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Job Guarantee - Full Employment
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11-09-2012 12:00am#1This is a topic I've seen come up from time to time at places I read, but which I haven't studied in great detail, and after reading this (very lengthy/detailed) article on it, think I may have good enough a grip on it to start a topic:
http://bilbo.economicoutlook.net/blog/?p=10554
The basic idea is that government would be an 'employer of last resort', such that they would act to provide permanent full employment (max 2% unemployment) in the economy; the money for this would come from money creation, not from national debt.
That is not the only goal of this policy though: It is also a policy for managing price inflation within the economy.
As things are, the above article argues that unemployment is effectively (albeit unintentionally) a policy for managing inflation, since the drop in demand caused by it keeps prices down (massive oversimplification, it's extrapolated on at-length in the article).
The problem with this is the massive social cost of unemployment, as well as the productive waste and other associated costs; by utilizing a system of full employment, inflation can be attenuated by tightening fiscal policy, temporarily pushing workers from private industry to the full employment program (instead of to unemployment).
It is a little bit complicated (and the length of that article doesn't help clarify it), but the traditional concerns of deficits and inflation (and hyperinflation) do not seem to apply with this policy.
It's quite an interesting alternative way of doing things, which if accurate, would be an extremely beneficial (and highly necessary) policy to undertake now that unemployment is so high.
In the context of Ireland and the EU though, implementing a policy like this seems a lot more complicated and subject to significant political inertia; it would be interesting to hear peoples (preferably non-ideological) opinions on this though (particularly those that have studied economics), even better if in the context of that blog post (since it goes into far more detail that I'm able).1
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Ambitious, but at least it's an alternative. I think they've effectively had something similar the Nordic countries for a while.0
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It's ambitious alright, and rests on the foundation of Modern Monetary Theory which (while very interesting) has yet to be proven I think; I haven't studied economics directly, but it appears to be one of the more fully-structured Post-Keynesian theories right now, which hopefully should gain more attention in the coming years, as an alternative to what we have now.0
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Let's say the state puts unemployed people to work making socks; this will just force private producers (sock manufacturers, distributors, and retailers) to cut back their operations and lay off staff due to the increased supply of socks on the market coming from the state workers. Add to this the newly printed money going into the unemployed worker's pockets which will just push prices up even more.
The program would simply increase both unemployment and prices.0 -
Let's say the state puts unemployed people to work making socks; this will just force private producers (sock manufacturers, distributors, and retailers) to cut back their operations and lay off staff due to the increased supply of socks on the market coming from the state workers. Add to this the newly printed money going into the unemployed worker's pockets which will just push prices up even more.
The program would simply increase both unemployment and prices.
In fairness, I'm going to imagine if you read the idea in full it would probably deal with simpler issues like this.0 -
Put them to work on infrastructure, or any other activity which is not competing with the private market; the inflation issue right now is being managed by a reduction in demand through unemployment, this would manage it by monetary/fiscal tightening in the private sector, forcing a reduction in prices and pushing people into the job guarantee program.Let's say the state puts unemployed people to work making socks; this will just force private producers (sock manufacturers, distributors, and retailers) to cut back their operations and lay off staff due to the increased supply of socks on the market coming from the state workers. Add to this the newly printed money going into the unemployed worker's pockets which will just push prices up even more.
The program would simply increase both unemployment and prices.
The productivity lost through unemployment, can be put towards anything; in your example, instead of putting socks right on the market they can be reserved based on estimated future requirements, and slowly released once the economy recovers (a buffer stock).
The job guarantee also sets the wage below private industry wages (most likely close to the minimum wage), so when fiscal/monetary policy is used to push workers onto the job guarantee, that pushes wages down in private industry as well, and acts as a counterbalance to any price inflation.
The article I link in the first post goes into very significant detail, and provides a fairly solid argument that a job guarantee employment buffer is more efficient and effective than an unemployment based one.
When discussing it here in basic economic concerns, it's easy to lose the details the article gets into, such as the quality of a JG employment buffer vs an unemployment based employment buffer; the JG workers overall will be of better experience/training for instance.0 -
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This wouldn't change the fact that by competing for sock-making resources, the state program would push prices up unnaturally, again leading to lower profit margins for private companies who may have to lay off more staff. Marginal producers and those on the very cusp of being just efficient enough would again be put out of business.KyussBishop wrote: »The productivity lost through unemployment, can be put towards anything; in your example, instead of putting socks right on the market they can be reserved based on estimated future requirements, and slowly released once the economy recovers (a buffer stock).
Their staff would presumably end up on the state work program, receiving more of the printed money, pushing up prices even further. Again, this program will just create unemployment and price increases, no matter how it's spun.KyussBishop wrote: »Put them to work on infrastructure, or any other activity which is not competing with the private market; the inflation issue right now is being managed by a reduction in demand through unemployment, this would manage it by monetary/fiscal tightening in the private sector, forcing a reduction in prices and pushing people into the job guarantee program.
I'm a bit confused as to why you're supporting a government program that has the stated aim of driving previously productive companies out of business and making people unemployed?KyussBishop wrote: »so when fiscal/monetary policy is used to push workers onto the job guarantee
This policy effectively amounts to cutting off one's arm to stop the pain of a self-inflicted finger injury.0 -
How would it push prices up, if they were going into reserve based on future demand estimates?This wouldn't change the fact that by competing for sock-making resources, the state program would push prices up unnaturally, again leading to lower profit margins for private companies who may have to lay off more staff. Marginal producers and those on the very cusp of being just efficient enough would again be put out of business.
More so, how would it push inflation, if they put production into an an area that does not affect private industry?
This is counteracted by fiscal/monetary tightening as the article describes, and the downward pressure on wages by the minimum wage job guarantee will act as another factor which counteracts inflation.Their staff would presumably end up on the state work program, receiving more of the printed money, pushing up prices even further. Again, this program will just create unemployment and price increases, no matter how it's spun.
It is a job guarantee, it does the exact opposite of making people unemployed.I'm a bit confused as to why you're supporting a government program that has the stated aim of driving previously productive companies out of business and making people unemployed?
This policy effectively amounts to cutting off one's arm to stop the pain of a self-inflicted finger injury.
Right now, policies lump the majority of the inflation avoidance mechanism onto labour, making workers unemployed, decreasing demand and harming business in the process (as well as causing social damage, and damage to the quality of the inactive labour force).
This policy shares inflation avoidance with business; companies will have to manage their money more carefully (just like people have to in economic downturns), and workers get to stay employed (avoiding the economic/productive waste and other damage caused by unemployment).
This policy is more efficient (causing much less harm) and stimulates demand far better than unemployment, so the effects on business from monetary/fiscal tightening will be ameliorated through that.0 -
For any economic plan to work you need to at more than the problem of unemployment.
unemployment is a symptom of the economic problem not the cause of the problem.
This programme does nothing to solve the problem of the banks, the deficit is government revenue, people unable to pay back loans on houses
What work would these people be given to do?0 -
Well, it actually goes a significant way towards addressing some of those problems, but of course is not an end in itself.For any economic plan to work you need to at more than the problem of unemployment.
unemployment is a symptom of the economic problem not the cause of the problem.
This programme does nothing to solve the problem of the banks, the deficit is government revenue, people unable to pay back loans on houses
What work would these people be given to do?
For the deficit: You wipe out the welfare expenditure through the money-creation backed job guarantee, putting us in surplus
For loans/houses: It gives unemployed people a better income, allowing them to pay back debt better and remove the grip of debt deflation on the economy (coupled with a limited scale debt jubilee, this would help get the economy going again).
The work they would be given really depends I guess; it could be put into infrastructure, or well...anything you can think of really.
It would probably result in job programs which try to tailor to specific groups skills, to keep them sharp, so would probably be quite varied.
It doesn't really matter what the work is though, so long as it avoids competing too much with private industry; all the better if it fits a workable economic needs now, or an estimated future need, all while keeping workers skills sharp/useful.0 -
By competing for sock-making materials and resources, it wouldn't matter if they hold the products back, the price of raw materials would increase for other sock producers.KyussBishop wrote: »How would it push prices up, if they were going into reserve based on future demand estimates?
By paying the previously unemployed workers (technically, in terms of productive work, they will still be unemployed so I think your program is more of a dole) newly printed money which they will then spend on goods and services and release into the market, prices will necessarily rise.KyussBishop wrote: »More so, how would it push inflation, if they put production into an an area that does not affect private industry?
I'll admit I don't really understand this point I would be sceptical towards the idea that any Western government would ever in a million years support a contraction of the monetary base. As Permabear pointed out, orthodox Keynesians accept Friedman and Schwartz' theory that monetary contraction led in a way to the great depression.KyussBishop wrote: »This is counteracted by fiscal/monetary tightening as the article describes, and the downward pressure on wages by the minimum wage job guarantee will act as another factor which counteracts inflation.0 -
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Well this would be counteracted by the price control mechanism.By paying the previously unemployed workers (technically, in terms of productive work, they will still be unemployed so I think your program is more of a dole) newly printed money which they will then spend on goods and services and release into the market, prices will necessarily rise.
I'm not sold on the idea yet myself either (post I linked in my previous reply puts some good arguments against it), though it doesn't seem to use a contractionary money supply, it seems like it (maybe) would reduce issuance of credit.I'll admit I don't really understand this point I would be sceptical towards the idea that any Western government would ever in a million years support a contraction of the monetary base. As Permabear pointed out, orthodox Keynesians accept Friedman and Schwartz' theory that monetary contraction led in a way to the great depression.0 -
Cross-posting from a separate thread here, since it's a long post better suited to this forum, and I (try to) explain a lot about the Job Guarantee (my knowledge of it isn't perfect though):
https://www.boards.ie/vbulletin/showthread.php?p=81836380#post81836380
I'll try and explain the inflation part of it well, but I don't think I do a great job of it here; you could check the article I post near the bottom as well, but that's pretty tough going.mariaalice wrote: »Explain how government guaranteed employment would not cause inflation eventually.
(1) what rates of pay are you proposing to pay for the government guaranteed jobs.
(2) How would it not interferer with the local jobs market, for example around Christmas retail takes on a lot of short term workers which are then let go in January they are mostly at minimum wage although some pay more. If all the supples labour is take up by a government guaranteed job retail employers will have to pay more than the government guarantee job/min wage to get employees thus causing wages to rise because of government interference which is wage inflation.
(3) Stockpiling goods is a silly idea because if they are stored for any length of time they will problem be obsolete by the time they are released on to the market. ( phone 1 verses phone 4 or 5 ).
I do think the social impact of unemployment is an important subject but I think it needs to be looked at in a completely different way. Have you ever read the right to useful unemployment Ivan Illich.
Here is also another article, which may be a bit more approachable, but is still quite long (starting at the bolded 'Aggregate demand, Employment and Inflation' header; the bolded 'Conclusion' section is worth a quick look even if you get tired of the rest):
http://bilbo.economicoutlook.net/blog/?p=14208
Right now we are undergoing debt-deflation, which is peoples wages being spent on paying down debt rather than buying, leading to a loss of demand in the economy which affects business and self-perpetuates, with more people losing jobs and getting in trouble paying debts, leading to even less demand etc..
A lot of the job guarantee money will go straight into those debts for starters (through wages), then more will go into spurring consumer demand back to what it was, bringing private industry back to its previous levels of production over time (with the job guarantee slowing winding down as private industry recovers and reabsorbs workers); so that's already a significant amount of money going back into non-inflationary things.
If people are spending too much money (rather than saving) in relation to what private industry can supply, then that would cause some demand-pull inflation, and that's when you need to step in to counteract inflation (this doesn't come immediately either, because a lot of business will have the extra capacity to soak up demand, before inflation happens, and industry will also grow to meet increased demand over time, reducing inflation).
Remember though, that a significant amount/percentage of money will already be going into non-inflationary areas, so this will be a problem coming only after that (and once the size of the job guarantee goes below a certain level, it may not even be a problem at all); this means a significant proportion of stimulus is non-inflationary, and any inflation is only an incidental side-effect (and is manageable, can be counteracted).
In our current system, inflation is counteracted by allowing unemployment to rise, causing significant social and economic harm that is compounded over time.
In the job guarantee, when inflation is reached (only after a significant fraction goes into debt and reinflating aggregate demand, so we're already making progress with economic problems), one of the mechanisms than can be employed (mentioned more in the article below), is tightening of fiscal/monetary policy (raised taxes, decreased non-JG public spending for instance) to stabilize aggregate demand, and thus inflation.
This may push people out of the private sector (that happens anyway, with our current policies, just people go unemployed instead), due to the cap on aggregate demand, and pushing them into the job guarantee like that, has a temporary downward effect on wage prices (for the lifetime of the job guarantee), also helping curb demand, acting as a counterbalance to inflation.
It shares the burden more equally, rather than just massively lumping it onto unemployed workers, and it actually stabilizes and resolves the economic problems, rather than engaging in massive destruction like austerity does.
So in the end, a job guarantee is a more efficient way to manage inflation, than unemployment is, and it's an automatic stabilizer for some economic problems too, whereas austerity just makes things worse.
As to the other questions:
1: Minimum wage most likely.
2: It's a wage floor, not wage inflation; with the job guarantee set at minimum wage, retailers would just have to either offer that (which they'd need to anyway), or just a little bit higher.
3: You're talking about consumer goods that depreciate over time; that's not what people would need to work on (and indeed, wouldn't be a good idea for stockpiling).
There is an example here, a little bit under the bolded header 'The concept of a Job Gurantee':
http://bilbo.economicoutlook.net/blog/?p=10554
In the example there, it lists a past example of the US stockpiling wool to provide price stability; that's one random example of non-perishable goods that you can stockpile, you can do the same with any kind of surplus raw materials.
The purpose for that is just to ameliorate the effect it will have on the price of that good in the market, while trying not to waste the productive effort of peoples labour in the job guarantee.
Not wasting labour is a bonus by the way, not an inherent necessity; people can do work instead, which prioritizes social value rather than monetary value too, such as helping the elderly, homeless, and any other kinds of community or traditionally-volunteer services you can think of (but which may not have enough help to make enough of a difference), it really doesn't matter in the end.
It is flexible though, you can aim primarily at regaining money from labour from the JG program (maybe through material stockpiling), to the exclusion of socially-oriented work, or you can mix in socially-oriented work too.
I haven't read that book by Ivan Illich, no, and it seems to be a bit hard to figure out what it's about through Googling, though I gather it (appears to) argue for a lessening of labour, and more meaningful work.0 -
Here is an interesting paper from L. Randall Wray, outlining a job guarantee for Ireland (the first part which outlines Ireland's position, can be skipped to get to the job guarantee part, at page 7):
http://www.levyinstitute.org/pubs/wp_707.pdf
It goes into much better depth in detailing the possible configuration of the actual program, than my past posts have done, and gives a very good idea of the possible range of work (it is quite long though).
One thing it differs on though, compared to the job program configuration I would prefer, is that it focuses mainly on jobs and provides a very diverse range of them, whereas the program I would like to see, would focus not just on wide-ranging jobs but also on moving away from fossil-fuel energy sources (which will get increasingly expensive through the future).
The article also provides some interesting speculative ideas on funding a more limited version of the program, even from within our current economic/political conditions; none of it matches the full potential of the money-creation-backed version, but the suggestions are very interesting all the same, and could build up to an eventual recovery.0 -
How different is this to Germany's approach where those in receipt of unemployment benefits are eventually asked to do some sort of community work, and if they refuse are cut loose?0
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The difference seems pretty clear? That's focused on making people work for their benefits (limited to community service), and this program focuses on providing full-fledged jobs with an actual wage (with job types going far beyond community service).0
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KyussBishop wrote: »The difference seems pretty clear? That's focused on making people work for their benefits (limited to community service), and this program focuses on providing full-fledged jobs with an actual wage (with job types going far beyond community service).
Ok, what do you do with people who refuse your job guarantee, and how much voluntary unemployment is one allowed to take if any?0 -
You can either leave them on unemployment, or kick them off for refusing a job offer (I'm not 100% sure I'd agree with the latter, but that's another discussion, as the policy option is there).
If you wanted to allow a certain level of paid unemployment, then I don't know, that would be a separate policy decision also; it certainly wouldn't seem appropriate to fit that under any "jobseekers allowance" type benefits in any case, but I suppose you should allow a bit of time for job-churn, before pushing someone off unemployment into the job guarantee.0 -
As posted on the economics forum (and testing in debate a lot in some AH threads lately), there is an alternative method of funding (Tax Anticipation Notes), that Ireland should be able to use all on its own, without permission from Europe (sidestepping the entire EU political impasse), without burdensome interest that would occur with public debt, to fund a job guarantee program like this, which could restore full employment and provide economic recovery.
After testing this proposal in a good number of debates, there do not appear to be any show-stopping issues that people can provide - and the novel funding mechanism, might even have the potential for convincing fiscal-conservatives/austerians of the merits of a program like the Job Guarantee.0 -
You(kb) have stated one of the obvious things unemployed people could be utilized in, is the building of infrastructure. What happens the private sector infrastructure construction industry in the mean time, considering the only consumer of their services, now has their own construction company with the guts of 100,000 workers?0
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There are concrete production facilities and quarries, and much other construction-related infrastructure, laying idle since the construction boom in Ireland wound down - there's lots of room for expansion, without harming the private sector.whatstherush wrote: »You(kb) have stated one of the obvious things unemployed people could be utilized in, is the building of infrastructure. What happens the private sector infrastructure construction industry in the mean time, considering the only consumer of their services, now has their own construction company with the guts of 100,000 workers?
Any publicly-run infrastructural/construction services/projects, would be aimed at not competing with the private sector, but only at facilitating public infrastructural projects (no selling of material on the open market; avoiding bidding-up scarce construction resources on markets, thus avoiding affecting prices).0 -
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Ok, that answer isn't really related to my question but is the government going to be purchasing these assets and then installing their own workers?KyussBishop wrote: »There are concrete production facilities and quarries, and much other construction-related infrastructure, laying idle since the construction boom in Ireland wound down - there's lots of room for expansion, without harming the private sector.KyussBishop wrote: »Any publicly-run infrastructural/construction services/projects, would be aimed at not competing with the private sector, but only at facilitating public infrastructural projects (no selling of material on the open market; avoiding bidding-up scarce construction resources on markets, thus avoiding affecting prices).
This sounds very dubious, along the lines of digging holes and filling them in. Can you give an example of this type of infrastructure, that won't take work away from the private sector?0 -
The government doesn't need to purchase those assets, could just purchase the material it needs from the markets and let the 'the market' do the work - the boost in demand, would cause a boost in production to meet the demand - and if the government announces and/or makes contracts well in advance of projects and actually using the materials, the private sector would have loads of time to ramp-up without prices being affected at all.0
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In the Economics thread I gave these examples:whatstherush wrote: »This sounds very dubious, along the lines of digging holes and filling them in. Can you give an example of this type of infrastructure, that won't take work away from the private sector?KyussBishop wrote: »As for the jobs, the public sector can be restaffed for one, and parts of it like public health can be expanded to provide proper coverage (since it's straining now), particularly a large expansion in mental health facilities/resources/treatment (since this is very poorly provided right now), and resources for education surrounding mental health and health issues can be properly expanded too.
Beyond that, you can have an expansion of jobs with community development - proper maintenance of rundown community areas, and for areas troubled with social issues, resources put forward to help tackle that (like more facilities/education surrounding for help with drug addiction), more facilities/jobs for helping the elderly.
We also would have the resources for going ahead with shelved infrastructural projects, and planning/starting new ones as well - in particular, new ones we definitely should be looking at, are large R&D and infrastructural work on moving our energy system away from fossil fuels - and expansion of public transport infrastructure (in addition to restaffing cut public transport services).
That's only a handful of things off the top of my head as well - there's not really an end to the different types of useful work that can be thought of and people put to work at (also ones which target social purposes, rather than just economic).
The jobs in general, would be aimed at not competing with the private sector - that would want to be avoided.
The wages for the jobs program would want to be kept at a wage consistent with a minimum decent standard of living (with wriggle room on pay for more skilled jobs), so the wages will be kept at a low level (to minimize competition with the private sector) - which the private sector will need to do better than to hire the workers out of the jobs program.
And on this thread, there is a document linked in one of my posts, which describes an entire Job Guarantee program specifically tailored for Ireland:
http://www.boards.ie/vbulletin/showpost.php?p=82910878&postcount=14
http://www.levyinstitute.org/pubs/wp_707.pdf0 -
KyussBishop wrote: »In the Economics thread I gave these examples:
And on this thread, there is a document linked in one of my posts, which describes an entire Job Guarantee program specifically tailored for Ireland:
http://www.boards.ie/vbulletin/showpost.php?p=82910878&postcount=14
http://www.levyinstitute.org/pubs/wp_707.pdf
Ah come on KB, it was a simple question to name one type of infrastructure construction that won't cannibalize work from the private sector. Quoting past posts or sending me off to some pdf looks like your avoiding it.
Also your quoted answer mentions going ahead with shelved infrastructural projects. Before these projects were shelved who was going to complete them?0 -
I quoted you a post I made less than an hour ago...it's right there in the big quote, and I only just made that post.whatstherush wrote: »Ah come on KB, it was a simple question to name one type of infrastructure construction that won't cannibalize work from the private sector. Quoting past posts or sending me off to some pdf looks like your avoiding it.
Also your quoted answer mentions going ahead with shelved infrastructural projects. Before these projects were shelved who was going to complete them?
The PDF is large, so can skip that, but I give some examples in that quote above it - that also doesn't just say shelved infrastructural projects, I mention new ones as well (public transport, energy redevelopment away from fossil fuels, and entire mental-health-based expansion of public health and associated infrastructure - among more).0 -
I've also explained how it boosts work in the private sector, by giving construction-related business more work in supplying public projects (and how to make that avoid price competition), and doesn't take workers from the private sector - because it takes up unemployed workers.0
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KyussBishop wrote: »I quoted you a post I made less than an hour ago...it's right there in the big quote, and I only just made that post.
The PDF is large, so can skip that, but I give some examples in that quote above it - that also doesn't just say shelved infrastructural projects, I mention new ones as well (public transport, energy redevelopment away from fossil fuels).
Half hour ago you said this
All I'm looking is for one example of this type of infrastructure, public transport and renewable energy R&D have nothing to do with this. Remember you have 100,000 ex construction workers to play with.KyussBishop wrote: »Any publicly-run infrastructural/construction services/projects, would be aimed at not competing with the private sector, but only at facilitating public infrastructural projects0 -
whatstherush wrote: »Ah come on KB, it was a simple question to name one type of infrastructure construction that won't cannibalize work from the private sector. Quoting past posts or sending me off to some pdf looks like your avoiding it.
Also your quoted answer mentions going ahead with shelved infrastructural projects. Before these projects were shelved who was going to complete them?
the US Military sort of fits this role, it's much larger than it needs to be and mops up a lot of people who would be otherwise unemployed, support industries create extra jobs and knowledge which overflows into other indutry as an added benefit.
Didnt read the full article but would a possible downside of having this last resort employer lead to lower levels of education as people would always have a fallback...a la joining the army in the US0 -
Public transport infrastructure, redevelopment of energy infrastructure away from fossil fuels - these do relate to that, as do many of the other examples I'm giving.whatstherush wrote: »All I'm looking is for one example of this type of infrastructure, public transport and renewable energy R&D have nothing to do with this. Remember you have 100,000 ex construction workers to play with.
Those are expansion of new infrastructure, ones that can be made to not compete with the private sector - this fits those conditions, or am I misunderstanding what you're asking for? (can you clarify?)0 -
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That's a good point with regard to education, and you could provide free educational resources and training, to occur alongside the Job Guarantee - even training into specific work roles, that the JG might create demand for, or for which workers themselves would like to work towards.the US Military sort of fits this role, it's much larger than it needs to be and mops up a lot of people who would be otherwise unemployed, support industries create extra jobs and knowledge which overflows into other indutry as an added benefit.
Didnt read the full article but would a possible downside of having this last resort employer lead to lower levels of education as people would always have a fallback...a la joining the army in the US
I think a supporting educational/training program, would fit well with the Job Guarantee.0
This discussion has been closed.
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