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The Job Guarantee and the MMT Core: Part Six, John Carney on Stagnation and Prosperity With Unemployment

letsgetitdone's picture

Parts Two, Three, Four, and Five.

In the first five parts of this series, I analyzed views on the Job Guarantee (JG) idea offered by Cullen Roche and Peter Cooper in conjunction with a post by John Carney, which kicked off an explosion of blogosphere posts and commentaries on the JG. In Part Three I began an analysis of John Carney's views by taking exception to his claims that the JG would be inflationary, a bureaucratic nightmare, and would cause economic stagnations. In Part Four, I critiqued his views on the problem of a mismatch between demand and the skills needed to fulfill it, the possible inflationary impact of this mismatch, and also his claims on the JG and stagnation. In Part Five, I focused on his discussions of the problem of a mismatch between demand and the skills needed to fulfill it, the possible inflationary impact of this mismatch, and also stagnation.

In this post, I continue analyzing John's further take on the JG in in his 'The Trouble with a Job Guarantee. His arguments in this post cover incentives to work that might be impacted by a JG program, and the notion that we know that prosperity with unemployment is possible. My interleaved replies from an MMT perspective to his arguments are provided in this and an upcoming post, as well as in Parts Four and Five of this series. All my replies assume that the JG would not be “paid for,” but would occur through deficit spending.

The JG is a Guarantee of a Job Offer, Not a Job

”It would be possible, of course, to diminish or eradicate the inflationary effect by tightening other government expenditures, raising taxes, or making sure the Jobs Guarantee wages were so low that the increased demand generated would be minimal.

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?”

Comment: People will be able to lose their JG job. MMT proposals guarantee an offer to work. They don't guarantee that someone will be able to continue to work if their work isn't satisfactory.

There may be some people who will want to work just enough to get by. So what? Why is this a problem, if people can get by this way. They'll be doing valuable work, while they're doing JG work from time to time. If they don't want to graduate to private sector work, and periodically join and drop out of the JG, instead, then why should that bother us, as long as they're getting paid for the work they do?

”Yes. There will be. And some of these people will be very intelligent, even diligent people. I know people like this in New York City, who go through long periods of voluntary unemployment during which they paint, act, and write. They are enabled in this lifestyle by unemployment insurance and rent-control. Some of these people used to be computer engineers but found that they preferred more leisure and the income from unemployment insurance to less leisure and income from a private sector jobs.

It’s a wonderful life, really. But if it were too popular it would obviously be economically stagnating. I can see the possibility of The Job Guarantee inviting this type of economic stagnation at a whole new level. Work a week per month, earn enough to pay your for your rent-controlled apartment, then spend the next three weeks painting.

Work every other day. Work half days. Whatever. There's always a job waiting for you the next day. Get sick? Go down to the Job Guarantee office, take a job, then use the health insurance to pay for the medicine you need.

We do not know that this is what would happen. But that’s part of the point. Nothing on this scale has ever been tried before. It is bound to produce unexpected and unintended outcomes. Pretending as if we know the economic and social consequences of this kind of revolution in the way Americans work is a dangerous conceit.”

Comment: Oh, those evil New York wastrels, and bohemians! How can the hard working folks out in Iowa possibly agree to support them with guaranteed occasional work, even if they have that same guarantee themselves, even if it provides them with the full-time continuing work they prefer, and even if they're not (remember, John, this is MMT) actually funding them from anyone's tax money?

And, what, exactly, is wrong with the value produced from painting, acting, and writing? Of course, not everything produced from these activities adds value. But the same is true of many private sector activities. Does John really think that economists are more valuable to society than artists, actors, and writers, for example?

And why isn't it the case that many people will use the JG as a means of leveraging getting new businesses started? Why assume that this sort of pattern will be economically stagnating? Maybe it will be the opposite. Maybe it will free up creativity? Why is a certain amount of freedom from other people's judgments about what activities are valuable to undertake “stagnating?” Again, John is showing an ideological bias here, and it is a conservative bias toward reinforcing authority and against increasing personal freedom.

Prosperity with An Unemployed Buffer Stock?

”As Cullen Roche at Pragmatic Capitalism points out, we know that we can have prosperity with unemployment. We don’t know we can have it without unemployment because we’ve never tried it and our economic models will always fall short. The maps aren’t the territory.”

Well, the question here is: prosperity for whom? Maybe there's prosperity for Cullen, and for John, but there's no prosperity for the people in the unemployed buffer stock, their families, or their children. There's also no prosperity for working people whose wages are either kept low or further depressed by the rising buffer stock of the unemployed. That's why the median wage in the US has increased very little in the US since the 1970s and that's also why inequality has grown so greatly. If we want to stop trends like this and create a more equal society, more consistent with robust political democracy, then we have to stop depressing wages by fighting inflation with large unemployed buffer stocks.

Also, what is the standard used to say that the unemployed buffer stock “works”? It certainly hasn't worked for working Americans if we compare their state with citizens of other nations. With each passing year we see that cross-national indicators of economic well-being show that US citizens are falling farther and farther behind the citizens of other modern nations. There is no getting around it: something's rotten in the United States, but not in Demark. The US isn't working as it should as an economy producing the kinds of opportunities people value; including the opportunity to start new businesses, to attend college, to receive health care when you need it, or even to have an economic safety net when disaster strikes. And one of the reasons is that we don't (John Carney and Cullen Roche, not withstanding) have widely shared prosperity due to our insistence on having an unemployed buffer stock.

”You’ll notice that in my story of my arty NYC friends above I pointed out that unemployment interacts with rent control in ways that many people have never considered. The Job Guarantee will not come into an economy unencumbered by regulation. It will become part of an extremely complex web of regulations enacted during the last hundred and fifty years. It is impossible for anyone to know how the Job Guarantee will interact with the rest of the regulatory state.”

This is a very common conservative complaint about any attempt to change the way things are done. Yes, we live in a complex adaptive system, and our participation in it is reflexive to boot. Life is about unanticipated consequences and “black swans.” It is impossible to know exactly what will happen if we make major changes to our economic system. But the only way to find out is to make the changes we think will improve things, to evaluate them, and then change things again if what we've done doesn't work. John's attitude toward the JG is the traditional conservative 'can't do” attitude. The attitude that says the sky will fall if you change anything substantially. But, I think that the present system is ruining a lot of lives. We need to change it, and keep changing it, until we get it right -- until those lives are no longer being ruined.

Conclusion: Fallacies of Composition

What we're seeing in the objections to the JG offered by Cullen Roche and John Carney are micro-economic and even anecdotal arguments arguments being used against the JG proposal by people who don't want to risk certain possible, but not likely effects of the program. What's possible can be recognized by thinking through scenarios like those which end in inflation, excessive bureaucracy, skills mismatch, and stagnation. All these things are possible consequences of the JG impact on some individuals.

Implementing a JG may well cause one-time price adjustments in the economy. We will probably be able to point to examples where its introduction causes certain prices to go up. But, because of the impact of other MMT stimulus programs and the aggregate demand introduced by the JG itself, the private sector will move strongly toward providing full employment (though at higher wage levels) within 6 months. So, the JG population will be declining, and along with it Government deficit spending and any inflationary impact it could have. From the micro point of view, it may be reasonable to project that the JG will cause inflation, but from the macro point of view it makes no sense at all if we look at things over time and in terms of the likely interactions between the Government and the private sector.

When we think about the JG, further, and also think about our personal experiences with Government programs, a plausible reaction is: “Oh no, not another Government bureaucracy.” However, if the JG program primarily relies on State and local authorities and non-profits to hire JG people, while the Government restricts itself to funding, then it may not add very much to bureaucracies that already exist. So, if we look at it in the context of other existing bureaucracies, the micro objection that this is going to take another big bureaucracy pales before the reality that the work on the ground can be overseen by bureaucracies and organizations that are already there.

The skills mismatch complaint, next, looks plausible, when we reflect that most of us may have had the experience of seeing an advertisement for a desirable job and then lamenting that we are lacking a few qualifications to take advantage of the opportunity. But that's not looking at things from a macro point of view. Which industries really have skills/job qualifications mismatches that would require more than a short time of company paid for, or JG supported training or both to resolve? What percent of the unemployed pool is affected by that? What percent won't be hired because they want good wages and benefits, and people who need people with their qualifications cost much less in other nations? Without good data on the frequency of the mismatch “problem”, how can we know whether it will impact the JG or not? It may be a possibility; but that doesn't make it likely.

Finally, we all know about “welfare queens.” Reagan's never existed. He just told a story, and people believed it because they could imagine that it might have happened, and because they wanted to believe the worst about people on welfare.

John Carney's story about his “arty friends” in New York, may be true, and maybe he knows them. But the fact, that the JG may produce JG Queens or Kings only becomes a problem, if the people involved are a statistically large proportion of the program, and also if they're people who aren't producing value in their JG and broader social roles.

Anecdotes about individuals John knows, don't show that this possible phenomenon would be an actual problem if the JG program were implemented. They only show, instead, his own judgmental Calvinism, which looked at from a macro societal point of view may be a bigger and much more serious problem than any possible JG Queens or Kings could ever be.

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Submitted by Hugh on

Carney is a con man, a propagandist for kleptocracy. I disagree with MMT. I think the government should offer a jobs guarantee with jobs that pay a living, not a minimal, wage. If private industry wants to compete, they can offer better wages and benefits.

In my reading on the web today, I have been coming across all these tells. With Carney, it's here:

I know people like this in New York City, who go through long periods of voluntary unemployment during which they paint, act, and write.

I hate to tell Carney this but if you are painting, writing, or acting, you are working. You just aren't getting paid for it. But this does raise in its way the scarcity argument. In our kleptocracy, almost all the resources have been vacuumed up by the kleptocrats, creating scarcities. But if these resources were released back to society, exactly how many people would we actually need to fulfill our, and I mean all of us, basic needs of housing, healthcare, food, infrastructure, and education? We can discuss how to divide up this work, but once it is, all of us should have a great deal more time to dedicate to those activities which Carney disses. Again just because you're not working 9 to 5 in a job you hate doesn't mean you are slacking off.

There is something peculiarly malevolent and illogical in Carney's take that quality of life, and societal value, can only legitimately come from a job which precludes both.

I agree with you that unemployment is a tool, I would say a kleptocratic tool, to disempower workers and loot the fruit of their labors.

As for stagnation, we have that and worse now, and that is with all the kleptocratic claptrap the Carneys of the world advocate.

Hugh

Submitted by MontanaMaven on

The whole concept of how to live has been massively screwed up. That's why I am not interested in discussing "jobs" or "jobs bills". That's also why I wrote my post "Chores". At a family farm/ranch level, everybody pitches in. So do urban families with chores like taking out the garbage. If we work in a worker cooperative, we don't work for profits. Our "profits" might partially go back into our workplace. Bonuses, if given out, would be for individual wants.

If we had a fair system our old age would be taken care of so we wouldn't spend our lives in joyless jobs for the sake of not ending up on the street under a bridge.

I was one of those people Carney talks about. I was in theater in NYC doing Off Broadway working for next to nothing or nothing. All societies had their drama troupes; their story tellers in paint and ink. They valued them. What do we value? Hucksters and Con Artists.

I'm interested in work that involves nurturing of humans. So building schools, hospitals and highways. Employing more doctors, nurses, care givers of every kind, teachers. Employing writers, photographers, movie makers, theater artists, painters. All the money given to individuals for these endeavors will recirculate within their communities. Real money goes to real things so it doesn't cause inflation. Real money going into warfare or bubbles doesn't create anything of real value and so is inflationary.

But I'm getting out of my depth.

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Groucho Marx

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Submitted by letsgetitdone on

may not be easy, because they're hard things to do. But I think we should have it easy when it comes to having the necessities of a decent life. The economy has been and is able to produce enough wealth make that possible.

Stephanie Kelton has a post today reminding us of FDR's second bill of rights. Notice how she introduces it by tying it to "the MMT movement."

That should be in the forefront of our thinking all the time. It's a pretty good general layout of the idea of public purpose, especially if we update it to take account of environmental, climate, and resource limits. That's what MMT means to me. It's the approach to economics that can help us realize FDR's dream.

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Submitted by letsgetitdone on

The public purpose of the economy is to produce goods and services to people. You've pointed out that the system as it exists now isn't producing real value. That's the truth, and that's the problem we have to solve. Those JG jobs or BIG payments should allow people to produce value that the market system can't produce. That's why we need them.

Submitted by lambert on

"allow people to produce value that the market system can't produce. That's why we need them."

Exactly. You can look at the collapse and decay we see all around us as a sign of market failure (moral and well as pragmatic).

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

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Submitted by letsgetitdone on

except:

"I disagree with MMT. I think the government should offer a jobs guarantee with jobs that pay a living, not a minimal, wage."

I don't think you disagree with MMT, because MMT people don't agree on the precise level of the JG wage.

Here's Randy:

Rather, the best way to operate a money monopoly is to set the “price” and let the “quantity” float—just like the water monopolist does.

My favorite example is Bill’s buffer stock job guarantee program in which the national government offers to pay a basic wage and benefit package (say $15 per hour plus usual benefits), and then hires all who are ready and willing to work for that compensation.

and Pavlina says:

It is time for policy makers to take the Job Guarantee (JG) proposal seriously. Direct employment by government at living wages is the most immediate method for reducing the unemployment rate and keeping the jobless and their children out of poverty.

Also, Bill Mitchell has advocated a living wage as have other leading MMT economists.

However, Warren Mosler continues to old to his position that the JG wage should be $8.00 per hour.

My own view, though I am not an influential member of the MMT group, is that a $10.00 per hour JG wage with full fringe benefits is probably OK for the lowest cost areas in the US, but that wage should be cost-adjusted by region, with the JG wage in New York City being about $24.00 per hour.

I think this disagreement among MMT adherents needs to be worked out with some modeling, and should be based on the idea of providing a living wage to JG workers.

I'll be doing a post soon calling for MMT advocates to resolve their differences in possible or at least make clear the differing judgments that account for the differences we see in the wage rates they advocate.

Submitted by lambert on

.. is Stephen King (of the much reviled and not exactly "Shoes for Industry" English Department.

And I imagine Stephen King took some "time off" to write, at least in the beginning. Or maybe the writing was his work, Philistines notwithstanding.

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi