I’ve been thinking about the job guarantee as it is envisaged by proponents of Modern Monetary Theory (MMT). My focus has been on various quantity effects of the policy that can be considered using the standard income-expenditure model as a base (for preliminary posts along these lines, see here and here.) Since the income-expenditure model takes the general price level as given, it does not directly shed light on the aspects of a job guarantee that would pertain to price stability. To provide some context for a possible future discussion of quantity effects, it is perhaps worth summarizing how the job guarantee would moderate price pressures. Clear statements of the MMT position on the topic can be found in a billy blog post (here) and closely related academic articles by Bill Mitchell (here) and Warren Mosler (here).
A recent post considered one way of including a job guarantee in the income-expenditure model. Doing so makes it possible to represent various macro effects of a job guarantee within the model. An obvious effect is that the program would deliver a degree of demand stabilization. An effect that is perhaps not quite so obvious is the way in which a job guarantee would ensure supply-side changes in the economy automatically impact on demand, actual output and employment. Before illustrating a few of these effects, the modified income-expenditure model will be briefly outlined and tailored to present purposes. A fuller discussion of the model is provided in the earlier post.
Under a job guarantee, there would be a standing job offer at a living wage for anyone who wanted such a position. Anyone without employment in the broader economy, or unhappy with their present employment, could opt for a position in the job-guarantee program. Similarly, individuals with less hours of employment than desired could top up their hours by working part-time in the job-guarantee program. In principle, the program might be locally or centrally administered. But, irrespective of administrative details, it will be assumed that a currency-issuing government funds the program.
Two policy proposals receiving increasing attention are the job guarantee (JG) and basic income guarantee (BIG). The first would provide everyone of working age with the option of a guaranteed job. The second would introduce an unconditional income payment. To be clear, I would support either of these as standalone programs, whichever happened to be on the policy agenda. Nevertheless, I think there are a few reasons to prefer a combined policy that integrates elements (perhaps all positive elements) of both programs. In its leanest form, a ‘job or income guarantee’ (JIG) could provide everyone with the option of accepting a job-guarantee position or, by opting out of the labor force, a means-tested but otherwise unconditional income payment. In expansive form, a JIG could provide a universal and unconditional basic income as well as the option of a guaranteed job for anyone who wanted one. Other intermediate variations on the theme would, of course, also be possible. The expansive form would be ideal, but even the lean version seems to offer some advantages over a standalone JG or BIG.
The notion of tax-driven money is easiest to understand in relation to an exogenous tax such as a property tax or simple head tax. Demand for a state money is most effectively driven by exogenous taxes, not endogenous ones such as income taxes. Even so, in a hypothetical system with a tax imposed solely on income, the tax would still drive demand for a state money. It is worth considering why this is the case, because it also indicates why some level (though not absolutely any level) of basic income would also be consistent with currency viability.
In the previous post, it was suggested that the unearned income of landlords, rentiers and capitalists should really be the equal entitlement of all citizens. Such an equal entitlement could, in part, take the form of basic income or a social dividend. Public banking would be one way to facilitate a move in that direction.
It is sometimes argued that a basic income guarantee (BIG) would be unfair because it requires no reciprocation from the recipient. If we are to hold to a principle of reciprocity, it might be worth briefly considering how the principle ought to be applied in the present social system. In a system of private property ownership, it would seem that the reciprocity argument against basic income is false. Would-be recipients are already reciprocating, before any such introduction of basic income, by agreeing to go along with the private-property system. Why should individuals, especially those not born into private property, respect private property rights unless they are compensated for their acceptance of the arrangement? If we are going to appeal to reciprocity, the onus of reciprocation should be on those who derive property income.
Recent posts have considered one or other of Kalecki, the job guarantee and the possibility of transitioning over time to socialism. There is a connection between these topics that has only been touched on in passing in earlier posts. The connection is visible in an old paper by Peter Kriesler and Joseph Halevi which draws on Kalecki’s 1943 essay, “Political Aspects of Full Employment”, to critique the job guarantee proposal. An outline of Kalecki’s argument in this well known essay is provided in an earlier post.
The previous post considered the question of how best to assist a transition to a society in which people can opt for more free time, if they wish. The likelihood of a high degree of mechanization in production in coming decades creates the potential for such a transition. Basic income, in isolation, while offering a limited measure of freedom from the capitalist wage labor relation, would not provide sufficient support to individuals in their attempts to shape productive lives. It would remain important to provide opportunities as well as the resources for meaningful participation in productive activity. As a basis for a freer society, some combination of basic income and a job guarantee could serve a positive role. For instance, a policy that permitted people to choose between a guaranteed job, with defined wage and benefits, or a more modest guaranteed income – a ‘job or income guarantee’ – could assist a transition to a society in which individuals were largely free to spend their time as they pleased, so long as it did not cause harm to others. The idea of combining a job guarantee with some form of basic income is, of course, not original. It is a possibility that has been acknowledged by Modern Monetary Theorists.
One issue that arises, when thinking about the possibility of a transition to a freer society, is the challenge of adjusting to a future in which there might be far less compulsion to work in the formal economy and an increasing separation of income and employment. This is not inevitable but is one possible response to the widespread mechanization of production that is likely to occur in coming decades. A dramatic rise in productivity can open the way for people largely to be freed from formal employment to pursue their preferred vocations either individually or in voluntary association with like-minded individuals. But since the experiences of many have not necessarily prepared them for this transition, it raises challenges. It might be worth discussing this issue in relation to the main policy options that seem to present themselves; namely, basic income or a job guarantee.