Common criticisms of a Job Guarantee

The common ones I hear are:

This leads into Zimbabwe/Weimar/Venezuela/etc. kind of talk and it's always so stubbornly ill-informed that I lose interest in talking any further.

Which clearly it's not, because it's optional, and it's a real job paying a socially inclusive wage.

(This is where you bombard the person with a list of possible JG tasks that have social value, and remind them that the alternative, the status quo, is to have people doing nothing instead.)

Yes it would bid up private sector wages to the fixed JG wage (intentional). But the JG would be designed to provide jobs that aren't profitable in the way regular jobs are. Environmental work is a perfect example.

(This is where you list Jefes, the Indian program, the New Deal, etc.)

I got this back from Phil Lawn about opposition to the JG. I am going to do a podcast episode with him next Tuesday, if anyone would like me to bring up something specific please post it below, thanks!

· Claim: the JG will drive up wages

o No – JG workers receive a minimum living wage. The JG wage sets a wage floor for the entire economy. There is no competition for workers up the entire private sector wage spectrum. No private sector employer should be able to pay a wage less that what is deemed to be a minimum living wage. If they currently are, that’s unethical.

o The JG will discipline workers’ demands for higher wages better than a pool of unemployed workers. The argument that an unemployed pool of labour prevents people with jobs from claiming wage rises is based on the false premise that an unemployed person is always ready to replace someone not willing to work at the current wage level. Wrong! If the unemployed person has lost some of his/her skills (human capital) from being unemployed for a period of time, then they offer no threat to the currently employed worker. With the JG, everyone who wants work has work. They maintain their human capital because they are given a job commensurate with their skill level and usual occupation. The worker now employed in the private sector at a wage higher than the JG wage has less power to demand a higher wage (note: not that workers should not be able to ask for a higher wage if it is justifiable – but this requires a better institutional framework to deal with such matters, which is sadly lacking and unrelated to the JG).

· Claim: the unemployed could get jobs if they weren’t so lazy

o If the private sector adjusts its discretional spending in order to net save out of current income (i.e., doesn’t spend all its income), then the central govt must run a budget deficit for there to be full employment (which it can do forever). This is not a theory but a fact. If the central govt doesn’t adequately net spend, it becomes like a game of musical chairs – there simply aren’t enough jobs than there are people willing to work.

· Claim: automation is about to make everyone redundant

o I can remember people saying this when I was in High School in the late-1970s/early-1980s. There will always be useful work for everyone. High tech machinery ought to make labour more productive and so we ought to receive a higher hourly wage for every hour of worked performed. This might reduce the number of hours we need to work in a week in order to receive a decent income, but it won’t render humans redundant. On the positive side, we won’t have to work so much – which is a benefit that economists talked about decades ago with reference to a post-industrial society. Automation is not a problem. It only becomes a problem when you have a system that drives down wages and forces those with jobs to work long hours. Then you have the difficulty of sharing all paid work across the entire workforce.

· Claim: There should be a UBI with no work attached

o I have no problem with a UBI if it is attached to work (i.e., a JG is a special form of a UBI)

o Having a UBI with no work attached won’t work for a number of reasons:

§ Those willing to work won’t accept having others receiving an income for doing nothing

§ Work is beneficial – idleness contributes to mental and physical health problems

§ A UBI should be based on mutual obligation – the govt provides a job for anyone willing to work who can’t get work; all individuals must work to receive a monetary claim on real wealth – i.e., they must contribute to the economic pie from which they will get a slice when paid

§ A UBI without work would be hyperinflationary since many would free ride (i.e., choose not to work), which would see financial claims on real wealth far exceed the new real wealth being produced by those who do work. Now that’s a potential Zimbabwe-like situation – one where you reduce the productive capacity of the economy and simultaneously increase financial claims on real wealth. This would be disastrous. Almost all people who argue in favour of a UBI without work don’t understand the economics associated with it which would render it catastrophic and set back for decades a policy mechanism designed to provide a minimum living income for all.

§ Above all else, a JG would not be exploitative – conversely, a UBI with no work attached would be exploitative because it would exploit those who are willing to work (i.e., those who are willing to contribute to the economic pie)

· Claim: the JG is nothing more than work-for-the-dole

o The JG wage is a minimum living wage, which would be well above the current NewStart Allowance (dole)

o People on the JG would be doing useful things and their jobs can be designed to be meaningful and workplace-democratic. They would also involve on-the-job training and the opportunity to attend educational/training courses, not unlike an apprenticeship

o The JG is not designed to replace private sector jobs and conventional public sector jobs. It is designed to provide work, a living wage, and educational/training opportunities to enable JG workers to transition into higher paid jobs should they emerge

· Claim: The JG would be inflationary because it would involve printing money and spending it into existence.

o These people simply reveal that their understanding of the public finances of a currency-issuing central govt and of demand-pull inflation could fit on the head of a pin.

o Every cent of central govt spending involves the creation of new money that is spent into existence. Taxes don’t fund anything. Taxes are a means for the govt to destroy enough private spending power to ensure its own spending is not hyperinflationary (govts spend first then tax). The amount of private spending power that a central govt needs to destroy is determined by the net savings desires of the private sector. The higher the net savings of the private sector, the less spending power the govt has to destroy.

o The amount of net spending at the margin that the central govt needs to undertake to achieve full employment does not need to be estimated by the govt. It’s determined by the number of people walking into JG offices looking for work. The more there are after work, the higher is the govt’s net spending. Importantly, this ensures that the net spending by the central govt is always just enough to achieve full employment – not a dollar more; not a dollar less. That is, the net spending of the govt (even if it is running a so-called deficit) is always such that the total spending in the economy (private sector plus public sector spending) is equal to the productive capacity of the economy. Hence there is no demand-pull inflation.

· Claim: A currency-issuing central govt couldn’t afford a JG

o A CICG has as much of the nation’s currency it likes for spending purposes – it cannot run out of the currency it owns and issues. A CICG can only run out of real stuff to purchase. This is precisely the aim of the JG – that is, for the CICG to run out of labour to employ (full employment).

· Claim: JG workers would be doing useless and soul-destroying work

o The Centre of Full Employment and Equity at the University of Newcastle conducted a survey of local govts in the Hunter region where it asked them what sort of work could be done if resources were made available to them. They all came up with a list of valuable activities as long as your arm (most with public goods characteristics). Provided JG work generates useful outcomes, a job can always be designed to be meaningful and task-varied enough to be interesting and stimulating. Surely critics don’t think that boring work is confined to the public sector?

· Claim: If the JG was possible and desirable, it would have been introduced by now

o Yeh, just like humanity has solved climate change and world hunger! Just because something is possible and desirable doesn’t mean it will be undertaken. If that were the case, all the problems of the world that can be solved would have been solved. One of the reasons why the JG hasn’t been introduced is because of all the misunderstandings associated with it as well as the false alternatives.

Thanks Edwin I think we should be able to cover at least some of that!

Also Iain Dooley, what I would like to see discussed in the podcast if possible, is other examples of JG placements. For example my suggestion of a Job Guarantee hackerspace where people submit circuit designs via a website and people are employed to build them.