Last week (October 7, 2019), the ILO released its latest report on Timor-Leste – Timor-Leste labour force surveys 2010-2013-2016: Main trends based on harmonized data. I have been waiting for this publication as it provides the most coherent labour market data for TL. I am working on a detailed Job Guarantee proposal and I needed the ILO data. In this vein, I have also been reviewing the most recent fiscal statement from the Timor-Leste Government to see what direction of policy is taking, which will further help me understand the opportunities. TL is one of the poorest nations. It has a very fast growing and young population. Around 70 per cent of the workforce is ‘self-employed’ in the agricultural sector despite that sector enjoying only modest growth (9 per cent between 2000 and 2017) which has seen it slip in importance from 24.5 per cent of total GDP in 2000 to just 9.2 per cent in 2017 (latest data). The growth in employment in TL has been largely confined to Dili and is mostly in self-employment with limited job security and capacity for wages growth. There are two factors constraining the growth of quality employment: (a) the lack of investment in education and skills development; and (b) the lack of diversity in the structure of the economy, with the oil and gas sector accounting for 43 per cent of total output (2017) but generating very few employment opportunities. Governance issues (rule of law, contractual enforcement, political uncertainty) also contribute to a lack of capital formation, which, in turn, constrains employment growth. What is needed are policies to diversify the economy both in industrial structure and in spatial terms (promote growth outside of Dili), strong investment in education and health, and job opportunities that are suitable to the unmet needs in regional areas and the skill levels of the citizens who live there. Once I investigate the data more deeply I will publish a Job Guarantee proposal. But here are some necessary thoughts that condition my approach.
Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!
Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.
My blog post last week – On the path to MMT becoming mainstream (April 17, 2018) – discussed the way in which the language and concepts that have been developed by the Modern Monetary Theory (MMT) authors are now permeating mainstream narratives and the media. While this has increased the pushback and hostility from both the Right and Left opposition to MMT, it is also a sign that the public understanding of the way in which the monetary system works and the policy options available to currency-issuing governments, is improving. Most recently, there is been a flurry in the US media discussing employment guarantees, which is a welcome relief from the previous saturation coverage of impoverished UBI ideas. It is fabulous, that at the policy level, the idea that the state can eliminate mass (involuntary) unemployment if it so chooses is becoming more acceptable. That’s down, in part, to the great work being done there by my MMT colleagues. There are also derivative public sector job creation proposals getting ‘airplay’ which I do not consider to be MMT-inspired nor are what I would call Job Guarantee initiatives, but which are still, to their credit, raising awareness of the need for the state to ensure there are sufficient jobs for all rather than dispatch citizens who are unable to find work to the unemployment queue. The push back is increasing and that is a sign that dissonance is being felt by the neoliberals who oppose the state taking responsibility for mass unemployment and using its fiscal capacity to render it a thing of the past. Many of the critics from the Left do not have the courage to come out and say they prefer the alternative to a Job Guarantee, which is entrenched unemployment. That leaves them carping away with no legs to stand on. The Right objections are venal as they always are – they want mass unemployment to persist to dampen wages growth and allow more real income to be captured by the top-end-of-town.
I have noticed a new phenomenon – a sort of new myopia – has emerged as the blogoshphere has expanded. The knowledge set that people think they are empowering themselves with becomes rather constricted – sometimes to a selection of blogs they may have read, sometimes even to the last blog they read on a topic. So we get a range of views and prognostications emerging – held out as expert commentary in many cases – upon the basis of perhaps just a few blogs having been read. As a long-term blogger, I also see this syndrome in the comments section of blogs. Someone new turns up it seems having read the latest offering from someone and launches into an array of criticisms which have been previously addressed but the commentator hasn’t bothered to read. The point is that research is a lengthy process and opinions should only be formed with conviction when one is convinced they have read all the major offerings in the area of interest and considered the evidence base. Which brings me to the real point. Before I wrote blogs I had generated 25 or so years of academic research material – in journal articles, books, book chapters, commissioned reports – hundreds of items of work. That is standard fare for an active researcher chasing competitive grants. That is where one’s contribution to ‘knowledge’ (as far as it is) is to be found. I only started writing blogs as a way of promoting Modern Monetary Theory (MMT) to a broader audience that would never read my academic work. I think that has been a successful strategy. But it has also created this ‘new myopia’. People think that the knowledge set available lies exclusively in blogs. It doesn’t. My blogs cut corners in writing style, referencing, and leave things unsaid that a more formal treatment would cover. The aim of the blog is accessibility and to provide an introduction to ideas which will encourage readers to delve further and arm themselves with deeper knowledge so as to promote informed progressive activism. A case in point is recent deliberations about one of my pet topics – the Job Guarantee.
Economists often use the so-called Unemployment-Vacancy (UV) ratio, which is the number of official unemployed divided by the number of unfilled vacancies at any point in time, to measure the strength of the labour market. The latest data from the Australian Bureau of Statistics (ABS) shows that the UV ratio in Australia is currently at 4. This means that there are four unemployed workers per unfilled vacancy – a sign of a relatively weak labour market. However, a new Report from Anglicare researchers in Australia, which was released yesterday, shows that when we disaggregate the analysis and examine a match of vacancies by worker in each skill level, the UV ratios for the most disadvantaged workers is much higher. The obvious solution for the federal government is to introduce a Job Guarantee, which effectively ensures the UV ratio for the most disadvantaged workers would be equal to unity. In other words, there would always be a job opportunity available that would suit the most unskilled worker in the nation. That is what today’s blog is about.
The unemployment rate in Finland is climbing steadily and in October 2015 was 9.6 per cent (seasonally adjusted) and the employment to population ratio stood at 60.1 per cent and was trending down. Finland is fast becoming the next basket case of the Eurozone. What was once a highly supportive society is steadily being turned into a austerity-ridden backwater. The latest news, however, that the Finnish government is due to debate a proposal to provide every citizen with a basic income of €800 a month has excited the progressives – unfortunately. The proposal currently being prepared by the national agency that administers the Finnish welfare system (KELA) would offer this basic allowance in lieu of all other existing benefit payments. It would be paid regardless of whether the person received income from any other source. I have been considering the Finnish welfare system over the last month or so since my visit there in October. This is in relation to a series of queries I had from activists there who were keen on the Modern Monetary Theory (MMT) Job Guarantee proposal but were wondering how it would situate itself within the existing system of unemployment benefits in Finland. This blog captures my thoughts on both of those topics.
Its my Friday lay day blog and I am working on various projects today so I will cut this blog relatively short. Two things came up this week that I thought were interesting but only require a noting by way of blog entry. The first was a report about a mini-Job Guarantee type program in the New Mexico city of Albuquerque, which is demonstrating that public job creation programs can change peoples’ lives for the better when there is no hope and no other opportunities. The second story I read that was interesting was the Wolf Street Report (October 24, 2015) – Barcelona Threatens to Print Parallel Currency, Madrid Seethes – which discussed the plan by “Barcelona’s left-wing city council plans to roll out a cash-less local currency that has the potential to become the largest of its kind in the world”. The austerity-mavens in Madrid and their puppet masters in Brussels will be having conniptions at the prospect.
Its my Friday lay day blog. So a rather short blog but with a research trail that can occupy the reader for hours if they pursue all the links. It seems that the mainstream American is rather progressive. Who would have thought given that public opinion is being continually drowned out by the deafening shrieking from the conservative think tanks and their media bully boys. In March 2013, a research paper from Northwestern and Princeton academics – Democracy and the Policy Preferences of Wealthy Americans – demonstrated the vastly different policy preferences held by high income Americans (in this case the top 1 per cent of the income distribution) relative to the general public. The research was motivated by the observation that the “wealthy exert more political influence than the less affluent do” and so if their preferences were not representative of American society in general then that would be “troubling for democratic policy making”. The authors find that the high income earners in the US are not only very active politically but hold ultra conservative views “concerning taxation, economic regulation, and especially social welfare programs” that are not remotely shared by the general public. The results might surprise people.
There are still those who criticise the concept of a Job Guarantee. I have received a lot of E-mail’s lately about a claim that the introduction of a Job Guarantee would be de-stabilising in a growth phase unless there is some time limit put on the jobs or the wage is flexible. Apparently, in a growing economy, the stimulus provided in the form of Job Guarantee wages (relative to what occurs when unemployment buffer stocks are deployed) will drive the economy into an inflationary spiral, which will then necessitate harsher than otherwise fiscal and monetary policy contraction. Further, the Job Guarantee is claimed to limit the size of the private sector relative to a system of unemployed buffer stocks and this distorts resource allocation and would undermine our overall material standards of living. The criticisms have been dealt with before – there appears to be a cyclical sort of pattern where newcomers seize on past criticisms and recycle them, without bothering to read the original literature on employment buffer stocks, which includes my work and several other authors. That literature considered all these possible issues – 15-20 years ago.
In my search for new terminology and descriptors I am no longer going to use “minimum wage” to describe the wage that a currency-issuing government should pay when implementing a Job Guarantee (JG). In the past I have written that to avoid disturbing private sector wage structure and to ensure the JG is consistent with stable inflation, the JG wage rate is best set at the minimum wage level. I have also indicated that the minimum wage should not be determined by the capacity to pay of the private sector, but should, rather be an expression of the aspiration of the society of the lowest acceptable standard of living. My view is that any private operators who cannot “afford” to pay the minimum should exit the economy. I also have proposed that the JG wage should be supplemented with a wide range of social wage expenditures, including adequate levels of public education, health, child care, and access to legal aid. Finally, I have stressed for many years that the JG does not replace conventional use of fiscal policy to achieve appropriate social and economic outcomes. In general, the JG would be accompanied by higher levels of public sector spending on public goods and infrastructure. I have written several times, in various outlets (academic, Op Ed, blog), that I see the JG as part of a fundamental transformative agenda to broaden the concept of work and to allow all people to receive a dignified and appropriate access to the distribution system. That message doesn’t seem to get through. So from now on the JG wage will be referred to as the living wage. Further, recent discussions of the JG reveal that commentators who criticise it do so from a standpoint of ignorance – a problem that is engendered by the blogosphere, which should be a liberating force, but in my view seems to unfortunately spawn narrow-mindedness and an anti-intellectual approach to policy debates.
Even though the US government has shutdown, the BLS is still open for data downloads. That is something. More on that data another day. Today I have been working on a formal academic paper (to be presented at a conference in December) which examines the concept of “capacity-constrained” unemployment. This concept says that capacity constraints may create bottlenecks in production before unemployment has been significant reduced (this would be exacerbated if there are significant procyclical labour supply responses). In this case any expansion in government demand may have insignificant real effects – that is, the real output gap is not large enough to allow all the unemployed to gain productive jobs. This argument is often use to attack the Job Guarantee. It can be shown that while private sector investment, which is government by profitability considerations can be insufficient (during and after a recession) to expand potential output fast enough to re-absorb the unemployed who lost their jobs in the downturn, such a situation does not apply to a currency-issuing government intent on introducing a Job Guarantee. The point is that the introduction of a Job Guarantee job simultaneously creates the extra productive capacity required for program viability.
This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. This blog will provide a detailed analysis of the investment the federal government would have to make to introduce a Job Guarantee. You will see how surprisingly small that investment is.
This is a background blog which will support the release of my Fantasy Budget 2013-14, which will be part of Crikey’s Budget coverage leading up to the delivery of the Federal Budget on May 14, 2013. The topic of this blog is the concept of employment guarantees as the base-level public policy supporting a return to full employment in Australia. We introduce the specific proposal – the Job Guarantee. In the next background blog we will see how much the Australian government needs to invest to make this policy improvement possible.
Last week, Eurostat released the latest – Retail Sales – data for the EU. It formalised what has been obvious for some time – private spending in the European economy is going backwards. But didn’t leading economists, including Nobel Prize winners, tell us a few years ago that if governments imposed austerity, the private sector would lose their worries about future tax hikes and start spending? Didn’t the current British Government say the same thing as a justification for the ficsal austerity that now looks like pushing the UK into a triple-dip recession (almost unheard of)? The answer is that these economists and politicians tried to convince us that there was such a thing as a fiscal contraction expansion. Fancy words like Ricardian Equivalence were dragged from the sordid annals of mainstream macroeconomics to give this notion some “authority” (because they knew hardly anyone understood what it was anyway). The wash up is they were wrong. And millions more are unemployed and moving towards or into poverty as a consequence. There is a wholesale failure of government at present in most advanced nations. A current proposal in Europe is to introduce a Youth Guarantee. However, for it to be effective it has to include a Job Guarantee component as its centrepiece. More supply-side activation is part of the problem and cannot be part of the solution.
I lived in the North-West of England for a time in Lancashire as I pursued my PhD at Manchester University. It was during the UK Miners’ Strike 194-85, which was in response to the Thatcher Government’s attack on the major unions in the UK to further its ideological war on workers’ rights and welfare provision. The union lost dramatically after a struggle of 12 months symbolising the rise of neo-liberalism. The same ideology that sought to undermine the rights of workers also led to policy changes that, ultimately, caused the financial crisis and on-going real recession. The reason I raised that experience is because I read a report from a Manchester research organisation over the weekend which highlighted a major problem in that region (poverty wages etc) but also, without stating it, provided an alternative policy approach to the current crisis which would quickly get economies moving again – creating jobs and enhancing the capacity of households to spend. A policy response that antithetical to what is being tried at present is to increase minimum wages and introduce employment guarantees for the most disadvantaged workers whose welfare has been disproportionately undermined by the crisis. That would not only help alleviate the major problem at present – deficient aggregate demand – but also redress some major equity issues that the crisis has accentuated.
If anybody knows David Cameron’s mobile phone number give him a call and tell him that as he scorches the British economy (more bad news about consumer sentiment yesterday) he should also introduce a Job Guarantee as a way of using the workers he declares irrelevant more productively. A Job Guarantee is the perfect accompaniment to a full-blown fiscal austerity program and will not compromise any ideological beliefs except those that say that some people should be unemployed. But how could I advocate this? Doesn’t the Job Guarantee require a demand expansion? Isn’t that the whole point of it? Answer: no! Recommendation: Austerity proponents should adopt a Job Guarantee. Am I mad? Answer: probably but read on …
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.
I was a speaker at the Sydney Greens Forum yesterday and today I am on a panel with Bob Brown at the Greens National Conference in Adelaide. Regular readers will know that in the past months we have been engaging with the Greens after I wrote – Neo-liberals invade the Greens. The initial reaction towards me was hostility but that soon gave way to a more reasoned engagement which I have found to be extremely beneficial. That is why I accepted invitations to speak at their functions. While there is a long way to go in fully articulating a modern monetary paradigm within the context of the generally sophisticated social and environment policy that The Greens have already developed I think the possibilities are now there. One issue that does emerge in my discussions is that of whether a person should have to work under a Job Guarantee approach to full employment. That is, should the Job Guarantee be compulsory?
In the current edition of the German weekly Magazine Der Spiegel (“The Mirror”) there is an article about a “new idea to keep unemployment down” entitled Germany Mulls ‘Parking’ Unwanted Labor in New State-Funded Firms. The thrust of the proposal is that Germany is now examining a proposal to set up government-funded “transfer companies” for workers who lose their jobs as a means of keeping unemployment in check. A reader wrote to me saying that it sounds a bit like the Job Guarantee that I have been advocating for years! Closer examination suggests that while the Germans are starting to come to terms with how bad their economic situation is, they are still a long way off understanding how to get out of it. In that respect, they share the ignorance with most governments. However, being a Euro zone member, the German government has voluntarily lumbered itself with even more constraints that will make it harder to insulate its people from the ravages of the recession.