Summary of My Position on the Job Guarantee

I have received a barrage of correspondence (a short Email) asking where I stand in the debate over the Job Guarantee (JG). Although the answer may be clear to those who have taken the time to read all my posts on the topic, it is becoming almost a full-time job just keeping up with the various MMT blogs. I thought I would provide a brief summary of my position.

The Email I received in part was as follows:

Just wanting to clarify a point.

Your opposition to the JG is because understanding monetary operations, you can move into a post-capitalist era rather than maintain a JG in the current capitalist paradigm. However you are not opposed to the JG per se within a capitalist paradigm.

Is that correct?

To be clear, I fully agree with Modern Monetary Theorists that a JG will automatically stabilize demand and provide the most effective nominal price anchor. I also agree that the psychological and sociological literature on the human costs of unemployment is overwhelmingly on their side. There is no question about that. If the choice is between what we have now and the JG proposal implemented in a manner that is close to the intentions of its proponents, I support the JG.

Now for the qualifications.

What I most favor is a Job or Income Guarantee (JIG). This would be a combined policy in which individuals choose whether they wish to participate in the JG, and are guaranteed placement in the program if they desire it, but will receive a basic income unconditionally irrespective of their choice.

As part of such a program, I like the JG component because I think if somebody wants a job in the formal economy, they should be entitled to one. After all, MMT demonstrates that unemployment is a government policy choice.

At the same time, I want the Basic Income Guarantee (BIG) to form the other component because I don’t think people should be compelled by existing property relations to sell their labor power in exchange for a wage or salary due to their lack of an independent income, and also because, over time, as production becomes increasingly mechanized, I think people should be liberated from the wage labor relation if that is their wish.

Ultimately, I am interested in a transition to a society in which people as much as possible are free to pursue their own productive and leisure activities either individually or in voluntary association with others. My view is that the JIG facilitates that transition more effectively than the alternatives.

If I had to choose between a JG implemented as intended by the Modern Monetary Theorists or a BIG, I am not sure which I would prefer, but I would certainly be supportive of the JG if it were the only option of the two on the table.

If I had to choose between a JG reduced to workfare or a BIG, I would prefer a BIG, even though I do think this would be problematic to the extent that the unemployed are not ready to embrace free time and still desire the order and external motivation of employment in the formal economy.

In making a transition to a post-capitalist society, I think the JIG is clearly better than either a JG or a BIG. However, a JG would not necessarily scuttle such a transition (even though I consider it a backward step in terms of separating income and labor time) provided a concerted collective effort is made to broaden over time the notion of what is socially productive.

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15 thoughts on “Summary of My Position on the Job Guarantee

  1. I think the practical implementation of a Job Guarantee scheme would pretty much give you a JiG by default.

    Because I doubt the political will would be there to deal with the ‘tough nuts’ once you’d solved the 85% unemployment problem by simply declaring that the government will pay the wages of anybody hired by the voluntary sector.

    So they’ll just put them on ‘gardening leave’.

  2. Peter, in the last couple of hours, I have come to realise your advancing upon the work of Philip Harvey (Funding JG) & Pavlina Tcherneva (Job or Income Guarantee).

    Harvey proposes a budget neutral JG based on near orthodox economics whilst also sympathetic to the PK variant. Both also analyse the BIG over the JG and the obvious net results.

    You add to their work by saying “but what if they’re not mutually exclusive?”

    I have a mind to call you Philip Harvey 2.0

  3. I’ve just one quibble with the above article.

    I have doubts about the idea (popular with MMTers) that JG is an “effective nominal price anchor”. Given excess demand, exactly how exactly do the relatively low wages paid for JG work stop all and sundry bidding up the price of labour in regular jobs, and the price of materials and everything else? Darned if I know.

    As to FALLING PRICES, wages are “sticky downwards” as Keynes said, so I don’t see a rapid decline in nominal wages and prices ever taking place. So JG is irrelevant here as well.

  4. @ ralph

    I believe the theory is only that a buffer stock of employed people will give you better inflation control than an unemployed buffer stock because a JG worker is a more credible alternative for an employer than someone straight off the dole queue. However if the private sector is determined to overheat the economy you still have to use traditional monetary or fiscal policy to cool it down. I could be missing something though.

  5. If there were three political parties based their economic views on MMT:

    a) for JIG
    b) for JG
    c) allowing small buffer of unemployed and small government

    My first voting choice would be a), second b), third c)

    At present I would vote for ANY political party viewing the world through the MMT paradigm.

  6. Ralph –

    During an inflationary episode, prices and wages are rising — except for the JG wage, which remains constant. Ok, so the general nominal price and wage levels are rising — but the JG “pool” of workers that businesses can hire from remain at a constant floor wage level. As the discrepancy between nominal wages in the private sector versus JG-sector increases, it will be consider it cheaper and cheaper to find good labor to hire from in the JG pool.

    So what happens then? The size of the JG “pool” decreases. That is — the government deficit spending decreases which dampens down aggregate demand. Ultimately, prices should stabilize.

    There should be some inflation fighting effect there. Not an infinite one though. Inflationary pressure can be stronger.. so that the decreasing government deficits is not enough to stop it.

    In that case it probably needs to be complemented with a tax hike.

  7. Why would anyone pick the BIG over the JG? Wouldn’t the JG people resent the BIG people? JG most work isn’t going to be fun, and it certainly will come with a social stigma associated with govt support. Why should some have to pick up trash every day when they could be Facebooking at home and making the same?

    Also you’ll lose conservative support for the JG if you say it’s optional. They like the idea of people contributing to society in order to get something from society, not handouts.

  8. “JG most work isn’t going to be fun”

    Yes it is. That again is a pre-conception. JG should *not* be a punishment meted out to the individual. Jails already exist for that job.

    If there is no requirement to be on JG then the JG jobs will have to be fun or nobody will take them.

    “Why should some have to pick up trash every day when they could be Facebooking at home and making the same?”

    Because surprising as it may sound people get bored of Facebook and fancy doing something more with their lives. Once something has no restriction it becomes quickly joyless – as the ‘eat all the chocolate you like’ rule at one of our local chocolate factories shows clearly. They start off like a toddler and quickly get sick of the stuff.

    “Also you’ll lose conservative support for the JG if you say it’s optional. ”

    Conservatives are a strange bunch. They can be surprisingly progressive if you pitch the deal right.

    True conservatives have no objection to Gay marriage for example, because they don’t believe the state should interfere in people’s private lives if what they are doing isn’t impacting anybody else.

    The key here is to get across the point that unemployment is a systemic problem and therefore those the system cannot provide jobs for as a matter of design have to be fully compensated for their loss.

    Even once you have slashed taxes to the bone, removed interest income from bonds and all the other good conservative measures you will hit an inflation barrier. To get the extra percentage or so of employment in the private sector you will need a Job Guarantee like operation – to filter (in capitalist terms) the willing but inarticulate worker from the truly hopeless.

    As ‘Peoplware’ points out: It would be ludicrous to hire a juggler without first seeing them perform. And that’s because seeing the juggler perform reduces the risk that you make a mistake in your hire. In aggregate that risk reduction is what causes the extra hires created by the JG over other system designs.

  9. @ hugo heden

    I think the inflation fighting effect of a JG shouldn’t be overstated. I imagine the number of people in the JG sector would be allowed to float. In a large credit boom it might float down to as low as 2-3% of the workforce. Such a small buffer seems unlikely to restrain wages. The alternative would be to treat the size of the JG buffer as a policy variable. If it was kept permanently at 6-7% of the workforce it should have a strong effect on wage bargaining. I don’t like the politics of that though. Imagine the government announcing “We are tightening monetary policy in order to force people out of the private sector into the minimum wage JG sector.” They would be lynched.

  10. Hugo: If the nominal JG wage stays constant in an inflationary episode, then the REAL JG wage is falling. First, that might not be politically acceptable, and second I assume the nominal price anchor idea is supposed to work with the JG wage remaining constant relative to the average wage for regular jobs.

    I.e. to the extent that you rely on the JG wage falling in real terms, you are cheating. And that’s not fair – Ralph bursts into tears, throws a tantrum, etc etc.

    Re the fact that falling numbers on JG cause the deficit to fall, that’s just an example of an automatic stabiliser at work. And the nominal price anchor idea does not add anything to that. So I still think the buffer stock and the nominal price anchor idea don’t amount to much.

  11. @ hugo & ralph

    Of course we shouldn’t forget that what’s really bring buffered here is AD. The JG is just a less socially destructive way of doing it than unemployment. If 96% private sector / 4% JG sector gives you the same inflation rate as 94% private sector / 6% unemployed that’s just a little added bonus.

  12. Ralph,

    I wrote a long comment, dropped my handheld which closed the browser and the comment was lost.

    Now I’m crying too.

    :'(

    I’m such a boondoggler. But will try to respond.. later.

  13. “I.e. to the extent that you rely on the JG wage falling in real terms, you are cheating. ”

    You are assuming that it allows the inflation to start in the first place.

    Inflation requires sustaining from wage rise or it will naturally peter out as private firms go bust and the deflationary effects of people on larger wages suddenly getting the JG wage takes effect.

    The trick is that the government doesn’t have to get excited about people dropping onto the JG as it does unemployment, since by definition they have a job (or at least an income while the JG buffer system starts its scale up process).

    Aggregate demand is maintained and you can wave your hands and mutter something about ‘business cycles’ and ‘readjustment’. You don’t have to panic as soon as unemployment goes up 20,000 and start spraying discretionary public spending all over the place.

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