereft of crucial export-income needed for the purchase of food and energy (this dependency having been an explicit goal of US foreign policy in the continent since I can remember). A lose-lose in the long run.
Call me a pessimist, but I don’t trust a Trump administration to implement a far-sighted economic strategy of cooperative development with any other country they have a massive trade-deficit with. Especially not the Mexicans after all that talk of walls, rapists, invasions and so on.
As for an isolationist nation that has all the ressources it needs and the capacity to process them, I think that remains a possibility only for few big enough countries. Most of them either lack the proper industry or the necessary ressources. Even as an almost irrational critic of “free-trade”, I believe there are scenarios that benefit all of the involved parties.
Actually manufacturing is still quite strong in the US and Canada for the more complex sectors even if you won’t find any locally produced items in Walmart? The cost structure is not that bad but yes infrastructure needs improvement. Highly capable engineers, technicians, programmers, designers, skilled trades and entrepreneurs do exist in abundance. The main problems are stagnant demand and a lack of good national policy direction regarding trade protection/industry support and the transition to environmental sustainability. As I mentioned moderate tariffs act to factor out the higher labour and government imposed costs for international trade exposed highly automated or capital intensive enterprises. Close proximity to most of your customers also helps.
In the neoliberal era of fiscal austerity, high real levels of unemployment and underemployment, declining or stagnant wages and corporate price gouging; the demand for goods and services is therefore not surprisingly also stagnant so there is little incentive to build productive capacity and many manufacturing corporations have taken advantage of cheap finance to ‘play the stock market’ to drive up share values in yet another Ponzi scheme. Such speculative crap should be disincentivised by regulation or tax laws.
I have worked for Toyota in the area of car manufacturing as a production engineer and also for the semi government sector and can tell you corporations can produce a quality product extremely efficiently and with tight profit margins in a very competitive market place. Although theoretically possible I don’t think state owned car manufacturers are beneficial but Fiat was state owned for a period. The US based car manufacturers can be the equal of Toyota when they choose to be. Their main problem is the enforced class divide and belligerence between workers and management which is much less prevalent in the more egalitarian, less layered and more ethical (semi feudal?) Japanese approach.
Even now Toyota has in place massive plans to build capacity for electric vehicles (also hybrid and fuel cell) in the US, Japan and Europe as do most of the main manufacturers throughout the world. This however needs to be ramped up even more and a broad economy wide global transition must occur much more rapidly than currently. Governments must lead and set the regulatory framework, policies and spend.
For Australia to participate at all in making the goods and services needed by an environmentally sustainable and technologically advanced society especially by locally owned enterprises, moderate tariffs and a Japanese type or equivalent industry support model is essential in my view but no doubt is less essential in the US even given the similar cost structures due to the much larger starting point, the presence of large numbers of the relevant corporations and a far bigger local market. Canada is far closer to the US than Oz economically.
A Bernie Sanders administration may prioritise international aid again and assist Mexico to improve local wages and to transition to becoming more self sufficient. Currently the multinational corporations are driving Mexican wages and working conditions downward in semi corrupt collaboration with local unions, local oligarchs and local and regional governments. The Mexican manufacturers should instead transition to meeting increased local demand that will arise if local living standards improve and new opportunities in other areas such as environmental sustainability as well as supplying global markets. Moderate tariffs don’t preclude imports but should ideally just factor out the labour cost difference between nations and therefore close this avenue for excessive worker exploitation both sides of the border. US tariffs will however reduce cross border trade. The Mexican people as do the people of all nations need to take control of their own destiny and not hope for benevolence from the world’s corporations or from the US.
Very belated reply, no internet for a while.
Jerry Brown: I disagree somewhat, Some Guy. At least on one thing. There is a distinction between the buffer stock aspect of the MMT Job Guarantee and having the government seeking to create full employment by offering jobs that compete with the private sector.
Yes, but I wasn’t really saying that. “Not competing with the private sector” in the sense of never doing stuff that the private sector also does is not really essential to the JG. Otherwise opponents could (and did) point to some tiny Mom and Pop company somewhere and act as if the whole diabolical plan of an immense (G)ND was to ruin that Mom & Pop. But not competing for workers, by having a fixed wage that allows them to leave to find greener pastures is the essential part of the JG.
Jerry Brown: And politically, the relative importance of the ‘Green’ part of the GND to the ‘New Deal’ part is going to depend on which is viewed as the bigger problem- climate change or unemployment. If the worst case scenarios of climate change are true, then even unemployed people would agree it is the bigger problem. That’s just my opinion of course.
I should have worded it differently, again, we agree, I just meant that the JG is the most important part of the ND part of the GND. Of course the G is probably even more important than the ND. But really, they go together. Just as the labor intensive CCC planting 3 billion trees during the New Deal. was the greenest, and most popular part of the New Deal, doing a GND is almost certainly going to require something very similar, with a major JG / CCC component.