Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Those of you who have seen the web site at MMP Blog 50: MMT Without the JG? Conclusion know I’ve taken a terrible pasting for daring to continue saying what I said previously in Why Modern Monetary Theory’s Employer of Last Resort is a bad idea and in MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?”
Because Modern Monetary Theory (MMT) and Monetary Sovereignty (MS) have so much in common, I hate to see MMT destroy its credibility, and by association, the credibility of MS, on an unrealistic idea. We’ve worked too hard to build that credibility.
Sadly, some MMTers have invested so much personal capital into the Jobs Guarantee (JG) idea, that emotionally they find it impossible to view JG dispassionately. In fact, one of the major proponents of JG has written a book about it, and there is no way that book will be “unprinted.”
For the uninitiated, JG (formerly called “Employer of Last Resort”) is a proposal whereby the federal government would guarantee a job to anyone who wants one. Simple enough.
JG is based on the reasonable notion that involuntary unemployment is bad. Without addressing all the reasons behind unemployment, JG provides a simplistic solution: Give people jobs so they will have dollars and have “something to do” that is “productive” – the most common themes expressed by MMT.
Here is a direct quote from one of the foremost proponents of JG: “JG creates jobs for those who want them, then trains workers on the job.” For a moment, visualize the nationwide, millions-of-workers reality of that, before you continue reading.
The devils are in the details, and what fierce devils they are.
*Where are the jobs?
*Who fires (Is firing even possible?)
JG makes the tacit assumption that someone involuntarily unemployed will be so desperate he/she will take any job. But even in today’s economy, vast numbers of jobs are available, so many jobs, employers need to spend time and money, advertising for employees. Recently, I looked at Monster.com and found more than 1,000 jobs, waiting to be filled, just in Chicago alone. Add to that all the jobs being advertised in the Chicago Tribune, the Chicago Sun Times, the many other local papers, plus all the unadvertised jobs.
I saw all sorts of jobs: Office jobs, outdoor jobs, work-from-home jobs, restaurant waiters, busboys and dishwashers, fast food order takers, delivery people, lawn maintenance, maids, nannies, window washers, inside sales, outside sales, phone sales and sales trainees, warehouse and manufacturing workers, and on and on and on – these jobs exist. Walmart, Macdonalds, Starbucks et al continuously hire.
Yet, the unemployment rate in Chicago exceeds 8%. How can that be? Simple. From the standpoint of job seekers, they are the wrong jobs with the wrong pay at the wrong locations.
When I put forth that problem, MMT proponents respond, the government will match people to jobs. Oh really? Today, there are more than five million unemployed for 27 weeks or more (Federal Reserve Bank of St. Louis). These people live in big cities, small cities, villages and farms, spread all over the nearly 4 million square miles of this country. Who will match job seekers to jobs?
The JG program assumes people want jobs, when in fact, people want income, not jobs. Yes, I’ve heard the protestations that people need to be active and productive, and I’ve heard from people who say they love their jobs. Mostly, it’s all a myth.
If people loved their jobs, why do they prefer weekends to weekdays? Why are employers forced to pay higher than regular wages, just to get people to work more than 8 hours? In fact, why pay wages at all. Nobody pays people to go to Disneyland or to go Hawaii or to a movie. Nobody pays people for time off; people do “time off” for free.
How many people really prefer waking early in the morning, traveling an hour to work, taking orders from, and trying to please, a boss, worrying about being fired or passed over for promotion, then traveling another hour home – how many people prefer that to doing things they really enjoy like golf, fishing, tennis, sightseeing – or writing a blog?
What do people tend to do when they win a big lottery? Answer: Quit those jobs they “love” so much. (Of course, when they blow their winnings, what do they do? Look for a job. They need the money.)
So far we have touched on two JG myths: People will accept any job to get off the unemployment rolls, and the government is capable of matching people to jobs.
Now let’s get to salary. JG proponents either differ, are vague or noncommital on this crucial subject. One MMT leader says $30,000 per year plus benefits. (By the way, I keep saying “leader” because I don’t want to embarrass anyone by naming them.) Visualize the effects on all the employers, who pay less than $30,000, if everyone were guaranteed such pay. Massive numbers of firms would be driven out of business. The result: Fewer jobs, not more.
Another MMT leader says the JG pay should be at or below minimum wage, so as not to compete with private industry. But those minimum wage jobs already exist, as I’ve noted above. No JG needed.
Despite the fact that wage is one of the fundamental parts of any jobs plan, JG proponents don’t agree on what wage will be offered nor do they understand a wage’s effect on the economy.
So that’s the third JG myth: Wage doesn’t much matter.
Then we come to the “bufferstock myth.” To quote from the original JG post, “ . . . you can use the JG pool as a better wage- and price-stabilizing bufferstock than the “reserve army of the unemployed” can be.”
“Bufferstock” is a supply of people who are available to take jobs. It’s important, because if there is no bufferstock, employers can’t find people to hire, so must compete with other employers by offering higher and higher salaries, which leads to inflation.
But the notion of JG jobs being bufferstock requires that something about JG jobs must be less satisfactory than the jobs being offered by private industry – else people wouldn’t want to move. Bufferstock requires that the JG jobs pay less than minimum wage or in some other way, be less appealing to the JG jobholders.
But those low pay, less appealing jobs already exist – by the millions. So how does JG provide an improvement over the current situation? It doesn’t. It guarantees the same jobs the unemployed already have demonstrated they don’t want.
So that’s the fourth JG myth: JG provides bufferstock.
Then we come to a reality of employment, to which I allude in the headline: “You can’t fire me; I’m JG.” Businesses are controlled from the top. Someone in the role of CEO or president instructs subordinates, who in turn, instruct their subordinates.
To instruct there must be control, which is based on the ability to reward and punish. Rewards consist of compensation and promotions. Punishment means firing. But how does JG allow for increases in compensation or for firing?
The government would set some compensation level, and it’s difficult to imagine businesses being able to deviate from it for temporary jobs. And as for firing, how does one get fired in a jobs guarantee situation? Employers, being able neither to reward nor to punish, would have no control over employees, who would have no motivation to do as they are told.
So that is the fifth myth: JG provides good, productive employees.
In summary, JG seems wonderful when viewed from a distance: People need jobs; give them jobs. But under the microscope, it is an unrealistic disaster.
Finally, I can’t end without quoting one JG defender: “Jobs have a social benefit of social interaction and that’s where many people meet their partner for life these days.”
So you have it: Despite all its fatal flaws and myriad myths, JG can serve as eHarmony.com. That’s what makes it all worthwhile.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports