Monday, March 19, 2012

Rogue Economist — A workable JG proposal should be flexible, either on the 100% guarantee, the wage, or duration

Rogue Economist continues the discussion of the MMT JG, most recently engaged in at Bill Mitchell's in the comments. My comments to Rogue can be found there, too.

Read it at Rogue Economist Rants

A workable JG proposal should be flexible, either on the 100% guarantee, the wage, or duration
by Rogue Economist


Clonal said...

I think FDR's WPA had it right. No more than 30 hours a week (when the work week was 50 hr/wk) and no more than one person per family. The 30 hours was for the prevailing wage for the type of work being performed. See Questions and Answers on the WPA - Works Progress Administraion - 1939 - WPA Employment, Wages and Hours

Clonal said...

The above should address some of the concerns of Rogue. This allowed the spouse and the worker to look for work in the private sector. 3 days a week of work would allow a person four days to look for work in the private sector, or supplement his/her income (and this I believe was allowed.)

Tom Hickey said...

The basic macro issue as the MMT economists frame it is 1) buffer of employed or buffer of unemployed, and 2) what is the price anchor?

Clonal said...

FDR had a buffer of employed and the price anchor was 3/5 the prevailing (median) wage for the type of work performed. In today's world, the restriction on one per family could be removed

Jonf said...

I don't buy it. If we want full employment, then a job should be available to all. The minimum wage is certainly not going to make anyone rich. It is time we changed the buffers. The unemployment buffer is not workable for so many reasons. Hell, just look at it. I will leave the theory to Wray, et. Al.

Rogue Economist said...

Tom, thanks for engaging with an open mind. I'm after all not here to discredit the JG, just want to point out a point where JG as currently proposed is silent, or at most, muted.

In the end, as you said, it comes down to your choice between tradeoffs. Either you sacrifice the last unemployable person, or you sacrifice the next marginally profitable business. I choose to focus on the vantage where scaling down the JG does not sacrifice the unemployed, but gives a chance for the next marginal business to thrive, so it takes the place of the JG in employing same person.

The other vantage, which prefers to keep the JG permanent, because they believe the private sector expansion is not hiring that last person, I see as condemning that person to stay in the JG forever, because that last business that might have hired him did not get started, because of the added risks and complexities that the JG with a price stability puts on running a business.

Clonal, that might be a compromise. How I see JG is as a full-time job at the start, when the private sector is weak. This gets scaled down, perhaps in a mechanism similar to your example, when government sees that private sector hiring is already leading to average newly-hired private sector wages rising at say, 20% above the JG. The declining income from the JG should encourage the last JG holdouts to transfer to the private sector, and alleviate the wage bidding.

NeilW said...

" because they believe the private sector expansion is not hiring that last person,"

The private sector can't hire the last person as a matter of economic theory.

Full employment is incompatible with the profit motive as Keynes pointed out decades ago.

It is irrational for the private sector to employ everybody in a productive economy. That is the paradox of productivity.

The problem is the obsession with 'private sector good, public sector bad' - which is of course a religious position.

The deal is that the private sector is allowed to profit as long as it provides everybody that wants a job with a living wage. If it doesn't do that (and it can't as a matter of economic construction), then the non-private sector must provide that job and if necessary to control inflation charge the cost of that back to the profit share.

Matt Franko said...


"the added risks and complexities that the JG with a price stability puts on running a business."

What added risks? If incomes were higher across the board, I think that would remove a big risk (sales collapse).

I for one wouldnt feel as bad firing someone who didnt perform as I would know they could always fall back on the JG, that would be a plus (for me).

The only thing I can see you saying is that you think it would be harder for a business to entice a JG worker out of the JG and into the private sector? If the JG is run at $8/hr and you offered to pay $12, that is quite a difference (50%) and why wouldnt the motivated person take it? If they wouldnt take it, you wouldnt want them anyway.. not motivated. JG would automatically weed out the unmotivated.

They would also know that if they didnt like the new private job, they could just quit and go back to the JG and start looking for something else.

I think in the end business would end up with higher motivated people working for them and higher sales.

side issue: Illegal alien workers would have to be deported, corrupt HB-1 visas shut down, foreign exchange students sent home and told that their countries should build their own universities now after centuries, and govt would have to address the external balance imo for the JG/BIG system to operate at it's best.... those I think are issues that present larger problems to legit business and motivated workers than a JG/BIG would.


Rogue Economist said...
This comment has been removed by the author.
Rogue Economist said...

Neil, perhaps we need to define what we mean by the person. Is it the last person looking for a job? Last person looking who can actually do the job? Of course the private sector will only hire the last person who can actually do the job. This is before we even talk about profit motive.

Now let's go to the JG. Is it talking about the last person looking for a job? Last person looking who can actually do the job? What jobs are we proposing for the JG to have?( I think the proposal would depend on where that person lives too) That info would we useful before I can respond to your question.

Rogue Economist said...

Matt, the risk I'm talking about is that under a permanent JG, wage bidding will be swifter and more intense, and you never know when your hiring comes at a time when government tightens.

Matt Franko said...


So youre looking: You hire someone (with higher wages as enticement) and then the govt puts fiscal drag on and slows the economy and now youre stuck with a new worker and less business?

If so, then the move would be to send the new hire right back to the JG no?


Tom Hickey said...

I think that arguments by rogue, John Carney, etc., have merit in that there are always trade-offs in economics. To think that one can design a perfect system with no trade-offs and opportunity cost involved in choice is unrealistic. A solution should also not be attacked as imperfect for that reason, too. The question is what the trade-offs are and how different solutions handle them.

In my view, the greatest argument against capitalism comes from Marxians, that is, capitalism treats labor as a commodity and therefore workers as less than human. This is the source of alienation of workers form their human nature, which has brad and deep implications, spiritually, psychologically, socially, politically, and economically. We now think of Marx as an economist. That is wrong. Marx never considered himself an economist but rather a philosopher specializing in social philosophy. He was educated in philosophy and received his degree in it. Only later, when Marx cam to see the relevance of economics, did he read in it and employ it in his argument on behalf of worker freedom.

The essence of Marxian thought is Hegel's master-slave dialectic. Marxians show how capitalism's commodification of workers not only makes them unfree, but also requires it to discipline wages. The point of truly anarcho-socialist thinking is to free workers from this bondage to the necessity of optimizing return on capital as essentially profit off the back of labor due to wage discipline. Workers cannot be permitted to gain leverage in capturing profit share.

The reality is that as productivity increases, workers are not "working harder" but technology is replacing the need for them. With technological advance, more and more workers become dispensable, which disciplines the wage-power of the workers that get hired and increases competition for jobs.

So instead of increasing distributed leisure, productivity increases lead to income and wealth inequality and less and less freedom for workers in aggregate.

The only entity capable of rectifying this imbalance is government. If government does not pick up the slack, more and more workers will fall through the cracks. The purpose of the JG is not only to pick up the slack, however, but also to give every worker the an alternative wage offer, thereby increasing worker freedom.

Of course, capitalists do not like this arrangement, or any other socialists program or institution, because this undermines the basic premise of capitalism that capital is to be served by the social, political and economic system in order to maximize growth in terms of production, and productivity in terms of resource efficiency, and profit margin as owners' share — which they are argue is not only most efficient and effective, but also just in that owner's contribution is really the only aspect of production that doesn't come from mere resource use and organization. It's the standard trickle down theory that all boats are rising when capital is served.

Workers as human persons? Corporations are persons. Freedom? The Bill of Rights applies to corporations. Legal equity. Property rights trump human rights.

So again, look at the trade-offs and figure the opportunity cost.

geerussell said...

the risk I'm talking about is that under a permanent JG, wage bidding will be swifter and more intense

I'm having trouble understanding why this would be so. Without a JG, there's a fixed wage floor of zero for workers not employed by the private sector. In an overheating economy with a tight labor market private sector employers compete vs each other to bid up wages. The floor doesn't move. The swiftness and intensity of wage bidding is driven by escalating employer demand for employees.

Now change the initial conditions to a non-zero but still fixed floor for workers not employed by the private sector. Why would a different but still fixed floor cause bidding for scarce workers to be more intense?

and you never know when your hiring comes at a time when government tightens.

Like the other aspects of an overheating economy, this risk is just as prominent without a JG.

Rogue Economist said...

geeruseel, too long to post my comment here, so you can find it here . Hopefully, it makes clearer to more people what I mean by wage bidding.