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Let’s Compare the Job Guarantee to the Alternatives, NOT Against Some Distant Utopian Vision

I’m always shocked at the objections raised against the Job Guarantee—especially by those on the Official Left.

Here is what WE propose: Let’s provide a job at a decent wage to anyone willing to work.

Here’s the reaction from the crazy right: Zimbabwe! Weimar! You fiat money proponents would destroy the value of our currency.

Hold it, we argue. We already have a fiat currency. Exactly when the USA went over to the dark side of fiat money is perhaps a judgment call (I’d put it back to 1789), but there is no sentient creature in the USA who does not recognize we’ve been on a “fiat” standard since Nixon went off gold. Get over it. We’ve got a government that buys thousand dollar hammers and toilet seats priced in the six figures. And they still have not managed to stoke the fires of a Weimar-type inflation. Heck we’ve got Uncle Ben flying $29 trillion dollar helicopter drops onto Wall Street (in the form of loan originations at effectively zero rates) and even he cannot get inflation stoked.

Study after study pegs the net cost of a universal job guarantee at a percent or two (or three!) of GDP. If the much, much bigger Social Security payments and Military spending and Wall Street bailouts and QE 1+2+3 cannot do it, a little tiny Job Guarantee won’t do it, either.

I guess we could at least recognize the logical consistency of the right. Fiat currency leads inevitably to hyperinflation because it does not have gold behind it. Fine. True regardless of what government spends on: Wall Street. Obamacare. Military. Welfare. JG. Basic Income Guarantee. Hasn’t happened in the past (even in the 1940s when budget deficits reached 25% of GDP) and no sign of it in the near future.

What is more troubling is the criticism from the Left. The Left has no problem with QE (helping homeowners) or Wall Street Bailouts (had to save the banks) or Military (security in the age of terrorism) or Welfare (gotta help the poor) or even the Basic Income Guarantee (time to end the “work fetish”).

But, provide Jobs to those who Want To Work? Hell NO, We Won’t Go!

Why not?

1. Inflation—the Phillips Curve Trade-Off. (For which there is no evidence whatsoever for the USA)

2. Environmental Destruction—the poor will want “meals” and “televisions”. (The Poor are our Environmentalist Buffer Stock—their poverty protects our environment.)

3. Make-Work—we will never find useful things for workers to do. (Unlike, say the fast food or prison industries where they stamp out burgers and license plates.)

4. Fetishizes work—we want to eliminate the link between work and income. (Which our Capitalistic Undertakers will immediately embrace.)

5. Impossible to manage—just “too messy” and “too much trouble”. (Unlike our Welfare and Prison Industrial Complexes that are paid to screen, manage, convict, chastise, incarcerate and parole the poor.)

6. It is modern slavery—forces people to work. (It is fine for Walmart to recruit “willing” workers, but we wouldn’t want to provide the funding for not-for-profits to do the same.)

7. Bust the Budget—sovereign government could never afford to spend one or two percent of GDP on jobs. (Better to spend the funds on prisons, welfare, and foreign wars.)

I think that a lot of the critics on the Left mean well. They’ve got a progressive future in mind—one where we’ve eliminated the link between work and pay, where capitalism and all of its nasty money-making motives “wither away”, where we’re all living an eco-friendly life (without “meals” or “televisions”), and where everyone just putters about being creative and artsy and doing innovative stuff so that we don’t need to consume exhaustible resources in an environmentally destructive manner. I share that vision.

Meanwhile, back on Planet Earth, we’ve got at least 30 million Americans who want jobs but cannot find them (because they do not exist). And we’ve got lots of nifty things they might do to make lives better. Why can’t we compare the JG to the alternatives we’ve got right now for those 30 million people—prisons, poverty, and for the extremely lucky some public hand-outs?

Why can’t we match those who want to work with (not-for-profit) projects that need employees in order to make them happen?

Supporters of the JG do not argue that we must have 30 million jobs ready to go by next Monday. By proposing a JG and making it law, we recognize the government’s commitment to the human right to a job. There are a number of ways to phase it in. Some of the promoters of the JG prefer a federally-funded but decentralized program that allows not-for-profits and state and local governments to propose projects. Jobs would be created as quickly as projects could be formulated, proposed, and approved.

Yes, it will be messy—as is any new project (including as I argued last week, the Civil Rights Act of 1964—which set goals we still have not perfectly met). It is almost funny that many on the Left support Obamacare and defend its phase-in. Wow. Talk about a mess! (Obamacare, as I’ve long argued, is a program designed to fail—for reasons quite separate from the poor planning of the start-up.)

In a piece last week, my colleague Pavlina Tcherneva, corrected the erroneous critique made by Matt Yglesias of the JG. Here’s the nuts and bolts of her take-down. Read the rest here: http://neweconomicperspectives.org/2014/01/16-reasons-matt-yglesias-wrong-job-guarantee-vs-basic-income.html

MACRO ISSUES

1. Yglesias may not realize it, but all serious academic support for BIG is based on the idea that many people will quit working (this is considered desirable in order to eliminate bad jobs and ultimately ‘decommodify’ labor; e.g. here and here ). So the goal is to reduce the supply of labor and reduce production.

2. JG provides a “good job” alternative to people who work in “bad jobs”. When private employers want them back, they have to provide at least the same or better living wage-benefit package and work conditions offered in the JG. JG sets the labor standard.

3. Under BIG, production drops, consumption rises, and so do prices. Suddenly, the value of the BIG grant has been eroded. Great success: the poor are still poor.

4. Under JG, employment rises, socially useful production rises, and (as we have argued many times) some of that production is dedicated to the benefit of the poor, providing goods and services at the local level that the private sector has not provided, and thus it absorbs part of the wage. In other words, both supply and demand rise.

5. Coupled with its countercyclical mechanism, JG is an inflation stabilizer (not an inflation generator, like BIG). We’ve modeled this many times (see here, here, here). Inflation from other sources is, of course, possible (runaway bank lending, speculation, oil shocks etc.—all are separate issues.)

6. BIG is not countercyclical. It’s universal, unconditional, but does not fluctuate with the business cycle. JG is a direct response to recessions and expansions.

7. There is no mechanism by which BIG can ensure full employment over the short or long run. Only the JG can.

8. In short, BIG doesn’t deal with price (or currency) stability, useful output, or any of the negative externalities from unemployment.

POVERTY

9. As Amartya Sen taught us, poverty is not just a function of lack of adequate income. Providing income alone does not eliminate poverty.

10. The poor and the unemployed want to work (here, here). And as my work on Argentina showed (9m14s), receiving income is the fifth reason why the poor wanted to work! Why do BIG advocates presume to know what’s better for the poor than the poor themselves? BIG does little for those who want to work.

11. There is almost a ‘neoclassical market equilibrating assumption’ behind most BIG analysis that says: “as long as people have cash, the market will magically provide the goods for them, allow them to acquire assets, provide them with the freedom to do what they please, etc. etc.” If the market hasn’t solved these problems now, why would it do so just because people get cash? All structures that marginalize, reduce opportunities, and discriminate remain. JG is not a panacea for all these problems, but it deals with one crucial and systemic aspect of marginalization – the absence of guaranteed decent work.

12. Amartya Sen also taught us that what matters is not just freedom, but substantive freedom. That is, policy has to 1) recognize what individuals themselves want and value; 2) it must provide these opportunities; and 3) it must remove obstacles from taking advantage of these opportunities.

13. The JG does precisely that: recognizes many people want paid work, provides the job opportunity, and removes obstacles from taking the opportunity by targeting the jobs to the communities, and providing the very services that one might need in order to take care of these opportunities (education, transportation, care etc., etc.).

14. BIG may lull the recipients into a false sense of security. Once the BIG grant proves inadequate to liberate the poor from their poverty, and the poor decide to search for better paying jobs and opportunities, they will not be there. Just like they aren’t now. As research has shown the mark of unemployment is devastating and unemployment breeds unemployability.

15. Again, many BIG bloggers are not familiar with even the basic BIG literature. There is such a thing called ‘participation income’ and ‘civic minimum’ in serious scholarly work (Atkison 1995 and White 2003, respectively)—an idea that society is built on the principle of reciprocation. Society provides you with a basic income; you reciprocate by participating in socially-productive activities. This is exactly what the JG does. No matter what Yglesias says, it is not based on the coercion principle of workfare, but rather on the principle of participation.

16. I find it ironic that we have to debate each other. BIG and JG stand on much the same principles. Let policy provide an opportunity to all to perform socially useful activities on the ‘participation principle’ through the JG, while supporting those who cannot (the young, retired, disabled, with onerous care burden) and we have a stronger, more stable economy that creates socially useful activities that serve the public purpose.

Yes, sending a check to people is not as “messy,” but let’s stop pretending that it’s a panacea for the fundamental problem of economic insecurity.

 

14 Responses to “Let’s Compare the Job Guarantee to the Alternatives, NOT Against Some Distant Utopian Vision”

NeilWJanuary 27th, 2014 at 7:21 am

It's often mentioned that MMT annoys the Left as much as it annoys the Right.

IME that usually tells you that you have the Pragmatic solution.

Ed Dolan EdDolanJanuary 27th, 2014 at 4:57 pm

I've enjoyed your series on guaranteed jobs while I have been writing my own series on universal basic income. (Starts here http://www.economonitor.com/dolanecon/2014/01/03/… )

I guess the next step would be for us each to write a post "Guaranteed Jobs vs. Guaranteed Income". I think neither Yglesias nor Tchernev's reply even begins to scratch the surface of the pros and cons of each approach.

L. Randall Wray L. Randall WrayJanuary 27th, 2014 at 5:16 pm

Ed: 2 responses.
1. Pavlina and I have already written a number of academic papers comparing and contrasting the JG and the BIG. See some of the literature here: http://neweconomicperspectives.org/mmt-scholarshi
and some here: http://www.economonitor.com/lrwray/2014/01/09/han…. No need to reinvent the wheel. Been there, done that.
2. and in any case, since they serve very different purposes, why do you want to pose them against one another. Jobs vs Welfare? We need both, of course. I think the BIG is a particularly bad way to do welfare–so why not pose it as this: We need the JG; then we need to decide: BIG or Welfare?

NeilWJanuary 27th, 2014 at 5:37 pm

We need JG, and alongside that we need to determine what the particular society will accept.

Does it accept the notion of retirement.
Does it accept that those that are disabled struggle to work.
Does it accept that children should not have to work
etc.

And then what does society accept as being 'useful work'.

Only then do you know what a 'job' can be, and what the social limits of welfare are.

What's funny is that three year olds can work it out:
http://www.sciencedaily.com/releases/2011/07/1107http://www.nature.com/nature/journal/v476/n7360/f

Ed Dolan EdDolanJanuary 27th, 2014 at 8:09 pm

Thanks for the links. As you can see, this is a topic I am just getting into. And maybe the "vs" is not the right linking element. I didn't mean to say they are mutually incompatible. Each has its pros and cons.

While on the subject, though, I think your colleague Tcherneva grossly misconstrues the basic income when she writes "all serious academic support for BIG is based on the idea that many people will quit working." I have two problems with that statement.

First of all, when I follow the links, what I find is a couple of Marxist-flavored essays that are very much on the fringe of the profession, so even if you like what they say, it is silly to represent them as "all serious academic support."

Second, I think basic economics, unflavored with ideology, leads to the conclusion that a UBI would be much more likely to increase labor force participation than to reduce it. The reason, as I explain in Part 3 of my post, is simply that, provided a UBI replaces much or all of the current system of means-tested transfers, its positive substitution effect on work effort (operating through lower effective marginal tax rates and lower benefit reduction rates) would far outweigh any small negative income effect.

I regret to say that the whole tone of her comments (as well as those of Yglesias to which she is responding) is premised on the "vs" attitude, so I am glad to see that you think the two approaches are not mutually inconsistent.

L. Randall Wray L. Randall WrayJanuary 28th, 2014 at 1:28 am

Ed: I think there are “big” proponents who do not know the original literature. Pavlina and I were in a sense “there from the beginning”, debating with those who formulated the BIG. I do realize that there are some “small biggers” who are not interested in the original BIG plan–to separate income from work. The small biggers just want to give some handouts to make life a little less desperate. Call it small big or welfare, not A BIG BIG. I support small big, not BIG BIG. I think Pavlina does too. We need welfare for those who cannot or will not or should not work. No problem there. However, we think that even with a the little big, people will prefer to work. Hence, offer them the JG instead. If you agree with that, we are on exactly the same page.

StangleJanuary 31st, 2014 at 8:25 am

Great points – the left needs to embrace the JG.
I have a question that is quite off-topic so I apologize in advance for that!
China's debt problems and shadow banking system have been written about a lot lately – so I was wondering if there are any decent MMT analyses re what is going on over there and how this might play out. Michael Pettis has some interesting things to say but he doesnt seem quite on the same page as you guys re things like endogenous money.
Sectoral balances data (given public and external deficits, the private sector must be net saving, no?) would be very interesting.

Cheers,
S

Totum_February 1st, 2014 at 2:21 pm

I believe the JG has an immense advantage over a BIG specifically from a 'Leftist' perspective. For starters, a BIG will keep the already atomized and socially isolated in that very state clinging to existence with no practical opportunity for association with other people. In a JG there really is opportunity to reduce the degree of separation between the rural and urban poor, the marginalized, those with isolation induced social behavior problems, and most importantly a chance to experience their material potential as a collective force. What's not revolutionary about someone who spends years feeling like they are surplus human life – useless, ailing the planet with their useless existence, corrupting culture, and paling in comparison to the great creative class as they are constantly told – seeing that when working together with other people just like them they can build something or do something real? It seems to me this is exactly what the Left should be fighting for, if by the Left we mean policy minded intellectuals with the desire to combat the class system. Pretty much nothing from the "Analytic Marxists" who cooked up the BIG in the first place even resembles Marx, let alone the Left in general. They have always had a much stronger affinity with anarchism, with all its family resemblances to the hard right. I suspect their instinctual opposition to a JG could be traced back to some ego-maniacal raving by Kropotkin or some anti-Semitic tirade of Proudhon; in either case the dread of the evil collective springs from the same mistrust of poor people working together.

Jacob RichterFebruary 16th, 2014 at 6:06 pm

I'm in total agreement with Totem's post.

L. Randall Wray, in your arguments with the big BIG -ers "from the beginning," did you put forward the following problems which they failed to address?

1) Structural and cyclical unemployment
2) Desire to work and avoid the stigma of not doing something
3) Inevitable downward pressure on wages as a result of implementation (emphasis)
4) Privatization of the social wage (welfare being substituted)
5) Class origins of political advocacy and beneficiaries (working-class vs. lumpen)

L. Randall Wray L. Randall WrayFebruary 16th, 2014 at 9:24 pm

Jacob, yes, most of those. I do think both you and totum have hit at least one nail on the head. The biggers tend to argue from either a libertarian or orthodox economics view–or combo of both. They fully discount the usefulness of work–both for the individual’s feeling of self worth but also for integration into society. Work is just, well, work. Painful. You do it mostly for money. So why not just give money? the BIG at least partially solves one problem, but is a very poor policy to deal with a wide range of social ills.

Jacob RichterFebruary 17th, 2014 at 1:35 am

I'm guessing you didn't argue the fifth point on that list, but I'm OK with that. Of the items in that list, I'm most concerned about the third point, and that's the labour economics point that needs to be hammered home. Francine Mestrum, whose article I republished online, repeated Paul Cockshott on that third point.

On a lighter note, are you planning to travel to the UK anytime soon? I think you and Standing could go head to head in a policy debate accommodated by Left Unity.