In a February 18th front page article in the business section of the New York Times, Eduardo Porter surveys the potential for a job guarantee program. After starting with the caveat issued by Republican politicians—why trust your life choices to bureaucrats?—the piece goes on to present opinions of various experts on employment programs.Multiplier Effect
It is noteworthy that even among the specialists, not one has ever been involved in actual fieldwork or research in the various experiments with job guarantee programs. In an era in which we are asked to respond to facts, none of those consulted on the implementation of job programs has ever provided statistical analysis of results, nor studied the communities where the programs were actually successful in achieving their stated goals—which in general are much wider than the suggestions that the programs have not contributed significantly to lessen economic recessions, or that they are too expensive and that they might produce “useless make-work.” Indeed, there are no references to the many existing experiments....
The “Thing” with Job Guarantee Programs…
Martha Tepepa
5 comments:
I left the following comment at that site.
It is nonsense to suggest that no specialists have “ever been involved in actual fieldwork or research in the various experiments with job guarantee programs”. Pavlina Tcherneva, one of the leading advocates of JG in the US did field work in Argentina. Plus plenty of “research” and “field work” has been done in Switzerland and Sweden. E.g. see respectively:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1010145.
http://legacy.iza.org/essle/essle2002/Gerfin.pdf
Also the above article is clueless on the macro-economics of JG. For example it does not deal with the unfortunate fact that for a JG system to run, it has to nick skilled labour, capital equipment etc from REGULAR employers. Ergo while JG schemes can produce something of worth, they inevitably REDUCE the output of regular employers. Alternatively, if a JG scheme employes unskilled labour and almost no skilled labour, capital equipment, etc then output per head will be hopeless. And I'm not claiming that therefor the entire JG idea is hopeless: I'm just saying it's more complicated than the vast majority of JG enthusiasts think it is.
Also, I don’t want to blame Martha Tepepa too much for that omission: about 99% of the JG advocates are totally clueless on the macro-economics of JG as well.
Ralph,
"For example it does not deal with the unfortunate fact that for a JG system to run, it has to nick skilled labour, capital equipment etc from REGULAR employers."
No, these resources of labor and capital are idle. The private sector can draw them away from the government at any time it wants by offering higher wages for labor and the capital equipment follows with that labor. Here's an abstract quote from a Bill Mitchell article:
Governments have two broad buffer stock options when it comes to price stabilisation:(a) Unemployment buffer stocks: Under a mainstream NAIRU regime (the current orthodoxy), inflation is controlled using tight monetary and fiscal policy, which leads to a buffer stock of unemployment. This is a very costly and unreliable target for policy makers to pursue as a means for inflation proofing. (b) Employment buffer stocks: The government exploits the fiscal power embodied in a fiat-currency issuing national government to introduce full employment based on an employment buffer stock approach. The Job Guarantee (JG) model which is central to Modern Monetary Theory (MMT) is an example of an employment buffer stock policy approach. In this paper, we juxtapose the two buffer stock options from the point of inflation control with a discussion of where they fit into the literature on the Phillips curve and consider the macroeconomic efficiency implications of each. The discussion will consider the implications for the fiscal position of the government arising from each option.
source: The Job Guarantee: A Superior Buffer Stock Option for Government Price Stabilisation
Ahmed, I thought someone might produce the claim that skilled labour, capital equipment etc resources are idle. The reason that claim does not stack up is as follows.
Assuming demand is as high as it can be without causing excess inflation (and assuming no JG) then there'll be precious little skilled labour available: after all, it is precisly skilled labour that employers run short of when the economy is at capacity. So in that scenario, if a JG scheme is set up, it will have to nick skilled labour from existing employers.
Moreover, if no more skilled labour is available, then there is no way of producing more capital equipment, materials, etc. So those also will have to be nicked from exising employers as well.
Alternatively, if the economy is nowhere near capacity, i.e. there is plenty of skilled labour available, then JG is not a very good solution to unemployment: in that scenario, a straight rise in demand would be better, since that would increase the supply of REGULAR jobs (probably both public and private).
The same cohort of people who would administer a JG just let Texas run out of power in winter causing a bunch of unnecessary deaths... same people...
Ralph,
"So in that scenario, if a JG scheme is set up, it will have to nick skilled labour from existing employers."
The JG is for those who are unemployed, skilled or unskilled.
Say an engineer who normally earns $80k/yr is unemployed. The engineer falls into the JG pool earning say $30k/yr. The engineer would re-enter the private sector at any rate above that $30k/yr.
The JG does not take from the employed labor pool because the wages it offers are set lower than the wages available in the private sector.
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