Sunday, April 29, 2018

Sandwichman — Job Guarantee versus Work Time Regulation

There has been a bit of commotion recently about the Job Guarantee idea (AKA employer of last resort). I don't consider myself an opponent of the strategy but I do have several reservations about its political feasibility, the marketing rhetoric of its advocates, and its economic and administrative transparency. Some of these concerns I share with an analysis presented by Robert LaJeunesse in his 2009 book, Work Time Regulation as Sustainable Full Employment Strategy. For that reason, it would be timely to post an excerpt from Bob's discussion of"Job guarantees versus work time regulation."...
Lot of the things to think about and debate here.

It is framed in the spirit of inquiry rather than polemic, persuasion or invective, or in a such a formalized (wonkish) style that it is impenetrable to non-experts.
The following excerpt is from pages 125-134 of Work Time Regulation as Sustainable Full Employment Strategy.
 Longish but worth the read.

Basically the idea is that increasing distributed leisure made possible by productivity gains from technology is superior to a buffer stock of employed approach that simply continues the existing system after it has reached its expiration date.

This is the type of discussion we should be having.

Job Guarantee versus Work Time Regulation


Ralph Musgrave said...

There’s just one problem with work time regulation (WTR): it’s total and complete BS. It’s 100% useless.

I realize Sandwichman has been on about it for years and years and will probably never understand the flaw in the idea, but for the benefit of others who do not understand the flaw, I’ll explain it.

Demand pull inflation tends to take off when employers cannot find the labor they want: e.g. contractors who want fully qualified electricians can find semi qualified electricians but not fully qualified ones, so they bid up the wages of the fully qualified ones, which is inflationary. If everyone is forced to work say 10% fewer hours, the big idea of WTR is that AD stays the same, so there is then surplus demand which can be used to employ some of the unemployed (e.g. the semi qualified electricians).

Unfortunately (and continuing with the electrician example) employers’ preference for fully qualified as compared to semi qualified electricians is not altered not one iota. Thus employers will bid up wages offered to fully qualified electricians just as before. Thus the above surplus demand just cannot be used to employ semi qualified electricians.


Tom Hickey said...

The basic idea is distributing leisure owing to productivity advances that come from advances in knowledge, technology, etc.

The work day used to be all day seven days a week. It still is in emerging countries.

The US labor movement forced business to adopt the 40 hour week, weekends off, periodic holidays, and an annual paid vacation.

The benefits and leisure are more generous in some other developed countries.

The idea should be to reduce socially necessary work and to increase leisure as productivity improves.

Leisure is freedom, the liberal ideal.

Andrew Anderson said...

The work day used to be all day seven days a week. Tom Hickey

Which is totally contrary to Scripture since on one day of the week, the Sabbath, NO work was to be done. The purpose of the Sabbath was human ("The Sabbath was made for man, not man for the Sabbath" Jesus Christ, Mark 2:27) (and animal) welfare. Plus there were quite a few feast days too.

Yet, I've read that in so-called Christian England, workers were required to work 6 and 1/2 12 hour days by their so-called Christian employers. So much for disrespect of the Old Testament then.

Leisure is freedom, the liberal ideal. Tom Hickey

Having read the entire Bible, I'd say that justice and thus MAXIMUM leisure for all is a Christian ideal.

AXEC / E.K-H said...

The set screws of overall and individual employment
Comment on Sandwichman on ‘Job Guarantee versus Work Time Regulation’

To this day, economists do not know how the price- and profit-mechanism works. Supply-demand-equilibrium is merely a brain-dead proto-scientific joke. By implication, the theory of employment is false.#1 By consequence, economists’ policy proposals never had a sound scientific foundation.#2 This applies to all political camps.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Economists do not have the true theory. And this is why the whole discussion about the Job Guarantee, the minimum wage, or other employment measures moves in circles.

So, let us first get the basics straight. The elementary version of the axiomatically correct (objective, systemic, behavior-free, macrofounded#3) Employment Law is shown on Wikimedia.#4

From this equation follows:
(i) An increase of the expenditure ratio rhoE leads to higher employment L (the Greek letter rho stands for ratio). An expenditure ratio rhoE greater than 1 indicates a household sector budget deficit = dissaving = credit expansion, a ratio rhoE less than 1 indicates a household sector budget surplus = saving = credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio rhoF=W/PR leads to higher employment.

The complete employment equation contains in addition profit distribution, the public sector, and foreign trade. Note that the Employment Law consists exclusively of measurable variables and is therefore directly testable.

The macroeconomic Profit Law for the elementary investment economy reads Qm=I−Sm=I−(Yw−C)=(I/Yw−1+rhoE)Yw. Legend: Qm monetary profit/loss, Sm monetary saving/dissaving. Macroeconomic profit is given as the difference between business sector investment and household sector saving.

Item (i) and (ii) cover the familiar arguments about aggregate demand. The factor cost ratio rhoF as defined in (iii) embodies the macroeconomic price mechanism. The fact of the matter is that overall employment INCREASES if the AVERAGE wage rate W INCREASES relative to average price P and productivity R. This is beyond the horizon of the micro-brained micro-economist.

See part 2

AXEC / E.K-H said...

Part 2

With regard to an increase of average productivity then follows (under the initial condition of I given and rhoE=1) that overall employment L DECLINES. In order to prevent this and to keep employment at the given level, the factor cost ratio rhoF=W/PR has to be kept constant. So, either the average wage rate W has to rise in lockstep with productivity or the average price P has to fall. In order to keep the price constant, the wage rate has always to move in lockstep with productivity.

So, as a matter of principle, the economic system can be held stable at any level of employment with no inflation/deflation. How this can be institutionalized is a separate question.

The employment L in the Employment Law is the sum of individual labor times as shown on Wikimedia.#5 Legend: L total employment per period/year in hours, U legal norm time, e.g. hours per day/week/year, lit individual factor for the i-th employee, i.e. lit less than 1 is part-time, lit greater than 1 is overtime, n number of employees.

If n is fixed at full employment (however specified), then a reduction of overall labor time L can be achieved either by a general reduction of the legal norm time U or a reduction of the individual factor lit or a combination of the two.

So, the macroeconomic Employment Law gives one all the set screws (aggregate demand, macroeconomic price mechanism, labor time setting) to realize any level of overall economic activity in the monetary economy.

The at any time possible stabilization of employment at a level that has to be determined by the legitimate sovereign makes the whole blather about the minimum wage, buffer stocks, and reserve armies superfluous.#6

Egmont Kakarot-Handtke

#1 Mass unemployment: The joint failure of orthodox and heterodox economics

#2 For details of the big picture see cross-references Employment

#3 The macrofoundations approach starts with three systemic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. For a start it holds X=O.

#4 Wikimedia, Employment Law

#5 Wikimedia, Employment, differentiated labor input

#6 The minimum wage debate: a showpiece of economists’ hereditary idiocy

AXEC / E.K-H said...

Ralph Musgrave

Employment theory is macro. Your electrician example is micro. You are completely lost in the supply-demand-equilibrium woods.

Egmont Kakarot-Handtke