{"id":60964,"date":"2023-07-06T13:58:11","date_gmt":"2023-07-06T03:58:11","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=60964"},"modified":"2023-07-06T13:58:11","modified_gmt":"2023-07-06T03:58:11","slug":"un-report-on-employment-guarantees-misses-the-essential-points-about-buffer-stock-mechanisms","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=60964","title":{"rendered":"UN Report on employment guarantees misses the essential points about buffer stock mechanisms"},"content":{"rendered":"

In 1978, during my postgraduate studies at the University of Melbourne I came up with the idea of a Job Guarantee – although I didn’t call it that then. I have written about it extensively since then and you can see some of the non-academic work published in this blog under the category – Job Guarantee<\/a>. Among the many blog posts is this one – Some historical thinking about the Job Guarantee<\/a> (February 25, 2021) – where I discuss some of the provenance of the idea. It is hard to get people interested in this idea because they dismiss it as just another public sector job creation scheme and then make all sorts of claims about inefficiency, ‘make work’ and all the rest of the ruses that are used to divert attention from the substance of an idea or proposal. In fact, the way I conceived the Job Guarantee and the way it has subsequently become a central part of the body of knowledge now known as Modern Monetary Theory (MMT) is not as a job creation program, but, rather, as a comprehensive price stability framework exploiting the dynamics of buffer stock mechanisms. Anyway, it seems that the UN might be interested in the idea of guarantee employment now after the special Rapporteur on extreme poverty and human rights published – The employment guarantee as a tool in the fight against poverty<\/a> – in April 2023. The question is whether this is a job creation program or closer to the concept of a Job Guarantee.
\n<\/p>\n

These blog posts are useful background reading to learn about the role buffer stocks can play in maintaining price stability:<\/p>\n

1. Buffer stocks and price stability \u2013 Part 1<\/a> (April 26, 2013).<\/p>\n

2. Buffer stocks and price stability \u2013 Part 2<\/a> (May 10, 2013).<\/p>\n

3. Buffer stocks and price stability \u2013 Part 3<\/a> (May 17, 2013).<\/p>\n

One point I have always made is that there has never been a shortage of productive work to undertake even when there has been mass unemployment at various times in our history.<\/p>\n

A shortage of jobs is different to a shortage of work.<\/p>\n

The former arises because employers cannot see a revenue stream arising from hiring more workers and so a gap between the available labour power and the workers that have jobs arises – that is, unemployment.<\/p>\n

However, those employers will take on extra staff if there is the prospect of increased sales of the products that that extra labour would create.<\/p>\n

The constraint is a lack of spending not a lack of work.<\/p>\n

The other way to say that is that there is a lack of paid work not a lack of work to be done.<\/p>\n

Broadening it out, society always has the potential to benefit from the creation of hundreds of thousands of extra jobs in all sorts of areas of activity and service.<\/p>\n

These jobs are not created because no one will pay for them to be done.<\/p>\n

Of course, the currency-issuing government can always meet the payment and it is that reality that leads me to state in public presentations that mass unemployment is a political choice that can be remedied at any time the state chooses.<\/p>\n

The capacity to purchase anything for sale in the currency that the government issues, means there is never a reason for workers to be unemployed, unless they are just moving between jobs (so-called frictional unemployment).<\/p>\n

The UN Report adopts a human rights justification for proposing an employment guarantee, which is one avenue available.<\/p>\n

In 1998, I co-authored this article (among others on the topic) – Unemployment, Human Rights and a Full Employment Policy in Australia<\/a> – which lays out the rights agenda argument.<\/p>\n

The rights agenda demonstrates that the state has the responsibility to ensure there are enough jobs for all those who desire to work, given that “the right to work is a human right”.<\/p>\n

It is one thing to have responsibility and another to ensure it happens.<\/p>\n

The Job Guarantee requires the state to unconditionally offer a job to any person who desire to work, which is a more explicit statement of the rights embodied in work.<\/p>\n

The UN Report understands the difference between the number of paid jobs available and the potential for work.<\/p>\n

It notes that:<\/p>\n

\nThe job guarantee is an answer to a paradox … The paradox of too few jobs and unfulfilled societal needs …\n<\/p><\/blockquote>\n

In my research over the decades that my career has spanned, I have never found that community or environments needs are fulfilled.<\/p>\n

There is always work to be done, but often a lack of payment forthcoming to do that work.<\/p>\n

That is the paradox and arises from relying on market mechanisms to prorate people across jobs.<\/p>\n

It also opens up the idea of what is productive work?<\/p>\n

Too often, and this is a common mistake that opponents of the Job Guarantee make, productivity is conceived narrowly as some activity that makes profit for a private employer.<\/p>\n

Even public sector activities have, under neoliberalism, become KPI driven where all sorts of ‘corporate’ goals (user pays, cost recovery etc) are imposed to judge whether some work should occur or service provided.<\/p>\n

Of course, the role of the public sector is not to achieve the same goals and outcomes as a capitalist firm pursuing private profit, which means all the private profit-type calculus is meaningless and when applied usually results in an undersupply or degradation of an essential public service.<\/p>\n

But once we start thinking about unfulfilled societal needs, which in many instances remain that way because no private entity will allocate resources to them as there is no private profit to be made, the concept of productive work becomes almost infinite.<\/p>\n

When we shift our thinking from private costs and benefits to social costs and benefits, the door opens widely to a bounty of work that is available across a broad range of skills and preferences, that can be offered by government.<\/p>\n

So what looks to a capitalist like a boondoggle (make work) becomes a valuable input to a local community which advances its well-being and sustainability.<\/p>\n

My research over the years has verified the value in the creation of so many jobs that the private market will never create.<\/p>\n

Which gives the state a massive terrain to operate in both in terms of creating career public sector jobs and also offering a buffer stock of jobs with a Job Guarantee, to render mass unemployment a thing of the past.<\/p>\n

Further, given employment status is a major factor determining whether a person is forced into material poverty or not (unemployment is a major predictor of the incidence of poverty), a Job Guarantee would go a long way to eliminating the scourge of poverty.<\/p>\n

The UN Report says:<\/p>\n

\nUnemployment or underemployment significantly increases the risk of poverty, since social protection against this life risk remains highly uneven … public employment programmes … [are] … a powerful tool against poverty. Employment was the most important contributor to poverty reduction in a set of 16 low- and middle-income countries in which substantial poverty reduction occurred in the period 2000\u20132010: in 14 out of 16 countries, labour income explained more than 40 per cent of the change in \u201cpoverty\u201d (and 50 per cent in 10 countries).\n<\/p><\/blockquote>\n

Note, that a Job Guarantee would also eliminate time-based underemployment – which is a state where a person desires to work more but there is insufficient hours of work on offer in the labour market.<\/p>\n

Skill-based underemployment – where the skills of the unemployment are mismatched with the skills required in the available paid jobs, however, would persist, although providing training ladders with the Job Guarantee program would help reduce that source of labour wastage as well.<\/p>\n

While clearly understanding the benefits of eliminating unemployment and underemployment, the problem with the UN Report though is that it sees the issue in terms of governments having:<\/p>\n

\n… too little public revenue to invest in creating the jobs needed for these transitions …\n<\/p><\/blockquote>\n

The word ‘revenue’ is derived from the Latin word ‘revenire’ which means “return or come back”. The old French word ‘revenue’ took that meaning.<\/p>\n

What comes back?<\/p>\n

When governments spend their currencies into existence, the flow of income generates the capacity to meet tax liabilities, and the tax payments then flow or ‘come back’ to the government.<\/p>\n

The UN Report correctly notes that:<\/p>\n

\nThis is the paradox. There may be a shortage of decent jobs, but there is no shortage of work: the problem is that markets undersupply the public goods that are needed for the greening of the economy and for a thriving care economy …\n<\/p><\/blockquote>\n

But the reason for the paradox is not that currency-issuing government have insufficient financial means to ensure those public goods are in supply.<\/p>\n

Rather, it is because the dominant political ideologies prefer to leave productive labour resources idle and essential societal needs unfulfilled.<\/p>\n

It is a political choice that is being exercised not a financial constraint being met.<\/p>\n

Will a Job Guarantee eliminate poverty?<\/h2>\n

I noted above that unemployment is a strong predictor of poverty.<\/p>\n

However, not all work will eliminate poverty.<\/p>\n

The UN Report notes that:<\/p>\n

\nFor many, precarious working conditions and a lack of decent pay characterize the work experience. The \u201cgig economy\u201d, casualized labour contracted through digital platforms, has rapidly emerged as an important employment category, yet also one with less social protection and less scope for collective bargaining than more traditional employment forms … Precariousness and informality characterize the emergence of a global precariat.\n<\/p><\/blockquote>\n

A carefully designed Job Guarantee program will eliminate this trend to precarity.<\/p>\n

The provision of a socially-inclusive mininum wage to anyone who wants to work within the Job Guarantee (at hours they choose) will soon force private employers who are currently paying under such a wage or providing precarious conditions of work to either disappear from the scene or restructure their workplaces and wage offers to meet the ‘competition’ from the Job Guarantee.<\/p>\n

A win-win.<\/p>\n

I would also suggest that there a many private sector jobs that should be eliminated anyway given that they are not consistent with the challenges to move to a degrowth, lower carbon world.<\/p>\n

For example, factories that employ workers on minimum wages and conditions to spew out low-quality plastic consumer goods that quickly break and end up discarded are not needed.<\/p>\n

Many of those jobs could be replaced with Job Guarantee jobs, although we should see the latter as a structural change vehicle.<\/p>\n

What do I mean by that?<\/p>\n

The UN Report echoes the thoughts of many progressives that an employment guarantee program could help in the “greening of the economic and the growing recognition of the importance of the care economy”.<\/p>\n

Some MMTers have written that the Job Guarantee is the solution to the jobs displaced in the carbon economy by a green transition.<\/p>\n

We should be careful not to fall into the trap that sees the Job Guarantee as a panacea for the job shedding that will accompany the structural shifts required to meet the climate challenge.<\/p>\n

In the main, the new jobs that will meet this challenge should be highly-paid, career positions, not buffer stock jobs on a socially-inclusive minimum wage.<\/p>\n

The reason I make that point is that it goes to the heart of the Job Guarantee concept – it is a buffer stock mechanism to provide price level discipline which is why it must pay at the bottom of the wage distribution.<\/p>\n

The UN Report misses that point.<\/p>\n

It notes:<\/p>\n

\nPublic employment schemes typically pay the statutory minimum wage, ensuring that this minimum wage is sustained across the whole economy. Only rarely do such schemes pay wages that are higher: … this ensures that the costs will remain limited and that participants will be encouraged to graduate from the programme.\n<\/p><\/blockquote>\n

Once again there is the inference that a financial constraint limits the program – “costs will remain limited”.<\/p>\n

The UN author sees the employment guarantee as a job creation program that is supply-driven (constrained by government ‘budgeting’) rather than as a demand-driven program offered unconditionally to any one who demands work at the given wage.<\/p>\n

The latter conception is the MMT version and faithful to my original design as above.<\/p>\n

The UN Report clearly misses the point about the Job Guarantee being an inflation anchor when it notes:<\/p>\n

\nA more graduated pay level, however, set in line with education and experience,90 may reduce the risk of the scheme being used to undercut higher paid sectors of employment.\n<\/p><\/blockquote>\n

Once there is a wage structure offered, the price anchor weakens and the shifts of workers from employment to Job Guarantee employment have to be larger than if there is a fixed mininum wage offered.<\/p>\n

Those who advocate a wage structure in an employment guarantee scheme do not understand the way buffer stock mechanisms operate.<\/p>\n

If a higher paying job is justified then it should just be offered with the mainstream public service not as a buffer stock position.<\/p>\n

Conclusion<\/h2>\n

There are many more examples in the UN Report where the author is operating within a mainstream economics framework – “financing from general taxation would be fully justified” etc – which undermines the breadth in which he can envisage a Job Guarantee operating.<\/p>\n

Once we deliberately (and usually in ignorance) limit the field of fiscal space by imposing artificial (and erroneous) financial constraints on government, we limit the scope to which we can meet real world challenges.<\/p>\n

Neoliberalism has perfected the limitations on government activity aimed at advancing the well-being of all rather than the few and look what a mess that has left us all in.<\/p>\n

That is enough for today!<\/p>\n

(c) Copyright 2023 William Mitchell. All Rights Reserved. <\/p>\n","protected":false},"excerpt":{"rendered":"

In 1978, during my postgraduate studies at the University of Melbourne I came up with the idea of a Job Guarantee – although I didn’t call it that then. I have written about it extensively since then and you can see some of the non-academic work published in this blog under the category – Job…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32],"tags":[],"class_list":["post-60964","post","type-post","status-publish","format-standard","hentry","category-job-guarantee","entry","no-media"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/60964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=60964"}],"version-history":[{"count":0,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/60964\/revisions"}],"wp:attachment":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=60964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=60964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=60964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}