There’s been a number of articles I’ve read over the last few days on what we should do and what has been done in regards to people’s employment and well-being.
This article on giving rooms to the homeless reported by the BBC has shown the power governments hold and that it is not a lack of capacity to solve these issues but a political and collective will.
With reports that unemployment could reach more than two million people as a result of COVID-19 lockdown and corporations standing down staff in the thousands we have calls for basic incomes and ‘jobs guarantees’ that lack commitment to an understanding that unemployment is a structural issue caused by a lack of spending in aggregate and a system of full employment as envisioned under the UN Charter of Human Rights, which states:
Article 23 states (1) Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment,
and what the Civil Rights movements fought for, a Job Guarantee. It is a concession to the neoliberal orthodoxy that Full Employment would be desirable but it is not possible. The orthodoxy has conceded that ‘financing’ such a goal is not an issue, with governments in many countries doubling the unemployment benefit despite calls of it being unaffordable and announcing other spending measures. It is clear currency-issuing Governments face no insolvency constraint and financing of all currency issuer spending is an appropriation bill through the relevant legislature. Even CNBC admits it.
There’s a number of macroeconomic arguments and social arguments we can use in favour of a Job Guarantee. The term has recently been used to characterise something that it is not.
The United Workers Union recently called for
- – A jobs guarantee to be upheld by all employers; no layoffs during this time even if shifts are unavailable. Workers to resume work when shifts are needed again.
- – An income guarantee payment of $740.80 per week (minimum wage) to everyone except those covered by the jobs guarantee, or others who have not been financially disadvantaged by COVID-19.
The latter is essentially a basic income for anyone without employment while the ‘jobs guarantee’ call is a commitment that nobody is laid off. A call to continue to have these wages subsidised is conceptually the equivalent of paying an unemployment benefit at someone’s income or percentage thereof. For the purposes of this crisis, it is a call to avoid income loss for workers that are stood down and hopefully they have employment to return too.
The call for wage subsidies is a sensible idea, especially during the COVID-19 crisis as spending retracts. I would conceptualise it differently and call it a jobseeker payment (accessible to workers who have been stood down) at a replacement wage, for those on low incomes there would have to be a minimum payment. I would advocate that after the crisis anyone unemployed and seeking work should receive an unemployment payment at their replacement wage for a period of time whilst they sought another job.
Taking note of the basic income proposed, in the absence of a full-employment policy, it is effectively a subsidy for low paid, shitty work. If you can only manage to scrounge a few hours a week and the rest of your income is ‘topped up’ by a welfare payment, we as a society are forgoing Full Employment and allowing capitalists to profit from precarious working conditions and low underpaid work. Where will jobs come from for those on a subsistence living that desire to work?
The phrase ‘jobs guarantee’ is not the same as a Job Guarantee which is an unconditional offer to anyone and able willing to work at a socially inclusive living wage.
I’ve written about Full Employment and The Right to Work movement in the linked blog posts and here I hope to further explain a Job Guarantee as envisioned within a Modern Monetary Theory framework and further expand on the linked posts.
The Job Guarantee is a voluntary transitional program that is designed to create employment to suit the individual and work is there to fulfil a public purpose. It works alongside a national skills framework and the aim is to aid the JG worker to find higher-paying employment. It allows statisticians to assess what skills are in what areas and assist policymakers in creating industry policies. It is not there to take away work from the mainstream public sector.
A Job Guarantee is first and foremost a replacement for the Phillips Curve. In short, the Phillips curve is the trade-off between unemployment and inflation and there is a conjecture that as the unemployment rate falls, the general price level will increase. Today that is discussed as the Natural Accelerating Inflation Rate of Unemployment (NAIRU).
MMT looks at the Phillips Curve and identifies the unemployed as a buffer stock of unemployed to discipline the rate of inflation. It replaces it with a buffer stock of employed as an inflation anchor. Once in operation, the JG pool would serve the same function as a NAIRU but without the social and health consequences unemployment brings. It is effectively a Non-Accelerating Inflation Buffer Employment Ratio (NAIBER)
There’s a lot of misunderstandings to inflation and its causes within the public discourse (and even amongst academics) This is an attempt to give inflation an understanding to layperson terms and how a JG serves to discipline it.
When I say inflation I am talking about something very specific, that is a continuous increase in the general price level. The JG serves to discipline demand-pull inflation, so for the purposes of this discussion we will ignore cost-push. You can think of demand-pull as spending ‘pulling-up’ the price. One-off price rises are not inflation but they may lead to inflation if something does not ameliorate the conflict between wages and profit.
You need to appreciate that there is a distributional struggle [Conflict Theory of Inflation] over national income (GDP) between labour and capital.
We can view this conflict as perhaps leading to wage-price or price-wage spirals. As workers bid for nominal wages, capital seeks to maintain its profit and may increase prices and/or lay off workers to decrease costs as prices increase workers bid for more wages until the conflict is ameliorated.
Any Marxist will tell you, as well as an official in the RBA that we cause unemployment to discipline the inflation rate. (NAIRU approach) The RBA would use wanky terms like adjusting aggregate demand (total spending) and they morally justify it to themselves by adhering to natural rates of unemployment and fear-mongering over (alleged) a threat of inflation.
The JG is a buffer stock of employed that releases the JG worker when a better offer is made. It serves as a mechanism to ameliorate the conflict while maintaining price stability and full employment. It can not be inflationary as there has been no counteroffer made once the worker is released. Purchasing workers from the bottom of the market can not be the source of inflation either as they have been rejected by the market. What purchasing the unemployed does is set a floor for wages.
The JG is an automatic stabiliser that adjusts spending levels to ‘loose’ full employment and it targets directly where the spending is needed (the unemployed) . It is described as ‘loose’ because ideally, you want the JG pool as small as possible as we seek better employment opportunities for those workers.
The JG sets a floor for wages. If you think about the current floor for wages, it is $0. If you’ve been rejected by ‘the market’ the bid for your labour is zero. We then have pernicious welfare regimes that punish people into forcing them that take the shittiest job and the lousy wage and often risk their own lives! A JG, set at a socially inclusive wage, eliminates this as well as eliminating underpaid socially exclusive wage levels, it matches the desired number of hours demanded by the labour force and sets a living floor for wages. It effectively becomes the minimum wage and private employers are forced to compete with the JG.
Once the JG is in operation as workers leave the JG pool total spending increases (but government spending declines) as they leave the JG pool for better work. The reserve happens when workers enter the JG pool. Total spending decreases (Government spending increases)
The Social aspect of a Job Guarantee
There has been literature since the 1930’s on the ill effects that involuntary unemployment brings on the individual. This includes:
– loss of income
– impacts on mental and physical health
– deteriorating skills and loss of skills
– lack of motivation/self-esteem
– family/relationship breakdown
– poverty for those reliant on workers income
– results in other social issues (e.g homelessness, increased crime etc…)
A Job Guarantee is designed to create work for the individual, rather than find a job that doesn’t match the skill set of the unemployed. The work would be of public benefit and assist the JG worker in upskilling and finding work in the private or mainstream public sector.
The types of work that can be done can include work in the arts. We could pay musicians to give workshops on band dynamics, pay them to create and assist in the organisation of community festivals, we can have arts programs where artists can paint murals in public spaces and aid others in their own skill development. Surfers could be paid to pass on surf life safety skills and teach others how to identify and avoid rips. They could take part in sand dune rehabilitation. There is massive potential to enlist thousands of unemployed in ecological restoration and plant trees along with other flora to mitigate against climate change. There are activities we consider community engagement that become paid employment. Running and participating in community gardens is one example.
By having a direct employment program we target money directly to the areas that need it (the unemployed/underemployed) and it has profound social transformative effects. It is a vehicle that begins to transform some of the structures and norms that produce and reproduce poverty and gender disparities.
Work matters, however broadly defined. Work empowers, enhances individual worth, and allows one to lead a richer life, gain new knowledge and skill, and contribute to self, family, and society. Work is life-affirming. While certain pursuits are solitary and individual, even they deliver benefits when performed as part of a greater community.
Tcherneva, P. What do poor women want?, 2012, Levy Economics Institute of Bard College
In the Paper by Tcherneva on the effects of a direct employment program, the Jefes program in Argentina. (A program targeted at poor women) she states
[paying] special attention to poor women’s narratives [we] showed that their first exposure to paid work significantly boosted their self perceptions, promoted collective and individual empowerment, and made important qualitative changes to their lives. Found that the socialization of women’s work increased the respect and recognition women received in their own families and in the community at large.
Tcherneva, P. What do poor women want?, 2012, Levy Economics Institute of Bard College
We need an understanding that unemployment is structural. It is caused by a lack of spending in aggregate. As a monopolist over the currency, the Australian Government can always purchase anything for sale in the currency it issues. It is a policy choice. The Government of the day chooses the rate of unemployment.
Basic incomes (and even Universal Basic Incomes) are an admission that full employment is no longer possible and if we were to have it we would be dealing with inflation.
The JG crushes that argument, argues full employment and price stability is possible and the broader literature shows work is important for a sense of self, recognition in the community, and leads to vastly improves self-esteem and confidence.
This is an edited post originally by Jengis Osman originally published on Fighting Fish