We need to get a few things straight. And this is partly for those out there who seem to think that the extent of literature on Modern Monetary Theory (MMT) or the Job Guarantee within MMT is confined to collections of Tweets that allow 280 characters or Unicode glyphs. One doesn’t become an expert on ‘full employment’ or ‘political economy’ because they have suddenly realised there is a major crisis in the labour market and have decided to strategically place their organisations for self-serving purposes to be champions of full employment. There is an enormous literature on the Job Guarantee and I have been a major contributor along with my valued colleagues. This is a crucial time in history and one of the glaring deficiencies in the current crisis and economic management in general is the lack of an employment safety net. This is what MMT has to say about that safety net and stabilisation framework.
Some recent high profile Op Eds in the mainstream Australian press that I have written in partnership with indigenous leader Noel Pearson have apparently inflamed the so-called progressives out there who seem to:
1. Object to me writing in the Murdoch press.
2. Object to me writing with Noel Pearson.
3. Object to me saying that I would scrap the current unemployment benefits system in Australia and replace it with a Job Guarantee.
4. Conclude that I have a naive grasp on the ‘political economy’ in Australia and are essentially pushing MMT towards a hard right political position.
Most of the objections come from people who have a past history with the Australian Labor Party in one way or another.
Lecturing someone about their grasp on political economy when they belong to organisations that spent millions of dollars at the last federal election in an attempt to get rid of the worst conservative government we have had, only to see the government returned with an increased majority is not very smart.
Further, spending considerable dollars targetting certain Ministers and then seeing them getting increased votes is not a very good indication of a sound grasp on political economy. In one case, in Brisbane, the Minister was totally unelectable but increased his majority such was the toxity and incompetence of the campaign that the organisation in question pursued.
Apples and oranges
Then there was a Tweet informing the world that all the MMT scholars other than me supported retention of the unemployment benefits if a Job Guarantee was introduced.
The message was that I was alone in that view and no longer represented the MMT position.
While it is not clear that the names quoted in that Tweet would have supported being named in that way, the point is that even if the statement was true, they were all US-based economists.
Why is that important?
The US unemployment benefits systems are not remotely comparable to the Australian system.
They are mostly decentralised systems (state based) with some Federal additions, the policies are not uniform across the states, and the systems tend to exclude workers who are deemed to have been fired for ‘misconduct’.
This BLS fact sheet – State Unemployment Insurance benefits – is instructive.
The US systems are mostly funded by “a tax imposed on employers”.
You have to have worked a “base period” (a minimum amount of time earning wages before being eligible).
Once on benefits, which are finite, your obligations is to answer questions about “continued eligibility” (mostly whether you have been working or not or have had job offers).
Whether a person has to “register for work with the State Employment Service” varies and is not uniform.
The benefits are computed “on a percentage of an individual’s earnings over a recent 52-week period” – so they are not uniform nor progressive.
The benefits run out after a “maximum of 26 weeks in most States” and Federal income taxes are levied.
Conversely, the Australian system is federal and provides a uniform payment to workers who are deemed eligible. It is not an insurance system nor does it base the payment on any past earnings.
The current unemployment benefit (ignoring the short-term pandemic supplement) is well below the adult poverty line and the gap has been getting worse in both real and nominal terms.
But most importantly, unemployment benefit recipients are subjected to harsh work tests, are case managed within the sociopathological privatised ‘unemployment industry that pockets millions of dollars from federal payments but does very little to help the unemployment reenter the paid work force.
This privatised system punishes unemployment workers by reporting them to government who then ‘breaches’ them – which means they lose their miserable unemployment benefit.
In that context, I would doubt whether any of my US-based MMT scholars (those names in the Tweet referred to above) would advocate the retention of such a system that the unemployed have to tolerate in Australia.
So trying to ‘divide-and-conquer’ by asserting views that might apply within one nation as being applicable to another nation, which has a completely different system of unemployment benefits is not very smart.
It is like talking about the US going broke because Greece can!
And then the question is why would any Australian progressive want to keep our pernicious unemployment benefits system when a guaranteed job was provided at a socially-inclusive minimum wage supplemented by social wage benefits (a service guarantee if you like) and workers had the right to choose the hours they worked in the Job Guarantee?
I will come back to the Job Guarantee pay and conditions argument presently.
But let’s tease this out a bit.
These so-called progressive champions of full employment might reasonably say they don’t support the pernicious nature of the current system.
So then what have we left?
Effectively a UBI or some version of it.
So we are back to that – they would want a UBI to be run parallel with the Job Guarantee.
I noted a Tweet from someone claiming to be an MMT proponent saying exactly that.
Well none of my American MMT economics colleagues support the introduction of a UBI.
The fact is that once you go down the UBI route you are diluting the inflation anchor provided by the Job Guarantee – which is a central proposition within MMT, and, is one of the features, that sets it apart from mainstream macroeconomics.
And once you dilute the inflation anchor, then you are effectively back in a NAIRU world where unemployment is used as a policy tool to discipline any inflationary processes.
You cannot have it both ways as an MMTer.
If you support a UBI then you should not hold yourself out as a proponent of MMT.
Simple as that.
I recommend reading this blog post – The provenance of the Job Guarantee concept in MMT (April 20, 2020) – where I explain the foundations of the Job Guarantee with MMT and how Warren and I approached that issue when we set out on the MMT journey.
In that blog post, I discuss the debates about inflation control and the role of the Job Guarantee – as being much more than a meagre job creation program, a point not well understood by those who come late to our work in a time when inflation is of no consequence.
When I came up with my version of the Job Guarantee in 1978, the problem to be addressed was high unemployment and high inflation and a mainstream profession that was claiming the high unemployment was ‘natural’ and that the government could do nothing about it.
Workfare on steroids?
Some other person who is apparently trying to position their organisation as the champion of full employment claimed to be appalled by my work and asserted that:
The Pearson-Mitchell proposal which is basically WFTH on steroids, and exactly what many of us warned would happen to Mitchell’s JG.
And exactly what literature has this person read? A highly word-constrained Op Ed in The Australian that I wrote with Noel Pearson? More?
Where in the millions of words I have written over the last 42 years on unemployment, employment guarantees, work-for-the-dole (WFTD), and all the rest of the topics would she be justified in saying that I endorse a Workfare approach to unemployment support?
It would be impossible to find that sort of inference from my work.
In Australia, Work-for-the-dole has the following characteristics:
1. As stated by the government in Senate Estimates some years ago, it is a compliance program.
2. It pays below the hourly legal minimum wage – effectively forcing workers to engage in work but at below poverty line and legal wages.
3. It does not allow any choice over hours of work.
4. It does not allow a worker to engage in extended training nor does it provide training ladders.
5. It is finite in time period.
6. It requires the worker to participate in the pernicious work test and case management system described above.
7. It offers no additional benefits such as holiday and sick pay, superannuation, and other social wage benefits.
8. No allowance is made for workers with mental health problems etc.
9. The State takes no responsibility for the failure of the economy to generate enough jobs.
Compare that with the Job Guarantee that I have consistently advocated over my career, which could not be conceived of being a more elaborate form of Workfare.
1. A guaranteed job for anyone who wants to work and cannot currently find a job.
2. They would receive a socially-inclusive minimum wage.
3. They would receive holiday and sick pay entitlements, superannuation contributions from the employer, and other special leave entitlements that are common in the permanent workforce.
4. They would be entitled to undergo training (on-the-job or in outside environments, including going back to school, college or university).
5. They would receive social wage benefits – what some might call guaranteed levels of services – such as health care insurance, free child care, transport allowances, access to legal aid supplements, etc.
6. Family Income Supplements: The Job Guarantee is not based on family-units. The Job Guarantee wage (available to anyone over working age) would be supplemented with benefits reflecting family structure. In contrast to workfare there would no pressure on single parents to seek employment.
7. They could choose whatever hours they desired to work – effectively eliminating time-based underemployment.
8. IMPORTANTLY, a worker would be given a grace period on accessing the Job Guarantee. Their wage would start immediately but they could have 3-4 weeks before having to start work where they could sort out their affairs, ‘take a breather’, engage in job search if they wanted, etc. During this period they would be paid the standard wage rate.
9. The job would be permanent if they chose.
10. The job design can be flexible to help workers with special difficulties enjoy a productive working life (for example, the provision of clinical support within the workplace to help people burdened with episodic illnesses)
We have developed this concept based on extensive national surveys of Local Governments.
I have been involved in a major, long-term project with mental health professionals running pilots providing work for youth with psychosis and seeing how flexible workplaces can reduce the problems that such a cohort face.
I have worked in developed countries on major work projects and helped design a minimum wage framework for workers in South Africa.
What does a socially-inclusive minimum wage mean?
I have regularly written analytical reports for trade unions who are defending industrial matters on behalf of the members in the Fair Work Commission in Australia. That often requires me to appear as an expert witness in the relevant matter.
My view has always been the same as it was when I was helping in the South African situation.
I do not consider minimum wages should be set on private sector capacity to pay principles. The employers should adjust not the workers.
The minimum wage as a statement of how sophisticated you consider your nation to be or aspire to be. Minimum wages define the lowest material standard of wage income that you want to tolerate.
Accordingly, it should be a wage that allows a person (and family) to participate in society in a meaningful way and not suffer social exclusion or alienation through lack of income.
That means being able to go out for dinner sometimes, go to sporting or other major events, have a holiday somewhere.
A socially-inclusive minimum wage should be a statement of national aspiration.
In any country it should be the lowest wage that society considers acceptable for business to operate at. Capacity to pay considerations then have to be conditioned by these social objectives.
If small businesses or any businesses for that matter consider they do not have the ‘capacity to pay’ that wage, then a sophisticated society will say that these businesses are not suitable to operate in their economy.
Such firms would have to restructure by investment to raise their productivity levels sufficient to have the capacity to pay or disappear.
This approach establishes a dynamic efficiency whereby the economy is continually pushing productivity growth forward and allowing material standards of living to rise.
I consider that no worker should be paid below what is considered the lowest tolerable material standard of living just because some low wage-low productivity operator wants to produce in a country and make ‘cheap’ profits.
I don’t consider that the private ‘market’ is an arbiter of the values that a society should aspire to or maintain. That is where I differ significantly from my profession.
The employers always want the wages system to be totally deregulated so that the ‘market can work’ without fetters. This will apparently tell us what workers are ‘worth’.
The problem is that the so-called ‘market” in its pure conceptual form is an amoral, ahistorical construct and cannot project the societal values that bind communities and peoples to higher order considerations.
The minimum wage is a values-based concept and should not be determined by a market.
Anyway, those principles govern the way I have operated as a professional over many years.
I have not seen too much analysis coming over the years on these topics from those so-called progressives who are now slinging the mud about what Noel Pearson and I are trying to achieve by way of improving the lives of unemployed workers.
My position has always been the same.
A progressive society is one based on collective aspiration.
Neoliberalism is based on the promotion of individual aspiration even if it is at the expense of the collective.
That is why we are in the mess we are in now (health issues aside but connected).
I think the state has a duty to use its fiscal capacity to ensure there are jobs for all those who desire them.
In general, if there is something that is useful for the public sector to provide then I would create those jobs in the public sector in the standard way.
But there is also flux and uncertainty in private spending patterns and that requires a buffer stock either of jobs or unemployment.
Clearly, the costs of using unemployment to meet the flux and uncertainty of the private capitalist spending patterns are massive and extend well beyond the income (GDP) losses.
Using an employment buffer stock approach as an automatic stabiliser has to be superior to that approach.
So what are the responsibilities of people within that society?
I consider that persons who are able to work should to be required to take a Job Guarantee position to gain the income support if they are unable to find a job elsewhere.
They don’t have to take the Job Guarantee job. It is not a work camp approach.
But to receive the state socially-inclusive minimum wage under the conditions specified above they should be prepared to contribute back to society.
That is the progressive collective approach.
I argue that this possession of a job is a crucial source of self-determination for the typical worker in a capitalist system and the core of regional community development.
Please be clear – persons unable to work would be provided with a ‘living income’. This includes the aged, the sick, the disabled, the young.
They would have generous material support.
Tweets that claim that I support the abolition of all welfare are just plain straight out lies.
I don’t consider a healthy society is one that does not take responsibility to encourage young people to develop skills and engage in paid work, rather than be passive recipients of social security benefits.
There is strong evidence linking long-term unemployment and social exclusion, where the latter is manifested in economic deprivation, the absence of institutional support, and social, cultural and spatial isolation.
This is Noel Pearson’s concept of ‘passive welfare’.
If you are interested in this concept and how it relates to the Job Guarantee, please see – Conversation with William Mitchell and Noel Pearson, Newcastle, December 15, 2019.
The failure to engage in paid work, for whatever reason, cannot be narrowly construed to be merely an inability to generate disposable income which can be compensated for through a benefit, but entails a much broader form of exclusion from economic, social and cultural life.
Accordingly, the State would be evading its social responsibilities by providing an UBI or other form of benefit.
I think language loses all meaning if you think my work is ‘right-wing’ in nature or leaning, or that the Job Guarantee we propose is just nasty workfare or worse.
There will be more from Noel Pearson and myself in the near future as we launch a series of Live Streaming sessions promoting our work together.
But I hope that this blog post has clarified things for those who cannot be bothered researching our work in detail.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.