But why won’t producers increase production if we hire–say–a new ELR/JG worker to deliver (say) hot meals to the home-bound senior citizens? When that new worker spends her JG salary, are we supposed to believe that (mostly) private producers go on strike and refuse to react to any price signals that result? They won’t increase their own production and employment to meet the new demand? Why not?
And as they increase their own employment, the number working in the ELR/JG program is reduced. The number employed in the private sector increases. The logic of the JG program within an actual business cycle is that at precisely the moment bottlenecks would be reached the program has been shrinking and thus reducing government spending, which provides an additional automatic stabilizer to the economy; this means that even as bottlenecks arise inflation with a JG program is probably lower than it would be without it. Scott Fullwiler has the model, the simulations, and the “proof” that the JG enhances the stability.
Anyway, why won’t the market work–to allocate more resources to produce the stuff people are buying? After all, the JG/ELR wage becomes the minimum wage, so private employers can always hire workers away to meet the rising demand.
If the answer is “bottlenecks”–they simply cannot increase output without prices rising, then that would be true no matter who hired the unemployed. So we ought to fight against BOTH JG jobs AND Wal-Mart job creation.
Many critics argue that JG workers are inherently “unproductive”–as opposed to, say, Wall Street’s finest who are highly productive as they destroy tens of trillions of dollars of wealth, and force people out of their homes that eventually get bulldozed for lack of purchasers. On this neoliberal view, a nightwatchman who protects private assets at Wal-Mart is inherently productive; a JG nightwatchman who protects public assets at the local community center is inherently unproductive. A ditchdigger who lays a private sewage pipe is productive; a ditchdigger who lays a public sewage pipe is not.
I think all this has more to do with an ideological orientation than with economics. And I have never understood the critic’s response to the question: just how productive are the unemployed? We always just get dead silence when we ask it. Oh, very productive—learning how to get by without jobs. Some become quite adept—at stealing, robbing, pillaging. Almost as bad as Wall Street traders. That was a joke, folks. The economic losses due to unemployment swamp all other economic inefficiencies in our economy and every other one on planet earth. Yet, our neolib critics gleefully ignore them on the argument that actually hiring the unemployed and getting them to do something useful would be “inefficient”.
Getting back to the story. The market supposedly reacts properly to demand coming from private sector workers. Yet it will react only by raising prices when workers are hired into a JG program. Doesn’t make any sense to me. The market is supposed to react to rising prices no matter whether the extra demand comes from private sector workers (“productive”) or ELR workers (“unproductive”). As it increases employment in response to the rising demand, it pulls ELR workers (“unproductive”) into the “productive” private sector. Why do the critics who love market forces when it comes to private employment hate them when it comes to ELR?
Now, I think there are many things wrong with this view of the way markets operate. And I have not gone into other price-stabilizing features of the JG/ELR proposal. But I’d like a bit more consistency from the critics: if they hate job creation by the JG they ought to hate job creation by the private sector, too. By extension, they must hate all “job creators” equally—from Mitt Romney to the JG.
Editor’s note: There is a worthwhile comment stream that readers may find interesting for this article at New Economic Perspectives. (The GEI editor got involved.)
About the Author
L. Randall Wray is a Professor of Economics at the University of Missouri-Kansas City, a Senior Research Associate at the Center for Full Employment and Price Stability, as well as a visiting Senior Scholar at the Jerome Levy Economics Institute of Bard College. He is a past president of the Association for Institutionalist Thought (AFIT) and has served on the board of directors of the Association for Evolutionary Economics (AFEE). A student of Hyman P. Minsky while at Washington University in St. Louis where he earned his Ph.D. in economics (1988), Wray received his B.A. in Social Sciences (1976) from the University of the Pacific, Stockton, and his M.A. in economics (1985) from Washington University in St. Louis. Professor Wray has focused on monetary theory and policy, macroeconomics, and employment policy. He is currently writing on modern money, the monetary theory of production, social security, and rising incarceration rates (Penal Keynesianism). He is developing policies to promote true full employment, focusing on Hyman P. Minsky’s “employer of last resort” proposal as a way to bring low-skilled, prime-age males back into the labor force.