Job Guarantees and social democracy

Today is my last day in London and I am tied up all day with meetings and activities and then later I am travelling back to Australia. So I invoked the guest blogger facility and asked Victor Quirk to share his views on employment guarantees. Victor has just finished a doctoral dissertation and has produced one of the most compelling research efforts I have had the pleasure to supervise. He chose a very challenging topic overall – the political constraints on full employment – and compiled a very rich argument based on a substantial interrogation of an extensive array of primary documents which he sourced from various national archives in Australia, Britain and the US. Now that Victor has finished his work I hope he will share more of it as a guest blogger. So … over to Victor.

Full employment and price stability

For those who have come in late, what the instigator of this blog, Professor of Economics at the University of Newcastle, Australia, Bill Mitchell, and his numerous colleagues around the world, have consistently and convincingly argued and demonstrated for more than a decade, is that full employment and price stability are completely feasible. Not by calling six or eight per cent unemployment ‘full employment’, but by actually eliminating all but frictional unemployment (two percent).

According to their ‘Modern Monetary Theory’ (MMT) – governments which have sovereignty over their currencies and floating exchange rates have no fiscal constraint, i.e., no shortage of money, nothing to prevent them from mobilising their nation’s unutilised productive resources, such as unemployed people, and giving them socially beneficial work to perform.

They argue that this means that governments such as the USA, Australia, Canada, India, … in fact most independent nations except members of the European Monetary Union, have the capacity to finance an expanding / contracting buffer stock of jobs to augment the contracting and expanding demand for labour in the existing labour market. This would provide paid employment to anyone who at anytime wanted a job.

Bill and his colleagues propose that these jobs be designed to entail useful work that meets a social or environmental need that is currently unmet by the public or private sectors.

The issue of wage inflation would be avoided in three ways.

Firstly, by paying only the minimum wage, which in Australia is sufficient to maintain a modest dignified existence, people in these jobs would retain an economic incentive to work in the conventional labour market when an opportunity arose. Employers would need pay little more than they presently offer to poach workers from the buffer stock employment pool, since the ‘Job Guarantee’ system would make no counter-bid to retain them. By ensuring easy re-entry to the Job Guarantee, there would also be no risk in taking short term temporary work. By keeping the JG system as flexible as possible, patchy mainstream employment opportunities could be accommodated without impairing the economic security of the workers involved.

Secondly, while in this pool, workers could be kept in a more productive condition than they would if left unemployed. With useful work to do, preserving their mental and physical stamina, preserving their social and communication skills, and with ample opportunities for developing their vocational skills, the potential productivity of these workers could even be extended.

Thirdly, by enabling them to pay their bills, maintain their families and preserve their social supports and social integration, the otherwise unemployed (and otherwise socially isolated) would preserve their word-of-mouth connection to the job market. By integrating the public employment service with the Job Guarantee system they could also be kept informed of job vacancies as they arose (in real time), on the job. Employers could even meet prospective workers on the job to gain a clearer sense of their skills. The Job Guarantee (the buffer stock of jobs) would effectively be an employer that encourages the poaching of its skilled workers.

Through a well-designed system, that integrated a flexible pool of public sector minimum wage jobs with vocational training and rehabilitation institutions, and regional labour market analysis and strategic planning, the productive capacity of the workforce could be constantly developed, maximising national competitive advantage in a race to the top, not the bottom. By thus enhancing the efficiency of the labour market, the enhanced economic security of workers (that would tend to empower them to make greater demands in the lower levels of the labour market) would be offset (from the employers’ point of view) by an increased supply (both quantitatively and qualitatively) of available productive workers.

As for the social benefits of using all willing labour, these hardly need explaining. People routinely excluded from employment because of disability, or other forms of entrenched discrimination, can be accommodated with tailor-made jobs, if need be, that can be progressively modified as a rehabilitation program, while providing the worker with the dignity and economic security of steady, paid employment. The same system could also provide vocational experience opportunities for higher education and technical college students. To the extent that people would require attendant carers and other supports to participate in the workforce, these otherwise non-existent jobs could be filled by other Job Guarantee workers.

The sorts of institutional arrangements to do all this, and develop the nation’s skills base along the way, while building a fairer, healthier, more cohesive and sustainable society (using all the labour power we otherwise fail to utilise), have been proposed in detail and can be found in free downloadable publications from the CofFEE website.

And while we here in Newcastle have focused on Australia as the context for our designs of such systems, people in other countries with a grasp of the underlying economics can develop plans better adapted to their own existing institutional arrangements.

So is this possible?

The obvious question for me in all this is: if this is so possible, and so obviously worth serious consideration at the very least, why isn’t it being widely discussed on national television, or in the major newspapers? Why have so few public policy makers taken a close interest in it?

This question has been at the heart of a Phd I have been working on for six years.

The simple answer is that the people who run our societies, the people who provide the campaign donations, who control the editorial policy of television networks, who fund the think-tanks, who bankroll the ‘economic education’ campaigns, who run banks and other corporations, who transfer back and forth between the upper echelons of government and the corporations, etc., do not see the elimination of poverty and unemployment as desirable at all. Labour underutilisation preserves the social domination of employers over workers.

Although this accusation is generally denounced and denied, since admitting to it would be likely to provoke an electoral backlash and thereby make it difficult to maintain, there have been times and places when it was openly discussed in many countries. A particular case in point was during and immediately after the Second World War in countries like Britain and Australia. The Times expressed it this way in 1943, when post war full employment was being contemplated:

Unemployment is not a mere accidental blemish in a private enterprise economy. On the contrary, it is part of the essential mechanism of the system, and has a definite function to fulfil. The first function of unemployment (which has always existed in open or disguised form) is that it maintains the authority of master over man. The master has normally been in a position to say: ‘If you do not want the job, there are plenty of others who do’. When the man can say: ‘If you do not want to employ me, there are plenty of others who will,’ the situation is radically altered.’

The great Michal Kalecki had a more nuanced view. In his excellent paper on the ‘Political Aspects of Full Employment’ of 1943, he argued that there was no economic impediment, as such, to establishing full employment. The problem was political. Employers would sense their loss of power and would seek to restore unemployment. As well as the sort of labour market power-balance issues reflected by the Times, he argued that governments are more careful to preserve ‘business confidence’ when a downturn in investment can cause electorally damaging unemployment. If a government could automatically top up aggregate demand whenever private sector activity fell, it would be less responsive to business demands for tax concessions, ‘structural reform’, and so forth. He concluded his paper of 1943 reflecting on the possibility of employers turning to more authoritarian methods to bring workers to heel if unemployment were permanently abolished.

Why was there this candour and open discussion of this during and after World War II? Because the public spending required to mobilise these countries for war produced the full employment that employers and their mouthpieces had for decades declared to be impossible, particularly during the depression. H.V. Evatt, Labor Attorney General of Australia, told the 1942 Constitutional Convention, the first since Federation:

With the lesson that it took a war to teach us, we can no longer assert that the problem of unemployment is insoluble, that men are out of work only because they are unfit for work or unwilling to work, that financial policy prevents their employment, that the task of maintaining full employment is not a responsibility of the national Government.

Despite the best efforts of the conservative Opposition lead by Robert Menzies to stop them, Prime Minister John Curtin and Treasurer Ben Chifley maintained full employment after the war. By the final year of the war, the Financial Editor of the conservative Melbourne broadsheet ‘The Argus’ had to explicitly concede the point:

The experience of the war years has shown the Australian people that full employment can be attained. They are not likely to accept as inevitable the waste and soul-destroying bitterness of the large-scale unemployment of the depression years. ‘Full Employment Must not Fail’ (The Argus, 31/5/ 1945).

Full employment was achieved by having a large program of prepared public sector employment on standby to soak up unemployment wherever it occurred. An example of how it worked was provided in 1949 when a deep recession then underway in the United States, and a National Coal Strike that Chifley controversially broke by sending in the army to shift the surface coal, threatened to cause unemployment in Australia. To ensure this disruption did not induce a local recession, in August a ‘National Works Council’ announced a massive program of £743,357,061 of public works for the Commonwealth and States, declaring ‘that this should be sufficient to cushion effectively any recession which might be experienced in Australia in the near future’ (Canberra Times, 19/8/1949:4).

“Of this sum, nearly half is for work which could go ahead at short notice,” said Mr. Chifley. “The works involved are mainly for the building, construction and engineering industries. If these industries can be kept busy, and, if necessary, expanded, serious unemployment should not occur in other trades and occupations. The works in the reserve are so arranged that they will give employment in virtually all the cities and areas of the country,” he added.

“If Australia is again hit by a slump, the National Works Council is determined that Governments should not again add to the tragic waste of our greatest, national assets – the daily work of our citizens. If private employers cannot offer sufficient jobs, then the Governments will, but not make useless work. All the plans in the reserve are for genuine developmental projects which will add to the strength and efficiency of Australia’s economic machine” (Canberra Times, 22/8/1949:2).

It is almost surreal for those of us who never knew full employment (it was abandoned in Australia when I was 16) to see what the consequence of a government with this sort of attitude had on the lives of their people. By the time of this announcement unemployment had been kept at one per cent for five years. The public were by then so habituated to full employment, so conversant in the Keynesian principles that underpinned it, that this was the entire announcement of the state of the labour market on page five of the 16 September edition of the Melbourne Argus:

Unemployment
On Wednesday, 2,705 people in Australia were entitled to unemployment benefits. This was 1,055 less than on the previous Wednesday. – Mr Holloway, Minister for Labour and National Service.

The population was around eight million at the time, and the unemployment benefit was a non-contributory, non-time restricted benefit system for which one only had to be unemployed and seeking work to qualify. The Commonwealth Employment Service had tens of thousands of unfilled job vacancies.

What would be the size of the headline of such an announcement today?

In this environment Kalecki’s prediction was fully confirmed. All through the 50’s and 60’s employer groups and their conservative mouthpieces, such as the Sydney Morning Herald (it has mellowed somewhat in the intervening years), all commiserated the loss of unemployment as a productivity driver.

The plain truth is that in a labour market which favours the seller of services, workers have become less inclined to exert themselves. They have lost fear of unemployment, and, generally speaking, no other adequate stimulus to steady, conscientious effort has replaced that economic spur (SMH, 7/5/1949).

Having been forced to swear their commitment to preserving full employment in order to win the 1949 election, the Menzies cabinet were deeply unhappy about having to preserve it (for fear of the electoral consequences of not doing so). In one 1951 cabinet meeting the Prime Minister (Menzies) and Deputy Country Party Leader (John McEwan) discussed the 1951 inflation spike (caused by the wool boom of the Korean War):

McEwan: Inflation results from two things: too much money and too little work. The circumstances of full employment are the greatest single cause of inflation.

Menzies: If we can reduce public spending and private investment we will be attacking that problem.

McEwan: It is a terrible thing to think that the fear of unemployment is the only way that men can be made to work harder (Cabinet Notebook, 1951a).

We also see Menzies frustration at not having unemployment to attack the trade union movement when he observed the diminished impact of a threat to de-register a maritime union:

De-registration was a strong weapon but now in full employment it is not so useful (Cabinet Notebook, 1951b).

In July 1951, industrialist G.H. Grimwade, as Chairman of the editorial committee of the Institute of Public affairs was reported to have told the Junior Chamber of Commerce in Melbourne that :

Unemployment “was a promoter of energetic endeavour and respect for authority, whether benign or malign,” he said. Mr Grimwade emphasised that in the past, minds had become warped by this fear of unemployment, “and heaven forbid that I, or anyone else, should call for its reintroduction.” He said that the world was living in the shadow of Socialism, which was “now being sold under the latest brand ‘the Welfare State.’ (Argus, 28/7/1951)

…. and so the story went until the early 1970s when BHP Chairman Sir Colin Syme made his public call for more unemployment, a policy soon implemented by unelected Treasury officials behind the back of the Whitlam Government, consolidated by the Fraser-Lynch-Howard administration of 1975 – 1982, and institutionally embedded by the Hawke, Keating, Howard, Rudd and Gillard governments thereafter.

It is very informative to follow the British and Australian debates over full employment during the Nineteenth and Twentieth Centuries. We see the call for the State to supplement the deficient labour demand of the private sector was a central demand of the early labour movement (1890’s – 1910’s), it became a core goal of the Australian Labour Party during the 1930s, was implemented during WWII and maintained for thirty years (1944-1974).

It was then abandoned during the corporate mobilisation against the Whitlam Government, erased from the public memory by a massive corporate-funded economic education propaganda campaign maintained since 1976, leaving Bill and his colleagues arguing on platforms such as this blog that full employment is possible to a public that is largely oblivious that they once had it for thirty years.

Even worse, they are told by credible media outlets, such as the ABC, that the 12 per cent labour underutilisation rate they experienced during the later Howard years was full employment.

The political constraints on full employment

The broad church of Keynesian economic supporters don’t all support the Job Guarantee model largely because they don’t (in my opinion) appreciate the explicit price stability mechanisms incorporated in its design.In the 1980s, Gosta Rehn, the great Swedish co-architect of Sweden’s 1950s reformulation of a full employment economy, criticised the Anglo versions of full employment for their lack of an explicit inflation control mechanism, arguing that the increased bargaining power of Labour under conditions of full employment has to be taken into account in its design.

Where the old model definitely achieved full employment it did so through fairly cumbersome methods of estimating the amount of aggregate demand that needed to be added to the economy in order to bring it to full capacity. Over estimations produced inflationary pressures. The reliance on the mainstream public sector was more prone to expansion than contraction.

Fixed exchange rates required manipulating the economy (stop-go) to resolve exchange imbalances. Regional and local pockets of unemployment required the whole of the economy to be kept on the verge of over-heating. And when the OPEC inflation shock hit, no effective mechanism existed for negotiating the fall in national income between labour and capital, and unemployment was unleashed to force labour to bear the brunt.

By contrast, the Job Guarantee delivers a packet of aggregate demand precisely when and where it is required, since it is triggered by an individual reporting their unemployment. As a third sector to augment both the existing private and public sectors, its jobs can be designed to supply what the mainstream labour market requires in terms of a better equipped workforce, rather than compete with either for labour.

While providing better economic security to working people, and a constant improvement in the equity and public amenity for rich and poor alike, for the able and disabled, it will produce a better and more sustainable society. This is not nirvana. This is simply a mechanism for a more civilised and equitable method of organising market-based societies than currently obtains anywhere in the world.

But have no doubt on one point. The reason why this idea will be a long time gaining ground is not that it is in some way outlandishly utopian, because it is not, or that the numbers don’t add up, but because the neurotic wielders of global power in 2010 do not wish to lose the position of domination that other people’s poverty and unemployment gives to them. Personally, I believe these socio-paths need our understanding and support.

But even before we start them on their therapy, there are sufficient numbers of good, well intentioned, positive progressive thinkers who advocate for social democracy, that, in my opinion, need to get their heads around what the MMT community are reporting. The Ted Wheelwright lecture. by Professor Fred Block this year is a case in point.

Professor Block believes social democracy is possible using guaranteed minimum incomes, and proposes Government fiscal constraints should be overcome by requiring multinational corporations to invest their profits in socially and environmentally beneficial activities.

I don’t doubt the good professor’s intentions, but I don’t see his proposals leading to a more equitable distribution of social power. Disengaging a large segment of the population from all economic activity except consumption, making them dependent on the willingness of others to provide for them, is surely more likely to disempower them than empower them.

Conclusion

Making the civilising progress of society dependent on the profitability and good will of multinational capital is surely more likely to empower them than disempower them.

Clearly, the elimination of social domination as an organising principle of society will entail all of us acquiring many skills and forms of knowledge we do not already possess, but I believe Modern Monetary Theory and the potentialities of the Job Guarantee are fundamental concepts for advocates of social equity to take the time to consider.

Saturday Quiz

The Saturday Quiz will be back again tomorrow sometime with a tricky premium question to test all those smarties who think it is getting too easy. For us common folk … the other four questions will hopefully remain a (bit of a) challenge.

Time for me (Bill) to get to work today.

That is enough for today!

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    48 Responses to Job Guarantees and social democracy

    1. Andrew Wilkins says:

      I would like to learn more about the JG details. I feel the JG would bring dignity to the vast majority of responsible under utilised workers. It would also provide bargaining power to those in the public sector at or close to minimum wage.

      My questions are these:

      1) There will be a minority of whinging bludgers who will reluctantly show up to clock the nominal hours. Some of these individuals will be disruptive and difficult to manage. There may be elements of the criminal underworld topping up their income when business is quiet. How will low performance and non-performance be managed in the JG. Can disruptive bludgers be sacked?

      2) Following question 1. Is there any social security provided for chronic JG non-performers. Where is the base social security rate set?

      3) Will bridge unemployment benefits be provided at the same rate as JG workers? e.g. If newly unemployed you have 6 weeks to find a job at rate X before you have a choice of JG at rate Y or social security at rate Z.

    2. Neil Wilson says:

      Andrew

      1) Does it really matter? I’m sure that’s covered in Bill’s treatise on the matter, but I’d go for they turn up, do the hours and the hours are signed off as satisfactory.

      2) I would have it that if you don’t do the hours or those hours aren’t signed off you get nothing. It’s a real job.

      3) They should go to JG straight away and JG should be all there is. Don’t forget that looking for another job could be classified as ‘useful work’ and it may be that is the first ‘layer’ in the JG design.

    3. stone says:

      Victor Quirk -cheers for this wealth of insight, I’m always quibbling but I’m very grateful to people like you and Bill who take the trouble to make what you do accessible to non-economist like me.
      Neil Wilson “They should go to JG straight away and JG should be all there is. “- I think it is slightly murkier than that. There is the very thorny issue of who is genuinely too disabled to work. In the UK you can qualify for incapacity benefit (ie more than unemployment benefit) if you “need” alcohol before midday.
      To my mind a wider issue is should we all be working such long hours? My mum says that when she started work as a typist in the 1960s she finished the task she was assigned and reported back to get more work. That was met with great consternation from the supervisor and her fellow workers. You were supposed to just mess around unless the supervisor actively set you another task. Someone I know asked to go part time and they were told no and what is more they were demoted so that someone with the “right” attitude could be put in the job whilst they had to work full time in a lesser job. Bill says his aim is for humanity to “produce less and distribute it more fairly”. Perhaps some thought should be given to addressing our long hours culture. After all it seems ironic that hunter-gathers only work 4hrs per day and yet we with all our labour saving machines etc are focussed on working more. I think the ideal would be if people as much as possible were able to work as much or as little as they wanted. I’m not sure that the citizen’s dividend/minimum income idea is so bad so long as any extra income gained is not subtracted from it. In the UK I see a key problem is that people loose benefits by working.

    4. graham says:

      Dear Victor,
      what a great guest blogger posting. Congratulations.

      I’ll see you soon to get on with “Full Employment Australia”.

      I’m emailing from an internet cafe in Florence – and I’m bringing back that Michaelangello you wanted :)

      Take care

      Graham

    5. Victor says, “By contrast, the Job Guarantee delivers a packet of aggregate demand precisely when and where it is required, since it is triggered by an individual reporting their unemployment.” I suggest that JG does not provide much AD in that the JG wage is very close to unemployment benefits (at least in some countries).

      JG does bring additional AD in that factors of production other than JG labour are needed to work alongside JG labour (e.g. permanent skilled labour, materials, machinery, etc). And these additional factors of production must be ordered from the regular economy and must be paid for. But there is a paradox here.

      If the economy cannot take any more stimulus without excess inflation ensuing, the additional AD caused by ordering those other factors of production will be inflationary. On the other hand if the economy CAN take that additional AD, why direct the additional AD towards JG? That is, directing it towards the creation of more regular jobs (public and private sector) would be better.

      For the way out of this paradox, see my seminal (?) work on the subject:

      http://mpra.ub.uni-muenchen.de/19094/

    6. Min says:

      “Personally, I believe these socio-paths need our understanding and support.”

      Hmmm. It seems like an important aspect of the treatment of sociopathy is incarceration. :)

    7. Fed Up says:

      What about a retirement guarantee?

    8. NKlein1553 says:

      “…the people who run our societies, the people who provide the campaign donations, who control the editorial policy of television networks, who fund the think-tanks, who bankroll the ‘economic education’ campaigns, who run banks and other corporations, who transfer back and forth between the upper echelons of government and the corporations, etc., do not see the elimination of poverty and unemployment as desirable at all. Labour underutilisation preserves the social domination of employers over workers.”

      George Carlin, an American comic, said something pretty similar many years ago:

      “You know how I define the economic and social classes in this country? The upper class keeps all of the money, pays none of the taxes. The middle class pays all of the taxes, does all of the work. The poor are there… just to scare the shit out of the middle class. Keep ‘em showing up at those jobs.”

    9. Stephan says:

      Victor. Great post. Thanks.

      I think one fact overlooked is how the neo-liberal agenda and the supporting narrative feeds back into society. How society thinks about the unemployed. When Social Democrats abandoned their ideals, betrayed their founders (Lassalle, Bebel, …) and introduced Hartz IV it was about skill deficiency and the remedy should come from the supply side. That of course didn’t work. And because Mr. Market is always right the public asked “what’s wrong with the unemployed?” Maybe character? The infamous statement of the foreign minister about “late roman decadence” of the unemployed. The character changing agenda didn’t work either. Comes dear Thilo Sarrazin with his new book and explains its all about genetics. Sorry but such socio-paths don’t have my support. People are subscribing to these un-scientific insane arguments. They are brainwashed now for 30 years. His book is the top-seller in Germany. What next? You’re unemployed because of your physiognomy?

    10. Neil Wilson says:

      “I suggest that JG does not provide much AD in that the JG wage is very close to unemployment benefits (at least in some countries).”

      What about the extra aggregate supply? Doesn’t that count? What about the normalising effect on private jobs through competition? (If the JG job is 37 hours a week then 40 hour weeks for the same money is unlikely to exist).

      “That is, directing it towards the creation of more regular jobs (public and private sector) would be better.”

      That suffers from the same problem – when to withdraw the public money and the cost gap to the next job. We have tax credits now in UK and its a means tested shambles leaving marginal tax rates above 90% in some instances (and certainly at 70%).

      My suggestion would just be the Universal Pension – in other words you subsidise all ‘useful activity’ in society to the point where people can live doing it. ‘useful activity’ is a political construction than can be varied depending upon your prejudices – and would extend to pensions, the disabled and perhaps carers as well as normal and voluntary jobs.

      That way there is no issue of income withdrawal, no gaps, no need to worry about whether JG competes with anything else, no need to decide which jobs to subsidise and which not to – just a simple blanket payment that is the one, and only, safety net. The one below which no-one can fall but everybody can rise.

      The other advantage is that work automatically pays, and it is also an argument for a flat rate income tax on higher paid jobs. The argument for progressive taxation is that there is a difference between discretionary and non-discretionary spending. If non-discretionary spending is covered by the Universal Pension, then you can tax all discretionary at a single rate.

    11. stone says:

      Neil Wilson, your very wide interpretation of the Job Guarentee is making it evolve towards being almost a citizens’ dividend type set up (ie everyone gets a flat pay out). They have such a thing in Alaska (but only $800 per year rather than the £10000 or whatever that might be required) and Milton Friedman of all people at one time advocated it. I kind of think it might be the best solution too. It would be very cheap to administer.

    12. Some Guy says:

      Victor – a high standard of blogging. Gotta keep Bill on his toes, or he might become one of those whinging bludgers who reluctantly shows up to write the nominal blog. Do you have a link to your dissertation?

    13. Andrew Wilkins says:

      Neil,

      You replied to my comment, talking about bludgers who turn up at JG to do the minimum.

      1) Does it really matter? I’m sure that’s covered in Bill’s treatise on the matter, but I’d go for they turn up, do the hours and the hours are signed off as satisfactory.

      Notice I was careful to qualify my question with a statement saying the majority of workers would be responsible. It doesn’t matter much to me, other than basic issues of security. I wouldn’t want to be stepping on discarded needles and facing up to pyschotic axe murderers in the lunch queue.

      I am anticipating the questions, legions of neo-liberal elites would throw in our faces. They will be much less kind. We need to pre-empt and have a solid counter for their arguments. Preferably answer their questions, before they can open their spiteful little mouths. The Chinese in SE asia have a term “kiasu” which there is no ready English equivalent (look it up in Wiki). If we are to make any headway against aggressive interests, it wouldn’t hurt to be a little more kiasu.

    14. CharlesJ says:

      Andrew Wilkins,
      In various interviews Bill has stressed that JG employment carries the same rights and responsibilities as any other employment – if someone misbehaves they are subject to disciplinary action. In fact, this is a fundamental part of the solution that someone on JG is no different to someone employed in regular work – they can even have union representation if they choose!

    15. mahaish says:

      i’m all in favour of elr(employer of last resort)

      but in the australian and wider context implimentation faces siginificant hurdles.

      firstly the mantra today rather missguidedly is igbc(inter temporal governmentbudgetary constraint), and elr would incorrectly be percieved as a threat to igbc

      the larger deficits that would potentially be entailed in running elr, would have the deficit hawkes in a fit. it just wont happen until we bury the rotting carcus of igbc, and all those that support it also have one foot in the grave as well.

      furthermore, australia has a unique wage setting system, with a lot of powerfull vested interests in keeping real incomes growing, so the question is would the unions cop such a system, let alone business.

    16. victor quirk says:

      Many thanks for some interesting comments today. I’ve come back to see the discussion having scraped paint off a friends house today and having watered Bill’s garden. We’ve had some very heavy winds here in Newcastle today and I’m afraid his tomato plants have taken a bit of a battering!

      Andrew Wilkins and Neil Wilson

      Our first attempt to explore these questions (which entailed some lively debate) is here

      http://e1.newcastle.edu.au/coffee/pubs/wp/2006/06-15.pdf

      A more recent extended version is in the report Creating Effective Local Labour Markets of 2008:

      http://e1.newcastle.edu.au/coffee/pubs/reports/2008/CofFEE_JA/CofFEE_JA_final_report_November_2008.pdf

      I have taken a lot of interest in these questions of how it might be operationalised in Australia as I have a background in working with long term unemployed people in Melbourne (I was a specialist employment counsellor and community based vocational training centre manager over an 18 year period). I can confirm Andrew’s point that there are people out there who no matter what was done to encourage and accommodate them they would prefer to wreck what others are trying to do.

      However, in my experience of about 12,000 long term unemployed people, all but a minuscule proportion responded to encouragement, constructive peer pressure, and having someone get to know them as a friend. I would argue that there are probably more anti-social misfits running society than are likely to turn up on a job guarantee job. But yes, you are right, there needs to be contingency handling processes and we have included these in some detail, as you would with planning any public institution that deals with a large, diverse and changing population, such as a school, hospital, public transport system, and so forth.

      Our designs – I should add – were put up merely as demonstration models to suggest how such a scheme could be implemented in Australia, and came with an invitation for suggested modifications. The implementation of these ideas in even very similar cultural and social systems may need to be very different – we had our minimum wage, unemployment benefits, federal and local government structure in mind when we undertook these exercises.

      The basic principle re your questions is that this is a job, governed by the same industrial relations laws and treated by the social security system in the same way it deals with other jobs. In addition it was to be a very ethical, considerate and flexible employer that invested enormously in the health and safety and training of its workforce.

      Stone – thanks for the cheers – I am reminded of the argument by one scholar that the standard of living of indigenous Australians at the time of white colonisation, in terms of hours worked to produce their opportunities for leisure and cultural participation, and standards of nutrition, etc., far exceeded those of the British working class at the time. My particular interest (I am a sociologist – political scientist) in your point, is that we face a different set of power relations in a market based system in which the threat of unemployment is removed. It means that working people and their institutions (such as unions) would need to develop a new set of skills to use that power in an economically and environmentally sustainable way. My discomfort with guaranteed minimum incomes stems from having worked with people who were on unemployment benefits for ten years or more, and their social isolation, erosion of their social skills (inability to hold a conversation) and their disconnectedness (living through television, etc) seems a very dangerous thing to risk inflicting on millions. It is the tittytainment model that Zbigniew Brezinski proposed to the ‘state of the world forum’ in 1995 . Zygmunt Bauman argues that once a pool of dependent, non-producing life-long consumers are created, the risk of demagogues demonizing them as parasites in the eyes of the productive population could lay the seeds of future holocausts. In my experience of dealing with people who have effectively lived in this condition, they long for some useful, productive purpose. Why not then use all this human power to produce a richer, healthier, more sustainable and enjoyable human experience for us all?

      Graham – Great to hear from you. Nothing too ostentatious thanks. A pieta for my flat balcony perhaps.

      Ralph – you’re right, I do tend to think in terms of the Australian context and such a system would impact differently elsewhere. Currently the Federal Minimum Award in Australia is $569.90 per week (before tax), or $15 per hour (as rounded to the nearest 10 cents). The current single adult rate for Newstart Allowance (Australia’s main unemployment benefit) is $235 per week, but depending on how many children, and whether a person is married, all sorts of other rates apply. Low paid workers with children are also eligible for supplementary family allowances. On this basis, and with multiplier effects, I would think that the aggregate demand gap would be narrowed with each Australian job guarantee commencement. It would be very interesting to get models of a few different versions of an operationalised Job Guarantee in other countries. I will read your paper and get back to you.

      Min – I’d be satisfied if we could just arrange it so they weren’t running the world. Competitive hierarchies tend to concentrate sociopaths at the top. During the course of the Phd I have become very interested in the work of a group of US political psychologists who argue that a great deal of social domination orientation, materialism, xenophobia, etc., is attributable to our species’ techniques for managing our fear of death. It comes under the umbrella of ‘Terror Management Theory’ , well worth looking up as I think it does point to some solutions to a lot of anti-humanitarianism. Mind you, had Montagu Norman been incarcerated, Britain and Australia at least may have avoided the 1930s depression.

      Fed Up – What should such a guarantee entail in your opinion?

      Nklein 1553 – Carlin is almost exactly paraphrasing Goran Therborn’s notion of ‘Brazilianisation’. He sets it out in ‘Why are some peoples more unemployed than others?’.

      Stephen – The demonization of the unemployed is a necessary step in the process of maintaining unemployment as an instrument of social domination. Unemployment must be kept as unpleasant a condition as politically possible to ensure it serves as a repulsive incentive to force people to accept terms of employment more favourable to employers. If the public were presented with a more sympathetic understanding of why the unemployed behave as they do – ie., understood the effects of poverty and social isolation on people – there would be pressure to make unemployment a less painful experience, which would defeat the purpose of preserving a pool of unemployed workers. Without such a pool workers would be in a stronger position in their daily negotiation with their employers as to how hard they work for their pay. Denigration of the unemployed has been a consistent feature of public policy in this area for 800 years.

      Some Guy – Thanks – and yes we all have to keep William on his toes. I think the regular commentariat of this blog do an exceptionally good job of that. At the moment the Phd is in the hands of the examiners, and I expect they will have some suggestions for improvement (hopefully not involving the shredder), but once its through the gap I will be pleased to make it available.

      Mahaish – I find the lack of interest of Australia’s trade union movement in Bill’s work and the Job Guarantee quite inexplicable. People within the union movement with whom I have discussed this just say the leadership are careerists on a trajectory to a seat in parliament, and wouldn’t want to rock the boat by promoting anything so outrageous as full employment. But could you expand on your point in the last line (ie, the connection between real incomes and opposition to the JG?)

      Many thanks for your input folks!

    17. mahaish says:

      hi vic,

      the unions might see elr as a threat, in that under current wage fixing arrangements they are able to provide atleast nominal if not real wage increases to their membership.

      they could see elr rightly or wrongly as a stalking horse for undermining the conditions and wage agreements they have allready secured, and reducing there power to achieve future wage rises.

      but i think the bigger problem , is overcoming the budget surplus fetish we have in this country. elr would require us to run larger budget deficits consistntly than previously encountered. this would come up against considerable resistance from the neo classical right, and furthermore we would have to overturn the principll of rba independence perhaps as we pursue zirp(zero interest rate policy), as a consequence of those larger deficits, if we want a skirmish with the debt markets.

    18. mahaish says:

      i meant to say, “if we want to avoid a skirmish with the debt markets”

    19. stone says:

      Victor I agree that welfare dependency can mess people up just as can inheriting money (the “trustafarian” phenomenon). I wonder though whether if a citizens dividend was a flat rate (with no means testing and any money earned was extra money) whether more people would then take part in the economy. I do know quite a lot of benefit scoungers and trustafarians through rock climbing. I realize they are not neccessarily typical but they seem to be very contented and dedicated to their rock climbing persuits (entirely parasitic though :) ).

    20. Tom Hickey says:

      The way to deal with the folks that show up for the JG and aren’t qualified for whatever reason is to qualify them. It is a tremendous opportunity that they have turned out. To turn them away would be stupid. They have demonstrated motivation, which is perhaps most important of all.

      The military takes young and probably resistant draftees and turns them into soldiers in 90 days of basic training, and then puts them on a troop transport and ships them to the front. Civil society cannot deal with people who show up wanting to work or have trouble doing the job for whatever reasons?

      OK, it’s admittedly different from the military in that the military has motivators available to it that are unavailable to the civil sector. But is the civil sector therefore unable to come up with appropriate motivators and training?

    21. Victor Quirk says:

      Mahaish

      I see your point about the unions, and its worth someone exploring the question in some detail, because the anti-inflation aspects of the Job Guarantee would curb opportunities for higher wage demands at full employment (because of the fixing of the floor price at the minimum wage, and the superior labour supply of the JG pool compared to the unemployed pool) but on the other hand, there is the countervailing factor that eliminating the fear of unemployment and providing people greater economic security and public amenity, has historically led to greater participation in trade unionism.

      As to the independence of the RBA, this has been a political battlefield since the creation of the Commonwealth Bank (which functioned as both a public competitor to the private banks and as a quasi central bank) in 1911. In 1924 the conservatives stacked its board with private company directors and placed control of the note issue (monetary policy) in their hands, so that it would require the passage of legislation for a government to use deficit financing. In 1925 they put the Australian pound on the gold standard at parity with the English Pound (Sterling). In 1930 and 1931 when the proto-Keynesian Treasurer Ted Theodore sought to issue 18 million pounds to employ 40,000 people in the depression, while London refused to provide any finance unless draconian cuts in public spending were inflicted on the Australian people, the Bank board refused, and the Senate blocked his legislation that would order it. Their reasons? Fear of inflation, when unemployment was around 30%.

      During the War, the government had special powers and could direct the banks to do anything required. The economy was brought rapidly to full employment and institutions created that would support post war full employment. A Banking act of 1945 restored peace-time control over the note issue to the Parliament. This was preserved when the Reserve Bank was created around 1959, with its principle goal – the maintenance of full employment.

      The push for surpluses and central bank independence has been part of the consolidation process to prevent the restoration of full employment since its abandonment in the 1970s. In my opinion, the question of Central Bank independence, and of deficit financing, has always been really about the capacity to preserve unemployment as a tool for cowering labour whenever the wielders of economic power felt it necessary, as in the case of falls in national income over which a distributional struggle occurs to see who would bear the brunt.

      Stone

      Yes your right, but as you say, they are not typical. Unemployment messes people up. Paying people an income does not in itself. Taking money away from people (which neo-libs advocate) does not solve the problem of ‘welfare dependency’, because what they require is the social contact, activity, stimulation, sense of identity and structure to the day that work provides (See Maria Jahoda’s work on this). I’ve known unemployed people who build plenty of these things into their lives through sport, volunteering, informal study, etc, but these are a small minority. Most people who remain unemployed for a period become socially isolated, lose their personal confidence, lose their physical and mental stamina, become uncomfortable to talk to because their non-verbal communication skills fall out of practice, suffer incredible boredom, which they try to dull with television (which also gives them some daily structure as it follows a timetable) and alcohol if they can afford it. These people, understandably, find it very difficult to perform well in the intense test of social skill that is a job interview, and take many weeks on a job before they build up the stamina and concentration to handle it. That is why so many long term unemployed fail in job interviews, and quit or are fired in the first weeks of getting a job – its just that they need more time to adjust. They are then trapped in unemployment without choice, even when some vacancies are around.
      I’d encourage your friends to keep up the rock climbing since it will contribute to their ability to get and hold onto a job when they want one (once they have climbed every mountain). The Job Guarantee wouldn’t be everyone’s preference if they didn’t have employment, but for the great bulk of the unemployed I believe it would be.

      Tom

      Couldn’t agree with you more.

    22. Ray says:

      “The simple answer is that the people who run our societies, the people who provide the campaign donations, who control the editorial policy of television networks, who fund the think-tanks, who bankroll the ‘economic education’ campaigns, who run banks and other corporations, who transfer back and forth between the upper echelons of government and the corporations, etc., do not see the elimination of poverty and unemployment as desirable at all. Labour underutilisation preserves the social domination of employers over workers.”

      Oh you’ve got to be kidding. You have a PhD so I’d expect a slightly more open mind than parroting everything your mentor has told you.
      Any politician or corporate head worth their salt wants to live in and do their bit to enable all of society to prosper (in Australia at least). I just don’t follow how anyone would want to live in a society where there is a suppressed poor and unemployed class who are going to descend to lawlessness and threaten the quality of life of the well-off.

      This type of conspiracy theory which the loony lefties always fear has become a doctrine. Hilarious.

    23. Tom Hickey says:

      Ray: Any politician or corporate head worth their salt wants to live in and do their bit to enable all of society to prosper (in Australia at least). I just don’t follow how anyone would want to live in a society where there is a suppressed poor and unemployed class who are going to descend to lawlessness and threaten the quality of life of the well-off.

      Well, I don’t know about Oz, but they are doing a good job of it here in the US. Oh, right, I am a looney leftie and have a PhD. Hilarious.

    24. Min says:

      Ray: “I just don’t follow how anyone would want to live in a society where there is a suppressed poor and unemployed class who are going to descend to lawlessness and threaten the quality of life of the well-off.”

      When I was in Taiwan I saw a lot of houses/compounds surrounded by what looked like the adobe walls of the American Southwest. The main difference was that in Taiwan the tops of the walls had embedded in them broken glass.

      The rich in America can afford better: guards and gated communities. The only criminals they have to worry about are con men.

    25. Ray says:

      Tom Hickey says:
      Monday, October 18, 2010 at 3:45
      “Well, I don’t know about Oz”.

      Correct, you don’t know and as the author was referring to Australia more often than not, my comments were referring to Australia (as I stated).
      I refuse to believe that the majority of our businesspeople plan to go into business in order to create a dependency of the poor on the rich and maintain suitably high unemployment for their own purposes.
      Ditto our politicians. Even the greedy would wish to encourage a high standard of living for all so that underlying demand would further their profits and lower taxes due to a lower social government spend.
      Utter clap-trap.

    26. Gamma says:

      Victor,

      I can see a lot of merit in a job guarantee of some kind, but I am still not completely convinced. For example:

      1) Are you advocating a JG to completely replace unemployment benefits? If so, I think this would actually be a worse situation for most skilled workers. If I lost my job, I would much rather have the chance to look for a new job (with some income support while doing this) than have no choice but to turn up for a low-skill and low-paying JG job.

      2) Would this scheme be inflationary? You mention that “wage inflation” would be controlled due to certain particular features of the JG. This seems to imply that you see wage inflation as the underlying source of price inflation. Is this correct, and what sort of evidence do you have to support it? Why do we currently have inflation in Australia of 3% while we have such a large unemployment rate (5%, well above the 2% frictional rate) and according to Bill, something like 12% underemployment? This would suggest that there is much more to controlling price inflation than just worrying about wage inflation.

    27. Victor Quirk says:

      Actually Ray,

      Its a bit unfair to lumber Bill with my take on all this. When I first began my Phd with Bill, he was very sceptical of my position, and has generally taken the view that it is because of their lack of an empirical grounding, and the spurious assumptions peddled in economic text books from which they learn their theories, that economic policy makers don’t understand that what they do perpetuates poverty and unemployment.

      I am 52 and have worked in the area of unemployment and labour market brokerage, and studied this question, at the tertiary level since my mid 20s. I learnt of BHP Chairman Sir Colin Syme’s 1971 call more unemployment from Keith Windschuttle’s 1980 book ‘Unemployment’. I read Walter Korpi’s study of the OECD’s attempt to fashion a political solution for the abandonment of full employment (the 1970 publication ‘Inflation the Present Problem’) in the early 1990s. And I learnt the dynamics of the labour market through hands-on brokerage between employers and over 12,000 long term unemployed people over an 18 years as a specialist Employment Counsellor in metro and country offices in Victoria in the 1980s and 1990s.

      I only met Bill in 2001. During the Phd I studied the private correspondence of CEOs, politicians and Professors of economics who have publicly and privately advocated for higher unemployment.

      If your worldview is threatened by contradictory evidence, don’t denigrate me for reporting it. My motivation for what I do is to understand why 12,000 long term unemployed people that I had the privilege of meeting and learning from in my career had to have their lives wrecked so that employers could have a buyers labour market as opposed to one that favoured sellers.

    28. Victor Quirk says:

      Hi Gamma

      The question of the skill level of these JG jobs has evolved somewhat over the years, to the point where CofFEE now sees these jobs as potentially inculcating very sophisticated skills into the JG workforce, in accordance with regional surveys of skill formation requirements. The 1998 study (link is above) goes into this in considerable detail.

      But generally, the idea CofFEE has advocated is to preserve a work-tested income support comparable to the present non-contributory unemployment benefit (Newstart Allowance) that has operated in Australia since1945, to handle contingencies where it takes time to develop an appropriate JG position for someone – for logistical or other reasons – and for this to cut out once the person commences employment anywhere, including on the Job Guarantee.

      In the published models we have proposed for Australia (you’ll find links to them in one of my responses above) we propose integrating the public employment service with the Job Guarantee system, because we are replacing an unemployed buffer stock with an employed buffer stock, so that we need to actively facilitate brokerage of placements from the JG into the mainstream labour market. People may look for work in any ways they wish, as do many currently employed people when they are looking for an improved position, but the JG would be unusual as an employer in that it would actively facilitate the process by (1) circulating vacancies (2) permitting absences to attend job interviews (3) encouraging employers to contact and visit JG workers on the job.

      From a labour market brokerage point of view, the advantages of such a system would be very significant. The skills and capacities of workers would be more concretely determinable in ways that are quite impossible with people who have been unemployed for a significant period of time, training would be readily available to develop skills in local demand, you could negotiate placements in real time, and ongoing part-time and casual work could be complemented by JG work to bring the person up to a full time workload (if they wished).

      I’ll be very interested to get some feedback from anyone who reads the proposed operational models we put together – these are just our ideas and others may have some useful modifications to add. We could even put together a number of versions.

      As for the economics of inflation, I would defer to Bill or one of the regular economist commentators of the blog, but my belief is that the JG idea deals primarily with the issue of wage inflation, which is the principle challenge of a full employment system. There are other sources of inflation, where sellers put their prices up simply because they can, or because their margins are squeezed by rising non-labour costs – the inflation that followed the OPEC oil shock is a case in point. It may be that to manage other sources of inflation, such as asset price bubbles or other supply shocks, a government may need to impose deflationary fiscal or monetary policy. The point is – even if this were to impact on mainstream employment it will not produce the same misery, deskilling, and other effects typically experienced in recessions (such as the one Australia had in the early 1990s) because the JG buffer stock will sustain communities in a far more effective manner than mass unemployment.

      You’ll find a lot of material on this in both the blog archive, and the academic working papers on the website for the Centre of Full Employment and Equity (CofFEE)

    29. G. G. says:

      Ray:

      I know a guy who owns several franchise stores and has a completely psychopathic attitude in his business endeavors. He went on a trip to a South-Asian country and waxed lyrical about the low wages and lack of employee protections. He speaks fondly of this story where an Indian businessman marketed a brand of matches to poor people with the promise that if they didn’t light straight away, they would get 10 thousand rupees. Of course, the guy made millions and never paid anyone for their crappy unlit matches. The glee in his eyes when he told me this made me realize that him and many others see the poor as prey to be exploited ruthlessly.

      Of course, he voted for Tony. So it doesn’t seem like much of a far-out conspiracy theory to me.

    30. Victor Quirk says:

      Ray,

      I agree with you, the ‘majority of our business people [do not] plan to go into business in order to create a dependency of the poor on the rich and maintain suitably high unemployment for their own purposes’. It would help if you understood what you were criticising.

      Many businesses thrived under conditions of post-war full employment.

      But full employment empowered workers. Trade unions became uppity. They had to be put in their place. Unemployment was induced to shift share of GDP from labour to capital. The instigators of this were a small number of powerful and influential people, not a majority of business people.

      But where you say ‘ditto our politicians’,

      “First consideration is how to get labour at any price. Many ex-farmhands have received training during the war which fits them for jobs with better conditions, others are getting training through rehabilitation schemes, and a lot more are just not going back to farm work if they can help it. How, then, to get men worth having?

      Mr Menzies quite coolly gave the answer at the Fremantle by-election (and Mr. Kim Beazley some votes) by stating that a pool of unemployed was necessary to discipline the workers (WA Wheatgrower, 24/4/1946).”

      And for our US friends

      “Mr Truman’s advisers are saying bluntly in private that a small “pool of unemployment” would prevent labour from asking a monopoly price for its services and would provide as well that mobility in labour supply which is essential to labour discipline, to recruitment for new industries, and to training programmes for skilled trades (Mercury, 31/12/1947:3).

      It was quite openly discussed at one time.

    31. Ray says:

      G. G. says:
      Monday, October 18, 2010 at 11:37
      “I know a guy who owns several franchise stores and has a completely psychopathic attitude in his business endeavors. He went on a trip to a South-Asian country and waxed lyrical about the low wages and lack of employee protections. He speaks fondly of this story where an Indian businessman marketed a brand of matches to poor people with the promise that if they didn’t light straight away, they would get 10 thousand rupees. Of course, the guy made millions and never paid anyone for their crappy unlit matches. The glee in his eyes when he told me this made me realize that him and many others see the poor as prey to be exploited ruthlessly.
      Of course, he voted for Tony. So it doesn’t seem like much of a far-out conspiracy theory to me.”

      Yeah, so what? He is a ruthless pig. I know a load of very generous entrepreneurs who treat their workers like family and voluntarily give them equity in the firm to promote loyalty and some small level of self achievement.
      You think your one example demonstrates the majority?

    32. Neil Wilson says:

      Victor,

      What about the problem of hiring away from JG jobs and the competition of JG jobs with volunteer operations as well as minimum wage private jobs? A JG job has a marginal cost that is much lower than an equivalent private sector job – the difference being the JG wage.

      The standard response I’ve seen is that JG jobs “wouldn’t compete” because the JG administration would avoid it. I’m afraid that the public sector is notoriously bad at spotting the ants it stands on. Even providing training in some skill X destroys the private sector people who are currently providing that training. I’ve seen it far too often for it to be dismissed glibly.

      Whereas a universal benefit system that subsidies all jobs to the same degree solves the problem because a private sector job doing training is then literally identical to a JG job doing the same thing. JG jobs and volunteer positions become functionally identical, if with a different marketing angle.

      But most importantly a JG shop next door to a private shop doesn’t compete them out of business on staff costs alone. The result is that you get many more private jobs and fewer public JG ones and the private market employment becomes a pure market (with the JG job providing the acceptable base). It would make volunteer positions available as ‘buffer positions’ and require a much smaller set of JG jobs to complete the buffer.

      Is there a good reason that just subsidising every ‘useful work’ position in the economy doesn’t work?

    33. Ray says:

      Victor Quirk says:
      Monday, October 18, 2010 at 10:03
      “If your worldview is threatened by contradictory evidence, don’t denigrate me for reporting it. My motivation for what I do is to understand why 12,000 long term unemployed people that I had the privilege of meeting and learning from in my career had to have their lives wrecked so that employers could have a buyers labour market as opposed to one that favoured sellers.”

      I took leave at your ridiculous sweeping statement below.

      “The simple answer is that the people who run our societies, the people who provide the campaign donations, who control the editorial policy of television networks, who fund the think-tanks, who bankroll the ‘economic education’ campaigns, who run banks and other corporations, who transfer back and forth between the upper echelons of government and the corporations, etc., do not see the elimination of poverty and unemployment as desirable at all. Labour underutilisation preserves the social domination of employers over workers.”

      I won’t even bother to take the time to attack this passage other than that you imply ANY fool can see EVERY politician, reporter, CEO or successful businessperson is guilty of unscrupulous behaviour that has had a profound negative effect on our society while performing no good.

      Why don’t you guys emerge from the classroom where your preach this stuff in unopposed bliss and actually make a difference? Do your stuff on the streets, write in the press (oh I forgot, all the media is rigged) or start a political party?
      It really does get tiring listening to all the moaning yet no one outside of this forum ever is introduced to MMT.
      I actually think there are a lot of very salient ideas but the way you guys love to fire shots at the real world and the evil NL’s ad infinitum loses credibility.

    34. Sergei says:

      Ray, ouch, yes “We are doing God’s work”. Sure, we have all heard it. And Bill and Victor and everybody else here are just wasting their time and resources by moaning and crying and bulling the innocent.

      There is no black and white but there are too many proofs of “people doing God’s work” compared to “people DOING work” And the reason is very simple: western mentality is based on competition and western people (in particular men) are taught to fight. This is an overwhelming force which denies any balance. Nevertheless some people do achieve this balance and we all know examples and anecdotes. Unfortunately, the fight for power and dominance brings up much more psycopathes simply because this is their mode of functioning. They love to fight against each other and any normal man chooses to surrender well before he/she looses his/her mind. So you course you can choose to refuse to believe but these processes are ingrained much more deeper into our (western) psychology than you might believe.

    35. Sour Monkey says:

      I am disappointed by the marginalisation of Andrew Wilkins’ point of enquiry (1) from October 15.

      “Some of these individuals [JG workers] will be disruptive and difficult to manage. There may be elements of the criminal underworld topping up their income when business is quiet.”

      Albeit, lacking Quirk’s breadth of experience with the long-term unemployed, I can confidently say that a number of long-term unemployed persons are criminals. This owes, possibly, to the social isolation Quirk suggests. These people subsidise their meager state-provided incomes by acting as intermediary drug peddlers and prostitutes, among other things.

      I would prefer if JG could provide a rehabilitory solution for these people, but I recognise that this is a secondary problem only to the one you are trying to solve; actual full employment and equity.

      Since the underlying motivation for JG participants remains financial I am concerned that this segment will not be encouraged to improve themselves through this mechanism.

      Is it okay to simply ignore this subset of the unemployed population?

    36. Victor Quirk says:

      Neil.

      The problem of hiring people away from the JG is an important issue, and central to its design. The buffer must efficiently contract as well as expand. It is why, for instance, the JG wage is set at the minimum permissible level in the labour market, so no private sector employer pays less for a start.

      Then, because a private sector employer can offer the prospect of future pay rises when justified by the workers increased productivity (once they settle into the job), which the Job Guarantee cannot match, there is an inducement to take up work with even minimum wage private (and mainstream public sector) employers.

      Then, because the JG includes work that has a skill formation content and training, the market value of the person increases while their JG pay stays the same, so the mainstream labour market should look increasingly attractive to the JG worker.

      It is because the JG makes no attempt to hang on to its workers (by offering matching inducements such as future pay increases, for example) that we say ‘it does not compete’ for this labour.

      And, we need to compare this with the present buffer stock: the pool of unemployed. The unemployed pool does not contract efficiently. Having worked with unemployed people for twenty years I can attest to the deterioration that occurs over a relatively short period of time and its affect on their capacity and motivation to apply for work. Two processes occur here: Firstly, the decline in the person’s social and communication skills, and their self esteem and confidence, makes them increasingly uncomfortable in situations that place these under the spotlight such as a job interview, and the first few days and weeks on a new job. At the same time, the palpable discomfort others experience dealing with them, because of the awkwardness of their communication skills, make the unemployed increasingly desirous of avoiding such situations. Secondly, experienced employers learn that people who are longer term unemployed take longer to become productive, and are prone to quitting or being sacked (for lacking the necessary stamina and concentration), and increasingly ignore applications from the longer term unemployed, which reinforces the de-motivation of the unemployed to apply for jobs. Thus, the longer unemployment is used as a buffer to the labour market, the larger the proportion of such de-motivated people, and the less capacity for employers to hire these people away from the buffer. It has been the case after the two biggest recessions in Australia (the early 1980s and early 1990s) that though unemployment remained high, as demand for labour picked up as growth returned to the economy, employers soon complained of a lack of applicants for their jobs, which caused inflationary pressures that choked off growth. I think Bill and the economists refer to this as a hysteresis effect.

      By contrast, by maintaining people in meaningful, paid employment, we escape this train of consequences and create a buffer stock of willing labour, sufficiently confident, and physically and mentally prepared, if not impatient, to gain a foothold in mainstream work as opportunities arise.

      This is an important set of dynamics in the Job Guarantee model.

      Displacement.

      Firstly, present volunteer work, meeting a need in the community for which the (paid) private and public sectors currently do not adequately meet (hence the involvement of volunteers) can be simply paid as JG jobs.

      The issue of avoiding the displacement of paid private and public sector activities is a challenge that we have attempted to meet through the institutional arrangements we have suggested in our two attempts at describing an operational model. We are certainly open to any suggestions as to how these may be improved.

      As a basis for our thinking we conducted a major survey of hundreds of local government areas around Australia and compiled a massive list of things Community Development Workers and Business Development Officers in these communities considered needed being done that were not currently being done by the (paid) private or public sectors, largely because there isn’t a buck in it or there isn’t a vote in it. Some functions were being covered as best they could by volunteers, but most were not being done at all.

      The existence of such jobs was the key element of the UK Local Employment Initiatives concept that was popular for a while in the 1980s, that ultimately failed to generate full employment because they did not entail additions to aggregate demand, but the concept of their being plenty of work not being done by the paid private and public sectors was well established.

      We have also proposed a number of checks and balances to provide for community approval of proposed undertakings, specifically to allow anyone who perceives their interests threatened by any proposed JG undertaking to lodge their concerns with local government who would have a veto over the proposal. Again, these ideas are mapped out in considerable detail in the above mentioned reports.

      These models were only proposed to illustrate (to ourselves as much as to anyone) how the economics of the MMT and CofFEE etc., clan might look in operation. There may be other ways of applying the economics that may work better, and certainly other countries, which have different institutional arrangements to Australia, would have to work out their own approaches.

      Universal benefit system

      Perhaps if you could flesh out your model in more detail I could see what it is proposing. There is nothing so annoying as someone critiquing your ideas without first getting a handle on them so I am reluctant to respond in too much detail lest I’m barking up the wrong tree.

      By ‘a system that subsidises all jobs’ do you mean by the same amount, or would you top up all jobs to the level of the Job Guarantee? If the latter, that is effectively what the JG proposal amounts to, since all other jobs are already paid at the same rate as the JG at least, apart from volunteer jobs, that we would pay as JG jobs in any event. So you see, I better let you explain the idea a bit more before I start making comments!

      Ray

      I appreciate very much your concession that we have some good ideas. We already do a lot of press and public speaking, particularly Bill, and now I’m a bit freed up I’m hoping to do a bit more.

      I think your suggestion about a political party is a good one, and I hope that if we have a go at it we can count on your support!

    37. Neil Wilson says:

      At the moment there is a gap in the private sector between voluntary positions and those that pay the statutory minimum wage.

      Something that is worth paying somebody $1 an hour to do cannot be done in the present system in a capitalist fashion because you can’t get labour that cheap. It would have to be done under voluntary conditions at $0 an hour or not done at all as you mention. Yet it would be worth paying somebody $1 to do it in an hypothetical pure market.

      So everything up the statutory, say, $8 an hour can only be voluntary. Then there is a step up to $8 an hour. There are a bunch of private sector jobs there that could exist, but for the minimum wage restriction. Importantly under the JG proposal these private sector jobs still wouldn’t exist.

      Now let’s say instead of a JG wage, you have a Universal Pension or Universal Benefit that is paid to everybody doing ‘useful work’ or exempt from doing ‘useful work’ by virtue of their age or infirmity. It would be pro-rata up to the hours per week that a JG job expects – whatever number of hours the politics determines. In other words it’s a JG wage you never lose whoever you are working for, and it is essentially a subsidy for every job position in the economy (which is what the UK Tax Credit system tries to do, with ludicrous and needless complexity).

      Now those jobs that are worth $1-$7 an hour become worth creating and the individual ends up with $9 (less tax on the $1 probably) and so on up the chain. A load more private sector jobs are created just above the JG threshold. The jobs market then becomes (as far as I can see) a pure market with JG jobs there to provide the ‘floor’ – the minimum acceptable job standard society is prepared to tolerate. Tax rates are adjusted accordingly to regulate economic temperature – probably at a largely flat rate since the argument for progressive taxation is dealt with by the Universal Benefit.

      The system is based on a redistribution structure where the benefit side is universal and the taxation side is means tested. The Universal benefit would eliminate most if not all other social benefits.

      For employees everybody gets enough to live on in a basic, but civilised, manner and anything they earn above that adds to their income.

      And for business it then costs just as much for the private sector to setup a minimal level position as it does the public sector.

      JG jobs are then the same as volunteer jobs and minimum level private sector jobs. There is no difference in cost structure – all get their wage bill paid by the state. The private sector can pull people away from JG for a very small increase in cost over a JG job.

      I see it as a combination of the JG work and the paper Ralph Musgrave put together (linked above) plus a general feeling that the best way to ensure that everybody is out of poverty is just to move the zero line for the economy to the point where everybody is out of poverty. MMT seems to suggest that can be done.

      The downside is the majority of the public appear to be hard of accounting and don’t seem to understand netting off.

    38. stone says:

      Neil Wilson; I totally agree with your point that it is good to allow lower (financial) value but nevertheless of some value work to be done within the private sector. For instance sorting plastic for recycling is something we can’t afford to do here- waste plastic goes to China to be sorted. Private sector jobs are real jobs and will create a true working mentality which will be extremely hard to create by a JG job . I guess the key distinction between your system and a flat citizen’s dividend system (ie a flat payout to everyone) is that your system compels people to either take a job or to demonstrate infirmity. I personally prefer the citizens dividend because I think as far as possible as many people as possible should not be told what to do. Lets say someone wants to be a stay at home parent of small children. Why is it better for them to have to employ a child minder so that they do a job that has been largely created just for the hell of it. Similarly someone (or even a cooperative) might be wanting to start up as self employed but initially has to get things up and running. A citizens dividend would enable them to be less reliant on start up loans until their company became profitable. I even think it is often no worse to let people do their own thing even if it has no economic purpose than it is to compel them to do a job with no economic purpose.

    39. Neil Wilson says:

      @stone

      ” Lets say someone wants to be a stay at home parent of small children.”

      Note I said “useful work”. That term has to be defined politically.

      Personally I would include in that caring for the young and the elderly, all forms of volunteer work, “big society” stuff. Business start-up support, job applications and the rest should all be ‘useful work’ and part of the JG programme. As should support for people who are ill and temporarily unable to work, those who are pregnant, and the like.

      But the width and the scope of that is a political decision that would be a matter of debate.

      Sitting on your backside watching Trisha, or being disruptive at any job is not ‘useful work’ and should attract no payment. And of course there should be no requirement to take a job if you’re independently wealthy (or a criminal) in which case you get nothing from the state.

      And again the categories of ‘non-work’ is a political decision.

      However the system works whoever you put in each of those pots.

    40. stone says:

      Neil Wilson, I guess my issue is that I’d prefer it if one group of people didn’t have the power to judge whether other people’s choice of time spending was or was not valuable. I especially would prefer not to have to pay a fortune to pay the people doing the judging to do the judging. My guess is that there would be a grand administrative system with an excellent career structure occupied in passing judgment on everyone else :).

    41. Gamma says:

      Victor Quirk @ Monday, October 18, 2010 at 11:04

      Thanks very much for the detailed response. As you’ve described it, the JG sounds quite reasonable, and would be something I would be likely to support.

    42. Andrew Wilkins says:

      @Stone

      “I especially would prefer not to have to pay a fortune to pay the people doing the judging to do the judging. My guess is that there would be a grand administrative system with an excellent career structure occupied in passing judgment on everyone else.”

      Don’t we already have this with the financial sector judging our credit worthiness. Judging whether our businesses are worth a punt or not. It costs us a bloody fortune whatever it is they are doing.

    43. Min says:

      victor quirk: “I’d be satisfied if we could just arrange it so they weren’t running the world. Competitive hierarchies tend to concentrate sociopaths at the top.”

      Charm, manipulation, and ruthlessness are hard to beat. :(

      victor quirk: “During the course of the Phd I have become very interested in the work of a group of US political psychologists who argue that a great deal of social domination orientation, materialism, xenophobia, etc., is attributable to our species’ techniques for managing our fear of death. It comes under the umbrella of ‘Terror Management Theory’ , well worth looking up as I think it does point to some solutions to a lot of anti-humanitarianism.”

      Very interesting. I have a general existentialist orientation myself. I checked out the TMT web site, and found too much stuff there to navigate easily. Can you give me a ref or a name or two? Thanks. :)

    44. stone says:

      Andrew Wilkins “Don’t we already have this with the financial sector judging our credit worthiness. Judging whether our businesses are worth a punt or not. It costs us a bloody fortune whatever it is they are doing.”- actually that side of what the financial sector does was already being done in the 1960s. The 5x increase in the financial sector has not been due to an increase in that side of things connected to the real economy. Instead the increase has been from aquiring money by manipulating money.

    45. Victor Quirk says:

      Min

      I thought these two gave good overviews

      Philip J. Cozzolino, Angela Dawn Staples, Lawrence S. Meyers, Jamie Samboceti, (2004) ‘Greed, Death, and Values:From Terror Management to Transcendence Management Theory, PERSONALITY AND SOCIAL PSYCHOLOGY BULLETIN, Vol. 30 No. 3, March 2004 278-292

      John T. Jost, Mahzarin R. Banaji, Brian A. Nosek (2004) ‘A Decade of System Justification Theory: Accumulated Evidence of Conscious and Unconscious Bolstering of the Status Quo’
      Political Psychology, Vol. 25, No. 6, 2004

      If you have difficulty accessing them send me an email (victor.quirk@___newcastle.edu.au but delete the ___!) and I’ll email them back.

      The TMT material builds on books by Ernest Becker who won the Pullitzer Prize for ‘The Denial of Death’ in the 1970s. SJT has a number of cross connections with TMT and has some extremely interesting insights for anyone wondering why the left draws only modest support from the poor and downtrodden.

      Neil & Stone

      Bill has asked me to do a blog for him for next week, so perhaps I’ll do it on the Guaranteed Minimum Income VS Job Guarantee debate, and include discussion of Neils suggestion in that.

      Would it be fair to summarise your idea in this way (version 1):

      All citizens are paid the equivalent of the minimum wage on top of anything else they may or may not earn. Those who establish they cannot work (to an authority) are exempted from doing so, but those who otherwise do not work, or are engaged in work that the paying authority determines is not socially useful, have their citizens allowance stopped.

      or this way (version 2)

      The CofFEE job guarantee model, but with an additional facility for people to apply to have self-employment, cooperative employment, and work for a for-profit or non-profit employer also authorised to attract a JG wage, that the employer may supplement however they wish. People incapable of participation in any form of employment are exempted from doing so, and receive the equivalent of the JG wage.

      or this way (version 3)

      A public funding authority certifies that a person is attending a for-profit private / non-profit community / or public sector workplace for a confirmable number of hours per week, and establishes that the work they are engaged in doing is of social benefit (‘useful work’). It pays them the equivalent of a Job Guarantee / minimum wage for doing it. People who can prove to that authority they could not work due to age or infirmity are paid a disability allowance or aged pension at the value of the Job Guarantee (minimum wage).

      Or another way?

      As you can probably see, there are different implications arising from them.

      Thanks for taking the trouble to set it out.

      Gamma – You’re welcome!

    46. Min says:

      @victor quirk

      Many thanks. I’ll check those out. :)

    47. stone says:

      Victor, just to clarify, my favourite idea was to just have a “citizen’s dividend” ie a flat payout to everyone irrespective of whether they had other income or wealth and irrespective of anyone’s opinion regarding the value of how they were occupying themselves. Higher taxes would mean that for wealthy people this payment would be netted out as Neil put it (I know Neil’s idea is very different). I guess much of my queasiness about the JG comes from seeing how spending of funds from the UK national lottery operates. It basically directs large resources towards the aims and tastes of a very small but vocal sector of the UK population (who ironically wouldn’t be seen dead buying a lottery ticket :) ). My fear is that the JG would basically end up being an army of conscripts for that same bunch of (expletive deleted).

    48. Neil Wilson says:

      “spending of funds from the UK national lottery”

      I gave up with lottery tickets when I heard it called by it’s alternative nickname – the prole tax.

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