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A Brussels-run unemployment insurance scheme is no fiscal solution

The new European Commission president Jean-Claude Juncker is a federalist. He claims in his new role that his first priority is “to put policies that create growth and jobs at the centre of the policy agenda of the next Commission”. Juncker was also the Prime Minister of Luxembourg and the head of the so-called Eurogroup (2005-2013) which comprised of the Eurozone Finance Ministers, the European Commission’s Vice-President for Economic and Monetary Affairs and the President of the ECB. Juncker and the Eurogroup were vehemently pro-austerity. He also reaffirmed last week at a – Meeting in Brussels of the Alliance of Liberals and Democrats for Europe, that “we need to keep austerity going”. Remember he was Angela Merkel’s choice for the EC Presidency! But there is new talk of federalist type fiscal innovations in Europe under the new Commission. The problem is that they are just neo-liberal smokescreens and will do very little to change the underlying problems that have prolonged the crisis and will ensure there is a repeat down the track.

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The Job Guarantee is a progressive vehicle for change

In my search for new terminology and descriptors I am no longer going to use “minimum wage” to describe the wage that a currency-issuing government should pay when implementing a Job Guarantee (JG). In the past I have written that to avoid disturbing private sector wage structure and to ensure the JG is consistent with stable inflation, the JG wage rate is best set at the minimum wage level. I have also indicated that the minimum wage should not be determined by the capacity to pay of the private sector, but should, rather be an expression of the aspiration of the society of the lowest acceptable standard of living. My view is that any private operators who cannot “afford” to pay the minimum should exit the economy. I also have proposed that the JG wage should be supplemented with a wide range of social wage expenditures, including adequate levels of public education, health, child care, and access to legal aid. Finally, I have stressed for many years that the JG does not replace conventional use of fiscal policy to achieve appropriate social and economic outcomes. In general, the JG would be accompanied by higher levels of public sector spending on public goods and infrastructure. I have written several times, in various outlets (academic, Op Ed, blog), that I see the JG as part of a fundamental transformative agenda to broaden the concept of work and to allow all people to receive a dignified and appropriate access to the distribution system. That message doesn’t seem to get through. So from now on the JG wage will be referred to as the living wage. Further, recent discussions of the JG reveal that commentators who criticise it do so from a standpoint of ignorance – a problem that is engendered by the blogosphere, which should be a liberating force, but in my view seems to unfortunately spawn narrow-mindedness and an anti-intellectual approach to policy debates.

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If you can have full employment killing Germans …

At the weekend I watched Ken Loach’s latest film (documentary) – The Spirit of ’45 – which was a classic – interesting and disturbing. After watching it I cannot understand how anybody could not achieve a score somewhere well into the south-west quadrant of the – Political Compass. It emphasised how societal values have changed and undermined the collective will that emerged in the early Post World War 2 period which garnered the political process into delivering structures that would never again see the mass unemployment and hardship that the Great Depression created. It was a hopeful period and politicians reflected that hope and acted as a mediating force in the underlying class conflict between workers and capital. The film traces how that “spirit” has broken down and what is required to once again make economies work for people rather than subjugating the needs of people to the economy – which really means allowing a small proportion of people to extract the benefits arising from the hard work of the rest of us. The film influenced today’s blog.

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A Job Guarantee job creates the required extra productive capacity

Even though the US government has shutdown, the BLS is still open for data downloads. That is something. More on that data another day. Today I have been working on a formal academic paper (to be presented at a conference in December) which examines the concept of “capacity-constrained” unemployment. This concept says that capacity constraints may create bottlenecks in production before unemployment has been significant reduced (this would be exacerbated if there are significant procyclical labour supply responses). In this case any expansion in government demand may have insignificant real effects – that is, the real output gap is not large enough to allow all the unemployed to gain productive jobs. This argument is often use to attack the Job Guarantee. It can be shown that while private sector investment, which is government by profitability considerations can be insufficient (during and after a recession) to expand potential output fast enough to re-absorb the unemployed who lost their jobs in the downturn, such a situation does not apply to a currency-issuing government intent on introducing a Job Guarantee. The point is that the introduction of a Job Guarantee job simultaneously creates the extra productive capacity required for program viability.

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UK workfare plans just show how mean-spirited and ignorant we are

The UK Chancellor George Osborne told the delegates at the 2013 Conservative National Conference in Manchester yesterday that he was ending the culture of getting “something for nothing”. In his – Speech – the Chancellor claimed that “no one will get something for nothing” from now on, in reference to the “Help to Work” program, dubbed a new approach, that would see “(f)or the first time, all long term unemployed people who are capable of work will be required to do something in return for their benefits, and to help them find work”. We should immediately challenge the claim that the unemployed are doing nothing. An appreciation of the function that unemployment buffers plays in the capitalist system would tell one that the people who are forced to be in that buffer are certainly very active and protect the rest of us from the damaging consequences of poorly crafted macroeconomic policy. But beyond that, the evidence is clear – workfare schemes are not effective ways to provide pathways to more permanent employment. They are poorly disguised compliance programs designed to let the most disadvantaged workers in our society know that we resent their existence and, like the usurer in the Merchant of Venice, we want our “pound of flesh” in return for the pittance we provide by means of income support. These programs shine a dirty light on how mean-spirited and ignorant we are – in believing that mass unemployment is anything other than a systemic failure of the economy, in the face of deficient aggregate spending, to produce enough jobs and working hours. They are the means by which we indulge in our neo-liberal delusions – until, of-course, the times comes for you or I to face the sack next!

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The ultimate boondoggle courtesy of slack government policy

Workers, particularly low-paid ones, are regularly sent up in comedy or satire. The 1959 British movie – I’m All Right Jack – was an acidic attack on the British trade union movement although it also parodied the stuffy upper-class British industrialists as well. In 2003, a British author Magnus Mills published the book – The Scheme for Full Employment – which is a satirical attempt to deride Keynesian full employment policies. Boondoggling and leaf-raking is the term that invokes the ultimate put down by the conservatives who laud the virtues of the private sector and accuse the public sector of creating waste and sloth every time someone proposes that the government introduce a large-scale job creation program to alleviate the dreadful damage that mass unemployment causes. Well the New York Times investigative team has discovered the ultimate boondoggle that has been made possible because of slack government policy. And, it involves our friends in the financial markets – those so-called productive, entrepreneurial free marketeers.

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Investing in a Job Guarantee – how much?

This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. This blog will provide a detailed analysis of the investment the federal government would have to make to introduce a Job Guarantee. You will see how surprisingly small that investment is.

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What is a Job Guarantee?

This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. The topic of this blog is the concept of employment guarantees as the base-level public policy supporting a return to full employment in Australia. We introduce the specific proposal – the Job Guarantee. In the next background blog we will see how much the Australian government needs to invest to make this policy improvement possible.

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Youth Guarantee has to be a Youth Job Guarantee

Last week, Eurostat released the latest – Retail Sales – data for the EU. It formalised what has been obvious for some time – private spending in the European economy is going backwards. But didn’t leading economists, including Nobel Prize winners, tell us a few years ago that if governments imposed austerity, the private sector would lose their worries about future tax hikes and start spending? Didn’t the current British Government say the same thing as a justification for the ficsal austerity that now looks like pushing the UK into a triple-dip recession (almost unheard of)? The answer is that these economists and politicians tried to convince us that there was such a thing as a fiscal contraction expansion. Fancy words like Ricardian Equivalence were dragged from the sordid annals of mainstream macroeconomics to give this notion some “authority” (because they knew hardly anyone understood what it was anyway). The wash up is they were wrong. And millions more are unemployed and moving towards or into poverty as a consequence. There is a wholesale failure of government at present in most advanced nations. A current proposal in Europe is to introduce a Youth Guarantee. However, for it to be effective it has to include a Job Guarantee component as its centrepiece. More supply-side activation is part of the problem and cannot be part of the solution.

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European Commission – Jobs for Europe Conference

I have been in Brussels this week as an invited speaker at the – Jobs for Europe: The Employment Policy Conference – being staged by the European Commission (September 6-7, 2012). One of the five main topics is “Pathways to full employment: job guarantee, social economy, welfare to work”. I gave a presentation yesterday on the Job Guarantee. The video of the presentation is available below.

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