Mitchell’s laws: Reduced money growth never stimulates economic growth. 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.
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Well, I really did it this time. A few days ago, I posted Why Modern Monetary Theory’s Employer of Last Resort is a bad idea, and I feel like a guy who has kicked a hornet’s nest. The MMT folks have responded in exactly the same way debt hawks respond when they are told they are wrong (which proves people are people, no matter what their stripe).
Here is just one of many written comments I received, and this is 100% verbatim: “Are you serious, or just yet another crazy, rightwing, Austrian nutjob jacking off in public to get your jollies off?” Believe it or not, that clever note came to me from one of the most respected MMT people in America. I won’t embarrass him by giving you his name, but if you know MMT, you know of him.
In the above-mentioned post, you saw a large number of questions about the practicality of ELR, which the MMT folks have changed to JG (Jobs Guarantee). As a long-time businessman, I thought the questions were legitimate — the kinds of questions I would have about any business idea. You can read that post to see whether you agree.
I believe there is a fundamental problem with JG, and that is, it implies, then tries to solve two, completely separate problems, and one of them might not be a real problem at all:
1. How to get money into the hands of people who have lost their primary source of funds.
2. How to give people something to do.
Problem #1 is both legitimate and easily solved. Addressing poverty or even impending poverty is an important task for the federal government. The Declaration of Independence calls for a “Government, (that) shall seem most likely to effect (citizens’) Safety and Happiness.” It’s why we surrender some personal freedoms to a government.
In 2008, the federal government attempted to address the new recession by sending money to taxpayers. It was an excellent idea, but unfortunately, the effort, as I predicted, was far too little and way too late.
Had it been increased at least ten-fold, it would have put many dollars into the hands of consumers, who would have spent those dollars, thereby increasing business profits. Given additional profits, the businesses would be motivated to interview and hire additional, qualified people, who in turn would have spent more dollars, and we wouldn’t even be thinking about JG, today.
I suggest this would be a far better solution to #1 than having some government agency hire anyone — able, unable, qualified, unqualified, smart, stupid — and putting them to work in a job determined, not by the economy but by the government.
Call me a “crazy, rightwing, Austrian, nutjob,” but I believe a private business, reviewing resumes and selecting the most qualified candidates, usually will evaluate, hire and train for its own specific business needs far more productively than will a federal bureaucrat, who knows little and cares less about the business, and whose sole task is to guarantee a job for whomever drops in off the street.
Job Guarantee is an indirect, rather clumsy solution, if #1 is the problem we are trying to solve. Far better simply to give people money — perhaps by extending unemployment insurance or a similar device.
Which brings us to #2: Give people something to do. There are those who believe people should be required to work for money, rather than having it handed to them. There may be a couple of reasons for this, and I’m not sure which is overriding.
Perhaps they feel that if people are given money, they won’t look for work. But at the pittance MMT is talking about — something less than minimum wage, so as not to compete with private industry — only those least motivated and least able would settle for such a permanent placement. Skewing an entire program, just to deal with the few at the bottom of the barrel, seems like misplaced priorities. Since dollars are free to the federal government, and federal spending costs you and me nothing, I say give money to the sloths, and don’t worry about it. Even sloth money benefits the economy.
Then there are those who feel a moral revulsion against giving money to people who don’t work. I assume these good people don’t give to charity, either. The most moral of us give without making demands on the recipient, because in truth, we can’t look into someone’s mind nor understand their circumstances. You can’t feel someone else’s pain.
And of course, the rationalizers say people should work because that provides pride and a feeling of accomplishment, although the government probably would send the vast majority to jobs they never would select for themselves. No pride or accomplishment involved.
Bottom line, simply stating a problem correctly is the first step to a solution. MMT incorrectly states the problem as “unemployment,” while the real problem is lack of income. Positioning the problem as a need for a job rather than as a need for money, leads to an inefficient, unsatisfying, unproductive solution.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
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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
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Rodger, I think there are at least four other reasons for moving toward a commitment to full employment. A full employment commitment will help us:
1. Do a better job at accomplishing the things that only the private sector can accomplish, or accomplish well, and that we are failing to accomplish now on a massive scale. These include strategic economic investments that require organization and expenditures on a very large scale, and tending to the conservation and improvement of the public’s wealth.
2. Give people the opportunity to participate in their society and thereby build social solidarity. People who are contributing to any kind of social effort generally feel more integrated into society, have more self-respect, have more friends and acquaintances, have stronger networks of social support and are more socially and politically engaged.
3. Eliminate the permanent buyers’ market for labor. Force businesses to compete more aggressively for workers by offering those workers a better deal. Full employment will exert strong pressure from below which will improve the distribution of income, build job security, ameliorate the miserable working conditions of low-skilled labor in contemporary America, and counteract the massive agency failures that have lead to management paying themselves ridiculous salaries and bonuses while looting their companies.
4. Achieve our potential. When a lot of our people are not working, we are failing to achieve all we can achieve as a society.
I think a lot of resistance to the full employment is based on the vague sense that if someone is not working, there must be a good economic reason for that. But I think we are being held back here by ideology. We have too much of a habit of relying on private sector business to do things that the private sector just can’t deliver on its own. Then when the private sector fails to deliver all of the employment opportunities we need we blame the individuals who haven’t been employed. But it seems to me that the main problem is that we have failed to mobilize the public sector adequately to fulfill its purposes and achieve our social potential. There is so much of vital importance to be done. Failing to organize the work to do these thing in the hopes that eventually some entrepreneur will figure out a way to organize that work for private gain just strikes me as stupid and stubborn.
Charity is an inevitable and essential need in any society. But a society which maintains large under-castes of people who are long-term recipients of not charity, but a kind tolerant rejection and disposal – is undermining its social compact, and setting the stage for persistent problems of social dysfunction, discord and under-performance.
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Where I said in #1 “Do a better job at accomplishing the things that only the private sector can accomplish ..”
I meant:
“Do a better job at accomplishing the things that only the public sector can accomplish…”
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RMM,
I’ve been casually following this debate over the JG here at Monetary Sovereignty and on various MMT blogs. It seems the most important aspect of the JG, according to MMTers, is the “price anchor” that they claim would lead to full employment and price stability. Admittedly, I have not read the scholarship on how the JG achieves these goals. But as a novice I keep wondering… couldn’t we do what RMM suggests AND have a JG? Couldn’t we combine forces?
My thought is that many of your proposals would go a long way toward “bringing the bottom up” and setting the country on a better path to prosperity. Maybe your proposals would be sufficient? Maybe not. Your proposals, as well as the JG, are at this point still theoretical, as they’ve not been implemented.
Likewise, I think a lot of MMTers would agree that your proposals would likely lead to very low unemployment in and of themselves. Could we not simultaneously do a JG, in this form:
The federal government gives out block grants to each county in the country (completely circumventing state bureaucracies): the amount being some $ amount per capita, and this amount is administered per annum. Each county then uses those funds to pay any willing and able body that shows up and wants to work. All the jobs can be things that serve local interests. Any leftover money at the end of the year could be used a local tax credit to the residents of that county.
It seems this setup would avoid all the bureaucratic nightmare scenarios. In my example above, MMTers get to test out the price anchor, but when it’s combined with eliminating FICA, Medicare-for-All, Federal subsidized education (through post-grad, etc), it seems the pool of interested JGers would always remain relatively small. But maybe, just maybe, there indeed are people who would rather pick up trash in the local park for $8 an hour (or however much) instead of getting a free education to get into more meaningful work?
Is your main objection: why even offer people at the bottom money to do work? Why not just give them the money for free?
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You must be from the West. Counties are not a governmental organization in some states, just geographic boundaries of limited significance.
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That’s a good point. I hadn’t considered that what “is” a county could vary widely across the country.
Nevertheless, if we were ever close to implementing something like the JG… would it be that difficult for counties to develop democratically elected boards that oversaw the funds that their county received.
The important point I was trying to get at was that state bureaucracies could be circumevented and that might would likely limit the extent to which the JG becomes a big bureaucratic nightmare.
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I suggested per capita block grants as well (in Rodger’s cited post). Get rid of some of the bureaucratic problems by letting the states deal with it.
The tax credit idea is pretty clever. Somebody mentioned a reverse tax in the previous post, too.
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Great post!
I’m afraid this JG/ELR lunacy will end up discrediting MMT as a viable alternative to mainstream economics. How can people in their right mind believe that offering crap government jobs at crappy wages for millions of people will be the holy grail that steers the economy towards full employment and price stability?
If the ELR is offered on a voluntary basis as an alternative to UE compensation it’s likely that most people will choose to receive checks while actively looking for a job. There won’t be many takers for lowpaying, dull jobs provided by the government as some kind of charity program – too humiliating.
If instead it’s a mandatory program for people out of a job and an income – meaning the end of UE benefits as we know them – then I guess it will likely pave the way for an authoritarian nightmare, a quasi-military service for millions of unemployed civilians every time we have a recession (and btw isn’t the implemention of MMT deficit spending ideas supposed to drastically reduce the ocurrence of recessions?).
Let us just hope that common sense will prevail in the end and that the founders of MMT will drop their proselytizing for the JG idea – keep it perhaps to their inner circle if they want, but stop scaring off potential sympathizers with unnecessary, ill-advised big government programs.
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From what I’ve heard, the unemployment office can be humiliating enough as it is.
ELR/JG is viable if it’s done right. Go read some of my suggestions and those of others. The government can give out money without red tape and still see to it that decent government jobs are made.
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Rodger, There is an important distinction to be made here between where unemployment is well above NAIRU, and where it is not.
Assuming unemployment is well above NAIRU, then as you rightly say, the solution is to put “dollars into the hands of consumers”. And that can be done with a government deficit. I.e. the real niche for JG (if it works) is to deal with “at or below NAIRU” unemployment.
In the latter scenario, it is very easy in principle to provide work for all the unemployed: just tell them their unemployment benefit is henceforth conditional on walking up and down their street keeping it free of litter – to illustrate with a very crude example.
The $64k question is whether that ultra-crude “solution” can be turned into something more sophisticated, i.e. arranging for the unemployed to do something useful. My answer to that is “yes in theory”. However I realise the whole thing could be a bureaucratic nightmare in which total costs exceed total benefits.
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This NAIRU stuff has been debunked time and time again. Why keep mentioning it?
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Have a read Ralph: http://bilbo.economicoutlook.net/blog/?p=1502
Might wake you.
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Charles, I don’t agree that NAIRU has been debunked “time and again”. A large majority of economists are happy with the idea, or some variation on the idea. Indeed Bill Mitchell himself uses the phrase “inflation barrier”: an idea which is not 100 miles from NAIRU.
When using the term NAIRU above, I was using it in a very vague sense, that is simply to refer to the fact that there is SOME SORT OF relationship between inflation and unemployment. I could have made that clear, but didn’t do so for the sake of brevity.
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Ah yes, the wonder of true believers. Wave a magic wand and the Republicans will simply spend a hundred billion or so putting Boehner in charge maybe under President Romney to give the downtrodden a job.
But they are having such a good time being ignored by the mainstream as they convince each other that they are relevant in today’s political climate. However, for what I can see, they are just exercising an academic exercise so we might as well leave them alone.
I don’t think these people realize that by the time a JG program is instituted we wont need it because the economy will recover enough to take the pressure off the politicians.
And speaking of necessity, I still don’t see a massive depression in the near future unless we get the corresponding massive budget cuts under Obama who I believe is unbeatable by Romney.
But he has been rolled a time or two by the Republicans so it’s anyone’s guess.
But what does this old Reagan Democrat know!
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“Call me a “crazy, rightwing, Austrian, nutjob,” but I believe a private business, reviewing resumes and selecting the most qualified candidates, usually will evaluate, hire and train for its own specific business needs far more productively than will a federal bureaucrat, who knows little and cares less about the business, and whose sole task is to guarantee a job for whomever drops in off the street.”
To be fair Roger, the federal bureaucrat is an invention of those who opposed any sort of Job Guarantee idea. That is a demon of the imagination, not of those who came up with the Job Guarantee scheme.
The Job Guarantee boils down to the Federal Government offering to pay the wages of the unemployed. And that’s about it.
After all the one thing the Federal Government is good at is paying people. Anything more than that is probably pushing it a bit.
Then you decide which entities in society are able to take advantage of that offer. Is it the Third Sector, the Second Sector, or even the Primary private sector.
Then we’re into the depths of economic theory as to what is the best configuration for productivity and output and what to do (if anything) with those who struggle to socialise.
So no compulsion. Just an offer and then a debate over whether the government needs to do something to help those who really struggle to ‘do something with their lives’ – which will involve spending more money (drug rehabilitation and mental support, etc).
The standard MMT approach (AIUI) is that those in private sector and ‘real’ public sector/third sector jobs should receive at least the minimum wage for whatever hours they can get. The ‘guarantee’ portion should get the guarantee wage for a maximum number of hours, and the remainder (if any) receive a lower unemployment benefit.
Whether the guarantee wage is the same as the minimum wage is still a debating point. Some argue lower, some the same. Some higher because the minimum wage is impossible to live on.
What you’re suggesting is a classic Basic Income Guarantee. And that’s about as Left Wing an idea as you can get. So whoever insulted you used the wrong wing (and of course they should apologise immediately for the appalling tone).
I’m assuming here you’re talking a flat rate. Are you seeing that for everybody or only those who find themselves currently out of work?
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If the delegating “bureaucrat” was previously unemployed, it’s a twofer!
The derogatory part of Mitchell’s response suggests only blue collar workers would be interested in guaranteed wages. I do not agree.
Furthermore, smart young workers with a good head on their shoulders might excel in leadership positions they could never land in private enterprise due to lack of turnover.
The wages may be low, but there may be very good resume food in guaranteed jobs.
That dovetails with #2. Giving people something to do. The guaranteed jobs may be superior in some ways to the private jobs available, even if they pay less well. Pure capitalists will howl about this, but there may be a little malicious motivation there. If unemployment is no longer a possibility the fear of quitting is substantially diminished for many and will require employers to be reasonable in their demands and payscale.
They HATE that.
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“Are you serious, or just yet another crazy, rightwing, Austrian nutjob jacking off in public to get your jollies off?” »»» Wow, this is really off mark.
Anyway, I think people should be preferably given a job because of the social micro differences between being unemployed and without a job. Which would be much, much smaller if the Government uses fiscal policy as it should – aka, maintains deficits.
MMT incorrectly states the problem as “unemployment,” while the real problem is lack of income
MMT sees the problem as unemployment, but it also sees the cause as “lack of income”. I honestly don’t see many differences between what you advocate and MMT.
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Neil and Talvez,
I’m talking about an extension of unemployment insurance, which is different from guaranteeing a job.
Neil, you said, “The Job Guarantee boils down to the Federal Government offering to pay the wages of the unemployed. And that’s about it.” It’s not exactly a job guarantee, so what is the purpose?
It’s more of a “Hello, I’m free, so hire me and fire one of your current workers” program.
The purpose of making people look for those kinds of jobs, eludes me.
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Neil, by the way, when you take that job where the Government pays your wages, are you employed or unemployed?
Rodger Malcolm Mitchell
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You’re employed by the employer. The only difference is that the Federal level pays the wage rather than the employer directly (up to the level of the guarantee).
So the guarantee is that if you can persuade somebody eligible to operate the guarantee to hire you the Federal government will guarantee your wages up to the ‘guarantee’ level – which is a higher rate of remuneration than unemployment insurance.
Those eligible are likely to be public and third sector entities. Although some argue that private sector should be eligible as well.
The private sector then has to bid you away from the scheme with a better offer.
“It’s more of a “Hello, I’m free, so hire me and fire one of your current workers” program.”
Only for vanilla unskilled workers at a low level – who then immediately becomes eligible for a guarantee position of course. Once you get a short supply skill that private sector employers are fighting over, that no longer works since the price rises above the guarantee level.
It makes sure that the system always has more for people to do than there are people – since jobs can be eliminated if the price is wrong, but people can’t.
“The purpose of making people look for those kinds of jobs, eludes me.”
The private sector will, on occasion, not hire everybody on its own. Even with aggregate demand maintenance you will still get Minsky moments where the private sector goes off doing something stupid and blows itself up.
If that takes a long time to sort out (as it has done this time), people need something to do so their work skills don’t atrophy.
The debate is whether that needs to be organised and in place ready for an event (like the fire service), or whether it could happen spontaneously in response to an event (in which case enhanced unemployment insurance with more freedom to ‘do something useful’ may do the trick).
What you suggest has the advantage of being simple, and there is a lot to be said for that.
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Neil,
If you’re employed by the employer, then you no longer are unemployed.
There are lots of people working minimum wage jobs. If I were an employer, I’d fire everyone, then re-hire them as “unemployed,” and have the government pay their salaries. Such a deal! 🙂
By the way, I assume your work skills “atrophy” (if that is really possible), when you don’t do the work for which you are skilled. If you’re a salesman, and you’re given a ditch-digging job — not sure that keeps your “work skills” alive.
MMT has lost sight of the goal, which is to provide income to people who have lost their source of income. They’ve thrown in a quasi-Puritanical requirement that one must work, which has nothing to do with the problem.
The MMT program makes as much sense as telling people they must currently be employed in order to collect Social Security, Medicare, food stamps, housing subsidies, disability payments, unemployment compensation or any other federal, anti-poverty payment.
Providing jobs and providing income are two separate problems. Monetary Sovereignty is 90% in sync with MMT, but they have lost their way on this one.
Rodger Malcolm Mitchell
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“Providing jobs and providing income are two separate problems.”
I should point out that you are quite right with this. The ‘work = income’ paradigm is breaking down in a post industrial world.
How we deal with this is going to be an interesting change to watch.
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“By the way, I assume your work skills “atrophy” (if that is really possible), when you don’t do the work for which you are skilled.”
That’s too high level. We’re talking about the skill of turning up on time in a fit state to work.
Long term unemployed struggle to do that.
“If I were an employer, I’d fire everyone, then re-hire them as “unemployed,” and have the government pay their salaries. Such a deal! ”
If that were allowed yes, and it would be then be recovered by higher taxes on business profits to avoid inflation. The free lunch is limited.
But it would actually make the system that much more stable – since the guaranteed wage paid by the state would be the new zero and private sector wages couldn’t go any lower.
Arguably all jobs should be subsidised by the state to the tune of the income guarantee. Then the private job market (which would pay a top up wage) would be a ‘pure’ market with a clearing level than can go right down to zero.
“They’ve thrown in a quasi-Puritanical requirement that one must work, which has nothing to do with the problem.”
I say it again, as you’re missing it. There is no compulsion. It is an offer – if you work you get more resources than if you don’t. Which is the same deal as with any other job.
So if you like you can see the Job Guarantee as a top up wage to the Income Guarantee you’re talking about.
So everybody outside normal employment gets $X per hour as an income guarantee, and those on the Job Guarantee get $X+Y per hour, with $Y being the work premium.
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“That’s too high level. We’re talking about the skill of turning up on time in a fit state to work.”
THAT’s the skill that atrophies? Kind of a stretch, don’t you think?
“If that were allowed yes, and it would be then be recovered by higher taxes on business profits to avoid inflation.”
Impossible. It’s an MMT pipe dream. Taxes cannot be used to stop inflation. Too slow, too political and not incremental. Think of getting a tax bill through Congress and the President.
“I say it again, as you’re missing it. There is no compulsion. It is an offer – if you work you get more resources than if you don’t.”
I say again, as you’re missing it. Work is not the problem or even part of the problem. The problem is income. Work is a digression.
Why do we need a “work premium”?
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“Kind of a stretch, don’t you think?”
Not really. Look at the employment statistics on the long term unemployed. They don’t get a look in. Why?
“Taxes cannot be used to stop inflation. Too slow, too political and not incremental. ”
Then alter the system so they do what you want.
It’s very easy to have variable taxes – that’s what a 15% percentage tax is over a flat tax of, say, $4000. So you can have auto-accelerating taxes in the same way 15%+cpi inflation for example.
Or you just delegate a tax range to the appropriate bureaucrat as you do the interest rate.
Or you fix your legislature so its more efficient.
But I’m not going to debate that again. We agree to differ on that point.
“Work is a digression.”
Work is more than a digression when you have a 19th century model school system churning out people who derive their value and social status from their ‘job’.
If you train an army of killers you at least have to pretend to give them something to kill, or they go a bit loopy.
“Why do we need a “work premium”?”
So are you suggesting that everybody receives the same wage from the president downwards? 🙂
The argument is that you need a work premium so that people will give up their free time and go to work and therefore produce some economic output in excess of that created by their spending.
The counter is of course whether that premium needs to be financial. The intrinsic rewards in just doing something may be sufficient.
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Moral hazard may weigh in here too.
You are not just inspiring the idle to work, you’re discouraging the moderately productive from slacking off.
If an employed person can suddenly dedicate 40 hours to writing their novel, watching TV, acting in community theater, or making flapjack sculpture, they may end up losing very little money to do so.
I suppose the counter-counter argument there is, why do we CARE whether the person stocks shelves at Wal-Mart or writes a really bad book?
I think it may have something to do with a low level requirement of society to do useful things because at that basic level growing food and building shelters IS useful and they should get compensated for that work with something they actually WANT. Market forces get answered in this manner.
Give people free money and the useful work may be devalued?
I’m rambling here and admit to not having thought in depth about this. I’m currently attacking fractional Reserve banking, so I’ll get to this topic later.
Macroeconomics is a trip.
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You like teasing the hornets, don’t you?
MMT advocates deficits in order to reduce unemployment. JG is not about reducing unemployment.
Nor is it about “giving people something to do”.
It’s about the “WITH” in “full employment with price stability”, which is the holy grail of economics. Without JG, it is “full employment OR price stability”.
JG addresses the problem that it is possible to reduce unemployment “too much”, so that aggregate demand exceeds the productive capacity of the economy, and the result is inflation.
In our current system, we maintain a “buffer stock” of unemployed workers in order to avoid the problem of excess aggregate demand. It works, but it creates other problems, which you have recognized: many of those unemployed workers do not have a sufficient share of the national income to support themselves and their families.
Our current solution to that problem — a not very good one sometimes — is unemployment insurance payments. The amounts and duration of unemployment insurance are sufficient only for short periods of unemployment. Meanwhile the program is run by the States, which are not monetarily sovereign, and so levy taxes on employers in order to fund the insurance payments. That is counterproductive, as the taxes themselves tend to reduce employment.
JG is funded by the federal government, which is monetarily sovereign and need not raise taxes to fund the program.
JG pays more than unemployment insurance, and for as long as it is needed. It doesn’t expire after 26 weeks or 99 weeks. JG includes health care, which unemployment insurance does not include.
As Ralph points out, the real benefit of JG will be what happens when unemployment is low, so low that additional demand would tend to cause inflation. In those conditions, the JG wage remains the same, and thus is an anchor (or a buoy, Cullen) that keeps the general price level in one place. As JG workers are hired into the private sector, typically at a higher wage, our progressive tax system ensures that taxes go up by a higher percentage than incomes, tending to moderate the increased demand. Also, our vigilant Federal Reserve Board will no doubt monitor the number of JG workers and take action to prevent it from going too low, just as they monitor prices and unemployment today. But even if they are late in acting (as usual), the competition for labor that drives up wages for scarce skills will not drive up all wages. Relative changes can occur, but not inflation.
And if they overreact (again), the presence of JG will moderate the downturn. Or, more importantly perhaps, the pain associated with the downturn.
The jobs that JG workers should do are those that are needed more during the downturn: being food bank volunteers, working on Habitat for Humanity projects, and working with other local charitable organizations helping those who need help due to the bad economy. JG can also allow for job-hunting time, and training, so that workers permanently displaced by creative destruction can thrive on the new technologies that eliminated their old jobs.
JG is not for maintaining highways and bridges, or other WPA-like government projects that are permanent responsibilities of government and should be done in good times and bad.
I would allow for workers to be hired as trainees or interns in the private sector, and have JG pay their wage for a limited time, until they would then be hired by the same employer as regular workers with regular responsibilities. The idea of JG paying the wages for a private sector job that is already staffed by unsubsidized workers should not be part of the program.
The unemployment insurance system can remain in place, for those who prefer it. They should be free to switch over to JG when their UI expires.
The minimum wage, at least as applied to part-time workers who are also full-time students, does not need to be a “living wage”. The JG wage should be higher than the minimum wage, if the minimum wage is to apply to all workers. The total compensation would be quite a bit higher, if JG includes benefits and the minimum does not. JG, ideally, would not compete with the private sector for labor, but employers paying minimum wage and no benefits would likely be priced out of the market for adult workers. That is a side effect which may or may not be such a bad thing.
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Well put.
“The idea of JG paying the wages for a private sector job that is already staffed by unsubsidized workers should not be part of the program.”
I couldn’t agree more.
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John, I assume that’s today’s MMT version, which Randy Wray just told me would require only one additional government employee to administer. Really.
I see nothing in providing jobs that affects the “WITH” part of the equation.
MMT would control inflation by reducing the deficit. Gimme a break.
“Without JG, it is “full employment OR price stability”.” Total nonsense.
“JG addresses the problem that it is possible to reduce unemployment “too much”, so that aggregate demand exceeds the productive capacity of the economy, and the result is inflation.”
Total obsolete nonsense, which might have been true 50 years ago, but not today. It is 100% impossible for there to be “too much” employment, and for America’s aggregate demand to exceed the productive capacity of the entire world.
And this is the funniest part of all: ” The JG wage should be higher than the minimum wage, if the minimum wage is to apply to all workers. The total compensation would be quite a bit higher, if JG includes benefits and the minimum does not. JG, ideally, would not compete with the private sector for labor, but employers paying minimum wage and no benefits would likely be priced out of the market for adult workers. That is a side effect which may or may not be such a bad thing.” Yikes!
Sorry, John, but your comments are so unrealistic, I have no hope in correcting them. They read like 1900’s economics.
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another excellent article
But you seem to be hitting a belief that belongs in the past. That people must work for money.
Today there is no need for everyone to work. So why not just pay people an ok salary who do not want to. And maybe some more if they can show evidence of for example charity work throughout the year.
Although when I suggest this to people they almost blow a fuse. Fortunately the ratio of pensioners to non pensioners is moving in the right direction. All we need are pensioners who have enough money to buy from a smaller more efficient workforce.
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Oh Dear,a comment from just a lucky fool.
I believe,as inteligent as you all are,you have missed “the heart and hit the stomach”.
The “heart” is NOT jobs,enployment.It is “the dignity of man”.Why is it necessary to force labor of any kind for the basic “simplicity of life and liberty .This shpuld be a function of “a more perfect union.
Attaching that a member “must perform something”(read job)
is a cop out.
As for an economic condition that there may be a requirement for employment,full employment should that be for All able and willing and those who wish better than “birth entitlement”?
RMM:Wouldn’t employment approach 100% of those wishing to make financial gains (seeking fruits from their labor) if
there would be NO INCOME TAXES and NO FICA?
BUT AS
On 60 minutes (12/11/11) ,President Obama said,”You can’t raise revenues by lowering taxes unless you get the money from somewhere else.”
AMERICA SHOW HIM THE WAY!
CHARGE INTEREST ON OUR OWN SOVEREIEN CURRENCY INSTEAD OF TAXES.
READ “The American Revolution of 2012″www.justaluckyfool
Obama,Bernanke,Sanders,Wray,everyone.TEAR IT APART anyway you wish,but then make it whole,make it work!!
wo
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Modest proposal: pay people not to commit crimes. All of this ‘work gives people a sense of purpose/community/value’ stuff is mostly junk. Give people checks that say “thank you for not rioting” and that’s that.
Brevity due to iPhone
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Interesting thought. Pay people for not committing a crime and if they commit the crime, they don’t get paid. Hmmm . . . .
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By the way Rodger, something that may interest you:
The Orthodox Economics “Mafia”
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All, or a combination of, the four points below would do the trick:
1) Yearly block grant to states based on states’ unemployment statistics.
2) Award Federal government contracts to staffing companies on a per-placement basis.
3) Subsidize private sector salaries (similar in the way Neil Wilson above said).
4) And yes, hire some full-time bureaucrats to administer the programs (bureaucracies aren’t going away people…deal with it).
Stimulative is stimulative. The rest is just what gets it done easiest and permanently (politically, etc.).
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One more comment on the thread.
Subsidizing private employers had it’s appeal for me.
I thought you could avoid some of that “fire your employees and hire them back as unemployed” stuff through two mechanisms:
1) Competitive bidding. Whichever employer offers to pay the biggest share of the wage gets the employee.
2) The subsidy declines with time. The amount saved by firing is inversely proportional to their skill and you may get outbid if you let that person go. This will make any employer think twice before unloading anyone who’s “learned the ropes”.
Further modification may prevent abuses and reduce costs even more (granted cost cutting is only useful in terms of tempering inflation which may distract from the more important goal of civil peace, maybe even contentment?)
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williamjacobs,
If employers were bidding for employees, there would be no need for JG. The whole concept comes to bear, when employers aren’t hiring.
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Maybe that would be the case, but if two employers would find SOMETHING for a new employee to do, they could bid a dollar an hour and let the Fed pick up the remaining $6.25 an hour (or whatever the minimum wage becomes)
The other employer may be willing to part with $2.00/hr.
They bid for the new hire.
I suppose, you may even end up with a condition under which the government pays the employer to train the employee? That is the “Free Money” approach, but with two recipients rather than one.
Possibly it’s unnecessarily complicated but may be worthwhile to overcome the moral hazard argument that many might present (and I, rightly or wrongly, sympathize with. Though I’m ready to learn why I’m wrong.)
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williamjacobs,
Think of it this way. People currently receive Unemployment Compensation, yet they search for jobs. Why? The single biggest reason is that UC simply doesn’t pay enough. No moral hazard there.
MMT suggests offering minimum wage jobs. Most people won’t want them, for the same reason. They would rather spend their valuable time looking for a real job, than wasting time as Walmart greeters.
Tell me. Which would you prefer? To look for a good job or flip burgers?
I think the moral hazard idea is way overblown.
Anyway, what’s the worst that could happen. Some people would get money for nothing. Big deal. The government has the unlimited ability to create dollars. Doesn’t cost you a cent.
Rodger Malcolm Mitchell.
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As I mentioned, the moral hazard also lies in encouraging some of those Wal-mart greeters to quit since unlimited unemployment pays about teh same and being unemployed might allow a more enjoyable life (but one that leeches on other members of society.)
This unwillingness to work will shrink the labor pool and drive up wages to a degree where proper rewards are associated with work. I see that as a good thing, and hopefully that could be the result.
As for those that turn down employment to seek work, I applied as a bank teller when I was unemployed in 2002. I aced the exam, but I think they turned me down knowing I would quit the moment a good job came by,.
I guess unemployment might have been okay. Maybe I just didn’t do it right at the time. Unemployment in Maryland, from what I read, paid $600 a month and if you found work, you were to report it and they’d take a dollar for every one I earned. With the odd jobs I cobbled together, I might have cleared $150 a month. I was too proud to accept so little and the reporting requirements to get that stupid 150 were onerous.
Would I take a government guaranteed job when unemployed? Sure! I’d also look for work and the government would be just as happy when I left, unlike that bank that refused to hire me.
The Fed can supply me with it’s endless dollars, but fulfilling a useful need preserves the value of those that labor for essentials (food, shelter).
When unemployed, I’d wished that Maryland would offer 50 cents for every dollar I reported. I felt like a fool for working when I wasn’t bringing in a cent more, but couldn’t justify accepting public charity.
What you seem to suggest, and I’m not saying you’re wrong, is that there is a segment of our population that we should not just tolerate, but EXPECT to consume with very little in return. Perhaps some of this subpopulation would be permanent.
In support of such, I’ve often wondered if we could FILL community theaters (and movies past opening night) and restaurants if such a class were tolerated. They are there to appreciate the capabilities of society as they have no superior talents of their own but may appreciate others. It rubs me the wrong way, but then, so did many tenets of Monetary Soverignty, at first.
Again, thank you for your diligent, thoughtful replies. I assure you they bear fruit in the world consciousness.
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“They would rather spend their valuable time looking for a real job, than wasting time as Walmart greeters.
Tell me. Which would you prefer? To look for a good job or flip burgers?”
Anyone seriously considering the possibility of flipping burgers for a living probably doesn’t have the money or a rich benefactor to feed, clothe, & house them why they frolic about town to “look for a good job”.
I can tell you’ve never had to deal with that problem though, right?
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you could just hand them a few treasury bonds and some land and let them steal income the old-fashioned way, through economic rent and usury.
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i favor the citizen dividend funded with pure agrarian and financial justice over the missed-the-poin-again job guarantee of the mmt keynesians. but i’m a crazy classical economist who rejects all schools of neoclassical economics, including the mmt keynesians and the austrians who love free markets and gold but who want government to intervene in the free market for gold by declaring it legal tender.
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My largest source of caution toward supporting JG is that it is such a monstrous endeavor with unforeseeable problems.
Conversely, eliminating the FICA tax would be so simple. It also would benefit the least of us, bring us close to full employment, and reduce inequality. Such an outcome is almost exactly in compliance with the goals of JG.
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“My largest source of caution toward supporting JG is that it is such a monstrous endeavor with unforeseeable problems. ”
While caution is always advisable when dealing with the government, I cannot believe that implementing a Job Guarantee could possibly be more difficult than, say, landing people on the fucking surface of the moon!
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