More proof the MMT’s “Jobs Guarantee” can’t work

 

 

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders.

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Modern Monetary Theory (MMT) understands that federal taxes do not fund federal spending. In that sense, MMT and Monetary Sovereignty (MS) are in perfect agreement.

However, we diverge in several areas, among which is MMT’s “Jobs Guarantee.” Stated in its simplest form, JG is: “The government will guarantee a job to anyone who wants a job.”

We have written about the naive impossibility of JG often, and will not repeat the various reasons here.  (If you are interested, see the links in Step #3 of the Ten Steps to Prosperity below.)

Instead, I merely will direct you to an article that succinctly addresses one of the issues:

Employers Say They Can’t Find Good Workers, but the Fix Is Simple

The economy is still shaky, (and) many parts of the country are suffering from the results of globalization. Employers have sent jobs to other parts of the world or axed them completely, in some cases.

Yet, there are still millions and millions of job openings out there. And incredibly enough, there are many employers who are complaining that they can’t find anyone to come work for them — or at least anyone who is qualified.

A July report from the Dallas Federal Reserve contained a couple of quotes from employers explaining their plight. “Entry-level candidates cannot read or follow instructions. Most cannot do simple math problems. What is wrong with the educational system? The ability to find qualified employees is our largest problem at this time.” 

This is at odds with what we’ve been hearing for many years now — that there simply aren’t enough jobs out there, and that has caused the labor participation rate to fall, and for many American communities to suffer. But evidently, that’s not quite the case.

People want jobs. There are millions of jobs available. Yet, people don’t want the jobs that are available. Why? Because many of those jobs aren’t “good” jobs.

  1. They may not pay enough
  2. Or offer full-time hours.
  3. Or require special hours
  4. Or require special skills
  5. Or require college degrees
  6. Or the jobs are seasonal
  7. Or there is no possibility of advancement
  8. Or are in an inconvenient location
  9. Or have unpleasant working conditions
  10. Or require too much physical labor
  11. Or the job availabilities are not known
  12. Or all the other reasons why a person might not want a job, or an employer might not want an employee.

If you go back to read the links indicated in Step #3, you’ll find that the JG proposes paying minimum wage. (It does that to keep the government from competing with private industry, which would be contrary to the fundamental purpose of the JG.)

So, how will JG’s minimum wage solve the problem?  Obviously, it won’t.

What’s an employer to do, given the circumstances?

The answer is incredibly simple, but evidently, many of the nation’s employers just don’t want to face the music: They need to pay more. Low pay is the number one reason people quit their jobs, and when people quit, companies need to spend more to recruit, train, and retain new employees.

For the time being, the economic environment is sending the signal that wages need to go up. Employers who refuse to budge are going to continue to be flooded with applications from workers they don’t want for jobs they can’t fill.

News flash: Employers will not offer higher salaries unless that is their only alternative. Instead, they will send jobs overseas, use automation, or simply not produce job-heavy products.

The solution is not an impossible  “Jobs Guarantee” from the government.  The solution is something indicated at the beginning of this article. Remember this line?

“Entry-level candidates cannot read or follow instructions. Most cannot do simple math problems. What is wrong with the educational system? The ability to find qualified employees is our largest problem at this time.” 

Education and training is the solution, and the solution for that can be found at Steps #4 and #5 of the Ten Steps, below.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

20 thoughts on “More proof the MMT’s “Jobs Guarantee” can’t work

  1. If the Job Guarantee includes training as one of the jobs offered, then that will help deal with this issue. There is no reason why it can’t. Here in Mobile, the state trains welders and pipefitters for local industry who then hire the trained workers and don’t have to do it themselves. Another way to do this is to have the federal government pay for apprenticeships at businesses that don’t want to pay for it themselves.

    You also miss an important point about the JG jobs being minimum wage. That is, that the minimum wage must be a living wage, adjusted for location. This requires legislation to increase the minimum wage, but if we all work together that can be accomplished as evidenced by the success in some cities that have raised the minimum wage substantially above the federal amount.

    Raising the minimum wage also adds to aggregate demand and increases sales (as I’m sure you must know). This has been demonstrated empirically. There was a study comparing sales in New Jersey and Pennsylvania at fast food restaurants when New Jersey raised the minimum wage and Pennsylvania didn’t. Much to the surprise of the economists, sales in New Jersey increased significantly while they did not increae in Pennsylvania, which is the complete opposite of what current economic theory predicted. There was also a story recently about a restaurant chain (fast food, I think) in Nevada that raised wages and the owners were shocked at the unexpected substantial increase in their sales and profit.

    Please Rodger, if you’re going to criticize the JG, make sure you are characterizing it correctly. Jobs digging holes and refilling them at the current minimum wage is not what MMT proponents are talking about.

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    1. Thanks, John,

      As for using JG as a training mechanism, I agree with the direction, but I believe federally funded education is better accomplished via Steps #4 and #5 rather than being job-dependent.

      A job requires a satisfied employer, who must direct training for his own, unique profit needs, plus the right to fire those who do not fit in with company philosophy or who are poor learners.

      In America, employees are “at-will.” That is, they can leave when they wish, or can be fired when the employer wishes. Would it be acceptable to fire a training employee mid-training, thus requiring the employee to start all over?

      And what of an employer who is not a good trainer? Should the employee be subject to that?

      And what of those jobs that have inherent dangers? Should businesses be government-encouraged (by financial money to train raw people who already should be trained?

      And what if a better-qualified employee shows up? Should the employer fire the trainee mid-training?

      And what if the employer’s business changes mid-training? Or what if the employer simply moves his business? What happens to the trainee?

      And is the employee employed by the government or the business? If by the business, does he/she receive employee benefits? If so, what if they are meager? If not, what benefits does he receive? Health insurance? Paid vacation? Sick pay?

      How much?

      And if the employer uses a trainee to complete certain tasks, would that encourage the firing of other employees who are not government supported, thus defeating the whole purpose?

      I can visualize JG producing a monster set of laws to address every situation and a monster bureaucracy to enforce those laws.

      (Perhaps that alone would solve the unemployment problem. Half the people could work for the government to enforce the employment/training laws pertaining to the other half.)

      These are only a baresampling of questions for which JG seems not to have answers. For the sake of brevity, I did not repeat the many, many criticisms made in the Step #3 links.

      I urge you to review them. It will take only a few minutes.

      I agree with the spirit of the “living wage.” From a legislative standpoint, I’m not sure how the difference between a “minimum” wage and a “living” wage is would be defined.

      And in any event, only a small percentage of American workers will accept a living/minimum wage, no matter how it is defined.

      Much is wrong with JG; digging holes and refilling them actually might be one of the inevitable results, but by no means is among the main problems.

      Having owned companies for more than 50 years, I can tell you that JG does not address the realities of the employer/employee relationship.

      It is an ill-considered, naive program designed by a professor to address a problem, directly. (Unemployed? Give them a job, any job. Hungry? Give them food, any food. Cold? Give them clothing, any clothing. Homeless? Give them a house, any house.)

      Reality doesn’t work that way.

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      1. I don’t have time to answer each of your questions individually. It’s tax season and I have tax clients to help. However, generally, the idea is for the government to train to the requirements of the employer like they do here for the shipyards. The trainee is not hired until he is trained so the employer doesn’t have to worry about mid-training failure. If the trainee can’t hack it, then he goes back to other JG work. Apprenticeships are effective modes of training and were used successfully for many years. The current JG proposal includes benefits, but if we adopt the rest of your Step to Prosperity, then health benefits will be covered by Medicare-for-All and retirement benefits could be covered by a vastly expanded Social Security.

        I agree that education paid for in Steps 4 & 5 would be better, but government training to employer requirements and apprenticeships could be useful transitions.

        I don’t believe you can’t figure out a way to define a living wage. It’s not that hard to find in the literature. It’s basically enough money to provide decent housing, food, etc. for a family, depending on the cost of living for any given locality, which is relatively well defined by the Census Bureau among others.

        I’m beginning to think that you have an ideological problem with the JG due to your conservative background that doesn’t want the government involved any more than the minimum necessary in the affairs of businessmen other than to provide enough money for the economy to prosper through the mechanism of your Steps.

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        1. Think nationally. This is a big country.

          Currently, there are approximately 30 million people in the “Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons.”

          You said, ” . . . the idea is for the government to train to the requirements of the employer . . . ”

          “The employer”? Specifically, which employer’s requirements, and who in the government does the training?

          Just curious: Where you yourself live, how much money would provide “decent” housing, “decent” food, “decent” clothing, “decent” healthcare, “decent” education, “decent” etc.? Please describe “decent.”

          This is one of my problems with JG. It skimps on national details, and assumes there is some person called “the government” and some person called “the employer,” and some person who will put each unemployed individual together with “the employer” all over the nation.

          I reminds me of the Republicans blithely saying they will replace ACA. but having no details.

          As for my “conservative” background, you must be new to this site.

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          1. Rodger, check back. I’ve been coming to your site for several years now. You’ve got great stuff here and I reference it regularly, especially the charts showing recessions and depressions caused by declining deficits. You have previously called yourself conservative and said you used to be a Republican.

            How do you think the Alabama training facility determines the requirements for its trainees? It consults with the industries for which it trains. C’mon, Rodger, you can do better than this. If you would spend the same amount of time thinking about solutions as you do about criticisms, you would be able to answer your own questions.

            The JG proposals do not assume a “person” called the government or the employer, it is much more detailed and nuanced than that. You’re making those assumptions and they’re not accurate. These are nothing more than straw man attacks.

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          2. I was a Republican. I am not a conservative.

            As I said, JG skimps on the details. Perhaps you can provide them.

            Does JG suggest establishing thousands of clones of the Alabama training facility all over the country, to service the 30 million “Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons”?

            If not, exactly what is the specific recommendation for a national solution?

            By the way, did you go to the suggested links and read the posts?

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          3. Ok, I stand corrected on the conservative point, but I really do remember you saying something like that.

            Yes, I have read your 10 Steps, and I’ve read every one of your posts for several years. The Steps are great and I support them unconditionally except for #3.

            One last point, and then let’s just agree to disagree. The JG proposals envision local agencies and non-profits being the organizers of the actual work and making the connections with local industry since they are the ones who are most in touch with local needs. There is no reason to have any national organization doing this. The only “national” part of this is that the “national” government funds it all.

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          4. John, rather than my repeatedly offering objections that are not addressed, I’ll let you offer your own questions.

            The purpose of the JG is to “ensure that everyone has access to paid employment opportunities.” See: http://bilbo.economicoutlook.net/blog/?p=23719

            Presumably, this goes beyond what we have today, since today everyone does have access to millions of employment opportunities, but either has refused those opportunities, for any number of reasons, or for many other reasons has been refused.

            Let’s say that you are tasked with the responsibility to organize the “local agencies and non-profits” you envision. What do you need to know? What are the issues you will solve? How will you begin.

            Remember: You must provide jobs to the approximately 30 million Americans who live all over the country:

            –Crowded big cities and empty rural areas
            –Young people and old people
            –Male and female
            –High IQs, low IQs, and mentally unstable people
            –Physically weak and physically strong
            –Lazy and motivated
            –Past criminal record and no criminal record
            –People with addictions
            –People with specific talents, who only want jobs that use those talents
            –People without cars or other means of transportation to jobs.
            –Homeless people

            There are millions of jobs available. So why aren’t they taken?

            The problem is not just that people aren’t qualified. The problem is that of all the jobs available, there are only a few you would consider. Look in the newspapers. How many of those jobs would you apply for?

            How will you not compete with the private sector, yet provide jobs people want?

            You’ll need to provide jobs that people want more than the jobs they already have rejected or have rejected them. How will you do that?

            What will you do for the millions of people who don’t want the jobs JG provides?

            You’ll need to provide supervision and evaluation. How will you do that?
            What will you do with the people you have to fire?

            These are not trivial questions. In my opinion, they are decisive questions that I’ve not seen JG address.

            Give some real thought to such questions, as I have, then begin to formulate a plan.

            It’s not enough merely to say “local agencies and non-profits” will solve the problems for you. What’s your plan?

            And after you puzzle over that for a while, go back to the Ten Steps and ask yourself: “Wouldn’t the Ten Steps be better?”

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  2. In an earlier post you pinpointed the real issue. You said what people need is money. Jobs are there to earn it, not the other way round. Jobs mediate between workers and living.
    Considering the direction ‘jobs’ is taking there are going to be less and less as time progresses. Automation, AI etc are changing the national GDP without needing so many jobs. Jobs is a threatened “species”

    So what to do? The solution is a UBI for everyone over 18. Absolutely everyone, including the Koch Brothers, gets it. It’s simple to pay for and simple to operate. It supplants welfare and unemployment benefits etc. the extra spending power will boost the economy and likely it will pay for itself soon enough. Then if you get a job you will earn more money and if you don’t then the UBI will allow you a basic living. No taxes involved. You won’t need a job guarantee then. Takes much of today’s stresses away.

    This idea is gaining traction, and considering the decline in the world’s economies, which will never reverse but keep failing, a UBI is going to happen, like it or not.
    Interested in your opinion here Rodger
    John Doyle

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  3. ““Entry-level candidates cannot read or follow instructions. Most cannot do simple math problems. ”

    And yet they already have access to free education that teaches these things, and much more.

    More education is obviously NOT the answer. These people are also not ready to go to college or grad school, even for free.

    Many people have answered your objections to JG, and you ignore the answers. Just to address the ones raised here,

    The workers are employed by the government, not private for-profit business. This is a totally made-up issue, because JG workers would not work at for-profit businesses. They would do jobs assigned by local government and non-profit enterprises, jobs that are not being done now for lack of funding. Not replacing government or private sector employees, but doing things that those employees do not do.

    The wage would be set by the Federal government, and may not have any relationship to the current minimum wage law, either Federal or State. JG advocates also include health care and child care benefits in the compensation package, rendering small differences in the amount of the wage nearly irrelevant in many cases. JG sets a de facto minimum compensation package for most jobs, but does not preclude the possibility that employers who offer other types of benefits may be able to attract entry-level workers for lower wages.

    JG workers who lack the basic skills described above might be paid by JG for the time they spend getting those skills, up to earning a GED, at which time they might be considered acceptable private sector employees.

    I’m sure that if you put your mind to it, you could contribute some constructive ideas to avoid the problems you have listed.

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    1. You said, “And yet they already have access to free education that teaches these things, and much more.”

      If that were true, why so many people who can’t “read, follow instructions or do simple math”?

      When I asked Professor Randy Wray (UMKC) about wages, he said “minimum wage,” because otherwise, people would gravitate from private minimum wage jobs to government jobs. especially if the JG government jobs had better benefits.

      As for your next-to-last paragraph, this sounds suspiciously like Steps #4 and #5. of the Ten Steps to Prosperity.

      I have put my mind to it, which is why I suggested that you click the links in shown in Step 3, which detail the numerous practical problems with JG.

      Perhaps the most fundamental problem is the size and diversity of America and the over-simplification of JG’s solution.

      Wray actually told me that JG could be accomplished without hiring any new government workers, as current agencies could handle it.

      (“FYI, Wray is one of the originators and prime proponents of JG.)

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  4. Hey Rodger
    I would just like to point out that the JG is to act as a buffer to the normal boom- bust business cycle.
    During a bust the JG will increase as the private sector shreds staff due the slowing of the economy.
    Instead of throwing people on the scrap heap they move to the JG where their wages will help the economy.
    When the economy grows then business in the private sector will increase hiring workers.
    The JG is just a counter cyclical tool.

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    1. Yes, that is the belief. There is only one small problem. For the many reasons I’ve enumerated, in this post, and in previous posts, JG can’t work.

      By the way, there is no“normal boom-bust business cycle. Busts occur when Congress causes deficit growth to decline.

      That’s neither normal nor cyclical. It doesn’t just happen. Congress actively makes it happen.

      Congress cures busts by increasing deficit growth. There are no normal reasons for a bust. We never need to have one.

      Like

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