Read it at CNBC NetNet
The Trouble with a Job Guarantee
by John Carney, Senior Editor
UPDATE: The comment section is significant. There are comments by MMT economists Pavlina Tcherneva and Warren Mosler with response by John Carney. Other comments are also interesting.
28 comments:
Next: The Trouble with a Job Training/Higher Education Guarantee
Yep.
Still waiting for a legitimate theoretical demonstration that private markets are good evaluators of social productiveness. The neoclassicals are the only ones to have made a serious attempt, and they abandoned the effort. The faith-based mantras continue regardless. Blind ideology, pure and simple.
I emailed a response to Carney last night, but unfortunately it is too long to post here.
Mr. Carney’s logic is garbage and doesn’t even pass historical logic. Did the unemployed buggy whip employees remain unemployed forever? I mean the entire demand for their skills evaporated so they had no place to be employed and no place to move to (distribution) to employ their buggy whip building skills. They obviously had to either obtain new skills or sell other skills they had to obtain a new job in a new industry.
How did the nation cope during WWII? We didn’t send unskilled women to battle and keep the skilled men at work to build tanks and airplanes. Distribution is a non-starter. It’s a phony cop-out. If there really is a distribution issue with labor businesses will relocate to the labor or they will relocate the labor. And some people who have a preference for a wage that is higher than the JG will relocate if they have too. That’s how it works today and that’s how it’s always worked.
As for people living a life of working the JG occasionally and then painting for weeks on end; well Mr. Carney already proved you can do it now. So why does a JG all of a sudden make people change their preferences from earning higher wages to a preference for a minimum wage job with periods of VOLUNTARY unemployment when they can live that lifestyle right now?
Mat 5:5
"Blessed are the meek: for
they shall inherit the earth" : FALSE
"Happy are the meek, for they shall be enjoying the allotment of the land" : BETTER
"Happy are the meek, for they shall be enjoying the JOB GUARANTY" : NOW WE CAN UNDERSTAND IT!
Question: What is motivating a human who would oppose this?
The basic problem with Carney's argument is that he assumes that if some labor is capable of being supplied, but there is no current demand for it, then that fact reflects the wisdom of the markets and any attempt to use government to demand the labor in question will be a market distortion and misallocation of resources.
So it's not so much MMT that he doesn't get here. It's just the basic Keynesian lessons about aggregate demand shortfalls which MMT shares with several other schools of thought.
I believe that Anonymous actually just made my points for me.
Labor-Demand mismatch is best met by market forces. A JG for buggy whip makers would have been counter-productive.
I agree, Dan. I think it is an illustration, though, that it is possible to take the MMT understanding of monetary operations and place on top of it whatever theoretical perspective you like as long as it doesn't contradict the monetary understanding. IMO, the arguments he presents are largely nonsense, but as you say, the nonsense is not in the MMT understanding of monetary operations but in the incoherent ideas he places on top of it.
I guess this is a dilemma for the academic MMTers. If they say it is just their descriptive analysis that makes something MMT, all sorts of nonsense qualifies. If they say it is the descriptive plus the prescriptive, MMT may lose supporters.
In the academic journals, descriptive plus prescriptive seems to be what is known as MMT (neo-chartalism). But there is a lot of assumed (Post Keynesian) knowledge that goes with MMT that would not be clear to those who have not acquired some knowledge of this diverse body of theoretical work.
The monetary understanding is very important in its own right, of course. In that sense, it is still a big step forward to have this understanding more widely disseminated.
Dan, John Carney does not say that types of economic activity for which there is no market demand are useless. In fact he specifically cites “caring for the elderly or constructing bridges and roads” as activities that JG might do. And in many countries those activities are supplied primarily by the state rather than “market demand”.
His point is that those activities require skills that are unlikely to be found amongst the unemployed. And I think he is right.
The above problem CAN BE solved, I think. But too many JG advocates can’t be bothered thinking about the above sort of “devil in the detail” problems.
Ralph,
What I'm talking about are skills that are found in very high supply among the unemployed, but for which there is currently low demand.
And yes, part of the problem might be permanent changes in the economy resulting in permanently higher demand for skills in short supply, and an oversupply of skills for which there is permanently lower demand. And it might well be that the best government approach to that problem is not to hire people to do old jobs for which there is permanently less demand, but to educate those people to do the new jobs (and I would argue to pay them to undertake the education.)
But there is the entirely different problem, which Keynes persuasively described and analyzed, of a merely temporary, recession-induced shortfall in the demand for labor skills for which there will remain strong long-term demand. In that case, we don't need training and education to fix a skills mismatch. We just need the government to step in to provide the missing demand, and hire these people to do more-or-less their old jobs, until the boost in employment and consumption (and state and local tax revenues) boosts private sector demand and the workers can be released back into the private sector. I have read several pieces over the past few years that suggest that this temporary demand shortfall is responsible by far for the lion's share of our current unemployment.
So I think the issue here is that John just doesn't believe the Keynesian story about recessions, and thinks most of our unemployment problem is due to rational market creative destruction in response to permanent changes in the economy.
You can get a Private Pilot License in the US in 40 hours from scratch for crying out loud.
This "skills mismatch" line is pure BS.
People can be trained to do just about any job in less than 30 days and it can be done with OJT in most cases.
Look at how many morons have highly paid jobs in the Govt and FIRE sector that think we are borrowing our own "money" from China, these are the true morons...
proving that you dont have to know a whole lot to get paid well under out current system...
Corzine lost over a billion in a short period. MFG could have picked up a wino off the street and this drunk would have probably bought US savings bonds and been over a billion ahead of Corzine (who also stuck CNBC for $850k HA! HA! Is CNBC looking for a new credit manager?) ... so I dont want to hear anything about "qualifications" in this.
First comment here from me. Just wanted to add my two pence worth. It seems to me that a key objection of the JG is that sufficient jobs that don't require significant skills could be found. I see this more as a lack of imagination than a real barrier to a JG.
I like the suggestion I've seen Neil Wilson propose, that a JG could work by expanding the voluntary sector where there is already significant experience of supervising and providing valued work for relatively unskilled volunteers.
Peter, I don't think John's ideas are incoherent. I just think they are empirically wrong.
If the problem extremely high unemployment were due primarily to a skills mismatch, then I wouldn't support the government hiring people to perform the jobs for which they were already suited. Instead I would support a massive program of public investment in the skills of our people, in effect paying people to go back to school.
Whether one calls that an implementation of the JG or not is really just semantics. We could always regard going to school to acquire new knowledge as their new "job", and thus say that the government had "hired" them. The key thing is that we would be investing in our people, and our people would be receiving an aggregate boost in income. The boost in income would in turn generate the private sector demand for the new goods and services that the recipients of the education were presumably being educated to produced, and that would naturally draw people back into public sector employment as they completed their educational programs.
Ben,
Welcome.
" I see this more as a lack of imagination than a real barrier to a JG."
Ben, yes they have no imagination, they are true morons. Carney/Roche look at this as some sort of complicated thing and it is easy for anyone with half a brain to figure out in a few weeks.
Put a team together, get the word out, folks start to show up, train the folks to do public sector work at first, if the "private sector" then wants to hire them away for better pay, they can always do that...
You have a bunch of moron, psychotic, bean counter, lawyer types trying to comment on these issues who probably could not walk outside and check the oil in their cars right now ...
Dan, I think we are discussing different aspects of his argument. At one point he writes:
"The jobs created under the Job Guarantee are specifically not supposed to compete with the private sector, which means that they supply goods and services for which there is not a market demand. The total output of the economy might increase, but much of this output is non-productive—that is, it doesn’t actually improve our lives."
He is claiming that since there is no market demand, the output would not be socially productive (would not "improve our lives"). In other words, he thinks social productiveness can only be reliably evaluated by private markets. This is voodoo, with no coherent theoretical foundation. It is ideology. That's all.
Yes you're right Peter. I forgot that part.
I emailed a response to John Carney last night, and zeroed in on that passage. But I emailed it at 3am, so my brain is now soggy :)
@peterc
> "I guess this is a dilemma for the academic MMTers. If they say it is just their descriptive analysis that makes something MMT, all sorts of nonsense qualifies. If they say it is the descriptive plus the prescriptive, MMT may lose supporters."
Perhaps .. MMT has three components - not two:
* descriptive (monetary operations.. accounting identities.. facts)
* theory (some post-Keynesianism, some this, some that - stuff that are more appropriately labeled as theory than identities or "obvious" facts.)
*prescriptive (policy proposals based on underlying theory and descriptions)
For example, isn't a statement like "a free market tends to full employment if left alone" flat out incompatible with MMT?
(Not sure.. maybe not this particular example)
But that would be a debate (a capital one?) within the realm of *theory* - rather than description/factualities, wouldn't it?
Not sure how my comment was relevant .. Except to say that if you only buy into the *descriptive* part of MMT, you miss out on a *lot* of good stuff :-)
Or maybe MMT is indeed only the descriptions .. Anything goes - as long as you get the monetary operations right.. hmm.
Dw Hugo, I make irrelevant comments all the time.
Labor-Demand mismatch is best met by market forces. A JG for buggy whip makers would have been counter-productive.
Education is not always best solved by the private-sector. Education is generally classified as a Volunteer's dilemma or a Tragedy of the Commons, therefore the state must be a significant stake-holder in any attempt to educate workers.
Therefore to solve the labor mis-match you describe will most likely require a State solution.
Shaun Hingston
Dan Kervick: unfortunately it is too long to post here [as a comment].
Anyone one wishing to work up a post is invited to send it to me at tom.hickey at yahoo.
Dear commenters,
I've commented over at Cullen's recently about the quality of debate deteriorating into throwing ideology at each other, often in the heat of highly emotional argument. That does not advance the debate.
These are serious issues that cannot be adequately resolved in a blog post, and especially not in blog comments. So let's not overreact.
Much of this has been discussed in the professional literature and the proper course is to cite sources, or else provide other substantiation like data for assertions and criticism, rather than just making stuff up on the fly that has no clear basis in fact, although it is deeply held feeling.
Let's also do our best to preview and edit comments taking out the heat and using professional language where possible, or at least politeness.
I don't want it to seem like I am scolding, since this is not offered in that spirit. This is a note to myself, too.
I rather am disappointed and even sometimes disturbed to see the debate deteriorating at other blogs recently as tempers flare up. I just what to keep things here on an even keel before that happens. So let's tamp down the sparks before they start flying and cause fires.
Thanks for your participation and cooperation.
There is a really good discussion at Cullen's blog today that I think has reminded people about all of the very important points they agree on.
The above problem CAN BE solved, I think. But too many JG advocates can’t be bothered thinking about the above sort of “devil in the detail” problems.
I hate to say this but the peacemaker here, the Tarzan bringing peace to the MMT jungle is Morgan Warstler. His Ebay-style job guarantee plan is lot more administratively feasible any other JG plan I've seen (and yes the wage rate should be doubled, the 1968 minimum wage as adjusted by Average Wage Index, was $12.00/hr. Also, nonprofits should be allowed to pre-bid).
All registered workers are guaranteed an income of $10,400 per year, at least $6 per hour. The minimum bid is $1, and the government uses current Unemployment Insurance I monies to add up to $5.
Current UI ends after 90 days. To receive any extra aid of any kind (food stamps, Section 8, energy assistance, etc.) able bodied workers must register in this system. They receive a Debit Card where their pay is deposited every Friday. They can choose to earn less, but they cannot decline to work and get GI.
We are all allowed to bid on any worker’s Man Week, as long as we have first deposited the money to cover the bid in the system; no credit will be extended. This bid covers employer taxes, workers compensation, everything soup-to-nuts.
http://biggovernment.com/tag/guaranteed-income/
Dan, You’ve got a point: John Carney does give the impression in his article that he thinks unemployment is down to skill mismatches and has nothing to do with deficient aggregate demand. My guess is he is smart enough to know that that is not true. I.e. I'd guess that he just didn’t phrase his article quite right. But I might be wrong.
Ralph, this is the big debate in the US now. Many economists are claiming that the recent spate of intractable high unemployment is chiefly structural. They are asserting that due to this, the new normal" natural rate may be closer to 6-8% even after the dust of the crisis settles.
Of course, MMT vigorously disputes this claim. Who is correct is pretty crucial, since a New Normal of 6-8% buffer of unemployed would result in huge economic inefficiency and massive waste through leaving resources idle that could be put to use with a more effective policy for reconciling production, employment and price level.
Structural mismatches in the labour market could be addressed with MMT compliant policies at any time. Yet when the UE rate drops to NAIRU levels, structural causes are no longer mentioned as a factor.
Tom, good comment on the need for civility. I was the main (perhaps only) culprit in this thread. Sorry for that. I really shouldn't have been posting past my bedtime. ;-)
peterc as I said, this was not aimed at anyone in particular. I was actually reacting to recent outbursts of incivility elsewhere, just saying that we should remain cool here. I've had to fight back geting sucked in over at some of those places, especially where there are a lot of belligerent ideologues.
I remember when John proposed a conversation between Austrians and MMT'ers, I thought, Uh huh? Some Austrians seem to thrive on confrontation, and some MMT'er get overheated when provoked. too.
The JG and in fact any government involvement in the economy is a highly emotional matter on both sides of the political spectrum. Actually, I think we doing much better here than elsewhere, but we have a less diverse crowd here, too.
If anyone should show over here and start acting up, the basic blog rule is, "Don't feed the trolls." Or as a friend of mine likes to say, "Don't feed the negative energy."
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