Today marks the beginning of – Anti-Poverty Week – in Australia and elsewhere. The overwhelming reason people are poor is because they are unemployed (or underemployed). There are related reasons associated with poor housing etc, but the fact remains that if we eliminate mass unemployment by providing enough work for all those who desire it and ensure there are jobs for those with multiple disadvantages then we will reduce poverty overnight. While poverty is persistent, it wasn’t always thus. I have been to many meeting where policy makers, usually very well adorned in the latest clothing, plenty of nice watches and rings, and all the latest gadgets (phones, tablets etc), wax lyrical about how complex the poverty problem is. I usually respond at some point (trying my hardest to disguise disdain) by suggesting the problem is relatively simple. The federal government can always create enough work any time it chooses at a decent wage to ensure that no-one needs to live below the poverty line. Read: always! It can also always pay those who cannot work for whatever reason an adequate pension. Read: always. If we run out of real resources which prevent those nominal payments (wage and pensions) translating into an adequate standard of living, then the government can always redistribute the real resources by increasing taxes on those who have “too many” resources at their disposable. Too many is a relative concept in this context. The so-called complexity of the problem is just code for an unwillingness of the policy makers to use the capacity they have as currency issuers. There is nothing complex about announcing that the government will pay a living wage to anyone who wants to work – just turn up tomorrow and the wage begins. If that announcement was made then we would know who wants to work for a wage and those who do not. For Anti-Poverty Week – the best thing the government can do is announce the unconditional job offer.

I am taking the easy way out today. I have a number of meetings today and also several deadlines coming up for work that I am doing. As a result, I decided to re-cycle some work I did on Friday (early), which was written for the Fairfax press daily newspaper – The Age – as a commissioned Op Ed contribution. Friday was ridiculous when I think back – I had to squeeze more than Archimedes would recommend if I was dealing with liquid into the time available. So today, what comes around goes around – to my favour. The Op Ed was 800 odd words on a complex topic so today, by way of reference, I thought I would add a few sentences to the 800 words to provide more explanation of the points. The background was that a few high profile firms announced fairly large job cuts last week in Australia which lead to a stream of media headlines and calls for government assistance, both short-run in the form of cash bailouts and longer-term, more protection (tariffs etc). The macroeconomics of the situation, however, has not been seized upon by the media, which goes to the heart of the problem. The debate tends to focus on aspects of an issue, which are less important, and, ironically, in this case, are changes which are largely beneficial (structural change), but, ignoring the issues which cause the most damage (those relating to output gaps).

The US President delivered his long-awaited speech outlining the proposed American Jobs Act today to a packed Congress. The room was full of self-serving, anti-intellectuals masquerading as the representatives of the people of America. Eventually, this sham will be clear to all and the “American people” will “demand action”. If they don’t then the neo-liberal domination of policy which has led to the crisis and the extended malaise will continue to impoverish them. Bold action was needed from the President at least to demonstrate leadership so that the democratic forces could start to pressure the T-pots. Unfortunately, the President doesn’t seem to understand that it is easy to create jobs. A government just has have the will to do so.

Its all weather today with severe winter storms giving grief to people (and some friends) in the US at present. Closer to home Northern Queensland, fresh from being flooded, will be hit later tonight by Tropical Cyclone Yasi which is now classified as a Category 5 and will have winds up to 300 kms per hour. My friends up in Townsville are staying calm though. Down here in Newcastle it has been around 40 degrees Celsius for the third day now with no real change coming. So weather extremes – and yes I think they are becoming more pronounced but I am an economist so that is just my uninformed (non climate change sceptic) opinion. But today I am writing about a speech the Australian Prime Minister gave to CEDA yesterday (February 1, 2011) that exposed her lack of understanding of how the macroeconomy works. The problem is that I suspect no-one else in the room who listened would have thought that her message was fundamentally inconsistent. The lesson is that cannot have more jobs by cutting spending despite what the Prime Minister thinks.

There were two very different Op Ed pieces in the New York Times on July 31, 2010. On the one hand, the “strategic deficits” man, David Stockman is trying to ramp up a bit of advance publicity for his upcoming book on the financial crisis which I hope goes out to the remainder desks shortly after being published. He is advocating balanced budgets and “sound money” – which is neo-liberal speak for austerity and rising unemployment. On the other hand, Robert Shiller is advocating a “just do it” approach to recovery where the “do it” is defined in terms of public sector job creation. I find the latter argument compelling when you look at the data and what it is telling us about the American lives that are being destroyed by the policy vacuum. I am also sympathetic to Shiller’s line because sound macroeconomic theory points to that solution. Stockman displays an on-going ignorance of macroeconomics although some of this views resonate with me in a positive way.

Today is actually the much promised shorter Friday blog. I had to write an Op Ed piece today for the Fairfax press on my recent evidence before a House of Representatives Committee of Inquiry into regional skills shortages. So I thought I would expand on that Op Ed a little for this blog. In April, my research centre – CofFEE – made a formal submission to this Inquiry. In June I gave formal evidence (see below) and some interesting things came up. A conservative MP on the Committee thought I was insane for suggesting that the public sector might consider creating employment given the high degree of labour underutilisation we have in this country. Some regions have 50 per cent of their workforces idle! Anyway, today I summarise our submission and provide some text from the official government hansard (record) of my evidence.

In Sunday’s New York Times, the Room for Debate series focused on one of my favourite topics – Should Public-Sector Jobs Come First?. The debate turns out to be very disappointing because even the so-called progressive offerings fall short of advocating an effective solution to the jobs crisis. Only one implies an understanding that the policy design proposed should not be compromised by an errant understanding of the way the fiat monetary system operates. Proposals that assume there is a financial constraint on government will almost certainly be second-rate. The debate could have been energised had the NYT sought expert opinion from those that are developing and implementing large public sector employment programs.

The OECD, the organisation that has spearheaded the abandonment of full employment in all its member countries since releasing the supply-side blueprint in 1994 – The Jobs Study, has now finally realised that things are very bleak in labour markets across the World and is saying more action is desperately needed. All their rhetoric in the last decade about making labour markets resilient and flexible through active labour market programs has not apparently stopped the major economies from going belly up.

There were two related stories this week from either side of the Pacific Ocean. From the east coast came – Rollout of jobs scheme ‘a sham’ and from the west coast – Stimulus Is Bankrupt Antidote to Failed Stimulus. While the US-based article is a polemic from the right-wing American Enterprise Institute and the second is a journalist’s reporting on Australian political trivia, they both raise interesting issues regarding the way fiscal policy is conducted. The issues raised provide further justification for employment guarantee schemes as a sophisticated addition to the automatic stabilisation capacity that is inherent in fiscal policy and makes it superior to monetary policy.