Saturday, March 23, 2019

Wray, Dantas, Fullwiler, Tcherneva and Kelton — Public Service Employment-A Path To Full Employment

Now that MMT is going mainstream, the MMT version of a universal permanent job guarantee that pays a living wage is under scrutiny. Here is an April 2018 presentation on the MMT JG proposal by some of the American MMT economists that clarifies the MMT position.

Key government spending for public purpose falls into important categories, including 1) public service employment, 2) public investment and 3) public welfare (different from "welfare" as transfers). The first and second are about production, that is, generating supply, although some of the income involved also goes toward increasing consumption. The third is mostly about increasing consumption, that is, demand.

Public service employment involves increasing both production/supply through work and consumption/demand through incomes paid to workers. The argument is often heard that "government work" is not productive because "it doesn't make anything." That is to say, the output of work does not increase supply of consumer goods. This objection is rather irrelevant in a consumption-led economy where service work is predominant. Overall productivity is sufficient to meet demand. The increased demand would be supplied by increased investment to meet it.

Where the problem of a mismatch between supply and demand is likely to occur is in extending health care and education to all. This would require increased supply, which could be addressed through increased public investment. However, there could be supply bottlenecks in the interim from passage of the programs to scaled-up facilities.

National defense is another key category. Production and consumption resulting from this category are limited to the category itself. It diverts real resources that would otherwise be available to the economy to use for national security. The incomes involved increase consumption, that is, demand, in the economy.

A job guarantee doesn't exist in isolation from public policy as a whole and it needs to be discussed in  terms of the whole. This requires a public policy vision, which thus far seems to be lacking, or at least is inchoate and needs developing. This will require addressing tradeoffs. It is unlikely that the US can continue to the status quo and simply add desirable programs. Changes will be necessary, especially in incorporating a Green New Deal (GND). This has been inadequately addressed thus far. The GND is chiefly an engineering problem rather than an economic one, and it is international in scope since a global solution is required to address the emergent challenges.

Levy Institute
Public Service Employment-A Path To Full Employment (PDF)
L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton


Ralph Musgrave said...

Why “public” service employment? I.e. why not have JG people allocated to private sector firms as well?

Take two schools which are identical in all respects except that one is publically owned and one is privately owned. Allocating a JG person to each school should have exactly the same economic effect.

Moreover, the empirical evidence from Switzerland is that private sector JG type work confers more benefits on the JG people concerned than the charity / public sector equivalent: i.e. private sector JG work seems to improve employability more. See:

Noah Way said...

Private sector job guarantee - like back when there were unions?

The private sector isn't going to guarantee anything - especially decent paying jobs.

Ralph Musgrave said...

Noah: A minimum wage can be stipulated for private JG jobs just like there is already minimum wage legislation for regular private sector jobs. Plus a possible arrangement is for government to pay the whole wage, in which case private employers would have nothing to do with deciding on the wage.