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Randy Wray: The Job Guarantee and Real World Experience

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By Randy Wray, Professor of Economics at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives

There have been many job creation programs implemented around the world, some of which were narrowly targeted while others were broad-based. The American New Deal included several moderately inclusive programs such as the Civilian Conservation Corp and the Works Progress Administration. Sweden developed broad based employment programs that virtually guaranteed access to jobs.

From WWII until the 1970s a number of countries, including Australia, maintained a close approximation of full employment (measured unemployment below 2%) through a combination of high aggregate demand plus loosely coordinated direct job creation. (Often there would be an informal “employer of last resort”, such as the national railroads, that would hire just about anyone.) As Bill Mitchell argues, a national commitment to full employment spurred government to implement policies that created jobs—even if it did not explicitly embrace a national and universal job guarantee/employer of the last resort program.

In the aftermath of its economic crisis that came with the collapse of its currency board, Argentina created Plan Jefes y Jefas that guaranteed a job for poor heads of households. (See Tcherneva and Wray 2005 here) The program successfully created 2 million new jobs that not only provided employment and income for poor families, but also provided needed services and free goods to poor neighborhoods.

For many years Argentina was proclaimed to be the success story of IMF austerity and market liberalization policies, until it experienced an economic meltdown in the winter of 2001-2002. (I won’t deal with causes of the crisis here—but it was the inevitable result of adopting a currency board arrangement. By giving up its own currency, it faced a financial crisis even though its budget deficits always would have met Maastricht criteria.)

To deal with the looming crisis and skyrocketing unemployment and poverty rates, the Argentinean government implemented a limited job guarantee program called Plan Jefes y Jefas de Hogar Desocupados (Program for the Unemployed Male and Female Heads of Households, or simply Jefes). Participation in the program grew quickly, to about 5% of the population, and about 13% of the labor force.

The Jefes program provided a payment of 150 pesos per month to a head of household for a minimum of 4 hours of work daily. Participants worked in community services and small construction or maintenance activities, or were directed to training programs (including finishing basic education). The household had to contain children under age 18, persons with handicaps, or a pregnant woman. Households were generally limited to one participant in the Jefes program. The program was intended to be one of the government’s primary programs to deal with the economic crisis that gripped Argentina with the collapse of the currency board. Most other safety net programs were eliminated or reduced in order to shift funding to Jefes.

Government’s total spending reached about 1% of GDP, with nearly 2 million participants (about 1.6 million in Jefes and 300,000 in a similar program that we did not study, PEL). However, it should be noted that the U.S. spends 1% of GDP on anti-poverty social assistance, while France and the UK spend 3-4% of GDP on such programs.

The program deviated substantially from our proposal for a jobs guarantee: it limited entry to those who had qualified and signed-up by May 17, 2002, although some who did not meet that deadline were added. This is said to have resulted in some cases of discrimination because other potential participants were denied access even though they appeared to meet program requirements—but had missed the deadline. More importantly, households were forced to make a choice concerning who would participate in the program. Limited entry prevented the program from reducing unemployment and poverty rates further. If entry into the program were not restricted to one participant per family, it is probable that many poor families would send both husband and wife into the program. This would have provided a minimum family income of 300 pesos monthly, lifting some families out of poverty. If the program were broadened further, extended beyond heads of households with children, persons with disabilities, or pregnant women, participation would almost certainly have grown well beyond 2 million. The unemployment rate would have fallen much further, as would the poverty rate.

Further, by limiting the program to the equivalent of half-time work, workers were prevented from working the number of hours desired, and their incomes were reduced to the extent that they were unable to find another part-time job to make up the difference. Given that many participants—especially females—had no previous formal labor market experience, the likelihood that they would find work outside Jefes at anything approaching the minimum wage is quite low. Limiting entry appears to have been made a central feature of the program in an attempt to constrain federal government spending; however, it led to much dissatisfaction and possibly to some instances of favoritism and corruption.

Much to the surprise of Labor Ministry officials, female heads of households initially accounted for some 60% of program participants and that eventually grew to three-quarters. Formal surveys indicate that the program was well-targeted to intended households (poor families with children) and was highly popular among participants. Studies by international researchers (including the World Bank) found that projects were generally well-run, completed on time, and provided needed services to poor communities.

The increasing “feminization” of the program (caused in part by economic recovery that pulled most men out of the program and into the private sector) proved to be a political problem. Government officials adopted the attitude that the program was providing jobs to “economically inactive” women who should be at home instead of working. I won’t go into the details (in part because I am not sufficiently familiar with them) but officials created an alternative scheme by which the remaining men would be moved into an unemployment program and the women would be moved into welfare. These moves were voluntary, but higher pay in either unemployment or welfare was the attraction that helped to gut the Jefes program. One of my PhD students continued to study participants as the program was reduced—and found that women would rationally take the higher pay in welfare but continue to work in their jobs (without pay) because they found substantial benefits in the social networks they had created through work. They also wanted to contribute to their communities.

Pavlina Tcherneva and I visited a number of Jefes projects and conducted interviews with about 100 participants (mostly women) and their supervisors. Just to quickly summarize our main findings, we found that when we asked “would you prefer to receive the benefit of the Jefes program but stay at home,” every single one, without exception, said that they would not want to sit at home and that they preferred to go to work. When asked “why”, the most common responses were that 1) they felt (or would feel) useless sitting at home, 2) they felt like they were helping the community when they were working, 3) there is dignity in working, 4) they were meeting their neighbors and 5) they were learning new skills. Note that our findings are consistent with survey data from other studies, which indicate that participants are highly satisfied with the program because they feel they “can do something”, they “help the community”, they “work in a good environment” and they “learn”.

It was particularly interesting to note that when we asked “do you think that there are essential goods and services that your community needs, which can be performed by Jefes workers,” everyone, without exception, answered in the affirmative. People distinguished between factory work and community work, with many claiming that there are social services that are not considered ‘productive’ in the sense of profit-generating activities that, nonetheless, needed to be done—things like caring for the young, old and the frail, cleaning and fixing up the neighborhoods, running soup kitchens, and so on.

Jefes was helping to redefine the meaning of work, providing paid employment for activities that are generally thought to be “unproductive labor”. However, we found significant barriers, especially at the highest levels of government, to thinking about such types of work as deserving of remuneration. All of the government officials agreed that the kinds of services provided by Jefes projects were useful, but they were reluctant to view Jefes projects as “efficient”. There was a strong bias toward market evaluation of efficiency. For example, officials agreed that the bread provided by Jefes workers to poor neighbors was meeting a real need; however, they believed that modern private sector bakeries could meet this need much more “efficiently” with skilled labor. They told us it would be better to pay the women to stay home so that they could simply buy bread from modern bakeries.

The Jefes projects that they viewed as “sustainable” were micro-enterprises (worker co-ops) that could compete in markets. Projects that did not produce output sold in markets were seen as “inefficient” because they did not meet a market test. Hence, woman baking bread in a Jefes project that was then provided freely to their poor neighbors was seen as necessarily “inefficient”—although the project created useful jobs and useful “output” that reduced hunger.

This is obviously a common attitude shared by mainstream economists. “Market efficiency” is the metric of value. So, ironically, they preferred that the women do nothing “productive”—just stay at home and live off hand-outs—rather than make positive contributions to their societies. The only “productive” use of such “inefficient” women and their kids was as “consumers” of the output of big “efficient” corporations. Nor could these officials really comprehend all the other benefits the women got out of working and feeling useful to their communities.

All officials we interviewed agreed that the women in Jefes were doing important, even necessary, things, however, they were less convinced that these activities should qualify for pay. If the women organized into micro-enterprises to sell products in markets, then the market would determine the proper remuneration. However, if products were distributed freely to neighbors, then the work was somehow undeserving of remuneration. Of course, these are widely held views all over the world—especially by those who are trained in mainstream economics.

More recently, India passed the National Rural Employment Guarantee Act (2005) that commits the government to providing employment in a public works project to any adult living in a rural area. The job must be provided within 15 days of registration, and must provide employment for a minimum of 100 days per year. These programs represent a relatively explicit recognition that government can and should act as employer of last resort.

Job guarantee supporters see employment not only as an economic condition but also as an inalienable right. Many of us see the right to work as a fundamental prerequisite for social justice. The American social scientist John Dewey maintained that:

The first great demand of a better social order…is the guarantee of the right, to every individual who is capable of it, to work—not the mere legal right, but a right which is enforceable so that the individual will always have the opportunity to engage in some form of useful activity and if the ordinary economic machinery breaks down through a crisis of some sort, then it is the duty of the state to come to the rescue and see that individuals have something to do that is worthwhile—not breaking stone in a stoneyard, or something else to get a soup ticket with, but some kind of productive work which a self-respecting person may engage in with interest and with more than mere pecuniary profit.

Some job guarantee supporters such as Phil Harvey and Bill Mitchell argue for the right to work on the basis that it is a fundamental human (or natural) right. Such treatments find supports in modern legal proclamations such as the United Nations Universal Declaration of Human Rights or the Employment Act of 1946 and the Full Employment Act of 1978. As these authors recognize, social justice arguments rest on more than the official recognition of the right to work as a fundamental human right.

Amartya Sen, for example, supports the right to work on the basis that the economic and social costs of unemployment are staggering with far-reaching consequences beyond the single dimension of a loss of income. Another Nobel Prize Winner William S. Vickrey identified unemployment with “cruel vandalism” and spent the latter years of his life outlining the social and economic inequities of unemployment and devising strategies for its solution. In sum we believe that the justifications for the right to income and the right to work on the grounds that they are inalienable human rights, consistent with the goals of social justice and freedom, are not incompatible.

In this vein, the Indian program might be more successful than the Argentinean experience. Note this is not for any technical reason, such as program formation or expertise. In my view, the Jefes program was organized in a very innovative way (albeit, as only a partial JG program, with various limits placed on participation and with a wage that was far too low). Its decentralization but with various levels of checks and balances was quite successful at generating projects that contributed to communities. And the program provided a wide range of benefits to participants. But the problem is that the officials in Argentina saw it as a temporary program to deal with a crisis. When the crisis was over, they phased out the program. India has formulated the program as a human right.

I had never been convinced that this is necessary because I thought that logic, alone, would carry the day. Employing people is better than giving them handouts. Enabling people to contribute to society is better than forcing them to remain at home living under the stigma of welfare. But, unfortunately, economists have successfully convinced policy makers that the only measure that really matters is narrow market efficiency.

Yet we have successfully battled against such arguments in the area of human rights—all races, all ethnic groups, all genders have fundamental human rights. As I said in an earlier blog, human rights are aspirational (Phil Harvey has written great articles on this)—and we need to recognize and fight for the right to a job. This is more than the right to have income. It is a right to do something useful, to contribute to society, and to have all the benefits one gains by fully participating in society in a socially useful way.

The Jefes experience allows us to move from the realm of theory to the reality of practice. Many of the fears of the critics of direct job creation programs have been shown to be fallacious. Job creation, even on a massive scale and under difficult circumstances, can be successful. Participants welcomed the chance to work, viewing participation as empowering. The program can be democratically implemented, increasing participation in the political process, and with relatively few instances of corruption and bureaucratic waste. Useful projects can be undertaken. Even with a huge program that employed 5% of the population, communities were able to find useful work for participants. Jefes reduced social unrest, and provided demand for private sector production.

Could a program like Jefes work elsewhere? At the very least, we can learn from the program’s successes and failures. As one of the Argentinean organizers put it to Pavlina and me, “The people that actually have the answers are the ones with the needs, those that suffer from starvation. If you target your policies to these people you cannot go wrong. This government did a good job; they addressed the root of the problem…. They didn’t look to the top; they went straight to the bottom.”

In a sense, the jobs guarantee/employer of the last resort program really is targeted “to the bottom” since it “hires off the bottom”, offering a job to those left behind. Its wage and benefit package is the lowest, setting the minimum standard that private employers can offer. It does not try to outbid the private sector for workers, but rather takes those who cannot find a job. Further, by decentralizing the program, it allows the local communities to create the projects and organize the program. The local community probably has a better idea of the community’s needs, both in terms of jobs and in terms of projects. However, actual project formulation must be done on a case-by-case basis.

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53 comments

  1. readerOfTeaLeaves

    Projects that did not produce output sold in markets were seen as “inefficient” because they did not meet a market test. Hence, woman baking bread in a Jefes project that was then provided freely to their poor neighbors was seen as necessarily “inefficient”—although the project created useful jobs and useful “output” that reduced hunger.

    This is obviously a common attitude shared by mainstream economists. “Market efficiency” is the metric of value.

    The pricing structures of conventional economics are rife with externalities. So the externalities accumulate over time, because ‘the markets’ are not able to correctly calculate the true prices.

    1. reason

      The market calculates the values of goods and services to people with money. The values of people without money are ignored.

      SO GIVE MONEY TO POOR PEOPLE.

  2. reason

    “The increasing “feminization” of the program (caused in part by economic recovery that pulled most men out of the program and into the private sector) proved to be a political problem.”

    Not necessarily co-incidence as more money flows throught the community.

    “One of my PhD students continued to study participants as the program was reduced—and found that women would rationally take the higher pay in welfare but continue to work in their jobs (without pay) because they found substantial benefits in the social networks they had created through work. They also wanted to contribute to their communities.”

    No surprise to me. So what is wrong with a “citizen’s dividend”?

  3. F. Beard

    What is this mad obsession with jobs, especially made up ones? Do not most people dream of retirement? And do not retired people continue to work but in ways that please themselves and that contribute to their family and community?

    If the problem is lack of purchasing power in the hands of the public (and it is) then fix it directly! Hand out new fiat equally to the entire population.

    And meaningless jobs are CRUEL, patronizing and demeaning. People want to be useful, not waste their time.

    I fear the Left cannot comprehend this but the Right sure can. Bush handed out stimulus money and no one complained that I recall.

    1. Philip Pilkington

      “And meaningless jobs are CRUEL, patronizing and demeaning. People want to be useful, not waste their time.”

      Funny. I know people who work these types of community jobs for free. They seem to think that ensuring that the local village has nice flower arrangements is a very useful thing to do.

      I’m not sure that people handing out homemade bread to the poor would feel that the government was ‘patronizing’ them for doing so either.

      Maybe you’re right. Throw them back to rot on the dole and suckle on the teet of the State. There’s liberty in smoking forty fags a day and watching Oprah.

      “I fear the Left cannot comprehend this but the Right sure can. Bush handed out stimulus money and no one complained that I recall.”

      Yes, the right LOVE handouts to the poor. THAT’S why disproportionately unemployed black and latino people vote consistently for… oh, no… hang on a minute…

      1. F. Beard

        I know people who work these types of community jobs for free. Philip Pilkington

        Thanks for making my point for me. They do what is meaningful to THEM.

        I’ll further dissect your comment later cause I got laundry to drop off. :)

        1. Philip Pilkington

          Which the jobs guarantee supports. We don’t force people to clean a toilet. We let them sign up to pre-existing community programs (or newly created ones) and get a paycheck. They figure out what is needed in their community. Big Guv’ment doesn’t tell them what to do.

          Only a neoclassical economist could be against such a proposal.

          1. F. Beard

            They figure out what is needed in their community. Big Guv’ment doesn’t tell them what to do. Philip Pilkington

            But little government does?! Just give people the money and let them self-organize if they wish to.

            Only a neoclassical economist could be against such a proposal. Philip Pilkington

            Are neoclassical economists against usury, against credit creation, for government spending without borrowing, for co-existing government and private money supplies and for a universal bailout till all credit debt is paid off?

            Are they for money systems that “share” wealth and power with the workers and the general public?

          2. They didn't leave me a choice

            I believe the schism here is that jobs guarantee programs involve more government supervision than a simple living stipend or whatever such a thing should be called.

            The supervision comes in the form of certifying the jobs for the program and collecting data on how they work. An LS system would not need that bureaucracy, a simple local advertisement board (virtual maybe?) for volunteer work would suffice.

            Both systems would, in the end, achieve the main goal, getting the money into the hands of the people who need it, and who the economy needs to have the money: the people who actually use it instead of hoarding it. The difference is that one system can easily get bloated and corrupted AND has the typical factor of coercion involved in it. From a purely humanitarian perspective I think the LS system is vastly superior, though you might, echoing the founders of modern capitalism, think that the poor should always be at work to produce things for rich. After all, people with free time on their hands are dangerous in so far as social conditioning goes…

        2. Leverage

          JG programs are not (or never should be) mandatory. Also, JG would come (ideally) after all other measures (cutting taxes, increasing deficits or whatever), I would argue that alternative currencies (both public and private) use should be facilitated too, to increase aggregate demand (and I guess F.Beard will agree on this), liquidity and exchange of good and services (private counterparts should be able to settle debts in whatever currencies they want, and states & public institutions to tax in their own money). After all that very few people would be unemployed, and of those desiring to work JG should provide means to do so, in socially and locally designed programs preferably (for big projects you have government spending).

          The devil is in the details, that’s where you have to look how the programs are designed, funded and to what purpose. But overall, the immense majority of the population will prefer to do something and receive income that to do nothing and receive income (extremely inefficient), why economists prefer a solution that is a mix of free income and enforcing poverty (externalization of costs via increasing criminality) is absurd. It’s very important to get right how these programs are designed and chosen, people could use incomes to start up small business while having some extra safety net.

          The current program is eliminating unemployment through ostracism and crime, and in addition add related jobs (privatized prisons, security related jobs, etc.). The economic and more important, social, costs are exorbitant. No one in his right mind who has given it some though would prefer the current system, even over an inefficient JG (current system of paying people for doing nothing and externalizing social costs to prisons is even more inefficient anyway).

          1. F. Beard

            No one in his right mind who has given it some though would prefer the current system, Leverage

            Which I don’t.

            even over an inefficient JG (current system of paying people for doing nothing Leverage

            That pay is barely subsistence. What’s that saying? “It takes money to make money”?

            and externalizing social costs to prisons is even more inefficient anyway). Leverage

            You’ll get no argument from me over that. Drugs should be legalized for adults. As for those who sell to children – throw the book at em.

        3. JTFaraday

          “I’ll further dissect your comment later cause I got laundry to drop off. :)”

          Drop it off? What’s the matter Beard? Don’t you want to do that laundry yourself?

          You know–it’s just a little soap and water. scrub scrub.

          1. F. Beard

            Don’t you want to do that laundry yourself? JTFaraday

            The laundry lady is very cute, needs the money and I am now addicted to neatly folded laundry. :)

            But I do the dirty work. I load the washing machines and she does the drying and folding. It’s a happy arrangement.

          2. JTFaraday

            I see. Like social time down at the river in ye old countrie, where the old crones gave the virgins advice on catching a man. ;)

            I guess some things never go out of style.

      2. F. Beard

        Throw them back to rot on the dole and suckle on the teet of the State. There’s liberty in smoking forty fags a day and watching Oprah. Philip Pilkington

        The Biblical ideal seems to be small family farms. But coop people up in apartments and they have little of their own to work on and improve. So then they live vicariously through the Telly (is that what you guys call it?). Who can blame them?

        And since the population was driven off their farms via the counterfeiting cartel, the banks, I have no doubt that land reform is needed too. I suggest the corporately owned farms be nationalized and some form of homesteading be reintroduced.

        1. JTFaraday

          “Throw them back to rot on the dole and suckle on the teet of the State. There’s liberty in smoking forty fags a day and watching Oprah.”–Philip Pilkington

          It’s “suckle on the ‘teat’ of the state” not “suckle on the ‘teet’ of the state.”

          Sorry to be pedantic, but if we’re going to be proper right wingers we should at least learn how to spell it.

  4. Ed

    I have to agree with F. Beard on this one. Its hard to determine whether the jobs guarantee as described is a make work program -the government requiring people to do various types of work that the market has no use for in return for what are essentially workfare checks- or a thinly disguised welfare program with extra paperwork. If the work is directed by the government, then its the former, and if the government simply requires the recipients of what “work of value to their communities they have done” and then hands them the checks the latter.

    I would distinguish this from the government simply expanding the civil service to work on projects it would have to do anyway, or addressing a labor market failure, where employers have just stopped hiring but there appears to be no supply shock or job destruction though automation or offshoring.

    The reason I’m skeptical is because I think the main reasons behind the drop in labor force participation are in fact job destruction through automation or offshoring, plus a supply shock in the form of rising resources and commodities prices. If I’m correct, its a very different situation from the 1930s. It means that we are not really looking at a freezing up of the labor market, it means there just isn’t as much work, at least work useful for for-profit enterprises.

    1. Leverage

      So until you come with an infallible problem to solve this we will fix it the old way: poverty, criminality and other ‘external costs’. Then add jobs by increasing security and legal related jobs. Just great! One way or an other the problem will ‘sort itself out’ (and it’s hard to say people that they better starve to death because machines are doing all the job).

      About resources, while I’m very concerned about future supply shocks, natural capital depletion and other biosphere and ecological problems, with gas as cheap as it is and 50% of developed world food production being wasted (not to talk about output gap and other issues). It’s a no go to be talking about supply shocks to start with when there are more pressing problems, or we have abandoned any hope to have an stable and relatively fair system? The only shortage right now is the shortage of money (although not for wealthy people and bankers, who can have trillions).

  5. Schofield

    If you’ve ever genuinely made the effort to work with a community instead of theorizing from a computer chair you’d know there was no end to the list of useful things to be done. Many of them an ego-centric capitalist would see no reason for but moral-centric citizens do.

    1. F. Beard

      you’d know there was no end to the list of useful things to be done. Schofield

      I don’t disagree. But just give people the money and let them decide what work to do. Call it a “Citizen’s Dividend”, if you like.

      Ultimately, this is a matter of justice. Is the population entitled to restitution for theft or isn’t it? If the answer is yes then just give them the money and be done with it.

  6. Keating Willcox

    How about this? Price supports for hand knit clothing from folks who are registered unemployed. As the economy deteriorates, simply raise the price supports. What to do with the enormous amounts of knit blankets and clothing? Sell them on the internet, distribute them to the poor, here and overseas, no training cost, no child care issues, good productivity and steady output makes for a good resume, and all the transactions can be done by websites such as ESTY…

  7. Ransome

    To labor for wages is a fundamental tenet of Protestant ethic capitalism. Unearned income of the animal spirits is theft. The WASP Robber Barons went to great effort to justify unearned income.

    The current crisis is partly due to the brainwashing of individuals to become consumers rather than the frugal asset managers of our ancestors. The average new immigrant has a better chance of success against a spoiled indulgent American who is totally dependent on cash flow from uncertain jobs that vanish overnight leaving only debt without savings.

  8. Hugh

    One of many reasons economics is a sick joke and junk science is that he does not ascribe any economic meaning to quality of life, when in fact that is the purpose of having an economy.

    Standard economic concepts, such as efficiency, productivity, competitiveness, and GDP need to be understood within the framework of quality of life. Outside this framework, that is as they are treated in modern economics, they are meaningless, and worse tools of class war.

    Jobs which fulfill a societal good and give those who work them self-respect are inherently productive whether economics can measure that productivity or not.

    An important issue that this post does not address is a living wage. If work is worth doing, it should be paid for at a rate that a person can live on. A criticism I have made of previous MMT Jobs Guarantees is that they would pay essentially minimum wage so as not to compete with private industry. The idea is that a Jobs Guarantee would provide a pool of low paid workers who would be incentivized to enter the private sector at the earliest opportunity. However, such an approach does not incentivize the private sector to pay a living wage, just something minimally beyond the minimum wage, and by providing the private sector with a stock of poorly paid workers, it would have a depressive effect on wages in the sector more generally. A Jobs Guarantee paying a living wage would have an opposite effect providing a socially acceptable floor to wages and forcing private industry to compete against that.

    1. JTFaraday

      Obviously the whole point of the minimum wage public job guarantee is not to give jobs to poor women in Brazilian favelas.

      Obviously the whole point of it is to give both the over-educated unemployed and the under-educated unemployed in the US a formal mechanism by which they can underbid current public sector employees, knocking them off their over-paid perches gladiator-style.

      At this point, I myself am really looking forward to the day that a hungry and nasty Phil Pilker knocks permanent student Randy Wray off the– what did they call it?– “the teet of the State” at UM-KC myself.

      Sure, unemployment will knock the bottom out of both the public and private labor market eventually anyway, but with a formal under-bidding mechanism in place in the public sector the MMTeet-ers can collapse it much quicker.

      1. JTFaraday

        Yeah, like Rumpelstiltskin petulantly stomping their tiny little feets until they pound a hole in the floor and fall right through it.

      2. F. Beard

        but with a formal under-bidding mechanism in place in the public sector the MMTeet-ers can collapse it much quicker. JTFaraday

        I never thought of that till now.

        However, I have noticed the MMT crowd are less than radical reformers when it comes to such fascist things as sovereign government borrowing and the government enforced/backed counterfeiting cartel, the banking system, EVEN though their monetary insights allow the abolition of both.

        1. JTFaraday

          It’s Looting Mechanism #67,382: The Synthetic Creation of Internal Global Labor Market Competition for Purposes of Domestic On-Shore Wage Arbitrage, Based on Genius Multi-Tier Compensation Packages Pioneered at General Motors (Phase I).

  9. mtnplover

    It seems strange that an article about the labor market doesn’t include a discussion about the length of the work week in each country. There’s nothing magic about a 48 hour work week in China, or a 32 hour work week in France, or a 40 hour work week in the US. In every country the largest employers could easily absorb 15% to 25% more workers if the existing workers were given shorter work weeks.

    Using existing large companies to absorb the excess labor allows the market to allocate production to the goods and services most desired by consumers, unlike the proposed government make-work programs that always suffer from the insular government decision making that favors some groups over others (military contractors, road/housing sprawl builders, etc.) Besides “job programs” are blatent government patriarchy and few people want some impersonal government entity controlling their work life.

    One of the many wonders of technology is that far more goods and services can be produced with far fewer labor hours. But even though we’re able to work fewer hours to produce at the same level doesn’t mean we won’t or wouldn’t contribute in other meaningful ways with our additional “free time.” Some of us will get involved maintaining and enhancing local parks, or get involved with our local schools, or become part of community policing and outreach activities. Some of us will turn hobbies into small businesses. And as more of us contribute labor to the local community aprt from the formal employment sector, the need for government services is reduced. Thus, taxes can be reduced and government debts can be paid off, giving everyone more disposable income that will create jobs and additional market activity.

    The road to a more sustainable and just economic future is fairly clear: slash taxes on lower and middle income working people (reducing/eliminating payroll, sales and VAT) and substitute the tax revenue with taxes on the largest earners of gross rent and interest income, gross business receipts, capital gains income, and a nominal Tobin tax on large financial transactions.

    Besides the ommission of considering the arbitrary work-week standard in a given country, any discussion of the labor market must also address the level of feudalism in a particular country. Argentina – like much of Central and South America – and especially India are among the most feudal of all countries, where a very small percent of the population own and control most of the land and mineral wealth, and most of the lucrative government contracts and subsides are given to a small subset of economic elites. In these countries it doesn’t matter too much what happens in the labor market since any increase in wages will merely increase rents and land values, and any decrease to overall wages will decrease rents and land values.

    Almost every other economic issue is a trifle compared to first solving the fundamental land and tax issues by eliminating all tax subsidies to landlords and land speculators, imposing new taxes on gross rents, and increasing capital gain and transaction taxes on all real estate sales and leases. It’s not a coincidence that every Econ course starts with the definition of land, labor and capital – the three main components of every economy – and then promptly ignores land in virtually every class through the Phd level.

    1. jonboinAR

      I agree wholeheartedly with the proposal to shorten the work-week. It seems to me it would have to put people back to work in the private sector.

  10. Yojimbo

    The Federal government’s interests seem to be contrary to the best interests of the majority of the populace. Even with good intent, it is unlikely the government is capable of creating and implementing any program that may be genuinely effective.

    America is afflicted with a virulent strain of elitism and snobbishness when it comes to education and employment. It seems the prevailing attitude is that those without tertiary education or those who perform unskilled, semi-skilled, or skilled manual labor are somehow lesser people than so called “knowledge workers”.

    Somehow America was going to become 100% white collar workforce and all that dirty manual labor would be taken care of by Mexicans and Asians.

    The very terms manual labor and blue collar have become pejorative. This is a cultural and societal ailment.

    I know of no other society (developed) where there is such an ingrained disrespect of manual labor.

    Japan is almost polar opposite. People are not generally judged by their profession but by their efforts and skill. Most are diligent and strive to be the best at whatever they do and most others respect them for it.

    To expect this dysfunctional predatory government to solve this while such societal bias exists, is naive and possibly even absurd.

    1. F. Beard

      I know of no other society (developed) where there is such an ingrained disrespect of manual labor. Yojimbo

      It’s not Biblical either:

      and to make it your ambition to lead a quiet life and attend to your own business and work with your hands, just as we commanded you, so that you will behave properly toward outsiders and not be in any need. 1 Thessalonians 4:11-12 New American Standard Bible (NASB) [emphasis added]

      Paul himself worked with his hands as a tent maker.

  11. ApeMan1976

    Given the cross post I assume a cross-comment is OK:

    The Job Guarantee is a program whose effects are fairly well understood, as big policy initiatives go. It’s been implemented at various times and places, in various guises, and has had certain effects which can be described with a decent amount of precision. The primary risks of the program seem to be political – not an insignificant consideration given that we seem to have entered an era of fiscal and regulatory brinksmanship that could doom even the most well-intentioned economic reform.

    However, the world seems to be extremely short on specific, operational objections to the Job Guarantee program. According to beard-stroking conventional wisdom, some usually unspecified economic calamity will befall us if we recklessly hire unemployed people and put them to work creating real value in their home communities and pumping net financial assets from the US Treasury directly into depressed areas of the country.

    Hearing objectors out is all well and good, but it’s important to remind everyone what they’re objecting to – sending money and jobs to people who need them to survive, whose communities are in crisis because the social infrastructure is crumbling faster than it can be repaired. This is not a theory. It is a description of the program, and of the conditions that make it necessary.

    1. F. Beard

      but it’s important to remind everyone what they’re objecting to – sending money and jobs to people who need them to survive, ApeMan1976

      I don’t object to sending the money – please do so! And don’t borrow the money; just spend it into existence.

      But keep the jobs other than for generous infrastructure spending that promote the general welfare in a non-controversial way.

  12. bluntobj

    Oh, a Jefes program in the US would be most useful. How else will government entities enforce socially useful mandates, monitor regulatory compliance, and monitor the electronic information flow through the Utah internet data sniffer?

    This would significantly bump up employment in the US. Take all the laid off middle managers, under- and non-employed college students, etc., and develop a Department of Compliance. There’s lots of work to be done there, and it’s not planting flowers or shoveling dirt. We can finance it all through Pure Deficits very easily, removing private credit inflation in one fell swoop.

    Pure Deficit financing will require some kind of price, consumption, and wage mandates, and someone needs to be there to monitor for non-compliance and re-educate uncooperative individuals back into the proper social structures. Mandates will help with economic stability, and ensure a minimum standard of dignity for life, which is the ultimate goal here.

    1. fred

      You can provide examples of this approach working, of course?

      Please list the governments which have prospered over 50 year periods by managing their economies in this manner : price controls, jobs assigned by government, ‘Pure Deficit’ financing, …

      My study of economic history must be deficient, as I do not know of any successes, tho I can cite many failures for partial/variant implementations of economic management.

    2. F. Beard

      Pure Deficit financing will require some kind of price, consumption, and wage mandates, bluntobj

      I have to disagree here. Pure deficit spending could be done with none of the above IF genuine private currencies were also allowed. Then excessive government money creation would hurt no one but government and its payees thereby incentivising government to spend wisely.

      But I agree with your opposition to job programs. Just hand out new fiat and let the unemployed find their own useful work to do.

  13. Yojimbo

    I am not a Christian but I completely agree with that riff.

    It is also no mistake that most religions viewed Money lending as essentially evil. The US and/or states need comprehensive new anti-usury laws (not sure of framework/jurisdiction).

    The current rules are written by the loan sharks for their benefit.

    P.S. I left finance and the big city 11 years ago. I was a moderately high flier. Many people thought I had potential to reach the “top”. They were perplexed when I walked away. After 7 or 8 years many of those people came to envy me.

    I operate a small restaurant in a beautiful scenic spot and derive great pleasure from providing my guests with pleasurable and memorable experiences.

    I have derived far more satisfaction from delivering delight to my customers than I ever did from bagging the big monetary game.

    I am lucky to be my own boss but I started off cleaning toilets, delivering pizzas etc.

      1. Yojimbo

        We need to think about how to take control of corporate governance.

        In theory it is pensioners and ordinary people who are the ultimate beneficial owners of these unethically driven mega corps. But in fact most shares are held in street names or by captive elites like blackrock, pimco, etc.

        This dates back to the late 60′s when broker dealers became unable to track constantly changing ownership interests. As a matter of expediency the franchise was transferred from the rightful beneficial owners to the broker dealer foxes.

        This is not captilism

        1. F. Beard

          We need to think about how to take control of corporate governance. Yojimbo

          I agree.

          In theory it is pensioners and ordinary people who are the ultimate beneficial owners of these unethically driven mega corps. Yojimbo

          Which is one reason why I support a universal bailout instead of debt abolition so as to not stiff the pensioners.

  14. Yojimbo

    This is not capitalism run amok. The beneficial owners need to be better informed and aggressively assert their rights. We need to educate and encourage the major institutional names and transfer the franchise from broker/dealers and asset managers to the beneficiaries.

    1. F. Beard

      Without the government enforced/backed counterfeiting cartel, the banking system, to borrow from I reckon that higher interest rates might force corporations to issue more shares and thus become more democratically controlled.

      I also advocate the direct use of common stock as money since it eliminates the need to borrow a “foreign” money except perhaps fiat in order to pay taxes.

  15. Jim

    I believe our present financial/economic/political/cultural crisis has also turned into a crisis for progressive liberalism.

    Many MMT theorists apparently see the common good as served best by an interventionist state able to deploy whatever measure the situation demands.

    By choosing the state as our agency of liberation MMT theorists also apparently believe that they are engineering faltering communities back into working order.

    “The government did a great job, they addressed the root of the problem. They didn’t look to the top, they went straight to the bottom…by decentralizing the program it allows local communities to create the projects and organize the program.” “The people who actually have the answers are the ones with the needs.”

    But isn’t the state(although sending jobs and momey to people who need them)simultaneously reducing citizens to clients, and thereby engaging in a logic of domination similar to the way powerful private corporations tend to reduce citizens to consumers?

    Some MMT supporters also apparently believe they can reinvigorate an “abstract” public constituting a national public sphere. Dan Kervick in a comment on NC on April 12 at 10:14 A.M. stated:

    “If people of good will want a truly democratic government, they need to act in solidarity with others to become the government they want. The way to do it is to infiltrate the political institutions of the empire and then legislate it out of existence. Want to end the rule of big finance? Then become the rule makers and put financial institutions under you thumb.”

    What is revealing about this strategy for political change is the assumption that the major problems with our current structure of power are simply operational, not structural, and that all we need are a new set of politicians with the right economic and legal knowledge to manage our way out of this crisis.

    From my perspective, such a strategy almost guarantees a continuation of the rhetoric of democracy with the actual structure of power still dominated by the privileged elite of both the public and private sector with ready access to real or cultural capital.

  16. Fred

    If the economy is a not a complex system, rather a machine that produces a given output for given settings and inputs, economists must explain why they so rarely make accurate predictions.

    If the economy is a complex system, then all of this is nonsense for a lot of inter-related reasons, e.g. mathematical chaos, computational complexity and emergent properties of systems.

    Conceptually, controlling complex systems is only possible if they are closed and are not chaotic. (This would not be considered a complex system by most people in the business, I think.)

    The economy is open : it is affected by human inventions, human fads, weather, position of the sun, …

    The very idea of controlling an open complex system is a conceptual oxymoron.

    Economists appear to know nothing about either systems or control of systems. A hint : waving your hands and talking, no matter how erudite your words, is not a control system.

    Based on quite fundamental mathematics, is not possible to control an economy, and there is no evidence that any government has succeeded in doing so over 50 year periods. In fact, the evidence is the inverse.

    But nothing stops this output of light comedy combined with black humor.

  17. F. Beard

    Employing people is better than giving them handouts. Randall Wray

    Not if they deserve restitution for, say, the predation and instability of the government backed/enforced counterfeiting cartel, the banking system.

    Then it is cruel mockery – making the victims of theft work to obtain back SOME of what was stolen from them.

    Btw, when are you MMT guys going to turn your guns on the money cartel? Never?

  18. jonboinAR

    How about shorten the work-week by 5 hours, anything over 35 hours mandatory double-time, and see what happens. Yes, some inflation, I imagine, but I’ll bet demand will increase and unemployment drop.

    We really need tariffs, as well, to start limiting labor-arbitrage by corporations.

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