Sunday, May 5, 2013

Bill Mitchell — What is a Job Guarantee?

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.
Bill Mitchell – billy blog
What is a Job Guarantee?
Bill Mitchell

MMT is "Keynesian," actually Post Keynesian. John Maynard Keynes: "Take care of unemployment, and the budget will take care of itself."

MMT puts economic priority on achieving and maintaining full employment as a goal, along with growth (production and productivity) and price stability, while the mainstream focuses on growth and price stability.The mainstream approach is to use unemployment as tool in targeting price stability in accordance with NAIRU (non-accelerating inflation rate of unemployment), that is, the lowest rate of unemployment that an economy can sustain without resulting in inflation. This is thought to be 4-6%, which involves a permanent stock of idle resources going to waste and degrading.

The MMT JG was conceived from the outset of MMT as combination of a buffer stock of employed and a price anchor.

The buffer stock of employed would result from an job offer by the government as the employer of last resort to anyone willing and able to work. This would replace the buffer stock of unemployed, which was and is still characteristic of policy. 

Marx and Engels called this "the reserve army of unemployed" facing destitution that serves to suppress worker bargaining power, ostensibly to control inflation, but with the result of increasing profit share over labor share as productivity gains are captured disproportionally by capital rather than shared with labor.

Taken together with suppression of labor unions and collective bargaining, along with the fungibility of global labor, profit share has been rising consistently relative to labor share. In the US, corporate profits are at an all-time high, while labor compensation has been stagnant for decades.

Moreover, in a monetary economy in which income is required for survival, lack of jobs results in social negative externalities that are unacceptable on humanitarian grounds — United Nations: The Universal Declaration of Human Rights, Article 23 (1): Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.

The MMT JG would be a step forward in addressing these issues that create tension between liberal democracy and modern capitalism, in which private employment that provides subsistence compensation is chronically scarce.

The JG wage would also serve as a price anchor by establishing the value of the currency in terms of the compensation for an hour of unskilled labor rather than using a commodity like gold or an arbitrary official price index like the US CPI compared to the so-called "natural rate of interest" of monetary policy based on NAIRU.


15 comments:

Jonf said...

So we have the answer to the misery of unemployment. Yet.we refuse to use it.

Matt Franko said...

Jon,

It always comes back to "how do we pay for it?" with the general public....

rsp,

y said...

"what is a job guarantee?"

Something that will never happen in the foreseeable future, because anyone who's slightly right-wing immediately freaks out when you mention the idea (i.e. "monetary realism"), and everyone else who doesn't understand anything thinks that "we can't afford it" and that "it sounds like a bad idea because like I heard this economist on the TV called Rogloff or something and he said that we've run out of money swo I think it's a bad idea".

Matt Franko said...

y,

correct.... I think we have to defeat these falsehoods first and then the policy options will naturally follow...

imo, 99.9% of people just dont think this is an option due to their ignorance of how our state currency system operates...

rsp,

F. Beard said...

What is needed from an economic perspective is government MONEY, not government jobs, though, of course, needed infrastructure should be adequately financed.

And from a justice perspective, the unemployed deserve a "share" in the productivity gains their own stolen purchasing power has financed instead of being trained* to be better slaves to the system that has stolen from them.


And is it really our proper business to force what we consider "good working habits" on people when the Bible commands:

Thus says the Lord, “Do justice and righteousness, and deliver the one who has been robbed from the power of his oppressor. Also do not mistreat or do violence to the stranger, the orphan, or the widow; and do not shed innocent blood in this place. Jeremiah 22:3 [bold added]

*Btw, the best job I ever had was one with flexible hours because I never (except for office meetings) had to waste my time at the office when I'd rather be somewhere else and conversely I never had to waste my time away from the office when I'd rather be there. Many would say I was not a disciplined worker but I was certainly a willing, happy one and I worked very hard, when need-be, to keep that job.

JK said...

Regarding NAIRU, is there any empirical evidence that supports it?..or is it just model-hypothesizing? Have any economies maintained unemployment under say, 4%, for a stretch of time worthy of empirical conclusions?

Does Japan ruin NAIRU (consistently in the 4% range)? http://www.tradingeconomics.com/japan/unemployment-rate

Seems to me that if MMT was in charge of fiscal policy, then we might not need Unions and Collective Bargaining - > Market forces would do the trick; keeping the economy near Full Employment would provide the bargaining power.

Whereas if we were to combine MMT fiscal simulus, a la Mosler's Law that that wherever we see unemployment, taxes are too high or government spending is too low, WITH Unions and Collective Bargaining, we could much more easily get Wage-Price upward spirals.

Any thoughts?

Tom Hickey said...

JK, the definitive MMT work on unemployment is Full employment abandoned: shifting sands and policy failures by William F. Mitchell and Joan Muysken. It's pricey but the university library will have it.

Clonal said...

This little flier should accompany the above article - Unemployment Statistics: Not The Whole Story

This tells the real story of 2001 when the "official" unemployment rate was 4.8%

Senexx said...

It's pricey alright, only reason I haven't bought it.

Roger Erickson said...

How have we ever afforded ourselves? Like bumblebees flying, we should never have happened. Were were ALWAYS out of fiat! Or?

Roger Erickson said...

Why is it we can't have a Job Guarantee, when we do have an Asset Grap Guarantee?

The 1% won't guarantee us 'nuttin, while we guarantee them everything?

Roger Erickson said...

So comical that this discussion is so convoluted, yet the conclusion is a simple tautology, and inescapable logic.

Distributed engagement is the closed circule of fiat.

You can't grow fiat without people expressing it.

Don't get no simpler than that.

Said another way, fiat currency is the notation thrown off when real people execute real transactions.

When groups of people compound the fruits of teamwork, and generate the astounding return-on-coordination, unlimited amounts of fiat are automatically generated.

The sky's the limit. If the 1% don't hold te 99% back.

Tom Hickey said...

Roger: Said another way, fiat currency is the notation thrown off when real people execute real transactions.

Exactly. Money is not just lying around and it doesn't grow on trees. Being debt, it is borrowed into existence for the purpose of making transactions. From that first transaction that bring debt-based money into existence, many more follow until those units of account are extinguished when the initial liability is cancelled.

The only question is whose liability, private or public. Sometimes private debt is appropriate, mostly for financing investment, and sometime public liability in the form of tax credits, either to transfer resources to pubic use or other public purpose that optimizes welfare and the common good.

Holding back creation of the latter when this results is sub-optimality, which always involves waste of resources, is stupidity, especially in a system that is supposedly directed by efficiency.

Roger Erickson said...

The liability, as you say, is self closing, and it's all left in the dust by the rising tide of evolving public fiat.

The only problem I see is the further confusion generated when confused people try to hoard fiat - which is an oxymoron too far for them.

Then they get stuck half way through their own logic ... and just stop.

We need a Mired-Bridge metric, to remind people to actually cross their logical bridges and close the circuits. :)

It's like watching people drive through snow or mud - in front of you on a one-lane road. You want to holler "DON'T STOP! ... No! Not in the middle of it ... oh,crap. [Call a tow truck!! We're ALL stuck now.]"

Tom Hickey said...

Roger, I don't know that it will be possible to change the morons thinking in time. A viable answer would be to substitute consols, which are stock instead of debt, as Chris Cook has pointed out. Being stock rather than debt, consols are booked on the RHS but as equity instead of under liabilities. That might calm down the people who are uncomfortable with fiat and debt.