Bernie Sanders proposes Job Guarantee

KyussB · 24-04-2018 1:41am #1

The Job Guarantee is a policy I've discussed and advocated here in the past going back more than half a decade, it is the principal policy proposal of the Modern Monetary Theory (MMT) school of economists (Stephanie Kelton is a leading MMT economist who works with Sanders) and honestly I never expected it to enter the mainstream anytime in the next decade or so:

Sen. Bernie Sanders will introduce a plan to guarantee every American a job paying $15 an hour, according to a new report.

The plan comes after two other Democratic senators, Cory Booker and Kirsten Gillibrand, also backed job guarantee proposals.

Advocates for the plan say it will fight inequality and dampen recession, while opponents say it is an inefficient use of government resources.

Sen. Bernie Sanders will roll out a plan to guarantee every American a job, according to a new report.
The Washington Post's Jeff Stein reported Monday that Sanders's plan will guarantee every person a job with $15 an hour in pay. The jobs would be generated by public investments in projects ranging from the construction of new infrastructure to education.
According to The Post, Sanders' plan would create 12 districts within the US that would approve jobs plans from municipalities, states, and American Indian tribal governments and then pass those plans along to the Labor Department for final approval.
The plan would also utilize job training centers to train and connect workers with jobs on the new projects.
...

http://uk.businessinsider.com/bernie-sanders-job-guarantee-plan-2018-4

This branch of economics is, lets say...'controversial'...it's led me to a ton of grief here tbh. It's very nice to see it getting this kind of legitimacy.

What the Job Guarantee is, is a policy aimed at providing Full Employment, close to 100% of the time - particularly during economic recessions - and it aims to do this, by hiring people into temporary employment and training, in various public jobs programs (depending on the types of useful public work that need doing, e.g. infrastructural development or whatnot), and paid at the minimum wage so as not to compete with private sector wages.

It's not just a simple jobs program though, it is aimed at being an overarching macroeconomic policy, for controlling inflation: In todays system, inflation is fought by economic contractions which push people from the private sector into unemployment - in the Job Guarantee system, inflation is fought by economic contractions which push people from the private sector into lower-paid work in the job guarantee program, instead.

It's been a while since I've researched on and described this policy in detail to others (and I likely won't have a lot of time to get into too much detail, but will try answer any questions) - it's complicated by requiring that people have a bit more of an understanding about macroeconomics, than is typical - and by the fact that it runs counter to conventional (false) assumptions about macroeconomics - but there's a more detailed description, here:
https://en.wikipedia.org/wiki/Job_guarantee

wes · 24-04-2018 5:19pm

Any kind of trials done on this? Would make sense to try a small scale trial first, to see how well it would work.

KyussB · 24-04-2018 5:27pm

Basically any kind of temporary or small scale local authority employment, has small scale similarities - but the main feature of this, is that it's done on a countrywide-scale - i.e. the purpose of this policy is its macroeconomic effects, so small-scale tests don't cut it (similar to how small-scale Basic Income tests, bear little resemblance macroeconomically, to what a Universal Basic Income would be like).

The New Deal employment programs, are an example of what the Job Guarantee will be like - and at a macroeconomic scale. The difference here, is that it will now become permanent policy to use such programs for employing people who can't find work in the private sector.

wes · 24-04-2018 5:41pm

Certainly an interesting idea. Not sure how feasible it would be, but having said that, the current system has more than its fair share of problems. Will be interesting to see if Bernie gets anywhere with it.

Zubeneschamali · 26-04-2018 11:51am

Some analysis on what kind of jobs programmes work best.

The answer: training the long-term unemployed.

KyussB · 26-04-2018 1:23pm

That analysis doesn't consider a Job Guarantee. The question is, what is the best way to get people working: Guaranteeing them a job (and training to get it) is, by definition, superior to all other options studied there.

Zubeneschamali · 26-04-2018 1:32pm

KyussB wrote: »

That analysis doesn't consider a Job Guarantee. The question is, what is the best way to get people working: Guaranteeing them a job (and training to get it) is, by definition, superior to all other options studied there.

That would come under Public Sector Employment in the analysis, and is shown to have a negative short term effect, and an even bigger negative long term effect.

Mind you, the commentator says: For what it’s worth, the sample size for direct public employment programs is modest, and the sample size for those operated over the long term is very small. This means that the large deterioration seen in these programs over the long term might be overstated.

KyussB · 26-04-2018 1:43pm

No it doesn't, small scale Public Sector Employment is not a Job Guarantee. You're comparing a policy with zero macroeconomic effects, to a policy which is defined by its major macroeconomic effects.

If you guarantee people a job, the short, medium and long-term effect is Full Employment, close to 100% of the time - better than anything else in that study.

Tabnabs · 26-04-2018 2:18pm

Sanders's jobs guarantee would fund hundreds of projects throughout the United States aimed at addressing priorities such as infrastructure, care giving, the environment, education and other goals. Under the job guarantee, every American would be entitled to a job under one of these projects or receive job training to be able to do so, according to an early draft of the proposal.

Where does the money come from? Who pays the wages, who pays for the mass employment projects?

The US national debt currently runs to over $21 trillion dollars. How much more debt do you propose they take on?

KyussB · 26-04-2018 3:24pm

It's not the size of a countries national debt that is the problem, it's the interest rate on that debt - as that determines how expensive the debt is. High Private Debt levels are more worrying than high Public Debt levels (Private Debt vs GDP is actually the more important figure, despite rarely being talked about) - the US can afford to take on as much public debt as it desires.

Since a Job Guarantee directly boosts GDP as well, and reflates the private sector when there is an economic downturn, it pays for itself pretty much - because in the long term, it boosts the GDP portion of 'Public Debt vs GDP'.

Having a bit of slack with Public Debt, in order to keep your countries GDP level at or close to maximum output, is almost always a good thing - and will maintain stable Public Debt vs GDP levels over time, in the medium/long term.

KyussB · 26-04-2018 7:14pm

Here's a good takedown of the earlier study regarding short-term public job programs, and how it is inapplicable to the Job Guarantee - also goes into a lot of other details about common Job Guarantee criticisms (though the author can tend to write excessively - still it's packed with good info on the Job Guarantee):
http://bilbo.economicoutlook.net/blog/?p=39198

The author - Bill Mitchell - is one of the core people who came up with the entire concept of the Job Guarantee - and is one of its leading proponents. The entire idea began with him and a small handful of similarly minded economists.

Dohnjoe · 27-04-2018 12:55am

Bit skeptical on this. What would be the rules on firing under-performing employees?

jimmycrackcorm · 27-04-2018 1:44am

Dohnjoe wrote:

Bit skeptical on this. What would be the rules on firing under-performing employees?

I'd guess that it isn't a mandatory program and the same rules would apply as any other job. Perhaps a more efficient version of our CES schemes.

Dohnjoe · 27-04-2018 1:55am

jimmycrackcorm wrote: »

I'd guess that it isn't a mandatory program and the same rules would apply as any other job. Perhaps a more efficient version of our CES schemes.

Possibly

I remember Bernies plan for breaking up the big banks years back. One journalist asked him for the details, he couldn't provide them, and hasn't provided anything since

I get the feeling we may be waiting a long time to hear details on this one also

And the US? come on, maybe a trial in Finland, but not a large country that struggles with the concept of universal healthcare. Real cloud cuckoo land stuff.

KyussB · 27-04-2018 2:23am

Yes, the country that implemented the New Deal - the basic template that the Job Guarantee expands upon to create a permanent macroeconomic policy - is a terrible place to implement this...

Tabnabs · 27-04-2018 12:04pm

The New Deal was an attempt to dig America out of the Great Depression. America is currently running at near full employment and welfare is at historic low levels. Kind of begs the question of why this new programme would be needed?

KyussB · 27-04-2018 2:43pm

It's a permanent New Deal - it's not a one-off program to dig out of an economic crisis - it's needed for all economic crises into the future.

Dohnjoe · 28-04-2018 12:45pm

KyussB wrote: »

Yes, the country that implemented the New Deal - the basic template that the Job Guarantee expands upon to create a permanent macroeconomic policy - is a terrible place to implement this...

I wouldn't hold my breath

PeadarCo · 28-04-2018 1:06pm

KyussB wrote:

It's a permanent New Deal - it's not a one-off program to dig out of an economic crisis - it's needed for all economic crises into the future.

So if you keep borrowing money and investing it in jobs it will solve all economic problems.

Ireland tried that in the mid 00s. Large amounts of money was borrowed and put into building houses and increasing public sector way and government welfare programs. We had a massive crash. And grand you can in the long run there was no problems (current numbers employed are reaching/are near precrash levels. But for anyone who suffered in the intervening period it's of little consolidation. Remember in the long run we are all dead.

Jim2007 · 28-04-2018 3:01pm

You are not comparing like with like here. The US provides very little direct support for the unemployed beyond a certain number of weeks. Sanders proposal is in reality an attempt to extend that support beyond that period in a form that would be acceptable to US voters. And of course it would be acceptable to the unemployed since they have no other choice.
By contrast in Europe we have a system which provides some kind of income support for the unemployed without requiring them to perform any additional activities. So to introduce such a scheme over here, would require people to do something in order to obtain what was free in the past = not a vote getter and not going to fly.

EdgeCase · 28-04-2018 3:12pm

I'm very sceptical about this as it's effectively what's done in southern Europe to tackle joblessness - the state tries to create jobs.

You've several basic models of social support in Europe and some work better than others.

1. Big spend social welfare system coupled with high job security and a lot of labour inflexibility - France. Great if you have a job. Terrible if you're starting out.

2. Big spend social welfare supports coupled with low job security but very high levels of support services to get you back into a new job. This tends to be more the Finnish and Scandinavian approach and it works very well.

3. Poor social supports and low job security - UK Tory philosophy predominantly and Ireland to some degree. The US is the extreme version of this model.

4. High job security and heavy state intervention in jobs market coupled with very low social welfare supports. Historically was tried in Ireland and even France pre 60s and is still very much the backdrop of the problems in Spain, Greece etc

You end up creating "busy work". It's a philosophy that says that the most important thing is everyone has a job not that everyone is working in a job that generates the maximum output and quality of life. It's often driven by dogma about work ethics and it's generally not been very successful.

I would suspect the model you will would end up with ij the states could be dystopian cheap labour and abuse. Sanders would want to be very very careful about attempting to introduce that philosophy into a country that has very agressive neoliberal economics and very hardcore attitudes about work ethic that look more like Victorian England.

You could end up creating an underclass of state paid for, low wage workers.

Look a how well similar schemes like Job Bridge worked here...

My view of it is you need to look at it from the point of view of quality of life and wealth generation across the whole society. Creating opportunities for people to do things that play to their strengths and generate real economic value is very important.

Shoehorning people into busy work for the sake of a notion of a work ethic isn't necessarily making best use of the resources available.

We should be aiming to work less to achieve more. If you want to create a really competitive and smart economy, you need flexibility for people to find their way into new and better jobs all the time. It's about having the infrastructure to allow the labour market to evolve and allow people to do new things.

Ireland has some of that but it's not as strategic as it is somewhere like Finland.

I just think Sanders idea is well intended but I would be very worried about how that would pan out when you throw in the US right wing ideologies that would inevitably be a big part of how it's implemented.

KyussB · 28-04-2018 6:05pm

If someone thinks the Irish Government borrowed tons of money to build houses during the crisis, then they have a very dodgy (as in, fundamentally wrong) recollection of the crisis.

Can people please compare like with like - and not make nonsense comparisons, like conflating private sector spending with government spending?

It's very easy to create a straw man - a completely incomparable situation, put in the Job Guarantee's place - and knock that down. It doesn't deal with the Job Guarantee, though - so it's a bit of a waste of my time replying to that.

KyussB · 28-04-2018 6:07pm

Jim2007 wrote: »

You are not comparing like with like here. The US provides very little direct support for the unemployed beyond a certain number of weeks. Sanders proposal is in reality an attempt to extend that support beyond that period in a form that would be acceptable to US voters. And of course it would be acceptable to the unemployed since they have no other choice.
By contrast in Europe we have a system which provides some kind of income support for the unemployed without requiring them to perform any additional activities. So to introduce such a scheme over here, would require people to do something in order to obtain what was free in the past = not a vote getter and not going to fly.

People don't refuse jobs just because there's the dole - there's enough proof of that. So the claim that this is a no-go because people could get the dole for free, isn't sound. This isn't work for dole - this is something else entirely.

KyussB · 28-04-2018 6:27pm

EdgeCase wrote: »

I'm very sceptical about this as it's effectively what's done in southern Europe to tackle joblessness - the state tries to create jobs.

You've several basic models of social support in Europe and some work better than others.

1. Big spend social welfare system coupled with high job security and a lot of labour inflexibility - France. Great if you have a job. Terrible if you're starting out.

2. Big spend social welfare supports coupled with low job security but very high levels of support services to get you back into a new job. This tends to be more the Finnish and Scandinavian approach and it works very well.

3. Poor social supports and low job security - UK Tory philosophy predominantly and Ireland to some degree. The US is the extreme version of this model.

4. High job security and heavy state intervention in jobs market coupled with very low social welfare supports. Historically was tried in Ireland and even France pre 60s and is still very much the backdrop of the problems in Spain, Greece etc

You end up creating "busy work". It's a philosophy that says that the most important thing is everyone has a job not that everyone is working in a job that generates the maximum output and quality of life. It's often driven by dogma about work ethics and it's generally not been very successful.

I would suspect the model you will would end up with ij the states could be dystopian cheap labour and abuse. Sanders would want to be very very careful about attempting to introduce that philosophy into a country that has very agressive neoliberal economics and very hardcore attitudes about work ethic that look more like Victorian England.

You could end up creating an underclass of state paid for, low wage workers.

Look a how well similar schemes like Job Bridge worked here...

My view of it is you need to look at it from the point of view of quality of life and wealth generation across the whole society. Creating opportunities for people to do things that play to their strengths and generate real economic value is very important.

Shoehorning people into busy work for the sake of a notion of a work ethic isn't necessarily making best use of the resources available.

We should be aiming to work less to achieve more. If you want to create a really competitive and smart economy, you need flexibility for people to find their way into new and better jobs all the time. It's about having the infrastructure to allow the labour market to evolve and allow people to do new things.

Ireland has some of that but it's not as strategic as it is somewhere like Finland.

I just think Sanders idea is well intended but I would be very worried about how that would pan out when you throw in the US right wing ideologies that would inevitably be a big part of how it's implemented.

This is not any of 1-4 - it is temporary job program work, with training if needed, and the level of job security is a few years, depending on the type of job you're doing.

The aim is for the job program itself to reflate the private sector, at a macroeconomic scale - not merely push workers back into the private sector - and for workers to be hired out of the job program and into private sector work, through demand for labour.

Our major infrastructural needs, for one, don't sound like 'busy work' to me - do they to you?

Your argument there relies on the claim that there is no useful work to be done? When there is an enormous amount of useful work that does imminently need doing? (pretty much endless, when it comes to infrastructural improvements)

Sanders is guaranteeing a Living Wage, so I don't see how this could approach cheap labour - Job Bridge and internships in general, are just ridiculous imo.

A Job Guarantee can be incredibly flexible with the type of work it can offer (remember: government funded work doesn't have to be profit generating, so you can afford to prioritize social benefit) - so you can quite readily tailor the program to suit peoples strengths, and provide fulfilling work to them.

Think more of how to make it work to suit those aims - rather than assuming that it would take the form of something that goes against those aims.

You're not wrong about the threat that right wing ideologues could pose to the project - of hijacking it from its core aims, and turning it into something else entirely - those are valid concerns, but judge the idea on its intent, you know? On how it would function without being hijacked - and then we can judge how likely it is to be hijacked as a separate line of argument.

EdgeCase · 28-04-2018 7:47pm

Major infrastructural needs aren't going to be met by people who aren't qualified to build major infrastructure. There's a finite availability of those skills, and they are usually in high demand.

The problem with this is that you have to find work for people to meet the guarantees. If the economy doesn't generate that, you then have someone in some position of authority trying to figure out stuff for people to do to meet the job guarantee requirement. That's where you get into it being busy work and could create a big risk of underemployment.

Also, I would almost 100% guarantee if this were rolled out in the US, the right wing dogmatists would have it morphed into a 21st century version of the victorian house model in no time.

You absolutely need strong social supports for people to take opportunities, adapt, change and up skill and strong protections if they lose their jobs, but I think when you start to get into state direction of the economy, rather than facilitation of the economy, you start to create the strong possibility of a mess.

Rolling something like this out in the US at present would be impossible anyway due to ideologies and I think if you did you would almost certainly end up with something very unpleasant. Either a situation where people were being state funded to work in major corporations, effectively giving them free employees. Or, it could end up being morphed into something more like a 21st century version of the victorian workhouse concept, if the right wingers really got their hands on it.

Also, Trump has been whipping up hysteria about high unemployment. There is record low unemployment in the US at the moment and it was very low when he took office. I'm not really seeing the need for a scheme like this.

What I do see in the US is a whole load of poverty traps where people can't get the skillsets they need to get better jobs, largely due to very limited / non existent funding of education beyond high school.

KyussB · 28-04-2018 7:58pm

It's a jobs and training program. If those skills are of finite availability and in high demand, that's exactly what you want the Job Guarantee training-up craploads of people for.

Do you see a lack of useful infrastructural work needing to be done? The Job Guarantee doesn't wait for the private economy to create a demand for particular work - it creates that work itself and directly employs people into it - because (being government funded) it isn't limited by a private, profit-based market economy - and that means all the major infrastructure that can boost GDP and private profits, yet which is itself unprofitable for private industry to undertake, can be undertaken as part of the Job Guarantee.

Really - your entire argument of busywork, rests on the concept of there being no useful work to do. How do you explain the gigantic amount of useful work that needs to be done, then?

If you're arguing that right-wing types will hijack it and turn it into something akin to slave labour - then make clear that that's a separate argument, so it can be debated on its own merits/demerits - as you're mixing it up with the rest of your arguments.

When you start doing that, you're not arguing against the Job Guarantee anymore - you're arguing against an imagined right-wing hijacking of it - which isn't very useful, as that's not what I'm advocating.

Jim2007 · 28-04-2018 9:02pm

KyussB wrote: »

Jim2007 wrote: »

You are not comparing like with like here. The US provides very little direct support for the unemployed beyond a certain number of weeks. Sanders proposal is in reality an attempt to extend that support beyond that period in a form that would be acceptable to US voters. And of course it would be acceptable to the unemployed since they have no other choice.
By contrast in Europe we have a system which provides some kind of income support for the unemployed without requiring them to perform any additional activities. So to introduce such a scheme over here, would require people to do something in order to obtain what was free in the past = not a vote getter and not going to fly.

People don't refuse jobs just because there's the dole - there's enough proof of that. So the claim that this is a no-go because people could get the dole for free, isn't sound. This isn't work for dole - this is something else entirely.

It is exactly that and that is how it will be seen. And that is why it has not really support in the main steam.

KyussB · 28-04-2018 9:41pm

The entire idea is shit-hot right now, and has already reached unstoppable momentum as it breaks into the mainstream. It already IS mainstream, now.

The polls done so far show that the idea is incredibly popular on a bipartisan basis - every single state in the US has majority support for it - the lowest being 57%:

We find that the job guarantee polls stunningly well in all 50 states. Even in the state with the lowest modeled support, Utah, support is still 57 percent. Deep-red states like West Virginia (62 percent support), Indiana (61 percent), and Kansas (67 percent) all boast strong support for a job guarantee. Indeed, the places where the job guarantee is most popular might be surprising: DC (84 percent), Mississippi (72 percent), North Carolina (72 percent), Hawaii (72 percent), and Georgia (71 percent) have the highest estimates, though support is also high in solid-blue states like California and New York (both 71 percent).
Map depicting support for jobs guarantee across US states

jobs-guarantee-supplementary-photo-3.jpg.png

https://www.thenation.com/article/why-democrats-should-embrace-a-federal-jobs-guarantee/

It's here - permanently - and it's not going away. I reckon myself, that pretty soon it's going to become the defining policy of the Left.

Dohnjoe · 29-04-2018 1:07am

KyussB wrote: »

People don't refuse jobs just because there's the dole - there's enough proof of that.

BBC ran an experiment on this. Yes, there are people who choose social welfare over working (obviously it's just a portion of people) Anecdotally I know and have known several who took the social over working.

Dohnjoe · 29-04-2018 1:13am

KyussB wrote: »

The entire idea is shit-hot right now, and has already reached unstoppable momentum as it breaks into the mainstream. It already IS mainstream, now.

The polls done so far show that the idea is incredibly popular on a bipartisan basis - every single state in the US has majority support for it - the lowest being 57%:

It's here - permanently - and it's not going away. I reckon myself, that pretty soon it's going to become the defining policy of the Left.

Fairly interesting results, well framed question too. Haven't seen any critical analysis of it, but definitely surprised at those results. The 5% tax on the over 200k earners seems fair if the program can withstand critical scrutiny

markodaly · 29-04-2018 4:34am

KyussB wrote: »

Really - your entire argument of busywork, rests on the concept of there being no useful work to do. How do you explain the gigantic amount of useful work that needs to be done, then?

Like?

Danzy · 30-04-2018 11:17am

wes wrote: »

Any kind of trials done on this? Would make sense to try a small scale trial first, to see how well it would work.

It sounds like what the dutch do.

johnnyskeleton · 30-04-2018 11:57am

Mod note:

KyussB, I'm going to send you a PM, but please engage with other posters and don't shift the goalposts.

KyussB · 06-05-2018 1:23am

PeadarCo wrote: »

So if you keep borrowing money and investing it in jobs it will solve all economic problems.

Ireland tried that in the mid 00s. Large amounts of money was borrowed and put into building houses and increasing public sector way and government welfare programs. We had a massive crash. And grand you can in the long run there was no problems (current numbers employed are reaching/are near precrash levels. But for anyone who suffered in the intervening period it's of little consolidation. Remember in the long run we are all dead.

My previous response to this, dismissed this as conflating public debt with private debt, without explaining why that difference is important - attracting mod sanction - so I'm explaining that here.

It's well accepted that the crisis in the 00's was driven by Private Debt being directed into housing - with Public Debt playing a minor role, in the form of Stamp Duty tax relief for First Time Buyers or such.

Due to the minor role played by Public Debt, Private Debt can be seen as the major role in the 00's crisis.

The difference with this, is that Private Debt is incomparable to Public Debt - and there are many reasons for this, e.g. Governments are not expected to fully pay off Public Debt (to roll-it-over in perpetuity, instead), and to instead erode-away Public Debt vs GDP, by boosting GDP, which may itself entail increased Public Debt in the short-term (to promote spending that boosts GDP), for a Public Debt vs GDP reduction in the medium/long-term - these dynamics are not possible with Private Debt, as individually taking out greater amounts of Private Debt can not create the macroeconomic effects that greater amounts of Public Debt can exert, on GDP and such.

I don't want to get into the details of this more right now (as it tends to attract sanction), but it highlights some of the significant differences in funding between Public vs Private Debt - and reasons why they should not be conflated or treated as the same, in discussion here.

PeadarCo · 06-05-2018 7:03am

KyussB wrote:

It's well accepted that the crisis in the 00's was driven by Private Debt being directed into housing - with Public Debt playing a minor role, in the form of Stamp Duty tax relief for First Time Buyers or such.

The problem is while it started off as private debt it became nearly all public debt when the government guaranteed the banks and nationalised nearly all the banks BOI just about staying full government control. Even alot of the private debt still outside government control was through the government owned banks. The government had direct or indirect control and or responsiblity for a large component of the debt in Ireland.

Also the crisis did not get resolved the minute the government started borrowing money. It got worse.
The governments decision to guarantee the banks on the basis they had a liquidity problem and not a solvency problem is up there with the biggest mistakes an Irish government has ever made. Resulting in Ireland having to use the Troika as a lender of last resort. The majority of the money that has been borrowed since the crash has been to fund day to day spending. Even this large stimulus from borrowing has been dismissed as austerity. The recession would have been far worse without this money.

Wether public or private debt there is a limit to the amount that can be borrowed. You can start printing money but even that has its limits, as Zimbabwe, Venezuela and currently Argentina are finding out.

Is there a difference between public and private debt, yes but for the purposes of your theory it's irrelevant because there is a limit to how much both can borrow. That means if you bring in a jobs guarantee scheme you are restricted in how many jobs are socially productive but don't give an economic return(increase/maintain the government's ability to repay the increased level of debt). It's not a pancea for all our problems and from a practical point of view will run into all the problems our current social welfare system faces as others have detailed.

KyussB · 06-05-2018 2:10pm

Yes the banks were bailed out with public money, funded using Public Debt - it's a very different situation to government funding job programs with Public Debt.

For starters, the government was pumping Public Debt into a black hole in the banks balance sheets - which contributed nothing to GDP, it was done at a time that GDP was about to encounter a precipitous drop - a jobs program pumps money almost directly into boosting GDP, as it takes up idle workers and gets them doing useful work.

Part of the principle behind the jobs program, at a macroeconomic level, is it aims to keep GDP at or close to its maximum potential - even in the depths of an economic crisis - and if it's funded through Public Debt, then slack is allowed to build up this debt during economic bad times, with it returning to normal in economic good times.

Public Debt is not a bad thing. The limit to borrowing and spending, is determined by reaching full economic output - you have to stop spending when you reach maximum output (i.e. full employment), as otherwise inflation will become excessive - it is not determined by an arbitrary numeric amount of Public Debt, that is not where the limit is defined.

PeadarCo · 06-05-2018 5:06pm

KyussB wrote:

For starters, the government was pumping Public Debt into a black hole in the banks balance sheets - which contributed nothing to GDP, it was done at a time that GDP was about to encounter a precipitous drop - a jobs program pumps money almost directly into boosting GDP, as it takes up idle workers and gets them doing useful work.

It did contribute a lot to GDP and jobs. Anglo aside if the banks had not been bailed out any business and associated jobs that relied on the relevant banks to provide credit such as bank overdrafts as part of their standard working capital requirements would have gone bust overnight. That's not to mention deposits that are required to enable banks and governments to lend in the first place. Or put simply if the government hadn't did what they did(feel free to argue over the exact mechanisms) unemployment would have far far higher than the already high level it ended up reaching.

You have also ignored that the majority of government borrowings was to keep the government apparatus and associated jobs and welfare supports going. If the government had not done that the recession would have been far worse. What's also clear is that there is a limit to how much a government can borrow. Its nothing new if you look down the centuries government's have gone bust.

Governments cannot borrow or print an infinite amount of money in the short to medium term. Look at the Eurozone crisis. Look at Zimbabwe, look at Argentina and Venezuela currently.

Yes you can argue in the long run but in the long run we are all dead. Could you give any actual example of your idea actually working. The idea of borrowing money and then giving people jobs isn't exactly new.

KyussB · 06-05-2018 8:12pm

I would just prefer for like to be compared with like. This is branching from me pointing out how Private Debt and Public Debt operate differently, and should not be compared - and I've explained the details of this a few times now - and its getting sidetracked into the bank bailouts.

If you look at recent history, limits placed on government borrowing were political limits (such as by EU treaties) - not economic limits (as in, unsustainability, economically).

Nobody argues there are no limits - proponents of the Job Guarantee argue that the limits are different to what people traditionally are fixated on - which is, the total level of Public Debt vs GDP - when all you need to point out to discredit that view, is that the economic sustainability of that, is (for example, among other things) more greatly determined by the interest rates on that debt, not the overall debt level.

So the question is: What exactly IS the limit? I've given a fair argument as to what I think defines the limit (needing to avoid inflation concerns, from an economy reaching full employment and maximum GDP output) - what mechanism do you think defines the limit, for Public Debt?

An example of the Job Guarantee elsewhere, is the Indian Rural Job Guarantee - it's only a partial Job Guarantee, for rural areas only, but it provides something to look at.

PeadarCo · 06-05-2018 8:43pm

KyussB wrote:

So the question is: What exactly IS the limit? I've given a fair argument as to what I think defines the limit (needing to avoid inflation concerns, from an economy reaching full employment and maximum GDP output) - what mechanism do you think defines the limit, for Public Debt?

Simple the point at which a country can no longer afford the interest payments on it's debt and the point at which a government can no longer roll over debt or and or borrow more at affordable rates of interest. Both of which will change over time and are moving target/limit.

If the jobs the job guarantee do not maintain or increase the governments ability to repay the interest the idea falls apart. Feel free to correct me but the central idea that separates your idea from standard job supports and the public sector is that it requires a government to borrow until you have full employment? Governments have limits to how much they can borrow. As far the rest of your idea you have been very light on details but I struggle to see the difference between it and stuff like jobs Bridge and standard government retraining programmes. Something pretty much every first world country does.

KyussB · 06-05-2018 10:24pm

The method of funding differs depending on the country - for the US the people who came up with the concept would want it funded through direct money creation, with spending limited by e.g. an inflation target - if we were to implement it here, Public Debt is the most likely funding option - but there are other more complicated methods too, which are a bridge between both.

I've kept it to discussing Public Debt for the moment, to keep the discussion simple and primarily about the Job Guarantee itself - and I think I will keep it to that, for the moment.

Presently interest rates are at or around their lowest levels in modern history - around 1% for Ireland - such that it is easy to sustainably spend as much as we like on public funding, until rising inflation would force us to constrain our spending - only politics prevents this, it's entirely sustainable economically.

Right now today we could easily afford to implement a Job Guarantee, eliminate the remaining unemployment, and pursue a whole host of badly needed infrastructural/housing projects - the time at which we would experience a challenge, would be in the future when an economic crisis happens, and creates a loss of employment in the Private Sector, shifting more workers into the Job Guarantee.

salmocab · 06-05-2018 10:34pm

Surely a long term affect of this would be to saturate the building industry with too much labor leading to lower wages.

PeadarCo · 06-05-2018 11:06pm

KyussB wrote:

Right now today we could easily afford to implement a Job Guarantee, eliminate the remaining unemployment, and pursue a whole host of badly needed infrastructural/housing projects - the time at which we would experience a challenge, would be in the future when an economic crisis happens, and creates a loss of employment in the Private Sector, shifting more workers into the Job Guarantee.

We are near full employment as it is so its not really needed at the moment. As you still haven't explained how your idea works.

PeadarCo · 06-05-2018 11:19pm

KyussB wrote:

Presently interest rates are at or around their lowest levels in modern history - around 1% for Ireland - such that it is easy to sustainably spend as much as we like on public funding, until rising inflation would force us to constrain our spending - only politics prevents this, it's entirely sustainable economically.

You have summed up the problem how long do you think interest rates will remain so low. Look at the Euro zone crisis interest rates can increase rapidly due to economic shocks and Ireland has an economic shock on the way called Brexit. If you load up with debt has happened in the 00s you put yourself at risk of economic shocks. Whether that's private or public its irrelevant. Ireland as a small open economy is very vulnerable to economic shocks. So you are proposing this job guarantee(which you still have not described in any detail) is to be funded by large amounts of debt which given Irelands small size will come from abroad.

Look at Venezuela which used its oil wealth to provide large subsidies to its population. You will notice despite loading up on public debt and pumping into the economy through jobs and price subsides it hasn't prevented a humanitarian disaster.

KyussB · 07-05-2018 12:02am

PeadarCo wrote: »

We are near full employment as it is so its not really needed at the moment. As you still haven't explained how your idea works.

Our unemployment rate is still rather high, at 6% - nowhere near the highs in the worst of the recession, but still high enough.

The advocates of the Job Guarantee (JG) tend to disagree with traditional ideas of what constitutes Full Employment (claims that it lays around 2-4%), and argue that it can be driven much lower.

JG advocates actually argue, that in current economies, a certain level of unemployment is deliberately kept, in order to manage inflation - keeping some amount of workers unemployed, in order to keep wage expectations down - and want to replace this with the JG, paying workers at a minimum living wage below what the Private Sector would pay, in order to keep wage expectations down that way instead (yet without wasting economic potential, by keeping workers idle/unemployed).

KyussB · 07-05-2018 12:18am

PeadarCo wrote: »

You have summed up the problem how long do you think interest rates will remain so low. Look at the Euro zone crisis interest rates can increase rapidly due to economic shocks and Ireland has an economic shock on the way called Brexit. If you load up with debt has happened in the 00s you put yourself at risk of economic shocks. Whether that's private or public its irrelevant. Ireland as a small open economy is very vulnerable to economic shocks. So you are proposing this job guarantee(which you still have not described in any detail) is to be funded by large amounts of debt which given Irelands small size will come from abroad.

Look at Venezuela which used its oil wealth to provide large subsidies to its population. You will notice despite loading up on public debt and pumping into the economy through jobs and price subsides it hasn't prevented a humanitarian disaster.

Interest rates are partly a reflection of perceived risk of default - I argue that in an economy with a Job Guarantee, recessions would be much shorter, and economies would quickly recover - and I believe investors would realize this, and that government bonds would not require a high yield in order to successfully issue them.
The problem with this argument is that it depends on investor sentiment and guesses about their psychology - yet I still believe political barriers (fiscal treaty etc.) are a bigger barrier than the economic ones, here.

The difference between Private and Public debt is very relevant - as I've discussed in previous posts - so can we please separate them in discussion here? I think I've given very good arguments as to why they are different, but you aren't engaging with those - just asserting they are the same.

I agree that over-reliance on Private Debt is disastrous - the way that Public Debt works though (as I described many times), make it work in a very different way, not subject to the same risks.

I mean, straight-off the interest rate on a lot of Private Debt is determined partly by the ECB and is subject to rate rises during the term of the loan etc. - this is not true of Public Debt, the rate is fixed based on the bond yield when it is issued, usually - so there are many, many reasons not to conflate the two.

The problem you describe with Venezuela, is a problem with a trade balance that is over-reliant on a commodity with a highly volatile value - so that when the value changes significantly, it undercuts their economy and public spending.

That's not a problem of public spending or public debt. That's a problem with the fundamentals of their international trade and overreliance on a volatile commodity.

PeadarCo · 07-05-2018 9:05am

KyussB wrote:

That's not a problem of public spending or public debt. That's a problem with the fundamentals of their international trade and overreliance on a volatile commodity.

Why are you so focused on public debt? It's a side note. You have admitted already there is a limit to how much a country can borrow, which was my point on debt. You can't borrow limitless amounts of money. If you can't do that what's the fundamental difference between your idea and current government programmes and alternatives to such as investment in housing that don't require the government to borrow unlimitlessly

Venezuela is very relevant because its shows borrowing isn't a panacea. It did rely on high oil prices. But Irelands economy is also very volatile. Look at the swings in GDP movements over the last decade. The country is a small open economy that is heavily reliant on international trade.

We know there will be an economic shock coming down the line in the form of Brexit, how big will largely be decided by UK politics. We also have a Trump administration in the US which is the most protectionist in decades. Neither of which we have any real control over.

PeadarCo · 07-05-2018 9:08am

KyussB wrote:

JG advocates actually argue, that in current economies, a certain level of unemployment is deliberately kept, in order to manage inflation - keeping some amount of workers unemployed, in order to keep wage expectations down - and want to replace this with the JG, paying workers at a minimum living wage below what the Private Sector would pay, in order to keep wage expectations down that way instead (yet without wasting economic potential, by keeping workers idle/unemployed).

So how does it work in practice? If you were to implement it tomorrow how would you go about it?

Wanderer78 · 07-05-2018 9:14am

PeadarCo wrote:

Why are you so focused on public debt? It's a side note. You have admitted already there is a limit to how much a country can borrow, which was my point on debt. You can't borrow limitless amounts of money. If you can't do that what's the fundamental difference between your idea and current government programmes and alternatives to such as investment in housing that don't require the government to borrow unlimitlessly

We really need to get on top of our real debt burden, private debt. The creation of money is easier than you d think, the problem is, in the modern age, we ve decided this is best left to an industry that behaves in potentially unethical and immoral ways, our banking and financial sector. We need to reignite our government money creation systems, or we re probably gonna end up in big trouble

markodaly · 07-05-2018 10:32am

KyussB wrote: »

Right now today we could easily afford to implement a Job Guarantee, eliminate the remaining unemployment, and pursue a whole host of badly needed infrastructural/housing projects

The people left on the dole at this stage are not trained trades people, bricklayers, carpenters and the like.

They are people who are either between jobs or plain work shy. So good luck in using them to try and build houses and roads.

What if someone refuses to co-operate, do you advocate cutting off their dole if they don't show up for work on the building site at 8 in the morning?

markodaly · 07-05-2018 10:37am

Also, we have not touched the elephant in the room. There is an almost unlimited amount of labour in Eastern and Southern Europe that would lick their lips at the thought of a Job Guarantee, paid to do **** all in reality and because of Ireland's membership of the EU, very little could be done to stop hundreds and thousands arriving on shore to avail of it.

Would this be an 'Irish only' Job Guarantee ?

Wanderer78 · 07-05-2018 11:06am

markodaly wrote: »

The people left on the dole at this stage are not trained trades people, bricklayers, carpenters and the like.

They are people who are either between jobs or plain work shy. So good luck in using them to try and build houses and roads.

What if someone refuses to co-operate, do you advocate cutting off their dole if they don't show up for work on the building site at 8 in the morning?

once again, some of the most common causes of unemployment, in particular long term unemployment, mental health issues, addiction problems, behavioral problems, personality disorders, developmental disorders such as autism, learning disabilities such as dyslexia etc etc etc, many of which are in fact undiagnosed, which can and are exasperated by our existing social institutions

Bernie Sanders proposes Job Guarantee

Comments