Bill Mitchell – A Job Guarantee would require $A26.5 billion net to reduce the unemployment rate by 6 percentage points

When Kevin Rudd was faced with the threat posed by the unfolding GFC in late 2008 his government became very pragmatic and immediately ditched the narrative they had been pushing out throughout that year about inflation being a threat and the need for tighter fiscal policy and surpluses. They introduced, in two rounds, a fairly significant fiscal stimulus (around 4.2 per cent of GDP) which effectively saved the Australian economy from entering a recession. A significant part of that intervention was that it had various temporal properties – a cash handout in December 2008 designed to get spending power into the hands of consumers just before Xmas (the famous ‘flat screen’ payment – there were a lot of TVs purchased), which obviously was an immediate focus, and, a longer term component, which included their plan to put insulation into every home. This was aimed at job creation clearly, to address the cyclical needs, but, it was also intended to address the longer term climate crisis, that were beyond the GFC cycle. When appraising what government’s should be doing now – to deal with the socio-economic consequences of the medical crisis – that style of thinking is essential. The questions that need to be asked are: 1. What can be done now to avert an economic collapse? 2. What do we want to change about the pre-structure of the economy into the future? 3. How can we use the stimulus intervention to make those changes, while addressing Question 1. In this blog post, I go through some of that style of thinking. I also provide some specific estimates of the investment needed to introduce a Job Guarantee in Australia....

Bill Mitchell – billy blog
A Job Guarantee would require $A26.5 billion net to reduce the unemployment rate by 6 percentage points
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell – JobKeeper wage subsidy – some strange arithmetic is afoot

It is Wednesday so music and some snippets. I have updated the US unemployment claims data with a new map and state table. Shocking. We are working on updated estimates of what the Australian government would need to invest to run a Job Guarantee. We haven’t done that for a while because I didn’t want the press to get obsessed with dollar amounts. But as I am currently talking a lot about the Job Guarantee in the media, I thought some numbers would be useful as a comparative exercise against the JobKeeper wage subsidy, which is the central stimulus plank of the Australian government. The current estimates suggest that to create around 685 thousand jobs might require an outlay of $34 billion over the course of a year. That got me thinking. The main response of the Australian government is the $A133 billion over 6 months JobKeeper wage subsidy scheme. The Treasury claims it will be the difference between an unemployment rate of 10 per cent and 15 per cent. That difference is 685 thousand jobs. Then start doing some division and multiplication and you start to see that this doesn’t make sense as I explain below....

Bill Mitchell – billy blog
JobKeeper wage subsidy – some strange arithmetic is afoot
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The provenance of the Job Guarantee concept in MMT

As the public scrutiny of the body of work we now refer to as Modern Monetary Theory (MMT) widens there is a lot of misinformation abroad that distorts or otherwise undermines what has been done to date. Most, but not all the misinformation or emphasis comes from those who attack our work. Their criticisms usually disclose an incomplete understanding of where MMT came from and what the core propositions and logic are. They stylise, usually using terms and constructs that are present in mainstream thinking, but inapplicable to an MMT way of thinking, and end up spitting out things like ‘printing money’ etc, which they think represents a devastating rejection of our work. As part of my own work, and I do this in liaison with Warren Mosler, I am interested in documenting the train of events that led to what we now call MMT. I love history and think it is very important in helping us understand things. So today I am continuing to examine archives to trace the provenance of key MMT concepts. And I am continuing to document the idea of a Job Guarantee, which is central to the MMT framework, despite many who claim to be MMTers thinking otherwise. I have noted in the recent press, claims that the origins of the buffer stock employment approach that became the Job Guarantee was the work of Hyman Minsky. Nothing could be further from the truth as you will see. It is important, in my view, to make the provenance very clear and that is what this blog post is about....

Essential reading (higher category than "must-read"). The MMT JG is probably the most misunderstood aspect of MMT. Hence, it is also the most mischaracterized.

It is a BUFFER STOCK (Bill Mitchell) based on an EMPLOYER OF LAST RESORT (Warren Mosler).

It is not Keynes. It is not Minsky. It did not come from Post Keynesianism. 

The BDE/ELR concept is original to MMT, being attributable initially to Mitchell and Mosler independently of each other. They worked out the together to put flesh on the bare bones. 

Randy Wray subsequently pointed out the similarity with Minsky, but the concept of a JG that Minsky proposed and the concept of the MMT JG are different.

The point is that:

1. The concept of a Job Guarantee that is now core MMT was entered into the discussion at that time by Warren Mosler (ELR) and myself (BSE). This was the provenance of the concept within MMT.

2. Minsky was never mentioned. Only his former PhD student, Randy Wray, once exposed to the BSE/ELR ideas, noted some overlap between the BSE/ELR approach and Minsky’s own, earlier ideas. But that was well into the PKT debate about the concept.

3. Anyone with knowledge of the history and the beginnings of the MMT work would not reasonably say that the reason that MMT considers a Job Guarantee to be an essential part of the body of work was due to anything that Hyman Minsky had written or said.
It is important to render history as accurately as we can.

This blog post is a key document of MMT on this matter. Bill is in the process of documenting the history of MMT, and I think it is safe to assume that this will eventually result in a formal document as an article or book. In the scholarly world, provenance is of the highest importance, and Bill documenting MMT history will be valuable in establishing priority. In the meanwhile, here it is.

Bill Mitchell – billy blog
The provenance of the Job Guarantee concept in MMT
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — A 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure

It’s Wednesday, and a quiet day for writing blog posts for me. But I want to comment briefly on the latest economic news that sees the IMF claiming the Australian economy will contract by 6.7 per cent in 2020 and the Treasury estimates that the unemployment rate will rise to 10 per cent (double) by June this year. While this all sounds shocking, the emerging narrative in the media and among politicians is that this is sort of inevitable given the health crisis and the Government’s Job Keeper wage subsidy, which the Treasury claims will constrain the unemployment rate rise to 10 per cent rather than 15 per cent without it is a jolly decent thing for the politicians to have done and keeping the unemployment rate down to 10 per cent is a “tremendous achievement”. Well, apart from the wage subsidy leaving a million workers outside of any benefit and cutting wages for thousands who will receive the support, I fail to see why the unemployment rate should rise at all. The government has options: (a) wax lyrical about achieving a disaster – 10 per cent unemployment; or (b) create jobs via a Job Guarantee and see the unemployment rate fall to 2 per cent or so. For the neoliberals who run the place and their media supporters, a 10 per cent as a “remarkable achievement” and that is the TINA narrative they are pumping out to assuage the population. For the likes of yours truly, a 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure. The government can always intervene and create sufficient jobs that will be of benefit to the society, can be designed to be safe in the current health context, and maintain the connection for most of us with paid work? Even if some of them would require the workers stay at home while being paid. For me that is a no-brainer....

To play the devil's advocate here, while implementating a JG would achieve "full employment" defined as a job offer fitted to every applicant at a wage that would set a floor under other wages, ostensibly at a "living wage" including benefits, this doesn't address the depth and breadth of the current crisis.

In the current context, the real danger in the dismal employment numbers is debt deflation as millions of people cannot meet their obligations and loans become "non-performing," that is, in default. Being at the minimum wage, an MMT JG is not going to prevent this. Governments need to do more.

Governments could declare the situation force majeure and suspend the terms of debt repayment, or, do what would be more effective — step in to make the payments. Or even better, foot the wage bill sot the conditions remain stable across the economy.

Bill has already considered this issue:

If you recall, a few weeks ago I did some rough modelling of my own which I presented in these blog posts:
1. “We need the state to bail out the entire nation” (March 26, 2020).
2. The government should pay the workers 100 per cent, not rely on wage subsidies (March 30, 2020).

But, but,  …what about the deficit and debt? If numbers bother, use "creative accounting," or just change the rules. This is the government, after all, and government accounting follows different rules anyway.

Bill Mitchell – billy blog

A 10 per cent unemployment rate is not a “tremendous achievement” – it is a sign of total policy failure
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Introductory Macroeconomics with a Job Guarantee — Peter Cooper

In some earlier posts, a job guarantee is added to an otherwise condensed income-expenditure model. This enables comparisons of steady states under different scenarios akin to the typical exercises conducted in introductory macroeconomics courses. What follows is a summary of the model, bringing together aspects that are dealt with in greater depth – but disparately – elsewhere on the blog, along with brief indications of how the model can be extended to include simple dynamics and short-run price behavior. Links to fuller explanations of various concepts are provided along the way....

heteconomist
Introductory Macroeconomics with a Job Guarantee
Peter Cooper

Job Guarantee as a Policy Variable — Brian Romanchuk

The Job Guarantee is the most natural implementation of the concept of having the central government act as a price setter. By making an open bid for labour at a fixed price, an effective minimum wage is created in the economy, and it will eliminate almost all involuntary unemployment. This discussion will not cover the tricky question of implementation details, but will instead discuss how this fits in with the Monetary Monopoly model....

Bond Economics
Job Guarantee as a Policy Variable
Brian Romanchuk

Bill Mitchell — UBI–the hopeful not the surrender

I have long disagreed with Guy Standing about the solutions to unemployment. 20 years ago we crossed paths on panels and in the literature where he would argue that UBI was the way forward and I would argue that it was a neoliberal plot and that, instead, we needed to push for job creation. My view has always been that to surrender to the neoliberals on their claim that governments cannot generate sufficient jobs to satisfy the desires for work of the unemployed was a slippery slope. Standing continues to publish his fiction. In his latest Social Europe article (January 15, 2020) – Building a progressive alliance in Britain – he seeks to integrate UBI proposals with a recovery plan for British Labour. My view is that would not help Labour recover from the shots they fired into their own feet in the period before the December election by listening to the likes of Standing and those who advocated the Fiscal Credibility Rule and the reneging on the Brexit commitment. Standing’s aversion to job creation is in contradistinction with a recommendation from the Wetenschappelijke Raad Voor Het Regeringsbeleid (WRR or in English, The Netherlands Scientific Council for Government Policy) to the Dutch government to deal with the challenges of achieving “good work”, in part, by introducing a ‘basic job’ which in my parlance means by introducing a Job Guarantee. They are motivated by a deep vein of social science and medical research that extols the virtues of work beyond its obvious income generation qualities. Pushing a UBI in the light of that research is just a pitiful bailout...

Bill Mitchell – billy blog
UBI – the hopeful not the surrender
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — A response to Greg Mankiw – Part 3

On the MMT JG and the buffer stock approach to controlling inflation. Important. For some reason, most critics ignore this approach, which is central to the MMT approach to both macroeconomics and policy formulation and policy space.

Interestingly, both Paul Krugman and Greg Mankiw, who come from different ideological perspectives (left and right respectively), but share much of the conventional paradigm (New Keynesianism), have difficulty coming to grips with what MMT economists are saying, apparently because they are trying to view it in terms of their own approach and conceptual frame instead of the very different MMT approach and framing.

This demonstrates the value of a pluralist and historical approach to the study of economics in learning to appreciate different perspectives and approaches on their own terms before critiquing them on the basis of one's own position. To do otherwise is an elementary mistake.

Bill Mitchell – billy blog
A response to Greg Mankiw – Part 3
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Peter Cooper — Macro Dynamics with a Job Guarantee – Part 2: Keynesian Cross Diagram

As a preliminary exercise, it may be instructive to modify the familiar Keynesian cross diagram to include the effects of a job guarantee within a simple short-run framework. The diagram includes two key schedules. The first is a 45-degree line showing all points for which actual expenditure equals actual income. The second is a line with lesser slope depicting the level of planned expenditure (total demand) at each level of income. Under appropriate conditions, the two schedules intersect at a steady-state level of income.…

Longish and wonkish.

heteconomist
Macro Dynamics with a Job Guarantee – Part 2: Keynesian Cross Diagram
Peter Cooper

The case for a guaranteed job — Robert Skidelsky

“Any government,” writes the economist and hedge fund manager Warren Mosler, “can achieve full employment by offering a public service job to anyone who wants one at a fixed wage.” Versions of this idea have received powerful endorsements from prominent Democratic politicians in the US, including presidential candidate Bernie Sanders and Rep. Alexandria Ocasio-Cortez, who has linked a government job guarantee to a Green New Deal. Moreover, versions of a job-guarantee program (JGP), more or less connected to green economics, have been implemented in Argentina, India, South Africa, and – whisper it quietly – Hungary under its illiberal populist leader, Viktor Orbán....

World Economic Forum
The case for a guaranteed job

Robert Skidelsky | Professor Emeritus of Political Economy at Warwick University, fellow of the British Academy in history and economics, member of the British House of Lords, and author of a three-volume biography of John Maynard Keynes

Originally published at Project Syndicate and picked up by World Economic Forum

Completing The Euro: The Euro Treasury And The Job Guarantee — Esteban Cruz-Hidalgo, Dirk H. Ehnts, Pavlina R. Tcherneva

Abstract
The problems with the design of the Eurozone came into focus when, late in 2009, several member nations– notably Greece – failed to refinance their government debt. The crisis that followed was not entirely asurprise. When the Euro was launched in 1999, many economists warned that the single currency was unworkable. Even Eurozone optimists argued that the Euro project would eventually need to be completed. More than 10 years after the crisis, unemployment rates remain elevated and continue to threaten the social, political and economic stability of the Eurozone. The institutional constraints of the single currency however preclude bold action to address these challenges. In this paper, we suggest that tackling the twin problems of the Eurozone – its institutional flaws and mass unemployment – could be addressed by creating a Euro Treasury that would finance a Job Guarantee program, which would eliminate mass unemployment, enhance price stability, and foster social and economic integration across Europe.

COMPLETING THE EURO: THE EURO TREASURY AND THE JOB GUARANTEE
Esteban Cruz-Hidalgo, Universidad de Extremadura, Dirk H. Ehnts European University of Flensburg, Pavlina R. Tcherneva Bard College

Scotland can have a job guarantee or the Fiscal Commission plan, but not both Richard Murphy

First, of course I welcome this.

Second, a job guarantee is a logical part of a Green New Deal, which offers work in every constituency by ensuring jobs are available everywhere to transform our green infrastructure, and most especially our housing.

Third, it has to then be noted that this policy is linked to modern monetary theory, which is the only current school of economic thought that makes full employment for those who want work its core objective.

And fourth, and inevitably, this policy is in opposition to the SNP’s commitment to Andrew Wilson’s Growth Commission plan for Scotland....

Tax Research UK
Scotland can have a job guarantee or the Fiscal Commission plan, but not both
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum

Nicola Sturgeon indicates a Job Guarantee would be part of a Scottish Green New Deal — Sean Bell

The GND proposed in the US already includes a JG. Now it looks like Scotland is in play, too.

• Asked if a Job Guarantee would be part of her vision for a Scottish Green New Deal, [First Minister] Nicola Sturgeon says: “‘Yes’ is the short answer.”

• A Job Guarantee would involve the state acting as an ‘employer of last resort’ to the unemployed, and was last year proposed in the United States by Senator Bernie Sanders

• Finance Secretary Derek Mackay warns that more powers over employment law would need to be devolved

Common Space ((Scotland)
Nicola Sturgeon indicates a Job Guarantee would be part of a Scottish Green New Deal

Sean Bell

Bill Mitchell — The Green New Deal must wipe out precarious work and underemployment

In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why....

Bill Mitchell – billy blog
The Green New Deal must wipe out precarious work and underemployment
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

New chapter on Euro Treasury and Job Guarantee — Dirk Ehnts

Together with Esteban Cruz and Pavlina Tcherneva I have written a chapter in a book on the Eurozone. It has been published by Revista Economica and is available for download here (PDF). This is the abstract….

econoblog 101
New chapter on Euro Treasury and Job Guarantee
Dirk Ehnts | Lecturer at Bard College Berlin, research assistant at the Technical University of Chemnitz, and spokesperson of the board of Pufendorf-Gesellschaft eV in Berlin

Yasmin Tayag — How Do You Pay for the Green New Deal? Ask Andrés Bernal

The House of Representatives didn’t know what hit it.

The Green New Deal, introduced by Representative Alexandria Ocasio-Cortez in February, energized politicians on both sides of the political spectrum with its twin goals of carbon neutrality by 2030 and the promise of jobs for every American. It also polarized them. Critics have one main question: How the hell are we going to pay for it?
As the guy responsible for the plan’s “jobs guarantee,” Andrés Bernal, 32, has a lot to answer for. And he’s more than happy to. The Colombia-born, Texas-raised advisor to Ocasio-Cortez spends most of his time thinking about the people who need that kind of job security and how to pay their salaries. In fact, he’s one of them.

When he’s not advising the most galvanizing congresswoman on the planet on progressive economics, he’s a Ph.D. candidate and lecturer of urban studies at Queens College in New York City, making him part of one of America’s most notoriously underprotected workers’ groups....

The next generation is rising up and they are energized.

Inverse
How Do You Pay for the Green New Deal? Ask Andrés Bernal
Yasmin Tayag

Bill Mitchell — The Job Guarantee misinformation campaign – UBI style

Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!...

Bill Mitchell – billy blog
The Job Guarantee misinformation campaign – UBI style
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia^

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

Zero Hedge — Ivanka Starts Cat-Fight With AOC: "People Want To Work For What They Get"

Hilton asked Trump: "You’ve got people who will see that offer from the Democrats, from the progressive Democrats, Alexandria Ocasio-Cortez: ‘Here’s the Green New Deal, here’s the guarantee of a job,’ and think, ‘yeah, that’s what I want, it’s that simple.’ What do you say to those people?"

To which Ivanka responded: "I don’t think most Americans, in their heart, want to be given something. I’ve spent a lot of time traveling around this country over the last 4 years. People want to work for what they get," adding "So, I think that this idea of a guaranteed minimum is not something most people want. They want the ability to be able to secure a job. They want the ability to live in a country where’s there’s the potential for upward mobility."...

Pouring the Kool-Aid.

Zero Hedge
Ivanka Starts Cat-Fight With AOC: "People Want To Work For What They Get"
Tyler Durden

Nina Banks — The Black Woman Economist Who Pioneered a Federal Jobs Guarantee

Decades before it caught on with other economists, Sadie Alexander was the first economist to recommend a government jobs guarantee in the US.…

Many contemporary economists have endorsed this idea, which is often credited to Hyman Minsky in the 1960’s[1]. But, its genesis actually begins two decades earlier, with Sadie Tanner Mossell Alexander, America’s first black economist.

Good to know. Like the fact that Aristotle wrote that money/currency (nomisma) is a creature of law (nomos).

INET
The Black Woman Economist Who Pioneered a Federal Jobs Guarantee
Nina Banks