Tag Archives: Job Guarantee

Modern Money’s Job Guarantee

Australian Real Progressives has mentioned this piece previously as a parry and riposte to nominal progressives in this piece but it deserves a full treatment of its own.

Modern Monetary Theory (MMT) is an incredibly complex body of work that studies macroeconomics. At its most elemental level, it says a currency is a social and legal construct. Currency issuers spend via an appropriation bill and are not financially constrained, though they are constrained by real resources. A monopolist of a currency can purchase whatever is for sale in the currency it issues, including idle labour. Thus unemployment is a political choice.

Within the body of work that is MMT it uses a Job Guarantee (JG) as a macroeconomic price anchor and stabiliser which I will explain below.

There have been claims that the Job Guarantee is workfare. It is not. It is a voluntary offer of a job to anyone, anywhere paid at a living wage with access to all the National Employment Standards just like every other worker.

The social policy setting of the JG is the policy manifestation of a technical concept to eliminate the tradeoff between unemployment and inflation. Current orthodox economists identify a link between rising employment and rising inflation and use unemployment to discipline the inflation rate. MMT economists say you can achieve the same end by using a ‘buffer stock of employed’ rather than a ‘buffer stock of unemployed’. This is what the Job Guarantee is.

The reason for the fixed-wage is the anchor. It sets the general price level. All prices within an economy are a function of government spending. The JG chooses to use employment as the anchor for the general price level. In the event of accelerating inflation, the cause of inflation can never be the wages of the JG workers because by definition they are purchased from the bottom and released from the pool when a better offer is made.

The JG is a small part of a broader full-employment agenda. Ideally, you want the pool to be as small as possible. It is not there to replace existing skills-based employment. It is there to sit alongside a national skills development framework to assist those that need it in finding future employment.

It ensures ’loose’ full employment as workers are drawn in and out of the JG pool rather than ending up unemployed. The automatic spending triggered by those entering the JG mean the government’s spending is directed when and where it is needed most – the unemployed.

The advantage workers have particularly those at the bottom who often hold little, if any, bargaining power is that the JG sets the floor for wages. Private employers would be forced to compete with what we as a society determine to be the absolute minimum socially inclusive wage.

A Job Guarantee is designed to create work to suit the individual. It is administered at the local level but funded by the federal government. The workers within this program are free to unionise and advocate whether something should be classed as a JG job. They are free to take part in determining what the living wage should be.

The work would be of public benefit and assist the JG worker in upskilling and finding work in the private or public sector. It is there to enhance the individual’s well-being and provide a public purpose. It is not used as a punitive system of punishment.

In a similar way to how the Commonwealth Employment Service worked, the unemployed person would have a case manager that held their CV and attempted to match that person to a job but rather than having that individual lay idle, they have the opportunity to maintain and enhance their skillset while seeking better employment working actively with their case manager to match them with an appropriate job.

The types of work that can be done are limited only by our imaginations. 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 while they undergo study in a related area.

Most importantly the JG allows the most disadvantaged in our society an opportunity to engage in paid employment which would lead to recognition in the community and vastly improved self-perceptions and a more prosperous society.

Jengis Osman is a union organiser based in the NT. He is a member of the NT- ALP Left and a research associate at the Centre of Full Employment and Equity. Twitter This first appeared in Challenge Magazine and is giving a fuller treatment on Jengis’s website Fighting Fish.


History: Modern Money Theory and Stagflation

Australian Real Progressives has written about full employment and the job guarantee many times previously.  What follows is a historical analysis of how the mythical NAIRU came into being and why Full employment, in the truest sense, was abandoned.

Via Bill Mitchell

Full employment gave tremendous advantages to the working class and allowed for upward inter-generational socioeconomic mobility – where children born into poorer families could aspire to transcend that social class and enter the more secure middle class.

And as capital became more concentrated – through takeovers etc, and, trade unions became more powerful, the two conflicting forces obviously gained increasing price setting power.

Firms set prices according to markups which reflected their expected profit return on capital and unions, representing their workforces, could exert power to gain wage increases.

As a result real wages mostly grew in proportion with productivity growth which reduced the likelihood of a realisation crisis (expenditure lagging behind production) but also reduced income inequalities and allowed workers to fast track into middle class life (and mass consumption).

But that increase in ‘price setting’ power brought a new propensity to crisis relating not to unemployment but rather to inflationary biases.

The – 1973 OPEC Oil Crises – triggered an inflationary spiral driven by the ‘battle of the markups’ (the conflictual struggle between capital and labour for real income shares).

The existing Keynesian policy consensus had really only constructed inflation threats in terms of demand pull events – where nominal spending outstrips the capacity of the economy to respond by producing more real goods and services.

There was some delay among policy elites in grasping what a raw material price hike (particularly one that is imported – such as the oil shock) meant when it interacted with the distributional conflict between labour and capital.

The point was that nations as a whole had to take a real income loss because an essential raw material they imported now took a larger share of nominal income.

So who would take that loss?

Capital didn’t want to take it, and, rather tried to pass it onto workers by increasing their markups and pushing up prices, thereby reducing real wages and the purchasing power of workers.

But strong trade unions were not keen to accept that profit push and ‘real wage resistance’ became a force, which was expressed in increased wage demands – thereby restoring the real wage cuts resulting from the price rises.

As both sides had price setting power, a price-wage spiral was easy to trigger and that is what happened.

Before long, inflation was accelerating away and governments, under the influence of the emerging Monetarist paradigm in macroeconomics, sought to cut net spending.

This resulted in rising unemployment coinciding with accelerating inflation, which we called ‘stagflation’ – the twin evils.

The rising unemployment was devastating but airbrushed by the Monetarists as being an essential ‘natural’ adjustment that we just had to tolerate to stabilise inflation.

And so the ‘natural rate of unemployment’ or NAIRU (non-accelerating-inflation-rate-of-unemployment) entered the picture and governments were told that there was no longer a choice to use discretionary fiscal expansion to reduce unemployment.

The only thing that would result from this strategy, we were told, was that inflation would continue to accelerate and only stabilise when the natural rate of unemployment was reached.

You can read more at Bill’s blog.  This is the most lucid explanation of stagflation from an MMT point of view.  It makes it clear that conflicting classes business and labour both had price-setting power and coupled with a supply shock that caused 70’s stagflation.  We are a far cry from that conflictual relationship today.

Why Do We Work?

There is plenty of work but there are no jobs available.

Not convinced? Our friends over at the Pragmatic and Empirically Guided Solutions  (PEGS) Institute have put together this wonderful video on work.

Is work just a four-letter word? Is the work we do our identity?  Is financial gain the motivator?  At the end of the day, what are we all really working for?

Work provides all the things we want and need; from food to shelter to entertainment to medicine to comfort to learning and beyond. If work doesn’t happen we all die.

Doing work that you feel is meaningful and worthwhile tends to make you happier and healthier; doing work that you feel is pointless or shameful tends to lead to the opposite feeling.
When thinking about the shape of society we want, it would be a mistake to think of work only in terms of the material gains it produces and delivers. Depriving people of meaning causes suffering just as surely as depriving them of food, shelter, medical care and comfort.


Thank you for watching.

16 Goals of Australian Real Progressives: UPDATED

Any politician or party that moves towards one or more of our goals will receive our support.


1. A Federal Job Guarantee to act as a safety net – an end to underemployment and insecure employment. The FJG also serves as a superior stabilisation and counter-inflationary mechanism, if it is designed appropriately;

2. An explicit target to reduce inequality by providing Housing Security, Energy Security, Food Security, Social & Retirement Security, Health Security, Childcare Security and Job Security and Communication Security (telecommunications: phone, mobile, Internet);

3. Major public housing investments and re-orientating the housing market to prioritize owner-occupiers over speculative property investments;

4. Increasing and extending the state pension;

5. Zero fee training and higher education;

6. Cancellation of student debt;

7. A Commonwealth Employment Service (CES), charged with anticipating and planning for changes in regional economies, providing input into an industrial policy aimed at maintaining similar jobs;

8. A re-regulated banking system;

9. A rethinking of fiscal and monetary policy an explicit reliance on fiscal policy for stabilisation, supported by the FJG.

10. Massive public investment in renewables;

11. Phasing out of coal, but with a just transition for workers (see FJG);

12. Construction of fast rail between all eastern capital cities;

13. Major investment in public transport;

14. A rapid transition to electric vehicles; and

15. A regulation-based, and public-ownership based, approach to a much more rapid reduction in carbon emissions

16. Enshrining First Nations Voices according to the Uluru Statement from the Heart recognising their Sovereignty, a Makarrata (Treaty) commission and Truth-telling process and empower Aboriginal people to manage their own affairs through constitutional or legislative reform

All these together help Australians improve their Well-being, Inclusion and Social and Emotional engagement with other Australians.  It balances, enhances and restores the Australian principle of mateship and the fair go.  It is a WISE idea.

It is Difficult to Implement the UBI, Here’s Why

Previously we have mentioned that Universal Basic Income is truly asking for a guaranteed job and thus desires a Job Guarantee and can work in concert with Participation Income and that is absolutely fabulous.

In the Monetarist-Keynesian paraidgm of economics, it is accepted that there is a trade-off between unemployment and inflation (price stability).  The Job Guarantee addresses this with a fixed price floating quantity mechanism to control for inflation.  The fixed price however is set at a socially inclusive minimum wage plus benefits.  This means of course that it is a rate above social security benefits like Jobseeker/Newstart and thus is not a form of Work for the Dole on steroids or otherwise.

To get to the crux of the matter as usually stated by enlightened Universal Basic Income advocates

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.

Theoretically you could do that but what this fails to recognise is that the introduction of a Universal Basic Income is one policy, the adjustment of tax rates to counter the effects of a UBI is another policy.  If one passes the legislature without the other it will be inherently inflationary unless we all decide to do socially useful productive jobs that need to be done .

Additionally the political economy of getting it passed looks like what happens with these two monkeys below.  This is what happens when it is taxed away in its entirety from those that never required it.

Much better to target it and the best form of a Universal Basic Income is a Job Guarantee.  It is universally accessible, provides a basic income and produces socially useful output and in the author’s opinion provides real freedom.