By Charles ‘Kondy’ Kondak
This analysis (it may turn out to be the first of my own series) will be based on the latest Proposal from the Levy Institute (4/18/18) entitled: “Public Service Employment: A Path to Full Employment” (PSE) which is linked below.
Let me begin with a little background. The “Public Service Employment: A Path to Full Employment” is the third re-branding of the Job Guarantee (JG) of which I’m aware. I have seen some formal academic work on it dating back to the mid-90s and beyond, chiefly by Paul Davidson of the University of Tennessee.
The first popularization of a guaranteed Federally funded job I saw was in 2011 during the depths of the Great Recession. It was called the Federal Government as the “Employer of Last Resort (ELR)”. It had a more transitional and temporary flavor to it. The suggested wage for the ELR was a very modest $8/hr in 2011, with some minimal benefits. At $8/hr most would likely have qualified for existing Federal Social Safety Net Programs, like Medicaid. We could have loosened the income restrictions for other Federal programs like food assistance, and increased the amount, but in my opinion we should be doing that anyway.
For a 40hr work week $8/hr amounts to Gross Earnings of $320/wk and would not be a huge threat to the current Unemployment Insurance program as the ELR wage is quite substantially lower than the maximum unemployment benefit in my State ($400/wk).
Actually, this incarnation is quite good and doesn’t come with many of drawbacks of the later more robust Job Guarantee proposal, especially if the temporary nature of the ELR is emphasized. This ELR proposal actually augments the current Social Safety Net, not threaten it. One has to wonder if the author who wrote the proposal, Warren Mosler, had this in mind when outlining his ELR proposal.
The next incarnation was a massive expansion of the ELR. It became known as the Job Guarantee. I won’t get into much detail as the link to the new rebranding of the JG called: “Public Service Employment: A Path to Full Employment (PSE)” report covers it. Briefly though, the JG wage is set at a “living wage” with liberal benefits. A person could stay in the Job Guarantee Program as long as they wanted, selecting from a smorgasbord of jobs at the one stop Employment Office. To quote the Eagles, “You could check in and never leave”. And if you didn’t like your JG assignment or grew tired of it you could select another.
This brings us to the first contradiction of the study. It begins right off the bat with the title: “”Public Service Employment: A Path to Full Employment (PSE)”. I spent almost my entire career working in State Government in Public Service Employment, it’s called a Civil job. Why are we talking about creating a second sub-class of Civil Service Worker with the PSE. A sub-class second rate Civil Servant. Current Civil Servants get little or no respect by some already. Who wants to be a clerk at the DMV? A job funded by Government is a Civil Service job, period!
Anyone hired temporarily or not should be hired into the existing Civil Service System at the current wage scale. That is to say a Civil Engineer hired temporarily should be paid the existing wage scale for that position. The State does have some Temporary CE positions left, but not nearly as many as in the past. Goodness knows my State and the country could use Temporary Civil Engineers working for the Public Purpose. This goes all the way down the Civil Service job skill and pay scale, like teacher aides. Don’t freaking insult Private sector workers Civil Workers with your 15/hr, $600/wk JG job. Which by the way is higher than the maximum Unemployment Benefit in my State. Say Good-bye to the Unemployment Insurance Program so don’t claim the PSE will not replace the current Social Safety Net, but be an add-on.
To think otherwise is living in a fantasy world!
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Source: PUBLIC SERVICE EMPLOYMENT A PATH TO FULL EMPLOYMENThttp://www.levyinstitute.org/pubs/rpr_4_18.pdf?fbclid=IwAR3Zmp2KDI3GxcwDCB-GveQ-zJNJxU0w0a3RnQ9oGfy16jQy0J50iG0qGB8
“The ability of the Job Guarantee as a permanent program to control inflation is often misinterpreted as having no downside to workers. There are serious downsides as I will explain.
In the advent of inflation, without the Job Guarantee people drop from employment to unemployment thereby reducing demand and inflationary pressure, simple enough. With the buffer stock Job Guarantee idea, people will drop from employment to buffer stock employment. Consider the case where the Job Guarantee wage is higher than that of current automatic stabilizers such as unemployment insurance. This means that more people will have to fall into the Job Guarantee buffer stock to achieve the same inflation reduction as currently the case. The results of a Job Guarantee buffer stock results in more workers losing their jobs and suffering a reduction in pay to allow demand to fall the same amount to control inflation. In essence you’ve penalized one group of workers to benefit another.
Is this something I see as a knock on the Job Guarantee? Yes! Of course, and the cry from the #FakeMMT ‘Keystroke To Every Need’ crowd is: ‘You’re saying let some people starve so other people can keep their jobs!’ No, what I propose is bringing the PureMMT for the 100% prescriptive pen. Currently, unemployment and inflation are low—all we have to do is increase the automatic stabilizers now such that they would equal the proposed income from a Job Guarantee. Increasing automatic stabilizers now would add 0 inflationary pressure and then under the Job Guarantee we wouldn’t be issuing $500 billion into the Economy to set up a program that would trigger at least some garbage inflation.”—Charles ‘Kondy’ Kondak
“Recently, I outlined an aggressive series of proposals to reduce hours worked to die-hard members of the Job Guarantee cult as something we could do for workers without pumping $500 billion into the Economy that comes with the risk of at least some inflation. I went with every worker earning 1 hour paid time off for every 8 hours worked, lowering the OT threshold to 35 hrs, and requiring Employers to provide 90 days of paid Family Medical leave.
The JG cultists replied that big business could do it more easily but that would drive out small businesses. Oh, so a guaranteed job at $31K / yr with benefits wouldn’t be even worse in that regard? Then they shifted the ground yammering on about non-profits like Habitat for Humanity as a solution to affordable housing. Don’t they understand how many income based affordable housing units we could build with $500 billion in Govt seed money, we could even outfit the units with state of the art ‘Greener’ technology. No matter how one moves these folks around the chess board they sound like Charlton Heston, ‘You’ll have to pry the JG out of my cold dead hands.’ The JG is an endless loop of ‘capitalism relies on a reserve army of the unemployed to survive’.
Instead, let’s roll up our sleeves, get to work, and actually use the power of Government-directed MMT spending into the Private Sector to produce things that actually make a difference, like affordable housing. Of course, we’ll need a boatload of skilled trades people which we are short of right now (and that inconvenient truth really jolts their reality).”—Charles ‘Kondy’ Kondak
“One has to ask several questions about this Government sponsored Job Guarantee, as outlined in the announcement below. Who is eligible to participate? The 16 million unemployed/underemployed or wherever they conjured up that number Job Guarantee advocates cite? Why only 16 million? How many privately employed workers will resign into the ranks of the Job Guarantee?
Wages for 40% of the workforce are below $15/hr, and the benefit package almost certainly far more spartan. Likely we would see about 50% of the workforce migrate into the Job Guarantee right off the bat, until Private business sorted out the “micro-economic” effects and what it took to lure workers out of the Job Guarantee. That’s around 75 million workers, which makes sense if one considers the current Median Household income is around $62K/year. A two income Household working in the Job Guarantee Full Time puts them at the current Median Income.
Please don’t tell me that will only marginally add to inflation. Proponents of a Job Guarantee say the Private Sector would have to offer better to attract workers. How much better? If a worker can make $15/hr. with liberal benefits picking from a smorgasbord of jobs located in their community how much would it take to lure a worker to be a roofer sweating in the hot sun?
Of course, now I’ll be called a Neo-liberal bastard. There are other prescriptive approaches to lift wages and the living standards for workers without some Employer of first resort Government Job Guarantee where the money would be ‘pried’ out of the Private Sector and leave it intact.”
—Charles ‘Kondy’ Kondak
OVERHEARD: During a discussion on the Libertarians + MMT page on Facebook:
Charles Kondak: Employers are somewhat hesitant to hire the unemployed when labor is plentiful. As labor markets tighten, they begin to become less picky. Using various fiscal levers to foster increased employment can be of great help to stabilize employment levels. Beyond that, use federal funding—at all levels of government (federal, state and municipal)—according to economic conditions; and hire those wanting to be temporarily or permanently hired into the existing Civil Service system at the wage/benefit set by the relevant Civil Service system that would provide a reasonable alternative to involuntary unemployment. Would it not be better for the worker to list a bona-fide Civil Service job on their work history rather than a Job Guarantee ‘job’ (which likely would be viewed as inferior by employers)?
Warren Mosler: Charles Kondak The employed transition buffer stock is a lot more ‘liquid’ than today’s unemployment, which means it functions as a superior price anchor, and likewise the transition job pool can be kept much smaller than the pool of unemployed for any given level of price stability, which is another way of saying that private sector employment can be that much larger. Just saying its a superior price anchor vs unemployment and a lot of the negative ‘externalities’ of unemployment are avoided as well. In a sense, the state has damaged the workers by creating excess unemployed by overly tight fiscal, and a transition job helps repair that damage as it facilitates a return to private sector employment.
Charles Kondak: Civil Servants are already government-paid employees working for the public purpose and hiring ‘excess’ workers into existing civil service systems as needed with federal dollars to get at involuntary unemployment does not require creating a second sub-class of government-paid employee working for the public purpose.
This was also overheard:
“Right now I see approx $3T spent on healthcare and out of that approx $1T is private-sector administration, meaning people who are like, digging one hole and filling in another. What they are doing, the administrative work, is valuable in its context, but the context has no value, that pretty much goes away if we go M4A.”—Warren Mosler, Discussion of Progressive Resource Allocation during a 2017 Real Progressives broadcast, explaining why the implementation of Medicare For All would be a highly deflationary event.
So right there, in Mr. Mosler’s very own words, is yet another problem with a federal Job Guarantee program. By design, the JG does not compete with the private sector (by design the federal program initially spends $500B to create ‘jobs’ that are unproductive and ‘have no value in context’).
Meaning that the same garbage inflation (that caused a $1T increase in medical costs) will also happen with other prices in the economy once a JG (that has people ‘digging one hole and filling in another’), is implemented.
Which will punish the very people who listened to all that MMT pillow talk (that ‘guaranteed’ them job security with a ‘living’ wage and are now stuck in a Job Gulag watching the world go by).
Not to worry though, because when that day comes, the political ‘prescription’ MMTers will whisper more sweet nothings into their ears and ‘solve’ that problem too.
“The proposed MMT Job Guarantee (JG) pays a fixed wage with benefits. The most quoted wage is $15/hr.. All workers in the JG are paid the same in all areas of the country. Aficionados of the JG are fond of comparing it to New Deal style work programs.
The Work Progress Administration (WPA) was the main program that was responsible for building the infrastructure, some of which is still in use today. Job Guarantee advocates will make sure to point that out to prove the overwhelming success of the New Deal 1930s Work Progress Administration. Yes, it did some excellent work in its time and place in history.
Job Guarantee supporters leave out one small detail. The Work Progress Administration (WPA) did not set a fixed Nationwide wage and the wage varied based on skills of the worker. The WPA Division of Employment selected the worker’s placement to WPA projects based on previous experience or training. Worker pay was based on three factors: the region of the country, the degree of urbanization, and the individual’s skill. It varied from $19 per month to $94 per month, with the average wage being about $52.50—$934.00 in present-day terms. The goal was to pay the local prevailing wage. Basically, the Job Guarantee is not like the WPA of yesteryear.”—Charles ‘Kondy’ Kondak
Agreed…To play along with proponents of the $500B federal Job Guarantee program, not only do you have to pretend that these fake ‘jobs’ would be like the WPA, one must also ignore all facts, math & data regarding record-breaking jobs figures (and only see 1930’s depression-era black & white images of *actual* involuntarily unemployed people standing in soup lines).
P.S.S.S.S.S.S.S. “Bad news for MMT’s Job Guarantee: The future is not more working hours, but fewer working hours. People want happy lives. Minimum wage jobs are not the road to happy lives. Working for money is seldom the goal. The real goal is what money can buy. Ask any retired person.”—Rodger Malcolm Mitchell
“The battle rages on between Political Populist MMTers on the merits of a Job Guarantee (JG) as opposed to an Universal Basic Income. Some propose an unholy marriage of the two – the Job Guarantee and a Basic Income. Putting aside the fact that the Economy is in the midst of the longest Job expansion in our history, let’s take a look at the mechanics of each and how each scheme have more in common than each side realizes.
JGers are very fond of saying that an UBI is inflationary and provides no check on inflation should it arise and the JG is far superior in curbing inflation. Really? OK, let’s assume the Job Guarantee (JG) wage and the Universal Basic Income (UBI) stipend are equal. If inflation surfaces consumers begin to cut back on consumption and employment declines. Simple enough.
Under a JG workers fall into “buffer stock” warehouse Employment at a fixed wage as Employment in the Private Sector declines. With an UBI displaced workers lose their Employment Income and fall back on their UBI “fixed benefit” Government stipend. Since the fixed JG wage equals the fixed UBI stipend, inflation would be controlled to the same degree. You guys are arguing about identities.
Of course, I just committed heresy and I am bombarded with links on the JG (like I’ve never seen or given any thought to the 16 reasons) http://neweconomicperspectives.org/…/16-reasons-matt-yglesi…
I get no rebuttal on the Economic analysis from the Political Populist MMTers, only “guru” links, and some goobly-gook about we need a JG, the Green New Deal and the WPA (all of which has been covered here in various other posts). I’m pretty certain at least one or two of the Political Populist MMT gurus have seen it or been notified. Either I’m being dismissed as a crackpot or my Economic argument has at least some teeth in it.
As far as one being more inflationary than the other at the outset of the respective Programs the inflationary impact is larger with a UBI since it is a far larger injection of money into the Economy on the demand side than a JG. The benefit of an UBI is that as one travels up the Income distribution some of it might be saved, the JG has no such meaningful benefit in this area.
The main criticism of the JG faithful of the UBI is that the UBI produces nothing directly. However, the JG is subject to the same criticism, only it’s less obvious (likely because it contains the word JOB). A JG job produces no goods or services that are not currently being offered for consumption by the Private Sector or Public Service Employees beyond some ill defined Public Purpose (this is where the Green New Deal is brought up, like Mr Davis Bacon or the IBEW doesn’t exist). Inflation wise under a JG there is a distinct possibility we’d end up near or at the same place as we would with an UBI, only it might take a bit longer.
I hear the term “one time price adjustment” thrown around a lot. Why would it be a one time adjustment? Public pressure to increase the UBI or the JG wage would be immense. Looking at the JG inflation effect JG experts say the maximum inflation premium of the JG would peak somewhere between .63% to .74% in 2020 and decline over 7 years to around .1%). Of course, Politicians would run around pledging to raise the UBI or the JG wage, promising us the sun, moon and the stars along with it such that Politics almost certainly would add a greater inflation premium to the JG than expert forecasts predict, the same holds true for the UBI.
This would be especially true if the General Public accepts the simplified Political Populist MMT mantra that Federal Government is not constrained by anything except the very inflation which is devastating them. Might the overriding temptation be to print (OK keystroke) money into the teeth of inflation. After all poor people are dying in the street because of the lack of keystrokes that a Monetary Sovereign can create at will. History does indicate that this is more likely than increasing taxes or cutting spending in the face of inflation.
The JG looks back to the political heyday of the 1930s Democratic Party. The UBI is a bit newer. It was born in the backwaters of libertarian free market thought in the 50s and 60s and has seeped more into Republican solutions (Earned Income Tax Credit (EITC) – Negative Income Tax was Milton Friedman’s term). IMO, the EITC is a rather elegant application of the Negative Income Tax). Now I’m a Koch Brother Fascist in the eyes of Political Populist MMTers. I just call it like I see it. It doesn’t mean I vote a certain way.
How about we do something a bit different this time? Increase paid time off, preferably in a way that has Employers pay for it (or at least part of it). If this technological takeover of the Economy really does occur this time making jobs scarcer (one of the big reasons both JGers and UBIers cite for their need) everybody works fewer hours at the remaining jobs, with no loss of pay (balances the scales of work and leisure).
Hell, machines were perceived as a threat to jobs all the way back to the very early 19th Century (Luddites), perhaps further back. I was told by my Elementary School teachers back in the mid-60s that when we got older the biggest “problem” we’d have is how to spend our leisure time, because the robots are coming. I’m still waiting…”—Charles Kondak
“On CNBC (3/1/19) Stephanie Kelton certainly ‘tailored’ the Job Guarantee message to fit the audience. However, her interview finally outlines the true impact of a Job Guarantee on the entire workforce. This is one aspect where the JG benefits one group of workers while penalizing another.
Kelton argues that ‘what MMT would do is actually use full employment to fight inflation’ by giving companies that want to hire a better option. ‘They don’t have to bid wages up trying compete with one another for employed workers. They can hire from this pool, this ready-pool of skilled workers who are employed in public service jobs,’ she adds. That sounds awful neo-liberal to me.
The quote describes wage suppression to benefit Employers anchoring the price of the entire labor force wage scale downwards towards the lower bound of $15/hr. I have said it many times, here and elsewhere, that the JG is one giant Temp Agency that will be used to suppress wages. Now one of the ‘gurus’ says it.
Further, the JG sets up the Government as ‘chief negotiator’ of wage/benefit packages nationwide, and will likely have a chilling effect on the existence of remaining Unions.
Agreed Kondy…they are goose-stepping their way back into the 1930s:
“First they came for the socialists,* and I did not speak out—
Because I was not a socialist.
Then they came for the trade unionists,** and I did not speak out—
Because I was not a trade unionist.
Then they came for the Jews,*** and I did not speak out—
Because I was not a Jew.
Then they came for me and there was no one left to speak for me.”—German Lutheran pastor Martin Niemöller on his opposition of the Nazi Party during the 1930s
*Under the guise of promoting pure MMT, the reason why Professor Mitchell ‘billy-blogged’ that ‘Progressives Are Neoliberals In Disguise’ and called The Greens ‘neoliberals on bikes’ is because he feels that progressives (left-leaning socialists) aren’t Far Left (radical extremist) enough…
**The advocates of a fake ‘job’ guarantee program suggest creating more ‘Public Service Employee’ jobs (like Division of Motor Vehicle positions that are already permanent Civil Service jobs) to achieve utopian ‘full employment’…
***Using the same-old class-warfare tactic in a different bottle, fake MMTers want to pitchfork the rich while insisting that it’s not ‘to pay for anything’ but only because the rich ‘have way too much money’ and that we need to make the rich ‘pay their fair share’ to ‘solve’ wealth inequality.
When I first encountered the Job Guarantee (JG) in 2011 my first response to it was quite favorable. The proposed wage was $8/hour with “some benefits”. I immediately saw that at this wage level many participants in the Job Guarantee (JG) would still qualify for current Social Safety Net Programs and if we adjusted the notoriously low Poverty level definition just a bit from $11,000/year to $16,000/year the rest of the workers in the JG would also be covered. At this level the Job Guarantee would be an add on not a subtraction to current Social Safety Net Programs, not like the current incarnation of the Job Guarantee.
Even with two people working Full-Time in Job Guarantee at $8/hour their combined income would be $32,000/year which was substantially below the Median Household Income in 2011 of $50,054/year. Today, two people working in the JG at $8.00/hour ($32,000/year) would put them just a touch below the Median Household Income of $63,688 in January 2019 . Paying a JG wage of $8.00/hour would become the effective minimum wage which is not a steep increase from $7.25 and should have been done at the time anyway. Of course, some States and Municipalities have since increased the minimum wage above the Federal minimum wage and the Job Guarantee would have to be higher. Basically, the JG wage should track the Minimum wage not set it.
The 2011 version of the JG listed the benefits as getting people used to show up on time, take a shower, learn how to work well with others, and remedial Education. Job Guarantee participants would join the ranks of workers at the bottom of the wage scale and it would be up to them to use these basic work skills to take it from there. Those benefits of a Job Guarantee are enough for me and any “productive” work a bonus, not the goal. The aforementioned benefits of the scaled back 2011 JG would be targeting at the proper portion of the population, those who have dropped out of the workforce, deteriorated into such a state that they have given up, many of whom are functionally illiterate. I could live, even support this type of Job Guarantee as it is clearly a transitional work program targeted at those who could be termed as unemployable.
I still don’t like the Federal Government effectively setting up a one stop Temporary Agency. Setting up a one stop Temp Agency concentrates workers into one place where Employers would have “perfect knowledge” to recruit the person willing to work at the lowest wage above the Job Guarantee wage, but that downside is manageable and very easy to greatly mitigate by increasing Unemployment Insurance benefits upwards when the Economy is doing well, like it is now. For example, in my State the maximum benefit is $400/week, and if we increased the maximum Unemployment Insurance Benefit a bit there would be few if any, higher skilled workers in the JG for Employers to poach as very few, if any, would take such a cut in Income by participating in the JG willing and give up their Unemployment Benefit Income. In this case the Job Guarantee would not compete with current Unemployment Benefits for higher wage more skilled workers. The temptation and very real risk of the elimination of Unemployment Benefits would not exist as with the current $15/hour “living wage” proposal.
The more robust Job Guarantee is something far different. It sets a wage floor and a price anchor. When I heard Professor Randall Wray say the phrase “wage floor and price anchor” coupled with the application of the buffer stock idea from Agricultural Economics I interpreted price anchor to mean a way to suppress and compress the price of labor wages. After all that is what an Agricultural buffer stock does. The concept of the Agricultual buffer stock is If there is a good harvest the Government buys up the “excess” of an agricultural product to keep the price artificially high that allows farmers to stay in business and when there is a bad crop the buffer stock is released to the market to prevent shortages and prices lower than they would have been otherwise. An agricultural buffer stock smooths out the price of commodities. In agricultural Economics it’s a solution to what is called “The Farm Problem”.
A robust Job Guarantee at the proposed wage/benefit package would almost certainty cause Unemployment Insurance to be abolished and higher skilled workers would fall into buffer stock Job Guarantee employment and be able to be poached by Employers at a flatter wage scale than would otherwise be the case (remember the effect on farm prices of an Agricultural buffer stock). Further, why wouldn’t Employers avail themselves of the JG option to find the worker that would accept the lowest wage above the JG wage? For example, might the owner of an apartment building scour the JG for a doorman willing to work for $43,000/year rather than the current $49,000/year.
Proponents of the current Job Guarantee incarnation might be able to bamboozle most people by saying: “No, the phrase price anchor as it concerns the Job Guarantee refers to the price of goods and services in response to inflation”. We here at Pure MMT for the 100% aren’t as stupid as not to ask questions. Why would Employers only hire from the Job Guarantee worker pool when there is inflation? Why would a buffer stock of workers work any different than an Agricultural buffer stock? How does a JG control inflation? I’ll tell you by suppressing/compressing wages.
The Job Guarantee is a wolf in sheeps clothing that shears workers not empowers them, but try to warn brain washed #FakeMMTers. I’ve been accused of using twisted logic quite a few times. They have no knowledge and don’t understand the the true implications of using the Agricultural buffer stock concept in labor markets. They cannot begin the fathom the following quote buried under the flowery language of a JG :
On 3/1/19 on CNBC Professor Stephanie Kelton argued that MMT would use ‘full employment to fight inflation’ by giving companies that want to hire a better option. ‘They don’t have to bid wages up trying compete with one another for employed workers. They can hire from this pool, this ready-pool of skilled workers who are employed in public service jobs.’
Perhaps, the #FakeMMTist are not fake and want to have people to slowly turn to the Government for their sustenance as the Government can print (OK, keystroke) to every basic need. Basic need? Is that like everybody gets a Voltswagen, the Peoples electric car.”— Charles Kondak
“The Federal Job Guarantee cannot be used for large scale Federally funded construction projects of over $2,000 lest it run afoul of prevailing wage Legislation (the Davis/Bacon Act). The MMT political polemic sheep have been sheered by their own words.”—Charles Kondak
AGREED…and that’s why Charles Kondak remains the ‘go-to’ guy for pure MMTers on the Job Guarantee—and not anyone peddling ‘prescription’ MMT (under the guise of promoting ‘description’ MMT). Case in point:
“I think MMT economists would see the ELR [the job guarantee] as providing a superior anchor to prices and as a more effective means of controlling inflation than today’s policy of using unemployment for that purpose.”—Warren Mosler’s response to the Thomas Palley critique of MMT [of the job guarantee].
Hmmm…Mr. Mosler (and all MMT ‘academics’ like Stephanie Kelton) keep repeating that ‘anti-Fed’ yarn that plays well with their listeners; however, the facts, math and data doesn’t fit that ‘policy of using unemployment’ narrative.
The Fed’s mandate is price stability and MAXIMUM employment. The Fed is mandated by Congress. Do MMTers regurgitating this ‘evil Fed policy of using unemployment’ think all of Congress is also in on this Fed conspiracy to throw people out of work?
The Fed does not ‘use unemployment’ to ‘control inflation’. The Fed uses adjustments in short-term overnight interest rates to attempt to INFLUENCE inflation. In other words, the Fed is the automatic ‘price’ stabilizer that REACTS (that is counter-cyclical) to incoming inflation readings. It is actually the many moving pieces of a dynamic economy—it is capitalism—that ‘controls’ inflation. So whenever you hear the MMT political polemic say they want to replace ‘the Fed’ from controlling inflation, what they are really saying is that they want to replace capitalism from controlling inflation.
The MMT political polemic sheep are indeed being sheered by their own words (and what the world is now seeing in 2019) is that under their wool was a radical plan to dismantle capitalism and replace it with a Utopian cradle-to-grave neomarxist welfare state. A plan that calls for a society where individuals have their needs met NOT by the person in the mirror, but instead by willingly subordinating themselves more and more to the state.
Meanwhile, outside of the MMT academic lecture halls, a federal job-apprentice guarantee program, that actually solves the nation’s current jobs problem (addressing a skills mismatch so that unemployed Americans can get trained and then get hired at one those record-breaking amounts of available job openings) continues to take shape:
“When the Government as Employer of Last Resort (ELR) ‘for 5 million or 10 million or 1 million low skilled workers’ morphs into a diversified pool of workers of various skill sets (including various ’employability’ / ‘marketability’), then serious implications for the wage structure will arise.
Stephanie Kelton either knowingly or unknowingly outlined the harmful effects of a differentiated pool of workers in buffer stock Employment:
Kelton argues that MMT would use ‘full employment to fight inflation’ by giving companies that want to hire a better option. ‘They don’t have to bid wages up trying compete with one another for employed workers. They can hire from this pool, this ready-pool of skilled workers who are employed in public service jobs,’ she adds. I would call that wage suppression for workers higher up the Employment ladder that keeps wages lower than they would have otherwise been.
Once the Employer of Last Resort wage exceeds Unemployment Benefit payments, then Unemployment Insurance ceases to exist de-facto; thereby swelling the ranks of skilled workers in the Employer of Last Resort Program. The ELR then becomes the Employment Agency of first resort for Employers rather than bid up wages among themselves—just as Kelton points out.
The Employment Buffer Stock—borrowed from Agricultural Economics—begins to fall apart the more varied the work force in buffer stock Employment becomes. Wool is wool, and workers in a Job Guarantee who are above the lowest rung of the wage structure are not.”—Charles Kondak
Pure ‘prescription’ MMT proposal
H/T Charles ‘Kondy’ Kondak
“The Federal Job Guarantee (FJG) is considered by most in the Modern Monetary Theory (MMT) community to be an integral part of MMT. The Federal Job Guarantee is said to provide ‘Price Stability at Full Employment’.
One favorite throwaway line of #FakeMMT is that the Federal Job Guarantee will improve the ‘well-being of all workers’ by providing a wage/benefit floor such that Employers would have to offer better wages to lure workers away from Government Employment.
Some prominent Economists disagree on that effect of a Federal Job Guarantee and argue it will have a dampening effect on wages for workers higher up the Income ladder. One Economist says MMT would use ‘full employment [FJG] to fight inflation’ by giving companies that want to hire a better option:
‘They don’t have to bid wages up trying compete with one another for employed workers. They can hire from this pool, this ready-pool of skilled workers who are employed in public service jobs.’ (MMT Economist Professor Stephanie Kelton).
Based on this statement we’ve established the wage suppression effect of a FJG, at least for skilled workers—with Kelton’s commentary. Two other Economists write:
‘Would the incumbent workers use the decreased threat of unemployment to pursue higher wage demands? That is unlikely. … [T]here might be little perceived difference between unemployment and a JG job for a highly-paid worker, which means that they will still be cautious in making wage demands.’ (MMT Economists Professors L. Randall Wray and William Mitchell).
Who are these highly-paid workers that would still be cautious in making wage demands?
We are not only talking about a highly-paid (higher educated and higher-skilled) worker, but also a highly-paid (but not so higher-educated nor higher-skilled) worker like a doorman in NYC making $49K. To hire a NYC doorman, Employers ‘would not have to bid wages up trying to compete with one another’ according to Kelton; and the employed doorman on Union scale ‘would still be cautious in making wage demands’ according to Wray and Mitchell.
In other words, according to Kelton, the FJG compresses wages towards the FJG wage (rather than having ‘to bid wages up’ an employer simply combs the FJG pool for a person willing to work at $45K as a NYC doorman); and in addition, according to Mitchell/Wray, to at least some degree, the FJG compresses wages immediately above the FJG wage (the NYC doorman making $49K ‘will still be cautious in making wage demands’) as well.
Simply put, there is no other way to describe the effects of a Federal Job Guarantee as alluded to here: Wage suppression further up the Income ladder. The part the macroeconomic role the FJG plays here is more in the interest of price stability and less in the interest of worker well-being. Now I can see how some early MMT advocates broke from the herd based on this issue.
Further, it is also said by #FakeMMT that the Federal Job Guarantee would be ‘Federally Funded but Locally Administered’. Here at this juncture, one group of MMT Economists describe their proposal this way:
‘The PSE [Public Service Employment Program, aka FJG] would be under the jurisdiction of the DOL [Department of Labor], as UI [Unemployment Insurance] is today. Similar to UI, states will participate in the program’s administration. Congress would appropriate funding for the PSE program through the DOL. The DOL budget would fluctuate countercyclically in a manner consistent with hiring anyone who wants work over the course of the business cycle. The DOL would supply the general guidelines for the kinds of projects authorized under the PSE program. Municipalities would conduct assessment surveys, cataloguing community needs and available resources. In consultation with the DOL, states, and municipalities, One-Stop Job Centers (discussed below) create Community Jobs Banks—a repository of work projects and employers that offer employment opportunities.’
Thus, without the flowery language of serving the priorities of the State (sic Public Purpose), it sure does sound like the FJG is marshalling labor.
In conclusion, it is my contention that only with very strong trade unions can the Federal Job Guarantee system be given some consideration but this is certainly not the case in the USA.
Perhaps the beginning point could become changing US Labor Laws that gives workers countervailing power (like in Northern Europe), another possible Pure MMT for the 100% PRESCRIPTIVE proposal? Meaning that unlike the current FJG proposal, this would be a proposal that would be taken seriously by policymakers because it doesn’t need a single deficit-money keystroke.”—Charles Kondak
“The problem the JG aims to solve is that, when labor markets gets too tight, workers’ wage demand can become too excessive, setting off a wage-price spiral. The JG solution to this problem is to use macro policy levers to induce mass layoffs and then funnel those laid off into a minimum wage public jobs program (conventionally known as ‘workfare’). The reason this solution is supposed to work is that the workers who are laid off into the JG program will be desperate to escape that program for better jobs and will therefore bid down the wages of those better jobs.”—Matt Bruenig, 06/16/19
KONDY: “Many advocates of the Job Guarantee are too busy popping champagne corks about who got Federal Reserve Chairman Jerome Powell to say the Phillips Curve the trade-off between employment and inflation and the Non-Accelerating Inflation Rate of Unemployment (NAIRU) is very weak, if the connection even exists, to even think of asking the following question.
Now that the Phillips Curve and the NAIRU have officially been declared dead what remains of the ‘philosophical’ and ‘Macro-Economic’ underpinnings of a Job Guarantee whose primary purpose was to provide for Full Employment with Price Stability?
Advocates of the Job Guarantee maintained that a reserve army of the unemployed was the way inflation was controlled. The Job Guarantee is/was to be used to control inflation through Labor Markets by tempering wage demands and increases by creating a buffer stock of workers employed in it. The Achilles heel of the Job Guarantee always has been the suppression of wages the mechanism by which it prevents inflation by penalizing one group of workers (those that would be getting wage increases) for another as the cost of controlling inflation. The need for a reserve army of the unemployed to anchor inflation is now unnecessary and the theoretical reason of anchoring wages to a fixed wage Job Guarantee buffer stock of the employed has vaporized before their eyes.
Of course, Job Guarantee advocates will come up with another reason for it. They are like gun nuts saying ‘you’ll have to pry it from my cold dead hands.’ They’ll yammer on about the Job Guarantee being a wage floor not understanding the real purpose behind it. The minimum wage is a floor the JG anchors wages to prevent inflation the same as the now defunct Phillips Curve was supposedly doing.”—Charles Kondak
AGREED…Advocates of the Job Guarantee maintained that a ‘reserve army of the unemployed’ was ‘the way inflation was controlled’, yet the Fed just agreed with Rep. Alexandria Ocasio-Cortez that it’s just not so—not anymore. More specifically, Fed Chair Powell testified to Congress last week that “The connection between slack in the economy—the unemployment levels—and inflation was very strong if you go back 50 years, back to the 1960s when we had a very different economy.”
Also agreed that their need to have a FJG ‘to anchor inflation’ is unnecessary—it has vaporized before their eyes with the rest of Powell’s answer to AOC:
“I think we learned that downward pressure on inflation around the globe and here is stronger than we have thought. One reason why there has been this decoupling of the unemployment and inflation rates is that inflation expectations are so settled…so you don’t see inflation reacting to unemployment the way it has because inflation just seems to be very anchored.”—Chair Jerome H. Powell, Semiannual Monetary Policy Report to the Congress before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C., July 10, 2019
When there’s no inflation and no jobs shortage and no importance whatsoever to NAIRU modeling, you don’t go around saying that right now we need the federal gov’t to spend $500B to anchor ‘inflation’ and create ‘jobs’ and replace NAIRU with ‘NAIBER’ (if you want to be taken seriously).