Saturday, March 5, 2011

The Humanity Standard, not the Gold Standard

One of the most appealing parts of the MMT framework is the idea of a Job Guarantee (JG) program, also called the Employer of Last Resort (ELR) program. If one examines MMT literature and discussions available on the web, the topics have tended to be about macroeconomic operational realities. This is mainly because the economic and political arenas are currently dominated by fear of government debt and deficits. Hence, specific MMT policy prescriptions are often given short shrift (a prominent exception being Warren Mosler’s proposals and Tom Hickey’s recent post).The JG idea deserves more attention as it has many positive features that should appeal to individuals across the political spectrum.

The Job Guarantee program should appeal to progressives because it would achieve a high degree of social justice: full employment. The socially corrosive effects of joblessness have been well documented (see here and here). Increases in drug abuse, alcoholism, depression, and crime are all linked to being unemployed. As a countervailing force to these social cancers, the JG would offer a full time job at a living wage to any individual who is willing and able to work.

A Job Guarantee program would be implemented as a non-discretionary spending program. It would be added to the tool kit of already existing automatic stabilizers. This means that it would be largely resistant to the political business cycle and the machinations of opportunistic politicians. Furthermore, the JG jobs could be provided through non-government, non-profit agencies. This should appeal to those who have an innate distrust of all things government.

The most powerful feature of the Job Guarantee program is that it would provide a large measure of price stability, much like the Gold Standard. By governmental decree, the JG wage can be fixed (at a living wage) much like the price of gold was fixed under the Gold Standard. A pool of low skilled employed labor at the JG wage is then created. If firms try to exert downward pressure (below the JG wage) on the wages paid to their low skilled workers, then the workers can join the JG labor pool. If low skill workers demand wages above the JG wage, then firms can obtain replacement workers from the JG pool. In this way, price stability is obtained.

The Job Guarantee program would deliver a perfect trifecta: social justice through full employment, great immunity from political manipulation, and price stability. Why do so many individuals desire to return to the archaic Gold Standard? Instead they should embrace the idea of a Job Guarantee program. Perhaps MMT advocates should use another name for the Job Guarantee: the Humanity Standard.

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