UBI Advocates want a Job Guarantee, They Just Won’t Say IT!

Cameron Murray has a great piece at Fresh Economic Thinking that I’m riffing this title off.


A Job Guarantee (JG) is a way to guarantee a certain income level to anyone willing to do tasks that some administrator decides are good.

A Universal Basic Income (UBI) is a way to guarantee a certain income level to anyone willing to do any task they decide is good.

We know that many JG advocates simply want to give people money for doing what they would do anyway if their income was guaranteed. They just have dogmatic beliefs about the dignity of work and the word “job.”

Here’s Bill Mitchell saying that you would eventually do whatever you liked in the JG (my emphasis).

The Job Guarantee in fact provides a vehicle to establish a new employment paradigm where community development jobs become valued. Over time and within this new Job Guarantee employment paradigm, public debate and education can help broaden the concept of valuable work until activities which we might construe today as being “leisure” would become considered to be “gainful” employment.

So I would allow struggling musicians, artists, surfers, Thespians, etc to be working within the Job Guarantee. In return for the income security, the surfer might be required to conduct water safety awareness for school children; and musicians might be required to rehearse some days a week in school and thus impart knowledge about band dynamics and increase the appreciation of music etc.

Further, relating to my earlier remarks – community activism could become a Job Guarantee job. For example, organising and managing a community garden to provide food for the poor could be a paid job. We would see more of that activity if it was rewarded in this way. Start to get the picture – we can re-define the concept of productive work well beyond the realms of “gainful work” which specifically related to activities that generated private profits for firms. My conception of productivity is social, shared, public … and only limited by one’s imagination.

In this way, the Job Guarantee becomes an evolutionary force – providing income security to those who want it but also the platform for wider definitions of what we mean by work!

If we are going to be this lenient and generous with the definitions of a job, why bother at all? How about being a parent, carer, child, or just a citizen? Why aren’t these “jobs”? And if they are, aren’t you just advocating for a guaranteed basic income of sorts?

The inflation concerns that JG advocates claim to have with a UBI are nonsense. They are just backfilling excuses. Obviously, most JG jobs wouldn’t in be sectors where output is priced, so wouldn’t enter inflation calculations anyway. Just like my housework isn’t priced, but could be if supplied by the market, a JG that includes my own housework would have no effect on reducing inflationary pressures.

Further, isn’t the insight of MMT that you might have to tax to reduce demand sometimes? In which case, a UBI can be easily designed to include taxes so that it redistributes in a way that doesn’t create demand-pull inflation.

Oh, and then there are people wouldn’t participate in the JG anyway, like children, the elderly and the disabled. They would have to just get money anyway.

So let’s retire the debate. Yes, the government can be a money-creator if it wants. There are only real constraints. So let’s now talk about funding things that we think are important for society over things that are not. Let’s talk about practical ways to redistribute income and wealth. Let’s get our priorities right and forget the word-games.


Now I agree that the Job Guarantee, the Universal Basic Income have Mutually Assured Goals in Concert.  So let’s make that MAGIC happen.  Many MMT proponents disagree with me but I am also an MMT advocate.  I am tired of the identity politics behind a UBI and a JG.

I have always said the JG is a UBI – it is a Universal offer for a Basic Income for perceived productive work.  When I use the word ‘productive’ here I am using it in a broad sense.  Is caring for   someone productive? Is  checking the safety of water productive? Is providing food for those in need productive? Is firefighting productive? Is studying, getting an education productive?

The answer is Yes, of course.

We all like to be productive, don’t we?  It fulfills human needs of accomplishment, self-esteem and much more.

As the futurist Alvin Toffler liked to ask at smart gatherings of business executives, ‘How productive would your workforce be if it hadn’t been toilet trained?’

What if the local level community administrator that helped with a gaps analysis to find, develop and create the JG jobs says the job is not ready to go ahead yet?  Well you still get paid the JG wage.  This makes it functionally the same as a UBI but not a pure UBI as it is in transition – just as the Carbon Pricing Reduction Scheme has a transition that was effectively functioning as a tax but the CPRS itself was not a tax.

Even John Quiggin effectively agrees with a JG though he renames it Participation Income.  A rose by any other name, smells just as sweet.  Under Quiggin’s assumptions or Bill Mitchell’s the amount we pay will not generate inflation and thus the payment’s are efficient.

I think the identity issues behind a Job Guarantee and a Universal Basic Income are those for a UBI are employed and in poor quality jobs and those for a Job Guarantee are unemployed, underemployed, long-term unemployed and/or know many people in this situation.  I think that is what it boils down to.  Those for a UBI in a poor job do not have the option currently to leave their job as they need their income.  Those for a JG do not even have that option, even the social security entitlements, if eligible, are insufficient for members of society to have Wellbeing, Inclusion, Social and Emotional engagement.  The Australian Real Progressives Be WISE philosophy.

We can refer to the Argentina near-JG experiment.  A survey asked why the participants preferred to work than receive a benefit.

  1. they felt (or would feel) useless sitting at home;
  2. they felt like they were helping the community when they were working;
  3. there is dignity in working;
  4. they were meeting their neighbors and;
  5. they were learning new skills.

This is how you generate Courage, Compassion & Connection.  I cannot see how a Universal Basic Income brings the marginalised willing worker into being WISE.

As the El Paso girl said, Why Not Both?

The JG is a universal offer that is voluntary to take up so why not add a UBI on top of the JG and make it an opt-in offer as well.

 

Australian Progressive Economists are at it Again!

As Kate Raworth says in Doughnut Economics, economics is the mother tongue of public policy.  So it is vitally important to understand the operational interactions of economics correctly to formulate public policy.

Nominal Progressive Economists like John Quiggin, Andrew Leigh, Richard Holden and others are at it again.  Andrew Leigh and his colleagues have an issue with Modern Monetary Theory but have not done their most cursory research about the constituent parts of MMT.

Real Progressive Economists should have a real connection with Keynes and Kalecki and other economists done correctly and not what Joan Robinson called “Bastard Keynesianism”.

Every Modern Money Theorist and other MMT proponents would agree that MMT and “conventional economic thinking” can arrive at the same or similar conclusions.

What follows is an adaptation of the work of the Swiss MMTist Andrea Terzi.

Modern Monetary Theory has historical precedents.

First, the notion—developed by Adam Smith—that the wealth of a nation is measured not by monetary values, but by its capacity to produce goods and services.

Second, the notion of money—developed by John Maynard Keynes—that any modern state claims the right to declare what money is.

While Smith’s concept hints to full employment as the primary policy objective, Keynes’s concept hints to the management of money as instrumental to reach such objective. Furthermore, MMT explicitly recognises that the currency itself is a public monopoly.

This leads to an appreciation of the monetary system fundamentally different from the conventional economic thinking / bastard keynesianism paradigm.

What follows is a summary of eight key differences between these two models:  the Bastard-Keynesian paradigm (BK) and the Modern Money View (or MMT).

1.
BK – The central bank controls the money supply indirectly through its power to control the monetary base.

MMT – The private sector uses bank deposits as money, and bank deposits are not directly controlled by the central bank: they get created by government spending and bank loans.

2.
BK – Because the central bank controls the money supply, it also controls the nominal interest rate in the money market.

MMT – Because it is the monopolist of money, the central bank controls the interest rate.

3.
BK – The long-term nominal interest rate is determined by private preferences about real saving and investment, as well as by inflation expectations.

MMT – The central bank has the power to control the interest rate at any maturity: the interest rate is a purely monetary phenomenon.

4.
BK – A monetary expansion can expand output and employment temporarily and yet, at some point, it generates inflation.

MMT – Any operation by which the central bank buys or sells financial assets does not make the private sector any richer and has little or no consequence on private spending decisions.

5.
BK – Government decisions are largely driven by short-term personal goals of politicians, and thus the management of money should be the responsibility of an independent institution with a long-run horizon.

MMT – While monetary policy can only set interest rates, fiscal policy is much more powerful, since any deficit of the public sector generates an equivalent financial surplus of the private sector, and thus affects spending decisions.

6.
MK – Taxes serve the purpose of financing government spending.

MMT – Because government spending takes resources off the private sector and simultaneously generates income and wealth in the private sector, it will cause inflation from excess demand unless a sufficient amount of taxes is levied on the private sector.

7.
BK – If the government spends more than its tax revenue, it must borrow funds from the private sector, and this reduces funding to the private sector.

MMT – Unless it loses its power to define what money is, the government is the currency issuer: It faces no funding constraint, and it must spend or lend first, before the economy has the funds needed to pay taxes and buy government debt.

8.
BK – Price stability is a precondition for economic growth and job creation.

MMT – A government deficit of a size that matches the private sector’s desire to accumulate financial savings is a precondition for full employment.

Modern Money takes many strands of classical economists, Keynesian economists and Post-Keynesian economists and weaves a consistent coherent synthesis of the many strands to describe the operationally correct procedures of the macroeconomy.

Once these are understood and not mythologised into deadly innocent frauds, noble lies or rules of thumb heuristics it opens up policy space.

So then you can argue for your public policy goals, whatever they may be, not just on their own terms but in a holistic complete way without any misunderstandings.