Yesterday John Carney posted an article titled The Trouble with a Job Guarantee. After reading the title I knew a response was needed. Rather than go on about how great the J.G is I will simply question some of the basic premises upon which Mr Carney makes his argument.
The Trouble with a Job Guarantee
There is no trouble.
In other words, the core problem of most unemployment is a distribution problem. The distribution of labor did not match the distribution of demand.
This is a self-evident fact. The problem with this statement is that it leaves out one basic principle of which should also be a self-evident economics fact:
- People are born into economies where the ownership of all controllable resources has already been determined.
- People must in someway interact via employment with the ownership structure, in order to obtain enough resources to survive.
- If they don’t obtain enough resources they die.
So I can agree that unemployment is a result of a mismatch between demand and supply. However, who’s responsibility is it then to ensure that the unemployed receive enough to survive? Is it simply the ownership structure’s fault for not providing enough jobs? Or is it the workers fault for not realizing that they didn’t have the appropriate skill-set that is needed by the ownership-structure?? The correct answer is not so simple, but the ownership-structure must provide ample opportunity. The amount of opportunity would be an amount similar to the natural opportunities that would be available if the ownership-structure had not existed. Since the J.G is offering employment at the minimum wage, then I think that the J.G goes some way in meeting this requirement.
What is typically required to actually decrease unemployment is relocation and retraining of workers, something which many of the temporary measures intended to ameliorate the effects of unemployment actually interfere with. ……….. But is the problem of mismatch really solved? I do not think it is.
Well the J.G does partly solve this situation by taking long-term unemployed or nearly long-term unemployed and keeping them in the routine of employment. There is plenty of literature showing the detrimental effects of long-term unemployment. Some aspects of worker-mobility must be handled by the State. If the private-sector tries to handle such problems, for example education and health, then this will cause a Tragedy of the Commons or Volunteer’s dilemma .
The jobs created under the Job Guarantee are specifically not supposed to compete with the private sector, which means that they supply goods and services for which there is not a market demand. The total output of the economy might increase, but much of this output is non-productive—that is, it doesn’t actually improve our lives.
John, firstly I highlighted market for a good reason. Since you appear to becoming aware of MMT concepts I think that it is really important to re-access exactly what that word means. If the State is the source of State issued money, then the State starts to dictate the terms of how the Market operates. Since the market is formed of people, people who vote for representatives of the State, then what exactly defines the distinction between the electorate and the market?? The better the State represents the wishes of the electorate, then the more market-like the State becomes. Consequently, if the decisions of the State proportionally represent the interests of the electorate, then there is no distinction between the Market and the Electorate. Therefore, under such circumstances the J.G would result in useful output. If the State doesn’t currently represent the proportional interests of the electorate, then that must also be fixed. Therefore, your argument has been reduced to relationship between the usefulness of J.G output and how well the State’s decisions proportionally represent the electorate.
The problem is that there is no reason at all to think that people laboring in Job Guarantee positions will supply meaningful improvements rather than holes in the ground.
This is missing the point of the J.G. First the ownership-structure must in someway provide opportunities for people to survive, as I have outlined prior. Secondly, although workers may not be producing anything immediately productive, they are Job-Ready. Rather than having people in unemployment, people working in the J.G remain in the routine of work. This makes it significantly easier for the Private Sector to increase output once demand picks-up. Rather than employing the unemployed and suffering the associated costs, firms can simply employ job-ready worker and immediately increase production.
But if they are creating jobs that put more money into people’s hands without creating more supply of that which is actually demanded, then prices are likely to increase. Businesses may be able soak up some of the extra-demand by increasing their output—but this has limits, especially if there is a labor-demand mismatch. The productivity of existing workers can only be increased so far.
John, your right. Given an amount of employed workers in the private sector, they can only produce so much. And when we start giving these J.G workers a wage, sooner or later this limit will be reached. The private-sector will be operating at maximum output just at the point before inflation kicks in. There will be all this money floating around from the J.G workers, money purchasing all kinds of goods & services, businesses receiving, spending, and profiting. They will be profiting so much that they will start to employ some J.G workers to increase production and thus keeping a lid on inflation and keeping prices stable.
The MMTers argue that the Job Guarantee positions will be so low-paying that workers will not be incentivized to stay in them. But I’m not sure this is correct. Do we really understand how workers will react to a job they cannot lose? Will there be some people who prefer to work just enough to get by, showing up at the Job Guarantee office every now and then, working for a few weeks, then going back to their personal hobbies?
Yes John we do know that people seek better wages, otherwise everyone would be on unemployment benefits. Even so go and read the work done by Pavlina.