EconoMonitor

Great Leap Forward

Hyman Minsky and the Employer of Last Resort

A couple of weeks ago, I mentioned Hyman Minsky’s new book, “Ending Poverty: Jobs, Not Welfare”, less than $14 at Amazon. There is also a Kindle version.

Take a look at the cover: MinskyFullCover3-14 — Minsky looking like a bit of a rougue!

Here’s a link to Amazon (cut and paste if it doesn’t work):http://www.amazon.com/Ending-Poverty-Jobs-Not-Welfare/dp/1936192314/ref=sr_1_2?s=books&ie=UTF8&qid=1364998534&sr=1-2

I thought you might enjoy my powerpoint presentation, given at the Levy-Ford annual Minsky conference in NYC in mid April. It summarizes some of the main arguments of the book. However, you really need the book–it is brilliant, and a good antidote to all the silly arguments made by economists that we “need” to keep tens of millions of Americans unemployed.
As Keynes put it:
“The Conservative belief that there is some law of nature which prevents men from being employed, that it is ‘rash’ to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness is crazily improbable–the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years….” (J. M. Keynes)
Here’s the powerpoint:
minsky ending poverty apr 2013 pdf

19 Responses to “Hyman Minsky and the Employer of Last Resort”

nmmaierMay 16th, 2013 at 11:52 pm

I reviewed the Minsky Powerpoint. Minsky is suggesting a massive government jobs program, essentially guaranteeing a government job to anyone willing to work. And he says the resultant employment will eliminate poverty to great degree. And the whole program is to be run by the Oligarchs (his words). Does this mean that he completely gets rid of welfare? You know it is difficult to get someone collecting welfare to take a $50,000 a year job. They have to give up their housing subsidy, foodstamps, medical care, disability and they have to get up every morning, get dressed, and commute to work to do a job that they may not like.

L. Randall Wray L. Randall WrayMay 17th, 2013 at 12:48 pm

Ahh NMM: We are not a very careful reader, are we? “Oligarch” is Minsky’s own words? Do you just make up anything you want? Doesn’t build confidence in anything you say. No, Minsky did not advocate getting rid of welfare. Read the ppt again. More carefully this time. ELR offers a job to those who want to work. It is quite simple. Those who prefer not to work do not have to work. Right now most of those without jobs but who want to work do not have a choice–simple dogs and bones story. If you send 10 dogs out but you only buried 9 bones, you can be sure that at least one dog comes back boneless. ELR ensures there is a job for anyone who wants to work. Wrap your mind around it. And then we need a decent social safety net for the rest.

benleetMay 17th, 2013 at 5:10 pm

Here's a question. The National Jobs for All Coalition publishes a monthly unemployment report. Towards the bottom they mention that 17.9 million, or 17.6% of the full-time and full-year workers, earn less than the poverty level for a family of four (they cite the Current Population Survey, U.S.Census, 2012). That means 101.7 million are working full-time and full-year. The Social Security Administration says that 151 million reported wage or salary income in 2011 (median income was $26,965). Therefore, only 55% of the workers had full-time full-year work earning more than $23,050, the poverty level for a four person family. The other 45% were part-time or temporary-contingent or working for below poverty full-time full-year. The labor force is 155 million, though I believe it is larger since the participation rate is at a 34 year low because of the poor economy. Let's say participation is truly the highest ever, the 2000 level, 67.3%, not today's 63.3%, then the labor force would be 164 million, not 155. Of course unemployment would rise to 12.7%, but that's secondary. It would mean that only 51% of workers had full-time full-year employment. 49% would be unemployed, under-employed, dropped out, working full-time full-year for below poverty level. I do this just to get your expert opinion. The ELR program would have to create a lot of jobs (let's say about 50 million) to employ such a huge "reserve army" of labor. It's still a good idea. Wouldn't this tend to increase wage income as the labor market would be "tight" causing employers to raise pay? But with corporate profits at all time highs, and wage income as a % of GDP at an all time low, this would be an improvement.

L. Randall Wray L. Randall WrayMay 17th, 2013 at 6:13 pm

ben: short answer. Don’t forget the multipler impacts. For sake of example, say we set wage in ELR program at $10. That raises private sector wages, too. Employ say 25million in ELR program at 10, increase wages of millions in private sector to 10, increases consumption, increases sales, increases private sector employment. Keeps people out of poverty, life of crime, incarceration. I expect 25M max in the program, probably falling to around 8-10M once we recover. But we won’t know for sure until we try. And of course if it is more than that, so much the better. We can accomplish a whole lot more to make this country better!

PaulMay 17th, 2013 at 8:42 pm

"You know it is difficult to get someone collecting welfare to take a $50,000 a year job."

Bullshit! Pure Bullshit. Any shred of evidence to back that up? Your imagination, or hypothetical utility functions don't count.

JMarcoMay 18th, 2013 at 2:49 am

I think that keeping unemployment rate high works in favor of financial captains/firms. They really want the majority of US worker anxious and frighten. In order to maximize profits they know suppressed wages will guarantee that. I believe the American dream died in the 70's and is not longer obtainable. I was listening to a 30ish reporter on NPR Fresh Air on Thursday give Terry Gross a very depressing account of how his money invested in 401ks was being drained of any real gains by fees and service charges. And he had to depend on fund advisors who do not work in his interests but for the financial markets' interest. What he didn't say was that Republican party would like to turn Social Security over to Wall street instead of its tax and present payout scheme.

nmmaierMay 18th, 2013 at 5:17 am

Rather than a massive goverment public works program, I like the free market solution better. Eliminate the minimum wage, eliminate all the goverment red-tape to hire and fire, and eliminate all income tax withholding, SS withhoding and Medicare on wages below $30K per year. Then you would see a lot of entry level jobs appear in the private sector for our young people.

L. Randall Wray L. Randall WrayMay 18th, 2013 at 1:07 pm

NMN: Of course you’d prefer your neolib paradise. Oh, actually there are lots of countries in the world living out your fantasy. Poor, malnourished, underdeveloped, diseased, with no public infrastructure, no regulations, wages less than a dollar a day, no healthcare, no retirement, no tax collection, unable to take care of their own. You’d love it.

L. Randall Wray L. Randall WrayMay 19th, 2013 at 12:14 am

People like NMM hate America. They hate everything America stands for. They want to go back to an imaginary Pre-American past. When there was no government, nothing that protected Americans. To a past in which (white) American (males) were top dogs. No one protected women, minorities, children. An imaginary past in which “free markets” ran everything. The reality was of course quite different. If you want to see the kind of economy they aspire to, look to Iraq. The Neolib wet dream. Dysfunctional govt. Free markets run amuck. No social protections. Poverty everywhere. Violence. No public infrastructure. Everything they want is exposed here: http://readersupportednews.org/opinion2/277-75/17…. As usual, Michael Moore has his finger on the pulse of Neolib America.

benleetMay 20th, 2013 at 5:59 pm

Thank you. Robert Pollin wrote in Back to Full Employment that in Jan 2012 the banks and corporations combined were "sitting" on $3.7 trillion in cash. He wanted to tax banks, and others want to tax corporations' surplus reserves. The carrot is to provide government guaranteed loan programs to private finance, and tax credits to business for new hires. There is a huge excess of reserve surplus that is presently useless — the ELR could change that. Here's Thomas Palley's 4 step program, no ELR, but pretty radical: http://www.thomaspalley.com/?m=201009 — the elimination of Bush tax cuts, using the new revenue to (50%) fund state and local government and (50%) to gift workers directly who earn less than $50,000 year wage income with an additional $4,000 or so per year until the economy recovers. And three other integral and necessary reforms.

L. Randall Wray L. Randall WrayMay 21st, 2013 at 1:42 am

Benleet: yes, unfortunately they are stuck in the Neolib mindset. We need more taxes so that govt can afford to do what we want it to do! No way. Wrong. Sovereign govt doesn’t need no stinking taxes to afford to do what it should do. Nonstarter and wrong. Linking higher taxes on the rich to doing what we know govt should do is just plain wrong and stupid politics. They should know better. It is a sure path to defeat. We need a new Meme.

Ben JohannsonMay 21st, 2013 at 1:44 am

You would see nothing but entry level positions and permanent mass unemployment, the return of poor houses and forced labor. Do you really despise your countrymen and women that much?

steveMay 21st, 2013 at 9:24 am

Unfortunately, people like NMM think "you" hate America. Their point of view is that any government-engineered solution to the problem that seeks to fulfill the social contract reeks to high heaven of pinko socialism and is, ergo, un-American.

L. Randall Wray L. Randall WrayMay 21st, 2013 at 12:29 pm

Steve, no doubt you are correct. Of course, those neolibs do not understand that the reason they live in a rich, highly productive, country (rather than a poor, underdeveloped one) is because of our govt. It was Roosevelt’s New Deal that brought us into the 20th century. And it is the Neolib backlash that will prevent us from entering the 21st.

nmmaierMay 21st, 2013 at 4:38 pm

Ben. You are punishing poor people, particularlymonority teenagers who cannot get that "first job" becuase the minimum wage is in place. These kids simply are not worth the $8.00 per hour plus SS, Medicare and Unemployment taxs that the employer has to pay. You are depriving them of that "first" job and therefore they can never get that second job.

L. Randall Wray L. Randall WrayMay 21st, 2013 at 10:10 pm

Right. If they’d only head to Bangladesh they could get very nice jobs making cheap clothes in dangerous factories. If we’d just get rid of minimum wages and nasty regulations, those factories could move here and kill hundreds of workers at a time. Memo to Neolibs: we’ve been there, done that. And then the “evil” unions came along and imposed decent wages and working conditions, and cut worker deaths, increased everyone’s living standards, and gave us the great country we have. Boy do Neolibs hate that. They hate America. They long for Bangladesh.