Tuesday, December 6, 2016

Ellis Winningham — The Job Guarantee – Understanding Fundamental Concepts

Many public discussions among progressives entirely miss the point of the JG. It’s normal, but at the same time, the lack of firm understanding is detrimental to the JG, and to progress. So, with that, let me try to clarify a few things.
What the JG is and is not.

Ellis Winningham — MMT and Modern Macroeconomics
The Job Guarantee – Understanding Fundamental Concepts
Ellis Winningham


Unknown said...

The author is just focused on his macroeconomic model. He has it absolutely incorrect. The purpose of the WPA and the CCC was not primarily economic in nature, they served two purposes - to help people in distress, and to serve as a macroeconomic stabilizer. The WPA was focused on all jobs, not just at a fixed lowest wage rate. You were paid at the market rate for your profession. Only not full time, but only half time - the rest of the time was available for you to seek a job, or work on your own projects or do nothing.

It is obvious that the author is clueless about what really happened when FDR was in office.

No wonder, that MMT economists are unable to sell the Job Guarantee to anybody. The really and truly misconstrue the purpose of Federal programs, because they buy into fungibility of everything

Unknown said...

I am just adding the link on the prevailing wage - Wpa Wages: Institutional Politics, Wpa Wages And The Struggle For Us Social Policy

To ensure the political viability of the unprecedentedly expensive work relief bill and to aid as many people as possible, Roosevelt called for the payment of "security" wages-an amount sufficient to live on, analogous to a minimum wage for unskilled workers. The American Federation of Labor (AFL) and some others on the left objected to this, however, as they thought this policy might reduce private-sector wages (Macmahon et al. 1941:29). They supported the payment of higher "prevailing" wages, or the going wage for a given job. Hopkins's solution was to allow state administrators to reduce workers' hours so that their hourly WPA wage would approximate the prevailing wage rate, but workers would still receive a monthly security wage.

Tom Hickey said...

The author is just focused on his macroeconomic model. He has it absolutely incorrect.


There are three aspects of economics, micro, macro and political economy. While money and banking and finance are not considered as an aspect of economics they should be to comprehensiveness.

Political economy is an aspect of policy science. It informs policy science about the economic aspect, while political science informs about the political aspect, and sociology and psychology inform about the social aspect.

MMT includes money and banking and finance in its operational aspect, and it is fundamentally a macro theory used to inform political economy.

MMT contributes to the understanding of policy formulation. It is a policy tool.

Policy is about governance of a social, political and economic system. An economy is the material life support system of a larger social system governed by a political aspect.

Economics considered as independent of the social and political aspects of a system is useless as a policy tool and is simply an academic study.

Not that all academic studies are a waste of time. such study underlies the practical disciplines.

But to take academic studies as tools applicable to governance is likely to result in disappointment because the assumptions are not geared that way. It’s the difference between theoretical study and application, e.g., in engineering.

Calgacus said...

The purpose of the WPA and the CCC was not primarily economic in nature, they served two purposes - to help people in distress, and to serve as a macroeconomic stabilizer.

Right, and better than Winningham, who focuses too much on the latter, but both of these purposes are clearly "economic in nature". (And of course the JG is a poverty fighting tool & safety net.)

As for the plight of the skilled worker? What a ridiculous worry!

Really, who cares? Why should anybody - including skilled workers - care so much about the skilled workers in a sane society with a JG? They've got their frigging skill! "Helping" the "unskilled" workers helps the skilled workers automatically. It is a trivial, meaningless, utterly imaginary problem that solves itself in a world with a JG. Bringing it up is a sign of confusion and of success of those who wish to divide and conquer. Winningham understands that OK. Many don't.

Overcomplicated crap about wage rates, part time work during the New Deal was just an unimportant political compromise. The part of the WPA that counted, that worked, that was important historically and economically was the no frills Job Guaranteeish part, the main part.

The really and truly misconstrue the purpose of Federal programs, because they buy into fungibility of everything.

What does this mean? In today's societies with money, an awful lot of things are "fungible". That is why it is so nice to have money. The MMT economists understand the purposes of the New Deal Federal programs very, very well.

Ralph Musgrave said...

I agree with Unknown that MMTers have a poor grasp of JG. One of the main questions that needs sorting and which MMTers do not consider in detail (nor incidentally does Unknown) is whether JG should take the form of specially set up employers (as per the WPA) or whether JG people should be hired out to EXISTING employers. My answer is: hire out to existing employers.

A second fundamental question is whether to hire out to just public sector employers or to private ones as well. Some left of centre advocates of JG have a phobia about private employers hiring JG people. Personally I can’t see the problem. Numerous employment subsidies past and present have been used by private employers.

Plus, while I know it’s rare for economists to take any interest in empirical evidence, the actual evidence is that private sector temporary subsidised work results in a better subsequent employment record for those involved. But I realize that for some, ideological purity takes precidence over actually helping the unemployed.

Calgacus said...

The problem with that is it becomes a subsidy to the private employers, a way for them to fire their previous workers, for instance. "The agency problems are insuperable" (says some MMTer I think). It is privatization of the JG before it has even started. The experience of the USA & the rest of the world is that privatization of public services is generally quite destructive of public welfare. Except for a few (rich) people who get richer.

I (and I believe) the MMT economists differ strongly with you about the actual empirical evidence. For instance, the New Deal programs worked spectacularly well in helping the unemployed and everyone else. Which is why it has been so important, so prevalent for so long to ignore or write nonsense about them.

In any case, the MMT economists certainly do consider such things in detail. Some people may not like their conclusions.

Neil Wilson said...

"My answer is: hire out to existing employers."

That's just tax credits with knobs on and destroys your productivity. Why do we want more hand car wash people, and not car wash machines?

We already know that subsidising the private sector makes them fat and lazy. So we need to stop that.

The job of the private sector is to invest capital and eliminate labour. The task of the Job Guarantee is to make labour relatively expensive and difficult to get an thereby encourages capital to invest. Plus it eliminates the parasite economy at a stroke, leaving the playing field clear for those businesses who are prepared to pay decent wages. They will then get what they spend as they should do without some parasite operation nicking the grain.

The lack of productivity and the presence of the parasite economy are both social ills that have to be dealt with. The way to deal with both of them is to provide a third option for labour outside the private and traditional public sphere.

As ever with empirical evidence collected in the neoliberal era, it is tainted with the neoliberal straitjacket. You cannot describe the movements of a man by referring to the movements of a man in a straitjacket. The evidence is inapplicable.

This has all been discussed many times. The JG, in UK terms, would work in personnel terms in the same way that the Future Jobs Fund worked under the last Labour government - but without the funding or time limits. And that means working for the 'nice-to-have' public good via local authorities and local groups all of which have to be organised.

The default is that people work for the Job Guarantee sector, and the private and public sectors have to bid people away from that. The reasons for that system are clearly laid out by Beveridge in "Full Employment in a Free Society'.

Tom Hickey said...

The fundamental problem with liberalism is that according to economic liberalism government ("the state") should not compete with the private sector since it will introduce distortion on one hand and secondly will aggrandize the state when limited government is the objective. This is shortsighted and erroneous.

This is basically an issue of dealing with the commons versus private ownership. Then public sector is best suited for issue dealing with the commons and the private sector with issues dealing with private ownership. However, there is no clear boundary. Indeed, extreme economic liberalism denies the existence of public goods. Where the boundaries should be drawn is a political question, but there are economic consequences of those political choices that need to be considered in political economy.

Government needs to do what it is best suited to do and the private sector cannot accomplish as well without introducing distortions. The private sector is best suited to producing discretionary rival and excludable goods, i.e, private goods. The private sector is also suited to non-rival but excludable goods, I.e., club goods. The public sector is best suited for dealing with non-excludable good, both rival or common goods, and non-rival or public goods.

However, government also has a role in ensuring that non-discretionary vital goods are in sufficient supply at affordable prices or through other extra-market means.

Government is responsible for employment in that as the currency issuer that taxes, government generates unemployment in the private through economic policy. The alternative to adapt economic policy to full employment, which is not possible without a buffer stock of employed provided by an employer of last resort function in fiscal policy corresponding to a lender of last resort in monetary policy. Just as a modern monetary production economy would not function smoothly without a LLR, so to it cannot function smoothly without a ELR.

That is the price of a workable capitalism through managed capitalism and there is no viable alternative long term. Otherwise, there will be growing asymmetry leading to social unrest resulting in to revolt and institution of some sort of "socialism," or a change in political leadership that institutes managed capitalism in a liberal democracy.

Freedom is not gained through license. That is the illusion of freedom. Freedom is gained when it is balanced with responsibility. This is really an issue of different parties and sectors responsibilities in creating and maintaining a free society.