Book Review: The Case for a Job Guarantee (1)
Pavlina R. Tcherneva (2020), The Case for a Job Guarantee, Cambridge: Polity Press, ₤9.99, pp. 140, pbk. doi:10.1017/S0047279421000568
Review by Martin Watts, University of New Castle, Australia
Reprinted with permission, Journal of Social Policy. (2021), 50, 4, 891-901
© The Author, 2021. Published by Cambridge University Press.
Monetary policy has been the dominant strand of macroeconomic policy since the 1970s and remains so within the New Monetary Consensus, yet the macroeconomic performance of developed economies, including USA, UK and Australia, has been inferior to the immediate post-war experience of close to full employment.
The Covid-19 pandemic deprived many workers of their livelihoods, either permanently through job loss or temporarily through lockdown, and threatened the sustainability of thousands of businesses. Governments rapidly recognized that stimulatory fiscal measures were essential as opposed to further interest rate manipulation, to provide households and firms with the means to spend through government transfers.
However there has not been a paradigm shift to fiscal dominance. The OECD and other international institutions argue that high fiscal deficits and growing debt can only continue, while interest rates remain low, yet independent Central Banks through their bond buying programs have kept rates low, not the markets (Mitchell, 2021). Thus, the restoration of genuine full employment, as opposed to the achievement of a NAIRU, is unlikely.
Modern Monetary Theory (MMT), which has received considerable scrutiny in the last decade, including ill-informed motions in the U.S. House of Representatives and Senate, incorporates a Job Guarantee (JG), a full employment macroeconomic stabilization policy, within its analytical framework. (I should acknowledge that my academic writing over more than 20 years has been informed by MMT principles).
In this persuasive, timely and accessible book by Pavlina Tcherneva, she makes a convincing case for the adoption of the JG in conjunction with a Green New Deal in the USA. Her arguments are equally applicable to other advanced economies, that are currency sovereign, such as the UK and Australia. These countries operate with their own fiat currencies which float on foreign exchange markets and issue little or no foreign currency denominated debt.
Under a JG, any individual of working age can secure an ongoing minimum wage job with all the usual benefits of employment including annual leave. The JG is federally funded but locally administered. The payment of the minimum wage is the means by which rising private sector employment can be accommodated by JG workers shifting into better paid jobs without wage inflation being instigated.
Tcherneva notes how unemployment and casualized work is considered appropriate for macro stabilization, even though their incidence is uneven across gender and ‘race' and people with disabilities. Even at a cyclical peak, the level of unemployment exceeds the number of vacancies.
She convincingly argues that, when account is taken of the social and economic costs of unemployment, it is imperative that full employment is restored. She notes that some socioeconomic are taken for granted including access to public education and retirement income but not the right to a job. A robust wage floor, and hence the end of wage theft, requires both a statutory minimum wage and the guarantee of employment.
Unemployment tends to rise quickly in a downturn but falls slowly in an upturn. A well-administered JG means that both the economic and social consequences of job loss are mitigated, along with the dangers of workers being scarred by long-term unemployment.
Tcherneva cogently argues against a tiered JG, pointing out that securing the living wage floor is the prime objective and that competing for labor with the private sector across the wage spectrum will generate inflation. She also dispels the myth that unemployment is somehow superior to low productivity work
Finally, she makes the important point that to achieve an inclusive and sustainable macroeconomy requires the implementation of both the Green New Deal and the Job Guarantee.
This brief review cannot do justice to the impressive range of arguments put forward by Tcherneva in favor of the JG but let me finish with some issues that a second edition(!) could address.
First, many critics would argue that sustained fill employment would promote inflation and the intense opposition of the captains of industry. More discussion of the two counter-inflation mechanisms embedded in the JG would be useful. These would be as follows: i) the job readiness of JG workers means that the private sector can readily recruit in an upturn without incurring high costs of training; ii) the buffer employment ratio (the JG share of total employment) can be raised if undesirably high inflation is anticipated via contractionary fiscal policy which should dampen inflationary pressure. Also, the labor market is segmented, so that job security for the low paid is unlikely to increase the bargaining power of the more highly paid. A stable inflation, full employment environment is very good for business in terms of stable demand for goods and services.
Second, a long list of potential paid jobs which meet social, economic and environmental needs is provided in Chapter 5, but it is administratively and politically challenging to identify ones which operate as JG jobs that can be scaled up or down counter-cyclically. Given the desirability of providing local jobs for local residents to reduce commuting, this becomes more challenging (pp. 109-110). Without this focus, JG would be wrongly perceived as a major job creation program rather than a macro stabilization strategy.
Third, Tcherneva recommends that the US Federal Minimum Wage (FMW) of$7.25 per hour be raised to $15 per hour, but 12 states currently have same minimum wage of$7.25 per hour and some workers in a further 6 states receive less than the FMW. The States would have to surrender responsibility for setting minimum wages to achieve complete coverage. While many orthodox economists in the USA now accept that modest increases in minimum wages have minimal effects on employment, such a huge increase in the minimum wage is certain to cause huge uncertainty and disruption in the private sector. Thus, the implementation of a JG would be very difficult, given the unknown level of worker displacement from the private sector. Two adjustments — the first to, say, $10 per hour — would be less disruptive. She suggests that the FMW would be reviewed every few years and increased in lockstep with increases in productivity, but not indexed to inflation (pp. 89-90): which would reduce wage share of national income. Finally, minimum wages are reviewed and adjusted annually in the UK and Australia with limited, if any impact on employment, which would avoid the larger, but less frequent increases, under Tcherneva’s proposal.
Mitchell W. F. (2021), 'OECD is apparently now anti austerity — warning, the leopard hasn't changed its spots', Billy Blog, 12 January, http://bilbo.economicoutlook.net/blog/?p=46689
Martin Watts, The University of Newcastle, Australia
Martin.Watts [at] Newcastle.edu.au
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Book Review: The Case for a Job Guarantee (2)
by Pavlina R. Tcherneva, Polity. 2020.
Reprinted from LSE Review of Books Blog
By Anupama Kumar
In The Case for a Job Guarantee, Pavlina R. Tcherneva argues that a job guarantee that provides an employment opportunity to anyone looking for work, regardless of their personal circumstances or the state of the economy, not only makes good economic sense, but is vital for people’s wellbeing. As discussions of a universal job guarantee have never been timelier, The Case for a Job Guarantee is a deeply thought-provoking book and deserves serious consideration, writes Anupama Kumar.
In The Case for a Job Guarantee, Pavlina R. Tcherneva argues that not only does a job guarantee make good economic sense, it is also necessary to people’s wellbeing.
Tcherneva defines a job guarantee as ‘a public policy that provides an employment opportunity on standby to anyone looking for work, no matter their personal circumstances or the state of the economy’. Such jobs provide a living wage and decent working conditions. In her vision, a job guarantee is universal and voluntary – available to all people who wish to make use of it. For Tcherneva, a job guarantee is an end in and of itself, and governments should ensure that jobs are available to their citizens.
The first part of the book argues that a job guarantee makes good economic sense for governments. Tcherneva begins by pointing out that while the US economy may have grown, this has not translated into benefits for ordinary workers. She notes that in 2017, real incomes for the bottom 90 per cent of families were lower than they were twenty years earlier, while those of the top 0.01% had risen by a staggering 60.5%. Unemployment rises dramatically during economic downturns, but recovery is anemic. For the most part, economic recovery does not create more jobs.
Governments have responded to economic downturns with fiscal stimuli, but these have tended to protect investments rather than jobs. Loan guarantees and bailouts help preserve corporate profits, rather than jobs for citizens. Instead, Tcherneva argues that a job guarantee ought to be treated as a countercyclical measure. A job guarantee would function like a buffer stock program in agriculture, where the government ‘purchases’ surplus labor at a fixed price. Such a program would address both in inflationary and deflationary pressures from fluctuations in employment. Moreover, by providing steady employment, a job guarantee program would soften the demand on other countercyclical social protection measures, such as unemployment insurance or food assistance. Finally, unemployment is expensive. According to one estimate, unemployment during the Great Recession that followed the 2008 financial crisis cost the United States $10 billion in output each day.
The more compelling argument, however, is that all persons have the right to decent work. This has been recognized as far back as the 1948 Universal Declaration of Human Rights. There ought to be no ‘natural’ level of unemployment, any more than there is a natural level of starvation or illiteracy. Tcherneva reasons that the inflationary effects of unemployment are vastly overstated, and that instead there are real costs to joblessness for individuals and communities. Unemployed individuals have shorter lives and more chronic illnesses than those who are not unemployed. These have effects not only for individuals, but on families dependent on them. Further, unemployment is contagious – mass layoffs in one area lead to chronic unemployment, which spreads to surrounding communities.
The author argues that the responsibility to hire workers cannot lie solely with the private sector. The private sector is in the business of making profits and not in providing jobs to those most in need of them. Nor are labor laws enough to ensure that workers receive a living wage and decent working conditions. At any time, there are more jobseekers than employers. In the absence of a job guarantee, workers will lack the ability to refuse unsafe, poorly paying jobs, as employers will always have the upper hand.
A job guarantee program that assesses the needs of communities locally, and provides adults with employment within that community, can provide a solution to this. A bottom-up approach, which encourages people to participate in job creation, can work better than a top-down, bailout-led model. Moreover, a locally administered job program can provide valuable services to the community, including preserving the local environment.
In proposing this theory of job guarantees, Tcherneva argues that most jobs today are not in manufacturing, but in services such as care work or education. These are jobs that cannot easily be replaced by automation – there is no substitute for a human touch in hospice care. In Tcherneva’s vision, the types of work a job guarantee would involve relate to services at the local level, in building community goods and public services and enabling environmental conservation (a Green New Deal). People making use of this program would also acquire skills that would enable them to take up employment outside the job guarantee program, thereby contributing to the economy. The job guarantee would, however, continue to hire people who do not move to private sector employment. The services provided by these jobs would also lead to a net bene t for the community around them.
While the book makes a convincing case, a deeper analysis of some questions would have been welcome. First, why is a job guarantee a better proposal than a universal basic income? While not explicitly stated in the book, the reasons for this seem to be that job guarantee programs generate productive assets, reduce the burden of unemployment (psychological and otherwise) and create a sense of dignity for workers receiving a living wage for an honest day’s work. Would a UBI be able to perform some of these functions better, especially for those too ill or too old to work?
Second, is a short-term guaranteed job at living wage – but no more – enough to provide the skills to move to employment in the private sector? As Tcherneva notes, the private sector is not in the business of hiring people who need jobs, but in making pro ts. The types of services provided by the private sector reflect this.
Today’s gig economy players such as Uber or Deliveroo essentially enable private contracts between individuals, and do not create the kinds of public goods a job guarantee program might. Will private players now shift to sectors for which the skills acquired in a job guarantee program will be useful? If not, will the public sector need to continue to provide jobs for workers? In Tcherneva’s argument, this is not a problem – providing jobs is a valid goal in and of itself.
Finally, Tcherneva’s analysis is specific to the United States. It would be interesting to examine the differences between job guarantees in the Global North, where there are well-established social security programs, and those in the Global South. Tcherneva cites Plan Jefes in Argentina and the National Rural Employment Guarantee Act (NREGA) in India as instances of ‘successful’ job guarantees, but does not elaborate on how these are different from the circumstances in the United States.
In sum, discussions on a universal job guarantee have never been timelier. The Case for a Job Guarantee is a deeply thought-provoking book and deserves serious consideration.
About the reviewer
Anupama Kumar – Dvara Research, Chennai
Anupama Kumar is a research associate at the Social Protection Initiative, Dvara Research, Chennai. She studies how social protection systems are designed in India with an emphasis on social security for workers in the informal economy.
Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics.
This review originally appeared at the LSE Review of Books.Note: This article gives the views of the authors, and not the position of USAPP– American Politics and Policy, nor of the London School of Economics.
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Unemployment in November 2021: Jobs Report Analysis
by Frank Stricker
The Bureau of Labor Statistics (BLS) job report for November 2021 showed that unemployment was just 4.2%. That looks pretty good, but we in the National Jobs for All Network (NJFAN) believe this official number is an undercount. We add part-timers who want full-time work and people who say they want a job but have not recently searched for one. Our unemployment rate for November was 9.9%.
Just so you know, there are two government job surveys. In the household (CPS) survey which yields the unemployment rates, 1.1 million jobs were added to the total job number. That’s big. In the payroll (CES) survey, whose data come from government and business organizations, just 210,000 jobs were added. The 210,000 number is supposed to be more credible because it derives from about 700,000 worksites. The unemployment rate is created from a survey of 60,000 households. But this household survey includes essentially all occupations. The payroll survey excludes the self-employed, independent contractors, and the farm sector. If, for example, there were a surge in the number of gig workers at Uber and a thousand other companies, it would not show up in the payroll number, but it could affect the household job totals. I do not know what happened to gig jobs in November.
In general, the fact that the official unemployment rate is down to 4.2% is good news. It’s a plus for workers. But that rate is not real full employment. There are millions of people out there who are essentially unemployed but are not actively searching for work and so aren’t included among the unemployed. And job totals in the payroll count are about 8 million below where they would be if we had not had a COVID recession.
It’s a Most Unusual Labor Market
Here are three of the key factors that affect current employment trends.
1. Workplace re-openings mean more job options. Re-openings are made possible by fairly widespread vaccinations, the wearing of masks, and other cautionary measures. Those measures cannot bring a fuller job recovery because millions of people refuse to get their shots and are determined to behave imprudently. Also, partly due to the high number of unvaccinated people, COVID sometimes morphs into more dangerous forms. That means re-openings are problematic and reversible. Dangerous variants are one reason some people do not want to return to work .
2. The job recovery has been better than we might have expected last year and the main reason is massive federal spending. Trillions of dollars went out to businesses, governments, and individuals starting in the spring of 2020. This year we’ve had President Biden’s American Rescue Plan and the infrastructure bill. We’ll need much more federal spending to get real full employment and more good jobs.
3. The official unemployment rate may also be rather low because a fair number of people who would normally be searching for jobs aren’t actively looking. Some of these people make up the BLS’s 5.9 million people who say they want a job but aren’t currently searching for one. I believe there are even more of these wanters-not-searchers. Some quit bad jobs and are looking for better ones. They are on the sidelines but alert to good job opportunities. They may not even tell government surveyors that they want a job, but they do. Just not yet and not any job. We are in a period of pause and reflection. It has been called the Big Rethink, the Great Resignation, and even the Great Escape.
In a variety of media there are thousands of testimonies from people fed up with their bosses and their crappy jobs. These feelings are nothing new, but the massive layoffs last spring, the COVID plague itself, and the lack of concern among many employers for worker safety have combined to blow the lid off the volcano of worker resentments. So many jobs are really terrible jobs: poverty-level pay, no-to-low benefits, authoritarian supervisors, ruthless owners, erratic schedules, and on and on. Perhaps a third to a half of U.S. jobs are bad ones. So workers are quitting in record numbers--4 million a month in July through October. They want something better than they had. And federal stimulus checks and richer unemployment benefits have supported more time for reflection. Some people still have benefit money in their bank accounts.
Because of the high rate of quits and the reluctance of people to go back to lousy jobs, there are a record number of job openings--10 to 11million a month. And that number of vacancies means, I think, people must have some confidence they can get jobs when they must work.
As savings shrink, more will have to work. Older people are retiring at higher rates. But others will need jobs. Will most of them return to work with focused anger and a willingness to help reset power relations in the work place?
In a way, it is refreshing to listen to people who feel comfortable discussing the fact that their jobs stink and that they want something better than what they’ve had for years. People who stay home mean more job vacancies and that is why some employers have offered signing bonuses, educational subsidies, and other enticements. Even higher wages! Average pay is rising at 5 to 6% a year, and faster in such low-wage sectors as restaurant and hotel work. Of course, special enticements will disappear when employers want them to. And inflation is now rising faster than the money in workers’ paychecks. Real pay, after inflation, has fallen a bit in recent months.
We are seeing a little more worker power and leverage than we have seen in decades. There have been a few more strikes and there is now at least one Starbucks outlet with a union. But we need many, many more union members, more collective action on the job, and wide support for an attack on obscene levels of economic inequality and exploitation. Building organizations is hard work, but it is one essential step toward making the Great Resignation more than a brief episode in working-class history.
Frank Stricker is on the board of the National Jobs for All Network, is a member of DSA, and is emeritus history professor, California State University, Dominguez Hills. He wrote American Unemployment: Past, Present, and Future (2020).
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The Full Count: November 2021
Officially unemployed: 6.9 million (4.2%)
Hidden unemployment: 10.2 million
(Includes 4.3 million people working part-time
because they can't find a full-time job;
and 5.9 million people who want jobs,
but are not actively looking)
Total: 17.1 million (10.2% of the labor force)
There are 1.6 job-wanters for each available job!
For more information and analysis, visit: www.njfac.org
Source: U.S. Bureau of Labor Statistics
Employment Statistics: NJFAN Tells the Whole Story
Since its founding in 1994, the National Jobs for All Network (previously Coalition) has been “telling the whole story” about unemployment.*
Our founders recognized that the official unemployment rate reported monthly by the Labor Department leaves out more jobless and job short workers than it includes. To be counted as unemployed, one must work less than one hour a week in paid employment and be actively seeking employment.. As the above figures show, more than half the unemployed or underemployed are left out of the official count. Consider the political consequences of this undercount—of a problem perceived by the public as less than half as widespread as it really is.
*See “Unemployment Statistics: Let’s Tell the Whole Story” by NJFAC founders Helen Lachs Ginsburg, Bill Ayres, and June Zaccone, Employment Statistics: Let's Tell the Whole Story - NJFAC
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