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THE JOB GUARANTEE: Finally Moving Beyond Theory to Implementation

Since the early 1990s a bunch of us have been advocating for a Job Guarantee or Employer of Last Resort program. My previous two blogs have provided some of the theoretical details.

In addition, in recent days there have been simultaneous discussions going on around the blogosphere. What is amazing to me is that the discussion has moved from the realm of theory to discussion of implementation of the program.

Now why is this so amazing? Because 20 years ago, anyone who advocated a universal jobs program was dismissed as a complete wacko, or worse. We were regularly called fascist Nazis, Slavers, and dirty pinko commies. No insult was beyond the pale. From the left—heterodox, Post Keynesian economists; and from the right—your usual nut-job anti-government free-market libertarian Austrians.

They all agreed: it is absolutely insane to offer a job to an unemployed worker who’d like to work.

Best to leave them unemployed. The only difference of opinion between left and right amounted to how much suffering you should force on the unemployed. The left wanted to ensure they live in poverty, to be sure, but give them enough that they won’t revolt or beg (it’s just so embarrassing to walk by those panhandlers, you know). The right wanted more severe conditions, to serve as a lesson for anyone else who might dare to go without a job. Any job. No matter how low the pay, how dangerous the working conditions, how demeaning the work. We need a lot of suffering to ensure that no job will ever be refused.

Besides, the left and right argued, we cannot afford to hire them. Better to pay them welfare or put them in prison. Yes, even if it costs upwards of $50,000 apiece annually, or even $100,000, best to imprison them. Provide the right incentives. In the long run, that is cheaper than giving them a job at a living wage.

We need the suffering of the unemployed to keep wages in check. That promotes economic stability. High unemployment is great for the economy. How many unemployed will it take? Well, certainly 10 million; maybe 20 or 25 million. They’re doing their job—a reserve army of the unemployed to help break the back of evil labor unions that cause inflation.

Yes, the left and right agreed—following Marx and Friedman—a buffer stock of the unemployed is just what the doctor ordered. It is the medicine for a healthy capitalism. An antidote to full employment.

By contrast, we argued, following Keynes, such beliefs are “crazily improbable”, the sort of stuff no one could believe unless her mind had been “befuddled” with nonsense “for years and years”. Surely it makes more sense to get them working, to pay them for contributing to society, to keep them out of a life of crime and destitution and desperation? Even if they don’t produce much, that is better than nothing? Even if their wages are above some measure of the value of their output, that is better than putting them in prison where they learn to be much more dangerous criminals, and where they must be watched and guarded and fed and provided with both care and punishment? And when they get out, we ensure they do not get employment, so that they go right back into prison where they belong. That’s efficient!

We responded: wouldn’t the economy be stronger, and actually less cyclical and less prone to inflation if we put them to work. If employment in the program moved countercyclically. If government spending on the program moved against the cycle. If the wage of the program attenuated cyclical movements. If employers could recruit out of the pool of employed workers, rather than looking among the ranks of the recently imprisoned, the homeless, the drunk, the destitute.

Well, we finally won those debates. Judging from the recent discussions across the blogs—from left to right, from Post Keynesian to Austrian. All seem to accept that IN THEORY the JG/ELR does everything we have always claimed it would do.

The only debate remaining concerns political feasibility and whether the program can be implemented and run. Don’t take my word for it. Look at the blogs:

http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94369

http://www.creditwritedowns.com/2012/01/my-comments-on-mmts-job-guarantee-idea.html

Heterodox economics, Marginalrevolutionaries: The crisis and the blogosphere have opened mainstreameconomics up to new attack.

MMT, NGDP, AndAustrian Economics: Alphabet Noodling!.

THE FUNDAMENTAL DIFFERENCE BETWEENAUSTRIANS AND MMT’ERS .

Also most of the comments on my own previous two GLF blogs ask for details on how to implement the program. How can you run it? What will they do? How do you prevent the crony capitalists from taking over?

Much of this has to do with the size of the program. Many commentators are presuming the number of jobs we need is 20-25 million. It seems overwhelming. Is government up to the task?

I consider that a victory of unimaginable proportions. I have been arguing since the 1990s that through the thick and thin of the business cycle, the number left behind is upward of 20 million. The “cost” of using unemployment as a buffer stock, the cost of the reserve army of the unemployed, is 20 million lost lives at the business cycle peak! The waste is beyond imagination. We could put the most incompetent and corrupt and bungling Bush appointees in charge of the JG program and still not manage to waste what our “free market” approach to maintaining a reserve army of the unemployed manages every year.

The extra output that would be provided is sufficient to resolve virtually every shortfall of infrastructure or public service that anyone could possibly come up with. Heck, if we really wanted to, we could rebuild Australia’s lost “Alps” with that workforce. Or rebuild the land bridge to Asia. Or, why not, build that stairway to heaven that we used to sing about.

(As you probably know, Australia lost its mountains; Warren Mosler used to always joke that they should be ashamed for not maintaining them. If their Alps could be restored, the land of Oz would no longer be dry. And, hence, the JG could be put to use to rebuild them. OK, before I get the hate mail, it is a joke. But you get the picture. 40 million American hands put to useful work.)

Those who push for the JG/ELR should just declare victory and go home.

But we won’t. I promise. Let the discussion of problems of implementation, management, corruption, efficiency, training, and matching skills to work begin. We’ve finally got beyond the theory and the name calling.

The other Keynes quote I love (but cannot locate right now), says that if we just get busy and start thinking of useful things for the unemployed to do we’ll have no problem coming up with a sufficient list.

Let me close with a quote from Minsky (1965: 299-300), who long proposed an ELR program:

“Work should be made available for all able and willing to work at the national minimum wage. This is a wage support law, analogous to the price supports for agricultural products…. To qualify for employment at these terms, all that would be required would be to register at the local U.S.E.S. [US Employment Service]. Part time and seasonal work should be available at these terms… National government agencies, as well as local and state agencies would be eligible to obtain this labor. They would bid for labor by submitting their projects, and a local ‘evaluation’ board would determine priorities among projects…. The basic approach is straight forward – accept the poor as they are and tailor make jobs to fit their capabilities. After this is done, programs to improve the capabilities of low income workers are in order.”

We’ve been working on this project a long time. Here is a very short list of just a very small proportion of the articles I’ve worked on. In coming blogs, I’ll provide more details on how to implement and run the program—and on what the workers will do.

http://www.cfeps.org/pubs/wp/wp3.html

http://www.cfeps.org/pubs/wp/wp9.html

http://www.cfeps.org/pubs/wp/wp39.html

http://www.cfeps.org/pubs/wp/wp41.html

http://www.cfeps.org/pubs/wp/wp43.html

http://www.cfeps.org/pubs/wp/wp50.htm

http://www.levyinstitute.org/pubs/ppb54.pdf

http://www.levyinstitute.org/publications/?docid=500

http://www.levyinstitute.org/publications/?docid=253

20 Responses to “THE JOB GUARANTEE: Finally Moving Beyond Theory to Implementation”

golfer2johnJanuary 4th, 2012 at 9:55 pm

"Unemployed" means INvoluntarily unemployed: looking for a job and can't get one. People not looking (e.g., retired, underage, independently wealthy, or just don't feel like it) are not INvoluntarily unemployed.

golfer2johnJanuary 4th, 2012 at 10:02 pm

20 million at the peak of the business cycle? Seems an order of magnitude too high. 20 million at the trough of the business cycle seems more like it. Kinda like now. But the program would never have to handle a trough like today, as the trough would be not so low, and the peak not so much above the average, and the average should be higher. The business cycle should be flattened by an effective JG program, as incomes would be not so variable over time as they are today.

golfer2johnJanuary 5th, 2012 at 8:01 pm

Don't get too giddy. MMT is not yet a mainstream idea. Nobody famous (outside academia) is arguing for it. 99.9% or more of politicians, media, and yes, even economists that get any air time, think that the US "can't afford" the current budget deficits, and is on the way to bankruptcy and/or insolvency. They don't see any difference between the US and Greece. The mere mention of MMT, without any real understanding of it, in the mainstream media is a step forward, but only a small one. There are many more steps needed.____

Andy_AWKJanuary 6th, 2012 at 8:21 pm

Hi Randy,

I'm writing the same comment to you that I did to Bill Mitchell on his blog and would appreciate your thoughts:

I haven't posted on your site before but I've been a long time reader and admirer as an MMT advocate. That said, I strongly believe the way you and other MMT theorists have framed the JG is biased and detrimental to the wider acceptance of MMT. I agree with you that for MMT to be complete it must tap a buffer for price stability and public purpose strongly favors a modality that should PROMOTE job creation, perhaps to the point where almost everyone that wants a job can get one. But insisting on a job GUARANTEE requiring new bureaucracies and government restructuring is not the only way to exploit the employment buffer and may not be the best way.

There are many other ways that government can spend its fiat money and use the coercive power of taxation to encourage job growth when and as needed without the need for the restructuring you and the other core MMT theorists have proposed. I think the chronic need for infrastructure rebuilding (where we have $3 trillion in needed work) is enough but we can always find other avenues such as green energy that serve multiple public purposes at once. If we need roads and bridges and solar farms it would not be hard for government to hire private contractors via competitive bidding and perhaps stipulate only the hiring of American workers and other incentives for using goods made in America.

I simply see too much naivete on the part of too many MMT theorists in how to feasibly implement a JG in the real world. It is doubtful that any major economy will implement a permanent JG (though used temporarily for the most part during downturns) de novo. Rather, MMT ideas will probably come in stages on the back of, or with the support of, (neo/post/etc.) Keynesian thinkers in more rigorously modeled stimulus programs along MMT lines. If they work as MMTers predict, the politicians and government will be more prone to implement MMT modeled stimulus in the future and these programs, MMT, and government will all evolve together. If done right, this evolution may asymptote to a JG program very similar to what the core MMT theorists have proposed. But I doubt it. My guess that it would evolve to something else and it's possible that this "something else" may be better than what the MMT theorists currently envision.

I think the JG is rightly causing a schism in the MMT community. You and other MMT theorists could stop it by redefining MMT as requiring a buffer stock optimization process to promote price stability and low unemployment (some level of unemployment may be healthy simply on the basis of human nature). Then, your JG or ELR ideas could be included as competing theories under MMT buffer stock optimization requirement but NOT as the be all and end all of MMT.

golfer2johnJanuary 9th, 2012 at 9:01 pm

Maybe I haven't read the same blogs as you, but I don't see people calling for "restructuring" of government in order to implement a JG program. Also, it's not a "stimulus" thing, like a one-time shot. It is essentially a more humane way of doing unemployment insurance, with the added benefits of promoting price stability while getting some societal benefit from otherwise idle hands.

Higher deficits would still be required even if JG were fully implemented today. The JG wages themselves would add to deficits, if other spending and taxing were not changed, but the labor buffer (whether employed by JG or unemployed) will not shrink without more aggregate demand.

The neglect of government-supported infrastructure is strictly the result of the lack of recognition of monetary sovereignty. They think we "can't afford it". This has nothing to do with JG, and the two issues should not be discussed together, because they just confuse the discussion. We need permananet workers to maintain government infrastructure. That job does not go away, and the workers who do it should not go away either.

JCJC777January 10th, 2012 at 3:34 pm

I think you're on the right track. Even if the jobs are caring for elderly, cleaning the streets, i.e. of marginal 'economic' value, these jobs would prevent massive personal unhappiness of the structurally unemployed, and prevent social disruption.

One issue is that the administration cost of the programme could be very large (although maybe much could be delegated to the employers).

Is there anywhere in the wrold which is doing something like this already? Lessons learned?

SteveK9January 10th, 2012 at 8:41 pm

I am new to the whole MMT thing, but I would say this is too pessimistic. People like Dean Baker and his colleague Mark Weisbrot at the Center for Economic and Policy Research agree in many areas with MMT and Dean is on television fairly often. Even people like Brad Delong and Paul Krugman (I know they have both dissed MMT) agree in some areas.

SteveK9January 10th, 2012 at 8:44 pm

I'm also glad that there is a discussion on implementation. The first MMT blog I found a few weeks back was Bill Mitchell's and the first post I made had some questions about implementation. This was taken by some other commenters as an attack on the JG, but I noted later that I was very intrigued by this, but recognized that there is a devil in the details. I've started to hear some answers to the obvious questions that come to mind, but I wonder if there is a list of a few documents that would be the best place to review the current state of thinking.

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