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This misunderstands Functional Finance. It is not a zero sum game to spend additional money on employing idle resources (labour), rather it expands total output and does not require additional tax revenue to be raised dollar for dollar. One is not ârobbing Paul to pay Peterâ in that grossly myopic libertarian rhetoric, JG workers are ultimately creating public value for their communities.
What happens is the money JG workers spend stimulates the private sector into creating more better paying jobs producing the goods and services the JG workers consume, which in turn reduces the number of people who end up relying on the JG for ongoing employment.
Additionally the fiscal expansion results in JG workers purchasing more imports, and these imports put some initial downward pressure on the exchange rate. This then results in boosting some employment in export industries which further reduces the reliance on the JG. The increase in imports and increase in Current Account Deficit occurs under all forms of domestic growth induced spending (including private investment), and not an issue for a developed country like Australia which has good export capacity and potential.
At some point if there are supply side bottlenecks which put pressure on inflation, it maybe necessary to increase taxes to a limited extent in target areas as to reduce aggregate demand. This in turn will suppress employment in higher wage private sector jobs and push workers into the lower paid JG bufferstock, thus suppressing wages and inflation without creating unemployment/underemployment.
However strong public investment in education and training would reduce these bottlenecks, in combination with a highly targeted skilled migration program, as does strong public investment in infrastructure which reduces costs and allows leverage of private investment.
The best taxes for suppressing inflation are taxes on economic rents, especially land, since land price inflation is the greatest source of inflation of all, and land is the most scarce resource since its supply is fixed.
There is a great irony in this line given all the fast food franchise scandals coming out in recent years e.g. 7/11. We worry about buggers in the government, but forget that the private sector is ruthless in exploiting workers to the point of not even paying them the minimum wage.
Even services like Uber where they only hire âcontractorsâ with huge overheads/liability for little pay, and they openly advertise it as being just a âside incomeâ. It truly is a race to the bottom.
Iâm always fascinated by Jesseâs explanations. In terms for Dollars vs Real Resources is this way we used to have things like the Public Works Department (in Victoria) to build stuff (all the Public Buildings built in this time period built like them all look so bland) with the workers hired directly by the Government, whereas these days most things are outsourced to Government contractors/subcontractors, or even if they work for the âgovernmentâ in reality the Employed by a contractor.
So let me get around whatâs being proposed.
Is it some sort of AirTasker style on-demand employment, thatâs topped up to a livable wage via negative income tax?
Itâs not a gig economy type institution. Itâs the provision of employment at minimum wage for any/all who want it, for up to e.g. 35 hrs per week, funded by the Federal Government. Such employment opportunities can be created in the public, not-for-profit and charity/volunteering sectors via wage rebates for e.g. registered charities. These jobs would focus on public goods/services and meeting unmet community and environmental needs.
Demand for these jobs would fluctuate with the business cycle, however it is estimated on 25% of the jobs would be cyclically created/destroyed, whereas the remainder would be exist structurally. So jobs which can easily be stopped and started e.g. public works, would be allocated to the cyclical component, while jobs which are less flexible in provision would be allocated to the structural component. The average number of structural jobs required can be reduced through good economic policy, which reduces structural imbalances in the labour market.
The question of whether the minimum wage (which this Job Guarantee would put a de facto floor on) should be raised is another discussion/debate in of itself. Some argue it should be higher based on real wages not keeping up with productivity growth, as Dr Steven Hail argues in the recent article twisty linked: https://renegadeinc.com/just-social-wage-job-guarantee/
Some argue that it should not be raised given the introduction of a JG alone would already be a massive shake up of the bottom of the labour market, and further pressure would crush too many private sector jobs and send too many people into the JG, increasing overheads and making it more difficult to manage etc.
I have left this discussion for another time and place, and would rather have someone else put forward that proposal. Personally my view is once the tax system is shifted towards economic rents, it becomes less of an issue. Iâm fine with modestly increasing the minimum wage once the private has adjusted to a JG and we can observe its effects.
Aside for the JG wage, the existing NIT/BI policy operates in parallel. Currently the maximum BI is roughly Newstart levels, and it tapers out at $40k - a bit more than the current minimum wage of $36,134.80.
A full time JG recipient would thus receive an additional BI payment of $1,449.45.
Thus providing a total after tax income of $37,584.25
This is the minimum amount that every Australian worker would be able to earn working full time.
This is giving me vibes of the East German lets find a job for everyone policy, where you ended up with weird situations like every truck driver ârequiredâ a navigator to read a map.
I know thatâs not what your intent is, and I can definitely see the appeal, but I would probably work it a bit differently, leveraging the negative income tax rate a little to compensate for it, and giving incentives for volunteering for audited, registered charities.
There also has to be a bit of leeway due to geographical concerns. e.g. in either system, people who live away from metro areas will be at a disadvantage due to reduced opportunities to work or volunteer, that will need to be factored in somehow.
Those sort of âread a mapâ jobs will not be permitted, as make work in the scheme will be prohibited. If people are signed up and waiting for work to be assigned to them, they can still receive their full wage until such time actual work is available. Although it should not be hard for people to organise their own community gardens, health programs etc. through the program. The definition of work can be made very flexible.
MarkG and myself have agreed that pilot programs should be run specifically in remote/rural/regional areas first, as these are the areas in most desperate need of direct job creation and where scheme will have maximum impact.
It will also be useful given in these smaller towns the program will be smaller (population wise), easier to initially administer, design, assess and work out potential issues with the program. Once the program has been optimised for a given region, and uniquely catered towards individual towns, then it can gradually be expanded outwards towards urban areas.
The priorities in addition to non-urban areas should be people at the bottom of the labour market who are at risk of (or are currently experiencing) long term unemployment, or face labour market difficulties. This includes youth, older Australians, asylum seekers, people with disabilities, single parents etc.
By the way has anyone considered a mixed approach of a basic income plus job guarantee? Basically you are encouraged to do whatever you want under a basic income, but if you want extra but need that stepping stone to the standard job market⌠you got the job guarantee?
This would ideally solve the useless job problem of a pure job guarantee, while at the same time provide a standard job path for those who desire guidance. (In theory, people do not want to subject themselves to useless jobs unless under economic duress).
Thatâs where our policy is heading, judging from what Iâve seen in the PDC this past 8 months.
The way I think about it is that the JG is a good tool to mediate the transition to a post-employment economy.
To date I think this is one of the best written articles on MMT for laypeople Iâve ever encountered:
In other news, Paulina Tcherneva has been doing a lot of work on decentralised Job Guarantee policy design which incorporates the not-for-profit and social enterprise sectors, which overcome many of the hurdles and criticisms (in some instances reasonable) of a government funded job guarantee.
https://www.pavlina-tcherneva.net/job-guarantee
Her recent paper looks at how such a decentralised model could be implemented in the US by funding currently volunteer positions in the not-for-profit sector and turning these into paid employment. I will be looking at this paper to incorporate some additional input into our JG policy:
http://www.levyinstitute.org/publications/the-social-enterprise-model-for-a-job-guarantee-in-the-united-states
FYI I noticed this today:
Establish trial âjob guaranteeâ programmes (especially for youth and the long-term unemployed) that includes opportunities for employment and training in conservation land management in regional (see REGIONAL & RURAL AUSTRALIA policy) and Aboriginal (see A&TSI policy) communities.
This marks the second registered political party (Iâm aware of) to adopt this proposal.
Breath of fresh air from the US, Sanders Institute interviews Stephanie Kelton on the introduction of a National Job Guarantee. A great simple explanation of what itâs all about:
Momentum is building, and the PPAU should be ahead of the curb.
Iâm just not buying into the Jobs Guarantee. I think the governmentâs public works has no business being tied together with social welfare.
I see it like how in America, many low income young adults sign up for military service just to get their college paid for. Meanwhile the issue of college costs and debt are brought up repeatedly and the US government never makes progress on it. Is the US government doing the mental calculus that fixing those issues would undercut the militaryâs ability to recruit?
If we have a job guarantee program that pays out minimum wage to do needed public works will our government do mental calculus on issues that would lower the amount of people in the underclass who would be willing to work for minimum wage?
And on that track what happens if you canât fill jobs? Just let public works go undone? If those projects are important to social welfare, them being understaffed without an underclass is a great way to create a brand new underclass.
Itâs quite hard to keep engineering a large JG program, because every time you try to create more unemployment by imposing more austerity, the JG program costs blow out and result in counter stimulus which in turn results in more private sector job creation.
Additionally my response to your criticisms:
The program design is a cyclical component and structural component. Cyclical would fluctuate with the business cycle and require jobs design to function accordingly. Whereas the structural component could have more long term programs with more permanent staffing placements required, given long term unemployment in some demographics of society persists even during booms e.g. in regional/rural areas (with structurally low export capacity), refugees, elderly, youth, single parents who have work//life balance flexibility requirements, people with disabilities etc.
So the problem of needing to âfill jobsâ is a non-starter - the jobs exist for the workers, not the other way around. Vacancies for long term projects will be estimated for the number of participants in the program across the whole business cycle.
This program is NOT supposed to replace the conventional public service, infrastructure or public works governments are currently responsible for. Although arguably there are some areas within the public sector which could be devolved to JG work e.g. in the environmental and community services space, charities and social enterprises which normally require volunteer labour and suffer shortages can be incorporated via wage rebates etc. So the community creates the jobs rather than the government. Should certain JG public goods/services be desired to become mainstream/permanent public sector activities, then it would be up to the government whether they want to take those programs out of the JG and into the mainstream public service, which would require a permanent expansion in government.
That is a cynical view of how congress considers expenditure and military service. Really it is a matter of political priorities in terms of whether the politicians value impoverishing people to de facto draft them, or improving the well-being of their citizens. Of course I donât expect any government which is using poverty and student debt as a stealth conscription tactic to be in favour of an Employment Guarantee. However I do not expect the PPAU to be in favour of that either, so I do not see what relevance that has in terms of whether we should advocate such a policy.
Governments (usually) hate spending money on âwelfareâ. I donât see how being compelled to spend money on offering people safety net jobs is an âincentiveâ to force people into those jobs, especially if they donât have significant political influence over what those jobs will be. Arguably the government has an incentive to enable private sector job creation to minimise the size and costs of the program.
Given you suggest a conflict of interest in job design and governments trying to engineer unemployment to increase the size of the program, I propose an easy solution. Use sortition from the pool of unemployed to create a Citizens Jury (Deliberative Democracy) to oversee the program and the types of jobs (including non-profit sector wage rebated) being created.
If the government doesnât have direct control over the program, itâs hard to use it politically.
There is however a more compelling motive to keep the government from trying to engineering increases in the size of the program. They have to engineer permanent recession/austerity to maintain a large program, and no electorate is ever going to stand for that - except perhaps in masochistic Europe where people seem to put more value on a delusional common currency than a functional society.
Really I find this criticism ridiculous when you contrast the current situation of mass labour underutilisation and underpaying of wages. âWoe is us, having the opportunity to take up a guaranteed MW job with super, sick pay, annual leave and other benefits, compared to the current situation of being paid below MW, no super, no regular or sufficient hours etc.â. As if this is somehow a deterioration of the situation of controlling the incomes of welfare recipients with cards, forcing them into drug tests, and all the ridiculous punitive measures imposed on them.
Itâs hard to argue the government is going to engineer mass public employment for their own benefit (somehow?), when currently they are already engineering mass unemployment/underemployment to suppress wages and impoverish people - even to the point where the BCA agrees Newstart needs to be increased.
They hate spending money that they have a hard time spinning. They wonât have a hard time spinning a JG because itâs them getting work for cheap. And then the question becomes what private business can underbid the governments access to minimum wage workers? The ones that hire less people and provide little more than the JG to their employees. Worst case the government will hand out JG workers to their contractors allowing an entire industry to be born of private business double dipping into the governments pockets for funding and free labor.
You mean the people in the JG program? The people who would have an incentive to promote whatever work they want to do? At that point why not just have Basic Income? With UBI they can do whatever work they want to do even if itâs unpaid. And comes with a benefit of a decrease in bullshit wasteful bureaucracy jobs instead of increasing them.
Because government policy isnât administered solely by the party that introduces it. If it has exploits it will be exploited. If itâs unstable it will be left to collapse. You absolutely need to be cynical.
Party politics is about who has the money to fund campaigns and what makes for good talking points. Any program with limited participation is a good target for divisive rhetoric. Any program that you can pump money into that goes to people who will repay you in campaign contributions is an investment. The Dole Bludgers donât send a cut to political campaigns, their programs donât give the government access to a labor force to barter with so theyâre useless to the controlling partys and theyâre a minority so why wouldnât you cut into those programs and use them as divisive rhetoric?
Generally it is considered a good thing when the government saves money on its labour costs⌠This aside, the Government canât undercut private sector wages if workers (especially skilled/mobile workers) are not willing to work for those wages e.g. Engineers are not going to go work in Engineering for minimum wage, when they can look overseas or alternatively enter âwait unemploymentâ, where they choose to wait for labour market conditions to improve rather than choosing to work.
More to the point they canât use JG workers in conventional public sector (or even private sector) work given the requirement for the projects to be ceased immediately when workers leave them.
This is the whole point - de facto minimum wage enforcement. Itâs what we already try to do with minimum wages, except this policy actually makes them effective through a market mechanism without legislative enforcement.
Businesses are already legally obligated to meet these minimum conditions, so the only businesses you are evidently referring to are those currently undercutting law abiding businesses by breaking the law. Existing businesses which pay above minimum wage do so due to either market forces or unions compelling them otherwise. These forces do not somehow disappear upon the introduction of a JG.
This is already happening with work for the dole. Workers are already providing free labour for private companies but instead are being paid below the poverty Newstart. The purpose of this program is to make it illegal for JG workers to perform any jobs for private profit unlike work for the dole, and should maintain oversight by a citizenâs jury of JG workers. Worst case scenario even if a violation somehow happened, the workers would still be better off than under current circumstances. Thrown in onerous fines and enforcement and this problem should be minimal to non-existent.
Of course, we want communities to be empowered to have the work they want done. The reason BI is deficient is there is obvious overwhelming evidence in the empirical literature that income support is not a substitute in well-being for actual employment - those who claim otherwise are either ignorant of the literature or disingenuous.
Additionally the state has access to mobilising and organising vast collective resources that individuals do not have access to. Thus making opportunities possible that are not feasible under supposed self-organising, rational âhomo economicusâ individuals subsisting on below the poverty line BIs.
Mind you, in these BI discussions no one seems keen to explain what people are supposed to do if they cannot get a job for whatever systemic reason, but the BI is insufficient to meet their basic needs given how costly it is to implement above the poverty line. The assumption is some right-wing bs that charities will somehow come to the rescue or people will magically start pooling their BIs together - all of these features being mute points given this is the failed situation of the current welfare system - it does not work. The alternative being to raise the BI amount, which under our modelling is not feasible given the insane marginal rates involved, nor is it desirable given how ineffective BI is as a redistribution policy.
Additionally there are many macroeconomic advantages JGs provide which BIs are inherently incapable of providing by their nature. I will not re-hash these given they are mention ad nausea in previous comments and links.
In comparison to what? The current welfare system? A potential BI that a future government might slash and hack into or reintroduce means tests? This is mute point since any future government can exploit any policy or overturn it. At least with a JG workers are guaranteed MW and benefits of employment all Australian workers are currently entitled to. I would not call this an unstable system either since it effectively operated in Australia (and many developed nations) from 1945-1975, and still operates in various partial forms to this day in different countries around the world e.g. The Indian Rural Employment Guarantee Act.
Given the millions of unemployed and underemployed Australians, I do not see this program as necessarily having narrow participation - especially across the business cycle. Nor do I see it as being divisive, especially since it is reciprocal in nature. Whereas âhanding out free moneyâ is a much more divisive subject given in our culture there is a narrative of âlifters and leanersâ. There is historical precedence for a JG but not a BI - de facto JGs (through public sector employment) effectively being bipartisan for 30 years and receiving wide spread public support. Menzies almost lost government over allowing unemployment to rise above 3%.
cough work for the dole cough
Frankly I donât think your criticisms stack up given we have real world examples of JG type programs operating for long periods on a national scale, and the problems you are suggesting do not occur. The labour in these programs is locally directed and controlled autonomously, to the benefit of local communities.