One issue that has come up in recent threads is the challenge of adjusting to a future in which there may 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. I thought it might be worth discussing this issue in relation to the main policy options that seem to present themselves; namely, a basic income guarantee or a job guarantee.
The potentially liberating effects of mechanization are summed up nicely in a recent comment by Tom Hickey in a thread at Mike Norman Economics:
With a different mindset, humanity could step forward to a new level of distributed prosperity, including the option of greater distributed leisure. However, I suspect that most people would not opt for greater recreation but more creative endeavor.
Most people can’t lie around on the beach for too long before they get antsy. And most people also find that their creative juices flow better when working in cooperation and coordination with others.
Then the difference between work and play would become the difference between process and result. Pure play is only concerned with process, and pure work is only concerned with results. The meeting point is in creative endeavor freely engaged in. Then leisure and work get combined, so that process and result are served simultaneously.
Really the only thing inhibiting this now is a collective mindset that is obsolete.
In relation to this, I suggested in the comments section of my previous post that it will be important to provide scope for people to occupy themselves in socially productive ways to the extent that this is their desire. In response, Neil Wilson hit on an important point:
Yes. But you have to realise that many people find that very hard to do and end up depressed because of it.
Once you lose the external motivation of starvation you have to find some internal motivation to do something else. And our school systems are designed to churn out robotic mass production workers not people who routinely explore their inner motivations and then work out how they can act on that to fulfil their desires while considering the needs of others.
So we have a society full of worker bees with a smaller and smaller hive to maintain.
I think that this transition can be a happier one if accompanied by intelligently designed policies, but could easily cause suffering and go haywire if managed poorly.
A basic income guarantee unaccompanied by the creation of opportunities to participate in organized volunteer activities of various kinds would not provide sufficient support to individuals who might struggle to adjust from formal employment, in which motivation is external, to a life dominated by free time in which it is up to each individual to determine his or her own activities and find their own internal motivation.
There are also dangers associated with a job guarantee if applied, contrary to the intentions of its proponents, in a minimalist or even draconian manner (e.g. workfare, or worse, conscription). A job guarantee that operated as little more than punishment for being a victim of deficient aggregate demand not only would provide little improvement over the current system as a safety net, but would in some ways be a backward step in terms of empowering people to learn self-motivation and self-discovery of what really interests and fulfills them. It is true that even a minimalist job guarantee would keep people in the habit of turning up each day and, for some, help to ward off feelings of emptiness, but this is no preparation for a future in which we could be free from such external motivations if only we can make the transition.
In contrast to these negative scenarios, well designed versions of the same policies could do much to empower people and raise consciousness over time.
A basic income guarantee that was combined with active policies to create outlets for organized volunteer work could accommodate not only people who were already happy to make use of their own time without further assistance (and so felt no need to participate in externally organized activities) but also those who needed additional assistance in keeping themselves occupied or staying socially connected.
A job guarantee introduced along the lines intended by its advocates would entail less freedom for the individual initially, because it would entail a degree of compulsion for anyone without access to an independent income. However, there would be scope over time to broaden the types of activities that are considered socially productive. The broader the accepted activities became, the closer the job guarantee would come to resemble volunteering alongside a basic income scheme, because eventually people would be able to choose activities they would have chosen even in the absence of the job guarantee mechanism.
In either case, an important aspect of policy would be providing outlets for socially productive activity. Perhaps one advantage of the job guarantee over a basic income guarantee, in this respect, is that the broadening of the definition of socially productive activity occurs at the pace societal attitudes are developing. This might be expected to generate less resistance and resentment amongst those in regular employment, although decades of mass unemployment may well have enabled the development of a more tolerant and progressive attitude on this issue.
Assuming that either policy approach was to be implemented in good faith along the lines briefly sketched out above, I do not personally have a strong preference for one approach over the other, although I lean towards the basic income approach. In terms of the transition to a freer society, a basic income scheme in conjunction with organized volunteer activities appeals more to my left-libertarian sensibilities than the job guarantee. I also worry that, in the event that policy implementation was not always in good faith, a job guarantee seems more open to abuse in the way workers are treated and how the program might be exploited politically.
Of course, proponents of the job guarantee point to other benefits, and from a macroeconomic perspective I do find these appealing. In particular, the automatic stabilizing and nominal price anchoring effects of the job guarantee are clearly superior to the current NAIRU approach, and probably also somewhat more effective than a basic income scheme even when combined with organized volunteer activities.
The job-guarantee wage sets the floor on all wages. This makes it an anchor for other wages because the cost of losing jobs in the regular economy depends partly on the difference in wages, and this can be expected to influence wage negotiations. The fixed wage also provides a floor on demand, providing stabilization for the broader economy.
Even here, though, the difference between a job guarantee and basic income scheme should not be overstated. Under the job guarantee, the domestic value of a unit of the currency can be regarded as the amount of job-guarantee labor time it takes to obtain it. Alternatively, we could consider it to be the average amount of socially necessary labor time required. The job-guarantee wage anchors other wages and hence the average socially necessary labor time required to obtain a unit of currency.
Under a basic income scheme, the value of the domestic currency can likewise be considered in terms of average socially necessary labor time. The basic income, rather than the job-guarantee wage, will provide the floor under demand and will also influence wages because it helps define the cost of losing employment. There would be a once-off reduction in the domestic value of the currency because no labor time is worked in exchange for the basic income payment. This will affect the average socially necessary labor time required to obtain a unit of currency. But once this initial adjustment has played itself out, it seems that a basic income scheme could play a similar role as a floor on demand as well as having an indirect effect on wages.
Even so, it might not match the effectiveness of the job guarantee in this aspect if job-guarantee workers were more “job ready” for employment in the regular economy. This would occur if the volunteer activities developed alongside a basic income scheme were of less relevance to employers in the regular economy. The extra “job readiness” of job-guarantee workers means that they would exert more competitive pressure on wages in the regular economy. In that case, the inflation-control mechanism would be somewhat more effective.
Then again, perhaps this could be addressed by ensuring that some volunteer activities were essentially of the same nature as those that would be provided in a job guarantee program. Workers who were keen to regain employment in the regular economy could opt for these volunteer options. The more demand there was for these volunteer activities, the more they could be provided.
Clearly, I am rather ambivalent in my attitude towards these policy alternatives. It should be emphasized, though, that I have not been comparing a job guarantee with a basic income guarantee in isolation, but rather a basic income guarantee in conjunction with the provision of opportunities to volunteer for productive activity. I think this latter combination could enable more freedom of choice while still serving a similar function for those who intend to re-enter employment in the regular economy. That said, I think either policy approach, handled well, could assist in the transition to the kind of society that seems possible in coming decades. This may be true whether the present wage labor relation remains in place or is replaced with something else.