by John Furlan
Unemployment reports over the past several months make “The Case for a Job Guarantee” by Pavlina Tcherneva imperative. You should read this book. In June there were 33.4 million people without jobs in the 25 – 54 age population, with the employment-population ratio of 73.5% shown in the chart below.
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As of June the U.S. had lost 16.6 million jobs since February but the number of unemployed supposedly had increased by less, 12.0 million, due to declining labor force participation. So take the June unemployment rate focused on by the media of 11.1%, 15.4% for blacks, with a grain of salt. The more realistic U-6 rate was 18.0%, up from 7.0% in February.
As of the latest report for November (released December 4), the numbers have only modestly improved as shown in the chart below:
Regardless, all these numbers highlight the urgency of “The Case for a Job Guarantee,” the title of a new highly readable short book by Pavlina Tcherneva, one of the most important books you can read right now. I highly recommend it.
The June report data came before a surge in Covid-19 cases to then record levels and the deadline to use up PPP small business loans to employ people. An estimate posted on June 29 by a former chief economist of the Department of Labor said
“the share of the workforce that is out of work and has no reasonable chance of being called back to a prior job is 10.7%.”
54.6% of the civilian noninstitutional population were employed in June, 118.0 million did not have jobs, almost half of American adults. That ratio peaked at 64.7% in April 2000. The decline since then reflects both the current depressed economy and other factors, such as an aging population. It is imperative that those who can and want to work are guaranteed a job.
Job Guarantee, JG, Would Help During Covid-19 Crisis and After
Tchervenva wrote her book before the Covid-19 Crisis produced the disastrous employment numbers shown above. During this crisis, the key question for tens of millions has been my job or my health?
That has been an agonizing dilemma for precariat workers because they have no bargaining power, no savings, and often no health insurance. JG would help redress their lack of bargaining power, so that workers can do what’s right for them, their families, co-workers and communities.
With JG, low-wage workers can stay home if they feel they need to, a public health measure to control Covid-19 could be part of their JG job, knowing that they can still get a living wage job with benefits, which they often don’t have, if their previous job is no longer available. It gives them some power and control over their lives that those with much higher income have right now.
Even during an economic recovery, without JG many long-term unemployed will become “unemployable,” a catch-22 the longer they remain without a job. JG would help prevent that outcome. Tcherneva uses the metaphor of joblessness as a deadly epidemic that must be prevented.
JG Would Do Exactly What It Says, Guarantee a Job for Any Person Who Wants One
JG is BY FAR the most direct way of increasing employment. Once the program is in place, it is an automatic stabilizer, like unemployment insurance is now, it just picks up whenever the economy slows and then diminishes as private sector employment increases.
Tcherneva’s JG would focus on what she calls public service care jobs, she calls it a National Care Act, for both people and the environment, created at the local level and administered through the existing unemployment office system. It is completely voluntary.
JG is not mostly spending on infrastructure, nor is it technology-driven industrial policy. Rather it is mainly public service sector jobs that can be created much more quickly and flexibly to suit local conditions, e.g. with regard to Covid-19, as the disease ebbs and flows. Perhaps many such jobs can be done outdoors, where social distancing is much easier, as it may be for some very necessary caregiver type jobs.
Since job loss “disproportionately affects the young, the poor, individuals with disabilities, people of color, veterans, and former inmates,” presumably these groups, often last hired, first fired, might be particularly helped by a JG.
In an October 2019 poll cited in her book, 78% of voters supported a JG, Tcherneva cites a number of other polls in support.
Her JG has a $15 wage, more than double the federal minimum wage of $7.25, medical insurance and other benefits. I think a majority of Americans would support that, especially if they felt it was being paid for useful work. That would establish a wage floor which lower-wage employers will adapt to.
Although labor should not be considered just another commodity, that’s in fact the problem, Tcherneva does use government price support buffer stock programs for agricultural products as an example of setting a price/wage floor.
How Much Might JG Actually Cost? Less than You Might Think
Tcherneva and her MMT co-thinkers, like L. Randall Wray, are serious economists. They ran a simulation of the JG on one of the most respected economic models which generated a low and high bound of 11.6 million and 15.4 million JG peak employment. The results:
“With conservative assumptions about the potential savings, the budgetary impact of the program in the higher bound scenario is less than 1.5 percent of GDP per year. It is plausible that if we accounted for all reductions in government sector spending on unemployment, along with all of the positive social and economic multipliers, the program’s budget impact would be neutral, though this would not be a criterion for success since in deep downturns the government would normally need to increase its deficit spending.”
The increase in inflation for the high bound was a peak of 0.74 percent declining to 0.09 percent, both perfectly acceptable in the current low inflation environment.
JG Bill Introduced in Congress, But Don’t Need to “Pay For” With New Taxes
Two representatives introduced a JG bill July 7 called the “Workforce Promotion and Access Act,” their bill
“avoids taxpayer funding by using a Wall Street Financial Transaction Tax to fund the program which will raise $777 billion over ten years.”
As Tcherneva notes, it is not necessary to “pay for” a JG through a tax, though this particular tax may still be desirable. Finding new taxes might make passage of a JG bill more difficult. No one “paid for” the $2.2 trillion CARES Act with higher taxes, Congress simply spent the money.
As any monetary sovereign nation can, as I explained in my June 28 review of “The Deficit Myth” by Stephanie Kelton, Tcherneva’s MMT co-thinker, the two books are complementary essential reading.
I think so highly of Tcherneva’s book that one of the single best investments that concerned activists could make right now would be to distribute it at minimum to every member and their staff of the relevant congressional committees and their local Congress people.
Without JG, During a Recovery the Fed, Economists Will Evoke NAIRU, Deficits
NAIRU is the supposedly Non-Accelerating Inflation Rate of Unemployment, i.e. the unemployment rate at so-called full employment, which they will claim to be at a much higher level due to the effects of Covid-19. They will also claim that government spending to help the economy will have to be cut back due to the rising deficit. Wrong on both counts.
Estimates of NAIRU kept going lower for years after the 2008 – 09 Great Financial Crisis (GFC). Even at the unemployment rate low of 3.5% in February, any new major opening for jobs would draw huge numbers of desperate applicants, which is to the employer’s advantage, which is why NAIRU is always too high. So instead of trying to run economic policy by an unknowable NAIRU, JG would end that travesty once and for all.
Instead of having state and local governments begging huge multinationals like Amazon to take their subsidies, the residents of those areas could simply get jobs for an equivalent pay and benefits at their local unemployment office, giving them more bargaining power with huge corporations.
As for the inevitable rising deficit bogey man, I addressed that in my June 28 review of “The Deficit Myth” by Kelton. Deficits need to rise especially in deep recessions, as Kelton says, government deficits are private sector surpluses.
JG Is Not Just About Creating Caring Jobs, It’s Also About Power
Most of the workers who would benefit from the JG are not protected by unions nor by the state. They are at the complete mercy of the “free market.” To use the analogy of both Tcherneva and Kelton, they are perpetually playing an extremely stressful real life game of musical chairs to get any job, let alone good ones. Tcherneva writes about JG as caring jobs, it’s also about power.
For the last forty years the working and middle classes have lost a tremendous amount of power to the top 1% and 10%. That’s what’s behind the huge increases in income and wealth inequality, and the enormous racial wealth gap, none of which are improving. (For perhaps the best short analysis of the three successive versions of U.S. capitalism since the late 1800s, see Dialogue 3 in the new book “Angrynomics.“)
The JG is the economic right to a decent job, as envisioned by FDR and MLK. It is not a panacea, it must be part of a much broader program for economic, social and racial justice.
But the JG can’t wait for a Green New Deal, if that ever arrives. A JG bill must be passed no later than January 2021 with a new Democratic government. Tcherneva’s excellent book provides Congress all they need to know to do so.
This article is an adaption of an article on Medium 04 July 2020.
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