Thursday, September 4, 2014

A Challenge To MMT: The Improved Job Guarantee (IJG)


ONE SIZE DOES NOT FIT ALL

One of my concerns with the JG proposal is that while it promises to "take workers as they are and provide jobs that fit their skills," the reality seems to be that it would "coerce" skilled and semi-skilled workers to accept a minimum wage dead end job or else face starvation and homelessness [bearing in mind that the vast majority of unemployed do not receive unemployment insurance, that only about half of Americans below poverty level receive food stamps, and that Clinton ended welfare as we know it].   This is in contrast to the New Deal WPA that offered different wages for different skills, or in contrast to BIG or JIG proposals that would guarantee a basic income so that no one would ever have to face starvation and homelessness.  

Conservative Milt Friedman advocated a BIG so that no American would starve or be homeless, while MMT does not advocate a safety net for those who cannot or will not participate in a JG.    Does that make MMT even more conservative than Milt Friedman?
I suggest an Improved Job Guarantee (IJG) that would pay 85% of the prevailing wage for each occupational category, up to some cap (perhaps set the cap at the median wage for each county).   For example, if the prevailing local wage for TIG welders is $20/hour, then the IJG would offer $17/hour for qualified TIG welders.   If you believe in the buffer stock theory (I mostly don't) then the IJG would create a buffer stock of TIG welders.   The 85% of prevailing wage would not compete with the private sector for TIG welders and would not cause TIG welder inflation.   And so forth for other occupational categories.

Alternatively you could do like the WPA and offer 4 wage categories:  unskilled labor, semi-skilled labor, skilled labor, and professional or management.   As long as each pay category is slightly below the local prevailing wage, it would not compete with the private sector, would not be inflationary, and any alleged buffer stock effect would still be there.

I challenge MMT to explain why they object to paying slightly below the prevailing wage for each job category?

BENEFITS SHOULD BE CONTINUOUS AND FAIL-SAFE


Another problem with the JG is the alleged benefits -- MMT suggests that JG workers should be provided with the same benefits that every other Federal worker enjoys.   But no real life JG that I am aware of has included benefits, and I certainly don't see the MMT JG benefit proposal as being politically viable because people who work in the private sector with lousy benefits would resent JG workers getting the superior Federal benefits.    [MMT claims the JG benefits would set the standard for private sector benefits, but why should that be so, since existing Federal benefits do not set a standard for private sector benefits?   Given a choice between a minimum wage JG grunt job with good benefits or a well paid private sector job that utilizes our skills but has lousy benefits, many of us would choose the latter.]

If JG workers do receive Federal benefits, then their benefits will be disrupted when they "transition" to the private sector.   They'll have to start over from scratch with a new out-of-pocket deduction before their new health insurance kicks in.   They may have to switch to a different doctor.   They may have to move their kids to a different day care.   And so forth.

I propose that the most obvious way to "set the standard" for benefits is a universal national benefit system.    It would be better for the people because we would enjoy continuity and equality of benefits and providers.   It would be better for private employers because they would no longer bear the cost of providing benefits.   It would be better for the country because it would make our businesses more competitive with foreign businesses.   It would be better for the political viability of the JG because it is difficult enough to pass full employment legislation legislation without linking it to controversial issues surrounding benefits.

I challenge MMT to explain why they do not insist on a universal national benefits system?

MACRO EFFECTS OF THE IJG

Compared to a minimum wage JG, an IJG would pump more money into the economy when the private sector lays people off.   Providing that the IJG wage for each job category is lower than the prevailing wage, it would not cause cost-push wage inflation and would not compete with the private sector.

POLITICAL VIABILITY OF THE IJG

At the present time neither the IJG nor the JG are politically acceptable to our oligarchic government.   The only type of job programs that are being passed in the current neoliberal political environment are "workfare" programs that replace the safety net.   It may take a revolution to create a political environment that is willing to seriously consider a humane full employment program.

MMT'ers often claim that their JG is more politically viable than other safety net programs, yet they have never been able to prove their claim by passing a living wage JG.    I challenge MMT to either pass a living wage JG or else stop making false claims about political viability.

THE WORKFORCE HAS CHANGED SINCE 1935

Contrary to the conservative claim that unemployment is "structural" and that the unemployed lack the skills employers are looking for, unemployment during the Great Recession touched almost all occupations, not just the unskilled.   Any true full employment program should accommodate a broad range of skills and occupations.
WPA boss Harry Hopkins recognized the need to create skilled and professional jobs, too.
Harry Hopkins realized this and tried to create WPA jobs for a variety of skills and education levels, not just pick-and-shovel work.    Since then, an even greater percentage of the American workforce has become skilled and educated, making the need to create skilled jobs even more important than it was in Harry Hopkin's day.
The workforce has become more educated.   A modern WPA should provide skilled and professional job opportunities, not just grunt jobs.


SKILL ATROPHY AND HIRE-ABILITY

One of the arguments in favor of a JG over a BIG is to avoid skill atrophy.   However, that only works if the JG actually uses a person's skills, and MMT has yet to explain how they are going to create skilled jobs out of thin air?

Another argument for the JG over a BIG is that employers prefer to hire people who are already employed.   But that only works if the applicant is employed at a job that is relevant to his career path.   I can speak from experience that employers looking to fill a skilled or professional position won't take you seriously if you are currently employed at a dead end grunt job.   You don't even want to list those dead end jobs on your resume, because they are toxic.

If the JG is to truly assist the individual, rather than be a form of punishment, then it needs to guarantee jobs that are relevant to the individual's career path.

PRACTICAL ISSUES WITH AN IJG

There are many practical problems with any job creation program: how do you create meaningful jobs out of thin air?  Who decides what sort of projects these jobs entail?    How do you fund the non-labor costs?   How do you create jobs that match the skills of the unemployed?   How do you target job creation in depressed regions of the country?   How do you avoid competing with the private sector?  How do you avoid duplicating existing government programs?   If you are merely substituting JG temps for jobs that would have otherwise been performed by permanent government employees, then what have you gained?   These are thorny questions that have never been answered to my satisfaction.
Hyman Minsky bragged that his ELR would take workers as they are and provide jobs that fit their skills
These practical problems apply to both the JG and the IJG.   The main difference with the IJG is that it is harder to create skilled jobs out of thin air than it is to create unskilled jobs out of thin air.    For example, a TIG welding job requires an expensive TIG welding machine and some metal and some sort of practical project that needs to be welded.   A bulldozer operator job requires an expensive bulldozer and some practical project that needs bulldozing.    A process engineer job requires some sort of manufacturing process that needs engineering support.   Tools and materials and facilities cost money, and would blow MMT's proposed 80% labor funding rule out of the water. 
 
The reality is that most skilled jobs are going to require either major infrastructure type projects (that need to be debated and voted on by Congress) or long term government programs (that also need to be debated and voted on by Congress).   

But ..... that's also a problem with the MMT JG, unless you admit that JG jobs would only be dead end grunt jobs, like picking up litter.   If that's the case, then the ELR/JG promise to "take workers as they are and provide jobs that fit their skills" is a big fat lie.

I challenge MMT to live up to their original promise to "take workers as they are and provide jobs that fit their skills."

FUNDING AN IJG

Any JG program will require funding for not just labor but also tools, materials, and overhead.   MMT has typically proposed spending up to 20% of the JG budget on non-labor, claiming that is how the WPA was funded.   But in fact 33% of WPA project costs were non-labor.  

33% of the cost of WPA projects was for something other than labor.
Today, non-labor costs would be much higher because of productivity gains.   For example, the WPA often used pick-and-shovel labor to dig a trench for a sewer pipe, but today the trench would be dug by one skilled operator in an expensive backhoe.   To revert back to pick-and-shovel methods would be "make work" and not in anyone's best interest.   To use MMT jargon, make-work would not serve the "public purpose."
WPA at Fort LeBoeuf, PA.   Today this  job would be performed by one skilled operator in an expensive machine.
MMTer's have often suggested shifting some of the funding costs to local governments, but that merely passes the buck and doesn't address the root problem.   Local governments must tighten their belts during recessions, they can't print money like the national government.   Local governments are funded by regressive taxation so passing the funding problem to local governments effectively places the funding burden on the poor and working class.   Shifting JG costs to local government is like saying "if the JG becomes law then you'll have to pay higher regressive taxes."   How politically viable is that?

I challenge MMT to explain how they are going to fund the materials and tools that any real life job creation program will entail?   I challenge MMT to explain how the funding for JG projects will be debated and voted on in a democratic manner, rather than dictated by some anonymous bureaucrat?

CONCLUSION

Today's workforce is more skilled and educated than the workforce of the 1930's.    The skilled and educated should not be ignored or abused by a JG that offers only dead end minimum wage jobs.   The WPA attempted to create skilled and professional jobs and a JG should do the same.  The WPA paid different wages for different occupations and a JG should do the same.

I challenge MMT to guarantee to fully employ minds and not just fully employ bodies.   

 

5 comments:

  1. I had a long comment, but it didn't post and I lost it.

    In short,

    the key thing is not letting skilled workers and professionals go unemployed in the first place b/c of a macro-constraint. the JG is less about preserving their exact skill set, and more about preserving their in general ability to get a job. And even more about getting 'the dollars out there'.

    Making 'transitional' JG workers do 'normal' gov't work works against the counter-stabilization purposes. If a government activity is vital, needs to get done, and requires permanent employees, a transitional workforce is not the best way to go.

    Obviously didn't get to everything here....

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  2. I'm having trouble posting comments, too.

    Thanks for reading my humble blog.

    Agree about avoiding the "macro constraints" and for that reason I am increasingly sympathetic to the proposed 1945 Full Employment Act which would have mandated a full employment budget based on Functional Finance and math formulas.

    Also, a strong safety net and more automatic stabilizers so that when the politicians do screw up the economy, no one suffers too much and the automatic stabilizers eventually straighten things out.

    ReplyDelete
  3. For more info on the JG
    http://e1.newcastle.edu.au/coffee/job_guarantee/JobGuarantee.cfm

    My own priority is to get rid of permanent & involuntary unemployment. I'm not worried about demand-side inflation. I also agree with your suggestion on '45 Full Employment Act based on Lerner's Functional Finance. Whatever works to get rid of the NAIRU.

    ReplyDelete
    Replies
    1. PS: I don't support authoritarian methods in general. I don't believe in abolishing the Welfare System; and I only support a voluntary JG scheme. There are plenty of examples of countries who ran at full employment, but still entertained slave wages & poverty.

      Delete
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