During my postgraduate study years I read a 1954 article by American economist Clark Kerr entitled – The Balkanization of Labor Markets – which attacked the mainstream labour market views that there was mobility within labour markets such that poverty arising from low-pay was a function of workers’ preferences for low education and more leisure (that is, unemployment). As such, there was no reason for the government to intervene to improve wages or job security. Kerr’s thesis was that there was not a ‘single’ labour market accessible to all, where individual mobility would result from personal investment in education and skill development. Instead, he argued that the US labour market was “segmented” by institutional arrangements, which trapped some demographic cohorts into low-pay and insecure jobs. Poverty could arise from these traps. The idea morphed into the segmented labour market literature of the late 1960s and early 1970s. The applications were mostly Anglo because in non-Anglo countries there appeared to be more resistance to institutional arrangements that undermined the chance for workers to enjoy job security with decent pay. However, in recent years (decade) the trend towards precarious work where certain groups (women, youth, migrants) are trapped in low pay and frequent spells of unemployment has spread, with devastating consequences. The largest European economies – Germany and France – are now bedevilled with this issue and with a bias towards fiscal austerity, the path for workers out of the trap is limited.
Here is a summary of another interesting study I read last week (published March 30, 2017) – Happiness at Work – from academic researchers Jan‐Emmanuel De Neve and George Ward. It explores the relationship between happiness and labour force status, including whether an individual is employed or not and the types of jobs they are doing. The results reinforce a long literature, which emphatically concludes that people are devastated when they lose their jobs and do not adapt to unemployment as its duration increases. The unemployed are miserable and remain so even as they become entrenched in long-term unemployment. Further, they do not seem to sense (or exploit) a freedom to release some inner sense of creativity and purpose. The overwhelming proportion continually seek work – and relate their social status and life happiness to gaining a job, rather than living without a job on income support. The overwhelming conclusion is that “work makes up such an important part of our lives” and that result is robust across different countries and cultures. Being employed leads to much higher evaluations of the quality of life relative to being unemployed. And, nothing much has changed in this regard over the last 80 or so years. These results were well-known in the 1930s, for example. They have a strong bearing on the debate between income guarantees versus employment guarantees. The UBI proponents have produced no robust literature to refute these long-held findings.
On August 19, 1964, the then US President Lyndon B. Johnson established the – National Commission on Technology, Automation, and Economic Progress. He established the Commission in response to growing concern during the deep 1960-61 recession that the unemployment had been created by the pace of technological change. Ring a bell! He wanted to an inquiry to explore this issue and come up with recommendations on how to deal with the possibility that automation was wiping out jobs and the future would be bleak. Before the Commission had reported, the Federal government had reversed its fiscal austerity and the resulting stimulus had driven the unemployment back down to relatively low levels. The Commission noted that unemployment was largely the result of inadequate total spending and that the Government had the tools at its disposal to eliminate it. They considered that there would be workers (low-skill etc) who would suffer more displacement from technology than those with more skill etc, but that ultimately even those workers would be able to get jobs if the public deficit was large enough. In this regard, they eschewed pointless training programs that did not provide immediate access to jobs. Instead, they recommended (among other things) the introduction of a Job Guarantee (Public Service Employment) financed by the Federal government but administered at all levels of government. It would pay the Federal minimum wage and be available on demand. This is the preferred Modern Monetary Theory (MMT) approach and rejects solutions that rely on the provision of a basic income guarantee to resolve the problems created by unemployment.
Today, I have translated two interviews I did while I was in Europe recently. The original interviews were in Spanish. The first interview was with Andrés Villena Oliver for CTXT and was published in the Spanish newspaper Público. It was conducted at Ecooo in Madrid on September 28, 2017. The the second interview was with journalist Marta Luengo Garcés from the progressive newspaper El Salto Diaro. It was conducted at the Principe Pio Hotel in Madrid on September 29, 2017. You can get a feel for the concerns of the progressive journalists in Spain by the type of questions they asked me. I have also included the video of an interview I did yesterday (October 16, 2017) with Steve Grumbine of the Real Progressives. That should keep readers more than busy until tomorrow.
Today’s discussion is about how employment policy becomes so corrupted by neo-liberal ideology (overlaid with some healthy racism) that the government causes damage rather than advances well-being. The examples I outline demonstrate the wider problem that neo-liberal inspired governments clearly understand the economy is not working yet they cannot bring themselves to introduce obvious solutions to the problems identified. Further, while they claim their policy choices are constrained by the ‘money’ they have to spend (limited according to their narrative), when they do spend ‘money’ they bias the benefits to corporate interests as a profit subsidy rather than providing sustainable income support for the most disadvantaged who just become pawns in the subsidy to capital. And then, they pretend, they are obeying ‘market’ dictates when the ‘free market (not!)’ was never in the picture anyway. The on-going hypocrisy of this neo-liberal era.
Poverty arises for a number of reasons but a lack of income has to be a central characteristic of someone who is poor. And notwithstanding the increasing tendency for people who work full-time to be found earning wages that place them below the poverty line, the major reason for people having a lack of income is unemployment. That typically makes poverty a systemic event rather than an individual failure because mass unemployment is easy to understand – it occurs when the system fails to produce enough jobs to meet the desires for work by the available labour force. Then, to understand why the system fails in that way, we know that once the spending and saving decisions of the non-government sector are made, if there is still a spending shortfall in the economy, which generates the mass unemployment, then it has to be because the net spending position of the national government is short. That is, either the fiscal surplus is too large or (usually) the deficit is too small. In that sense, the introduction of a Job Guarantee would eliminate poverty arising from unemployment and the working poor because the Government could condition the minimum wage by where it set the Job Guarantee wage. If it truly desired to end poverty among those in employment then it would set the Job Guarantee accordingly. Others argue that a more direct way of dealing with poverty and lack of income is to just provide the income via a Basic Income Guarantee (BIG). The BIG idea has captured the progressive side of politics and many on the Right. It is another one of those sneaky neo-liberal ideas that look good on the surface but are rotten not far below. Supporters of BIG are really absolving currency-issuing governments of their responsibility to use their fiscal capacities to ensure there are sufficient jobs created – whether in the non-government or government sector. They are thus going along with the neo-liberal attack on the right to work. Moreover, closer analysis reveals that the introduction of the BIG would not, under current institutional arrangements reduce poverty at all.
I read a social media quip today from someone who said they had “been banned from their library for moving the books on trickle down economics into the mythology section”. That is pure class. The mover not the banner. But the sentiment is relevant to today’s blog on the latest evidence available on the European Commission’s much-touted Youth Guarantee, that was launched in December 2012 and became operational in April 2013. I say ‘operational’ although given the performance of the initiative that might be somewhat of an overstatement. The latest evidence comes from the European Court of Auditors, which is charged with assessing European Commission policy initiatives. The Report – Youth unemployment – have EU policies made a difference? – which was released on April 4, 2017, is not very complementary at all about the Youth Employment Initiative. In fact, one is not being unfair to conclude after reading it that the whole initiative has been an over-hyped (by the Commission) and grossly underfunded failure – as it was destined to be from the start. It is hard to put any other spin on it. None of the Member States involved have achieved their stated objectives to integrate the NEET cohort “into the labour market in a sustainable way”. The ECA found that the policy intervention has made only a “very limited” contribution and was not sufficiently funded from the start. Bad news but then it is hardly surprising. When the scheme was announced it was clear that its emphasis, design and funding commitments would lead to this type of outcome. One didn’t need to be a rocket scientist to be able to see that.
I have noticed a new phenomenon – a sort of new myopia – has emerged as the blogoshphere has expanded. The knowledge set that people think they are empowering themselves with becomes rather constricted – sometimes to a selection of blogs they may have read, sometimes even to the last blog they read on a topic. So we get a range of views and prognostications emerging – held out as expert commentary in many cases – upon the basis of perhaps just a few blogs having been read. As a long-term blogger, I also see this syndrome in the comments section of blogs. Someone new turns up it seems having read the latest offering from someone and launches into an array of criticisms which have been previously addressed but the commentator hasn’t bothered to read. The point is that research is a lengthy process and opinions should only be formed with conviction when one is convinced they have read all the major offerings in the area of interest and considered the evidence base. Which brings me to the real point. Before I wrote blogs I had generated 25 or so years of academic research material – in journal articles, books, book chapters, commissioned reports – hundreds of items of work. That is standard fare for an active researcher chasing competitive grants. That is where one’s contribution to ‘knowledge’ (as far as it is) is to be found. I only started writing blogs as a way of promoting Modern Monetary Theory (MMT) to a broader audience that would never read my academic work. I think that has been a successful strategy. But it has also created this ‘new myopia’. People think that the knowledge set available lies exclusively in blogs. It doesn’t. My blogs cut corners in writing style, referencing, and leave things unsaid that a more formal treatment would cover. The aim of the blog is accessibility and to provide an introduction to ideas which will encourage readers to delve further and arm themselves with deeper knowledge so as to promote informed progressive activism. A case in point is recent deliberations about one of my pet topics – the Job Guarantee.
A reader pointed out the other day that a good idea remains a good idea even if bad people advocate it. This was in relation to my blog – Why are CEOs now supporting basic income guarantees?. It reprised an issue that has a long history in culture and the arts. Should we hate Wagner because it was symbolic for the Nazis? What about the work of Budd Schulberg who produced the screenplay for ‘On the Waterfront’ but was simultaneously dobbing people into the House Un-American Activities Committee? There are countless examples of this sort of quandary, or not, depending on your viewpoint. As I wrote in the earlier blog (cited abive), I am always suspicious when the elites advocate something. It is not just a taste for Wagner they are articulating. Generally, they are advocating further pathways that they can shore up their control and power. Which means bad things for the rest of us! The BIG is one of those pathways and it leads to impoverishment and an on-going capitalist domination. A basic income guarantee is not a path to nirvana – I see it as just a neo-liberal strategy for serfdom without the work.
It does not quite add up. But then why should it. Spin is spin. On the one hand, we are being constantly told that the world has entered a new era of secular stagnation, driven by an ageing population and a fall off in productive innovation, and we just have to get used to the elevated levels of unemployment that come with that. Yet, other spin doctors are talking about the innovation revolution, the second machine-age, where the march of the robots who will be embedded with AI that will make them smarter than us, big data, automation, the Internet of Things, and more will render work obsolete. In both cases, apparently, the introduction of a guaranteed income is recommended. Suspicious? Then there is more. When CEOs of big companies start advocating a policy that they claim will improve the lot of workers I become immediately suspicious. And why would people with a progressive bent advocate policies that are part of the continuing conservative ambition to achieve social control and which essentially amount to an abandonment of responsibility that government has for maintaining employment for those who cannot otherwise find jobs? So what is with this rush of support for a basic income guarantee (BIG) from all sides of politics??