There’s no shortage of ideas on how to create jobs, but ours is the only one without a detour. We suggest the government serve as an employer of last resort in times of crises. Jobs (not welfare) are what an economy needs in a downturn.
Japan is not exactly the country that comes to mind as a model of gender equality and high labor force participation for women. In 1995, the OECD estimated women’s employment rate in Japan at 56.5 percent, almost 10 percentage points lower than in the U.S., which had an employment rate of 66 percent for women at the time. Between 1995 and 1999, the employment rate for Japanese women grew by less than half a percentage point, while for women in the U.S. it grew by almost 3 percentage points.
However, since 2000 this trend completely reversed. Between 2000 and 2015, the employment rate for women in Japan increased by almost 14 percentage points, while in the U.S. it dropped by over 6 percentage points. Japan’s employment rate for women surpassed the U.S. in 2014. Currently, almost 65 percent of Japanese women are employed, while only about 63 percent of women in the US are employed.
In recent years, Japan has launched extensive campaigns to encourage labor force participation by women. The government took various steps such as increasing allowances given to new parents, subsidizing daycare, and ensuring both mothers and fathers benefit from paid parental leave.
A look at the employment rate for women in some other OECD countries over time shows that other countries had increases similar to Japan’s. The only country besides the U.S. where the participation of women in the labor force has decreased since 2000 is Denmark, which has seen a 1.8 percentage point drop in the employment rate of women. Despite this drop however, Denmark still boasts one the highest employment rates for women of any country in the world.
In Germany, Japan, Canada, France, and the U.K. the employment rate for women has been increasing. In the last 10 years, German women have seen the biggest gains in their employment rate, which increased by 17 percentage points. The increases in the other countries have been more modest: 2 percentage points for Canada, 11 percentage points for Japan, 4 percentage points for France, and 3 percentage points for the U.K.
By 2015 only France had a lower employment rate for women than the U.S. While France still trails behind the U.S., it has made progress in the past 10 years. The employment rate for women is on a steady upwards trend, meaning it could surpass the U.S. in the near future.
What all other countries besides the U.S. have in common is fairly generous parental leave policies for new parents. While in the U.S. new parents have no guarantee of paid leave, in Japan both mothers and fathers can take up to 58 weeks of paid leave. New mothers are guaranteed 58 weeks of paid leave in Germany, 52 in Canada, 50 in Denmark, 42 in France, and 39 in the U.K. For new fathers, France offers 28 weeks of paid leave, Germany, nine weeks, and the U.K. and Denmark, two weeks.
Furthermore, child care costs in the U.S. are extremely high, and are growing at a much faster pace than overall inflation. The rising costs of childcare make it unaffordable for many parents, especially for low-wage workers. The Economic Policy Institute found that childcare costs in some areas can take up more than a quarter of a family’s income. In some states, costs for daycare are higher than for college tuition.
This post originally appeared on the blog of the Center for Economic and Policy Research.
There’s been much talk about Trump’s plan for jobs and infrastructure that entails over one trillion dollars in new spending (without tax increases) and promises to employ thousands of American workers. Because it looks like this would require significant deficit spending, it has drawn stiff criticism: even Trump’s the own conservative supporters have expressed concern.
Among advocates of Keynesian spending and Modern Money Theory (MMT), however, some precautionary excitement can be observed. Their perspective is different because they are unafraid of a government deficit, and in favor of direct job creation. They understand that deficit-spending is not inherently bad, and that the US government will never have to default on its debt. When the economy is not at full employment, increasing the deficit would actually be helpful, not harmful.
A fiscal stimulus aimed at reducing unemployment is timely and necessary. Despite the confidence expressed by the Fed about the latest employment numbers, the situation for those who are jobless is not looking good. One of the reasons for the latest rate hike by the Fed was their positive outlook on unemployment numbers. Chairman Yellen has gone as far as saying that (at 4.6% unemployment rate) we are close to full employment and fiscal stimulus is not necessary to reach that goal.
However, the low official joblessness rate hides the fact that an increasing number of Americans have left the labor force altogether; for example there are currently over 5 million Americans who are not in the labor force but have reported that they want a job. This is where a Job Guarantee program could come in handy. In short, the government would act as an Employer of Last Resort, effectively guaranteeing a job to all of those willing and able to work.
And if Trump uses the deficit-spending towards jobs in infrastructure, it might result in something that resembles the job guarantee policy that America needs**. I argue, however, that the financial feasibility should not be the only criterium for a successful implementation of the job-guarantee. It also has to be sustainable. If we’re going to be at full employment, we have to do it in a way the planet can handle.
The current structure of the economy relies too heavily on fossil fuels, wasteful production methods and non-renewable resources. Unless we change this, sustaining full-employment would result in increasing production, consumption, and waste. My favorite Keynes’ quote is that “In the long run we are all dead.” If we’re talking about a long run of increasing pollution, he will surely be right. As we know, too much of a good thing can be a bad thing. This applies to jobs too. Unless they are green jobs, too many jobs will be bring us environmental destruction.
The issue of the environmental sustainability of a Job Guarantee program has been on my mind since I first heard of the proposal. Mathew Forstater’s Green Jobs proposal was inspirational to my work. In my Master’s thesis, I tweak its existing framework to target environmentally sustainable outcomes. I find that we can transform the Job Guarantee program to ensure its sustainability without increasing its cost. Here’s how:
I set up the program in a way that promotes social enterprise and community development, following the work of Pavlina Tcherneva et al. With the help of social entrepreneurs, NGOs, and Nonprofit Organizations, local communities should decide what projects will be undertaken. For example, communities along the Hudson river could support a program where workers dealt with invasive species such as the zebra mussel and water chestnut. Other localities could handle neighborhood farming, recycling centers, flood containment structures, bike paths, etc.. It’s been found that if the community is involved in determining what projects are taken on, participation levels are higher.
A more detailed account of my proposal and calculations is available upon request, but this is the gist of it: I used an Input-Output model to establish what would be the cost of employing the official U-3 unemployed population into “green” Job Guarantee jobs. That framework accounts for indirect job creation related to the proposal, but not induced employment. What I find is that the US government can, under conservative assumptions, employ all of those who are officially unemployed for around 1.1% of GDP while paying them a $15hr wage. That is about 17% of the annual military budget. The Green Job Guarantee program is projected to cost just under 200 Billion dollars per year in order to ensure employment for 7.8 million people.
As the world economy quickly transitions into a more sustainable state, a shift in the productive structure will occur, rendering some current occupations useless. Workers who are employed in areas like fossil fuel energy generation (the fabled coal workers of the American Midwest for example) will be left without a job and unlikely to find a new one right away. There is no way to predict how quickly this transition will occur: it could be a gradual–albeit fast–process if led by government initiative, a slower and insufficient movement if guided by profit motives, or even a sudden transition caused by widespread popular response to natural disasters.
Given current trends it is safe to assume that the transition to a renewable energy generation and a sustainable economy will occur before the fossil reserves are depleted. Just as the stone age ended before we ran out of stone, the “oil-age” will end before we run out of oil. As such, fossil fuel workers (and those who depend on their consumption) are at risk of losing their jobs in the near future. A Job Guarantee program would allow those workers to not only find employment readily, but also to acquire the on-the-job skills that will allow them an easier transition into the Green economy.
So as we continue to criticize and investigate the means of job-creation proposed by the President-Elect, let’s look beyond the government deficit, and consider the planet, too. Whether you’re afraid of government debt or not, you should be concerned with the destruction of the earth. If we are going to have a public program that aims a generating new jobs and bringing people back into the workforce, then that program should be a Job Guarantee. But, if we’re going to guarantee jobs, the will have to be green. And we have all the tools we need to make that happen.
*Interested in some good work on how to build a sustainable economy? Check out the publications from PERI and the Binzagr Institute for Sustainable Prosperity. Interested in a non-profit that is already doing some great things in that area? Visit GreenWave‘s website and get involved!
** I must make clear that, although Trump’s infrastructure plan might very loosely look like a Job Guarantee program because of its intent, it differs significantly from it because of how it will will be implemented. The president elect’s plan is based on private spending and making concessions to big corporations; it is basically a big giveaway to developers and not a program to ensure full-employment and financial stability.
It’s disappointing to see debates between proponents of the Basic Income Guarantee (BIG) and the Job Guarantee (JG). These discussions detract from the fact that both of these ideal policies are distant from the policies we currently have in place. Supporters of either of these policies should be working together to get either one implemented, and we can debate adding the other later. Today, we need to move beyond our current disjointed welfare system to one that will helpAmericans, and either policy (or both!) seems like a step in the right direction.
If we look at the current system, the three largest welfare programs we have are Medicaid, the Earned Income Tax Credit (EITC), and the Supplemental Nutrition Assistance Program (SNAP). Before the Affordable Care Act (ACA), Medicaid was limited to certain low-income individuals, but the ACA expanded this program so that all adults with incomes below 138% of the federal poverty line are eligible. For FY 2015 Medicaid cost $532 billion to cover 73 million individuals. EITC provides additional income to low wage workers, and in 2014 paid out $67 billion to 27.5 million tax filers. Finally, SNAP guarantees an income to buy certain necessary items, and paid out $69 billion to 22 million households in 2015.
All of these programs provide support by doling out income or necessities, with or without a requirement that the recipient be working. BIG and JG would both be ways to consolidate all of these programs, and then the debate becomes how much does someone have to work in order to receive assistance. A lot of people who advocate for BIG think that our current system has a lot of pointless jobs, and BIG would be away to allow those people to pursue something more creative. Considering that most entrepreneurs have one thing in common — access to capital — that may not be too far off. Then there are JG proponents who probably agree with that point, but think we can use the policy to help organize jobs that need to be done (liking cleaning up our environment, or building our infrastructure). Most people who support BIG worry that a JG would create “make-work”, quoting Keynes famous “bury bank notes and dig them back up” line. To them, just giving people the bank notes makes more sense. On the other hand, JG proponents worry about losing the social utility of work. People want to contribute to society, and they see work that needs to be done. Both policies seem hard to pass in todays political climate.
I think proponents of both the BIG and JG are disappointed with a U6 unemployment rate of 9.5%, current companies lack of interest in maintaining our environment, and over 45 million Americans living in poverty. Call it whatever you want, let’s guarantee every American access to the necessities: healthy food, shelter, and healthcare. Clearly this is going to require some people to do some work, so let’s make sure that work gets done with our social structure as well. Calling it a BIG or a Basic Necessities Guarantee (BNG) or a JG doesn’t matter so much to me.
In fact, I’d probably start with calling it the EITC. Get rid of the minimum income phase in, and we instantly have a “BIG”, with all the infrastructure already in place. It would only go to unemployed or low income citizens, since the EITC phases out, which helps it be a progressive policy. So that it can cover the housing benefits and others, we could expand the credit a bit too. How do we pay for this? It’s simple. Scrap the other welfare programs (keep Medicaid, that one’s complicated). The overhead of having all of these programs is gross. How feasible is this plan? Honestly, no clue. I’ve never made a policy. I’ve barely met anyone who even makes policy. It seems like the closest option there is, however. I can see the complaints already though. These ungrateful welfare abusers will buy alcohol and drugs with their new found income! Somehow it’s not OK to drink and do drugs if you’re poor, but if you’re rich, go for it, right? If you get rid of SNAP, people won’t buy food for themselves! Well surprise, there’s already a way to trade SNAP benefits for cash — it’s called craigslist.
Then there’s the other major complaint this would cause — now there is no incentive to work. We have to keep abject poverty as a social option so that people keep working at McDonalds making the McObese, and keep stocking the Wal-Mart shelves so that Wal-Mart can pay starvation wages which allow people to be eligible for the EITC in the first place. I’m not really sure those are the jobs that need to be done. If our low wage workers were working on local farms producing fruits and vegetables, I’d probably agree… someone has to do those things (or make robots to do them!). Yet I haven’t seen any proof an income stops people from working. It’s all speculation. I bet people still do things. Here I am, incomeless, and I’m doing something. I’m writing. I’m volunteering. I’m applying to jobs that I want to do and think will have a positive benefit. Getting rejected, but still, I’m trying.
Let’s see what happens when everyone has some cash on hand. If we start starving and need the government to force us to produce food, we’ll do it then. Yet from the friends I’ve talked to, boredom is a very potent driver of change. I know my fellow millennials and I have dreams of growing our own food in our parents backyards, or the empty lot across the street, or the empty K-Mart, or the empty mall. If only they’d let us. If only we had a little income, a little land, and some water to give it a try. If only the police weren’t killing and hurting us. If only Nestle wasn’t pumping out water from government land for free and forcing us to spend money on it. A lot of us worked our asses off at school, and what did we get? The choice between huge corporations who we see as destroying the environment, or low incomes working retail living with our family and friends. Meh. My friends and I want something different. I choose believing there’s something better than choosing between two evils.
Remember when the public hated huge corporations for destroying small business, not each others’ identities? Do we remember The High Cost of Low Price? BIG and JG proponents, let’s not quibble. We’re on the same side. There’s work to be done. Get organized. Make it happen.
The jobs in our society that focus on caring for others are often held by women. Women hold 70% of teaching jobs, 90% of nurses are female, social workers, childcare, customer service, you name it. If the duties performed in a particular industry involve caring for another person, most of the workers employed in that industry will be female. Yet within these industries men who do the same jobs are still paid more. Overall, women earn 80 cents for every dollar earned by men who perform the same job. This gender pay gap exists even in these jobs dominated by women. A male elementary school teacher earns 9% more than a female teacher. A male nurse’s median weekly income is $556 versus a female’s $446. When we cut budgets for our schools and our hospitals, we’re doing more than hurting the women typically in these jobs. We’re hurting everyone. If we want to better care about our citizens and reverse these trends, women would know how to do it best.
Yet women only hold 24% of C suite positions in the United States. Only 19% of our “representatives” in Congress are female. How does that stack up with the fact that half (that’s 50%, y’all) of our nation has the power to birth a human being? Rachel Croson and Uri Gneezy performed a comprehensive review of literature with regards to preferences and gender. They find that women are more risk averse than men, are more sensitive to social cues, and are more cooperative. If women were in charge, would the bets placed on the housing industry that helped cause the last financial meltdown have happened? Would we be cutting funding for educating our children, profiting off our students in colleges, or letting 48 million Americans live in poverty? Given the findings, it seems unlikely. Women just seem to care more about these things.
Take a look at Hillary Clinton’s choice for chief economist for her transition team, Heather Boushey. Her book, Finding Time, highlights how care for our health, our children, and the elderly, have all been subsidized by “the American Wife.” As women have entered the official workforce, “the market” needs to recognize these valuable contributions with equitable pay. Or look at our recently spotlighted economist Pavlina Tcherneva. She advocates for feminist fiscal policy, claiming our current gender and race blind policy approach is anything but. Policy that is race and gender blind really just means favorable for white males. These problems are intersectional, income disparities get even worse if you’re female and a person of color. If we want to reverse these trends, we need to target policy towards helping these communities who have been harshly marginalized. Sadly, I doubt it’s going to be males who get it done. Males are the more competitive gender, and real competition drives capitalism. If society was driven by the cooperative gender, and we had real cooperation and caring instead, where would we be?
Over forty years ago, President Lyndon B. Johnson declared a “War on Poverty” in his state of the union address. This war emphasized education as the remedy to America’s economic hardships. Critics, like Hyman Minsky, worried from the beginning that this would not be enough. As explained in some of his writings collected in Ending Poverty: Jobs Not Welfare, Minsky believed that without a focus on providing jobs the war would end in failure. In 2016 it is hard to say the poverty situation in America has improved drastically. Inequality has gotten worse, the minimum wage has stagnated, and food and health care prices have risen faster than inflation. I argue in my master’s thesis that while education has been shown to improve individual employment chances at higher wages, it is a fallacy of composition to assume those results can apply for everyone.
Trying to push all of our youth through high school will not guarantee them jobs, especially in today’s economy where we are far from tight labor markets. Minsky argued that programs should be designed which hold the promise of a useful and productive life for our high school dropouts. In my view, this would help students learn different skills that can’t be acquired sitting at a desk. Perhaps even more importantly, having an income would enable many students to either stay in or return to school, as requiring a student to forgo an income for four to eight years is just not realistic for many families living in poverty. College graduates are competing for jobs that do not require college educations. Our youth needs a more comprehensive “War on Poverty” than a focus on receiving a formal education.
Senator Bernie Sanders and Representative John Conyers have introduced the bill Employ Young Americans Now, which would provide $5.5 billion in funding to create jobs for disadvantaged youth. This seems like a better solution for our youth living in poverty. Employment is connected with a slew of benefits that education and welfare have not provided. Employment is shown to reduce incidence of mental illness, reduce criminal activity, and it allows production of useful goods and services. In my thesis I modeled EYAN and demonstrated that it will provide 500,000 jobs to young disadvantaged youth. This gives a young person a job in 11% of families with unemployed disadvantaged youth. My results suggest that if the bill were expanded 10x, we could provide a job for every young person living in poverty at a cost of $50 billion.
One issue with EYAN is finding jobs suitable for young Americans that do not yet have high school degrees. One possibility is to pay EYAN participants for raising young children in their families, since this is a responsibility that already exists for many youth living in families in poverty. Early childhood education has been shown to have great returns. Another prospect would be something along environmental lines. In the National Youth Administration as a part of Roosevelt’s New Deal he had youth plant trees, forming his “Tree Army.” This is another job that any able bodied youth can do. Jobs offered by EYAN do not necessarily have to be profitable jobs. The bill specifies that they could help the nonprofit sector with jobs volunteers are already doing for free. The nice part about this bill is that it allows local communities to determine who to hire and what type of jobs to do, as Minsky foresaw for a Job Guarantee program. That is, it is federally funded but locally administered. It would thus be up to individual communities to determine how they can best be benefited.
In a previous article I have discussed the role that college should be playing in today’s workforce and how education, as it is currently administered, has actually increased racial and class inequalities. In tight labor markets racial inequality has been shown to decrease, while with loose labor markets we have seen racial discrimination get worse. Economist Sandy Darity has shown that job prospects for black high school graduates are worse than for white high school dropouts. As I have discussed earlier, expanding the education system fails to provide income for all of our youth, and it does not payoff the same for those from low income families. Automation is on the rise, and business does not have enough demand to justify hiring more workers. We can thus not rely on the private sector to get us to full employment, and should push our legislators to create more local public jobs. While we can probably expect a huge infrastructure bill with our next president, if it’s anything like the American Recovery and Reinvestment Act it is unlikely this will help out low skill workers. With proper targeting, EYAN could hire 22% of our high school dropouts nationwide. This is why I believe in this type of policy, and would love to make it happen.
Reducing poverty and inequality will be hard, but I think a new focus on employment beyond education is the right way to do it. Argentina has had a direct government job creation program, Jefes y Jefas, which was modeled after Minsky’s ELR proposal and showed a lot of promise. It is therefore reasonable to see how such a program would work within the States, and EYAN offers us this chance. I wish I knew how to get it through Congress.
This post is an adaptation of my master’s thesis, and you can find the whole argument here. Comments and feedback are appreciated.
Debates about the disappearance of the middle class and the lack of opportunities for the majority of Americans have been at the forefront of the 2016 presidential election. However, discourse surrounding unions and ways to increase the bargaining power of workers are often overlooked in these discussions.
These are integral components of the issue that could enhance the current economic climate for the middle class, and especially benefit low-wage, minority, and immigrant workers. Without unions, employees can be fired at-will in most states and have no collective leverage to negotiate with employers over their most basic terms and conditions. There are almost 15 million union workers across the country who have these rights, and therefore benefit considerably from better wages and working conditions. Here are four ways unions make a difference.
1. Unions benefit workers—especially women and minorities—through the union wage premium,according to data from the Current Population Survey.
Collective bargaining gives union members wage advantages over nonunion workers, despite holding the same jobs and sharing similar characteristics (e.g. education level, age, race, gender). This is called a union wage premium. On average, union members commanded a 26 percent wage premium in 2015.
Women tend to have considerably higher union wage premiums than men. In 2015, they made about 33 percent more than their nonunion counterparts, on average, while the union wage premium for men was approximately 17 percent. Unions are also offering another advantage through helping to close the gender pay gap.
Minorities have also shown to have better economic outcomes when they belong to unions. As of 2015, average Hispanic full-time workers’ weekly earnings were 47 percent higher when they were part of a union. The typical African-American worker received a 30 percent union wage premium.
2. Unions not only push for higher wages, but their members also tend to obtain more comprehensive benefits. According to the U.S. Bureau of Labor Statistics, union workers are more likely to have access to health insurance, as well as have retirement plans and paid sick leave.
This is especially important for immigrant workers and employees in low-wage jobs. The Center for Economic Policy Research (CEPR) finds that immigrant workers who are union members have close to a 50 percent higher chance of having employer-provided health insurance, and twice the probability of having a retirement plan. Union workers in low-paying jobs have a 25 percent higher probability of having these benefits.
3. Unions fight to maintain an equitable distribution of income among employers and workers.
It is no coincidence that the percent of income going to the top percent of earners has increased while union membership has declined. The erosion of collective bargain reduces the share of income going to American families in the middle of the income distribution—not only union members. That is because unions pull millions of non-union Americans into the middle class by setting higher compensation standards that push everyone’s wages up. The decline of the middle class is, therefore, directly related to the decline in the density of unions.
The shrinking middle class has resulted in less spending money for many American families. Considering that household consumption is the main engine of our economy—accounting for around 70 percent of GDP—when the majority of workers can’t afford to spend the economy stagnates. Thus, contrary to popular opinion, unions do not impede economic growth when they fight for labor to receive its fair share of income, they are actually necessary to maintain a strong economy.
4. Unions are crucial for democracy.
As a recent Century Foundation report explains, unions serve as counterbalancing influences to arbitrary government powers. They function as “schools of democracy” for workers and help maintain a public education system that fosters democratic values. For example, the Milwaukee Teachers’ Education Associationsuccessfully advocated to revitalize the school curriculum to include issues surrounding civic engagement. Unions also represent one of the largest forms of an organized voice for low and moderate income Americans. In short, strong unions could ensure that society does not become governed by a small number of wealthy individuals.
So Why Are Union Membership Rates So Low?
Although there is overwhelming data showing the benefits of unions, they are battling to maintain their crucial foothold in the economy, especially in the private sector.
According to data from the Current Population Survey, unions remain strong in the public sector, with more than one-third of employees identifying as union members. Not surprisingly, the public sector employs more minorities and provides more equal wages than the private sector. The professions with the strongest unions include teachers, police officers, and firefighters.
The decline in union participation in the private sector has dragged down the total union membership rate. However, thanks to strong public sector unions, the rate of decline has stagnated in recent years, remaining at 11.1 percent since 2014.
Among states, New York has had the highest percent of union members with 24.7 percent in 2015. South Carolina has been on the other end of the stick, with only 2.1 percent of full-time workers belonging to a union. Examining the breakdown of union workers by state reflects the impact unions can have on lifting the wage floor for all citizens. States with higher union density tend to have a higherminimum wage for union and nonunion workers alike.
Even though polls show that close to 60 percent of workers see unions favorably, structural barriers have been holding back organizations from embracing unions.
The election process to establish a union, governed by federal law (National Labor Relations Act), puts major barriers in place for workers who want to become members. Even when workers want to be part of a union, they are typically harassed and can find themselves illegally fired. The National Labor Relations Board (NLRB) maintains that workers have the right to “form, join or assist a union.” However, the CEPR found there has been a steep rise in illegal firings of pro-union workers in the 2000s compared to the previous decade. Employers have a variety of unfair labor tactics they have used in union organizing drives—like hiring anti-union consultants (a $4 billion-a-year industry) or spying on their workers. However, minimal penalties and slow enforcement disincentivize companies from following the law. For example, two of the biggest employers in the U.S.—McDonald’s and Walmart—have been targets of such lawsuits but have rarely faced significant enough repercussions to dissuade them from continuing to employ these practices.
Another obstacle to establishing unions have been the Right-to-Work (RTW) laws, which are estimated to reduce union membership rates by 8.8-9.6 percent. With the addition of Wisconsin and West Virginia in the past two years, twenty-six states now have RTW laws. Under RTW state laws, companies can’t lawfully agree to agency shop, which allows workers to receive benefits secured by unions without contributing to cover collective bargain costs. The lack of agency shop cripples unions, and dissuades those interested in organizing drives.
Proponents of RTW argue these laws foster economic growth by raising competitiveness and attracting more business into their states. However, these laws promote economic growth by supplying their citizens labor at the cheapest price, instead of promoting and creating higher wage jobs. Workers in RTW states, which are most common in the South, are estimated to make $1,558 less per year, on average.
How Are Unions Responding?
Unions and their allies are developing new strategies to overcome these challenges and build alternative forms of workers bargaining.
A first priority has been strengthening labor laws and access to unions. Promising developments include the WAGE Act introduced last year that would extend civil rights laws to workers in unions. And, an emboldened National Labor Relations Act has put in place new rules to make elections faster and to make it easier to organize workplaces, like McDonald’s, that are jointly owned by a main company and numerous franchise.
In response to the limitations of firm-by-firm bargaining, unions are mounting cross-industry, cross-state campaigns to uplift the working conditions of all workers. The Fight for $15 movement is bringing together thousands of workers to demand a $15 minimum wage,which has already been implemented for workers in Seattle,New York, and California.
Unions are also partnering with alternative labor organizations, like workers centers, to provide support to workers—mainly people of color, immigrants, and low-wage workers but also those in the patchwork economy—that do not have access to union
representation.
When you think of economic issues what are the first things that come to mind? Poverty, inequality, unemployment, inflation, and crisis are all common answers to the question. Wouldn’t it be great if there was a policy that could address all of those issues (and more) in a cost-effective manner? In this piece I will give a very brief introduction to Job Guarantee (JG) schemes, the proverbial economic silver bullet.
Hyperboles aside, Job Guarantee proposals (which may come in many different names such as Employer of Last Resort, or Public Service Employment) are a remarkably good way to address many of the social economic problems current faced by populations all over the world. Ideas about JG programs date back to as early as the 1600s, they have been implemented in many nations during a variety of different stages of the business cycle – and usually to a great deal of success.
Simply put, JG is a direct public employment policy where all of those people who are willing and able to work are guaranteed a job given that these individuals meet some basic employability requirements. Most proponents of JG establish that these jobs should pay a basic, fixed, uniform wage plus full medical coverage and free child care (the latter can be provided by JG workers themselves). The goal of the program should be to ensure that all full-time JG workers are able to obtain a living standard that is above a reasonable poverty threshold. Thus, this sort of program go a long way in addressing poverty. Furthermore, it would also target another major economic problem, the stagnation of real wages and the currently low minimum wage granted to US workers. The JG wage would instantly become the minimum wage for the entire economy: workers in other sectors that are receiving less than the JG wage would be very compelled to take one of those guaranteed jobs, and employers would have to raise their salary offers in order to keep their workforce. Finally, the wages would also act as price anchor, which improves upon the stability of the economy.
The first question I usually get when telling someone about the Job Guarantee is “yeah but, how can we afford it?!” Questions about the deficit and national debt have been put to rest previously on this blog (see here), hence I shall focus on other questions regarding its affordability. For starters, it has been shown elsewhere that JG is remarkably cheaper and more effective than other proposals, such as Basic Income and Negative Income Tax, in achieving lower poverty and unemployment rates (see here, and in many pieces by Rutger’s Phillip Harvey). Secondly, the newly employed JG workers would bring in savings in many different ways: they would get out of unemployment insurance, food-stamps, and other such programs; they will pay income tax, medicare and social security tax, as well as more consumption related taxes; and the government would spend less on issues that are related to poverty, such as higher crime rates. In addition, employment multipliers would make it so the JG program would not have to employ the entire unemployed population. The extra consumption and production related to the JG will create indirect and induced jobs which will represent a significant portion of the job creation from the program. Finally, yours truly is among a number of economists who have modeled the implementation of a a JG for the US and found that eliminating unemployment at a living wage would cost just around 1% of the American GDP.
At this point many say something like “but employing everyone while raising the minimum wage has to be inflationary!” the answer to which is a simple “nope”. First, we have to bear in mind that in the current system the economy’s most precious resource – workers – is being wasted in unemployment, while under a JG program it will be put to use. Orthodox economic thought claims that millions of people need to be unemployed in order to contain inflation, that it is financially “sound” to a tenth of the population in idleness for an unknown period of time. It comes from the idea that the economy is always operating at full capacity, which then brings the inflation problem to being a matter of equilibrating the demand and supply forces of the economy. Both of these assertions are, to quote Keynes, “crazily improbable – the sort of thing that which no man could believe had not his head fuddled with nonsense for years and years.” Government expenditure is as inflationary as any other sector expenditure. Unemployed workers are spending in consumption either way, being sustained by welfare or, dangerously, by credit – and there’s nothing financially “sound” about that.
A JG program would in fact control for inflation by proving a minimum wage anchor for prices and by increasing the productive capacity of the economy through its projects. It would take off the pressure put on demand from the unemployed by increasing supply of goods and services by incorporating those idle workers in the productive structure. Furthermore, even if we assume it to be inflationary it would be a “one-time” increase in inflation, and not an accelerating type one, meaning that demand (and inflation) wouldn’t rise above the full employment level.
In that sense, the costs associated with a JG program (increasing budget deficit and inflation) are not more than ideological myths that obscure the true social costs of unemployment and poverty and curtails any innovative attempts to deal with them. Indeed, generating aggregate demand, employment and inflation is all what the US economy has tried to do since the 2008 financial crisis, but through the wrong ways. A JG program would be extremely more efficient and less costly than QE or negative interest rates. As the world crumbles in economic and political instability, guaranteeing jobs would surely deal with most of its problems. It is up to governments to load and shoot that silver bullet. I don’t think there’s a more appropriate time than now.
Written by Carlos Maciel & Vitor Mello
Illustrations by Heske van Doornen
