By Brian Fallow
Never waste a good crisis, they say, so perhaps it is time to take seriously the idea of a right to work or job guarantee.
As outlined by Waikato University labour policy scholar Bill Cochrane a job guarantee means the state funds, or directly provides, paid employment to all who want it when the labour market is failing to provide it.
Unemployment, already on the rise, is about to get much worse as emergency measures like the wage subsidy roll off. If the experience of the last cycle is anything to go by having peaked it will then get better only slowly.
The current shock will only exacerbate underlying structural trends. Technological advance is one. It is all well and good to believe that any task a machine or algorithm can do is something a person is wasted on. That is cold comfort to someone who loses his job and struggles to find another one.
Global competition for work, especially but by no means only in manufacturing, may weaken in the current fraught environment but will not reverse entirely.
And there are demographic changes. The big increase in female participation in the labour force has been followed by growing participation by the over-65s, not all of which is voluntary.
So the idea of replacing a system where there is a pool of unemployment, which waxes and wanes with the economic cycle and which is used to manage the cycle, with a pool of state-supported employment, which shrinks when the economy is going strong and expands when it is not, has a lot of a priori appeal.
Cochrane has experienced a policy of this sort, the Project Employment Programme (PEP) of the 1980s. “I still rate it as one of my best jobs ever, pulling trees out of a river and keeping myself out of trouble,’’ he told a Zoom-enabled meeting of the Fabians.
He still gets a kick out of seeing joggers enjoying pathways formed and planted back then.
Cochrane favours a model where the job guarantee is funded by central government but its implementation is devolved to local authorities, iwi and not-for-profits.
They would have the best idea of what work their communities would value, but which neither private nor public sector are providing.
Ideally it would be countrywide but it could be targeted geographically, to areas with persistently high unemployment like the Far North, or to groups like the long-term unemployed.
It would be voluntary. “This is not slave labour. But the unemployed usually want a job ... and people get a social reward from participating in labour.”
The idea that it is a universal guarantee has to be taken seriously, Cochrane said. “It is not just a matter of rounding up the able-bodied and assigning them some menial task. To me, it means allowing everyone a genuine chance to participate in meaningful employment.”
So for sole parents with school-age children it might mean hours that allow them to be back home when the kids get home from school.
“If you link it to training and education programmes it can help build the stock of human capital,” he said.
“And it can help with counter-cyclical stabilisation”
Job guarantees are not a form of welfare, Cochrane said. “Participants are workers, paid wages and treated as such… The terms and conditions would be at least equivalent to minimum statutory requirements for employment and best practice principles.”
The design would aim not to crowd out private sector employment.
That risk was one of the reasons given for scrapping PEP when the neo-liberal tsumami swept all before it in the 1980s.
But another advocate of a job guarantee, the Australian economist Bill Mitchell, a leading proponent of modern monetary theory, argues the risk is overstated.
The jobs would be offered at a “socially inclusive minimum wage” which enables people to participate in society, have a holiday, go out to dinner occasionally, go to the football or a gig, he said.
But it would be at the bottom of the wage distribution in the economy. “The important point is that the government is buying off the bottom of the market. Unemployed workers have zero bid in the market. No one wants their services. The government is buying labour that has no bid for it and therefore that spending can’t be inflationary," he said.
“Ultimately, when the economy is stronger it can bid the worker back out into the private sector and the buffer stock [of state-supported workers] will contract.”
The costs of such an approach have to be compared with the counterfactual, which is the current system.
“That is an incredibly costly approach. It not only results in massive income losses but also leads to a whole series of personal, family and community pathologies: crime rates, mental and physical health [impacts], family breakdowns, all of those things,” Mitchell said.
“One of the problems of children growing up in jobless households, especially the long-term jobless, is that they inherit the disadvantage of their parents. By seeing their parents always able to work that stigma and inherited disadvantage is [avoided].”
So that is the theory. Getting it to work in practice would require learning lessons from earlier versions like PEP, including their pitfalls, while there are still people around who can impart them.
The devil, as always, would be in the detail, along with a host of lesser imps and demons.
It would require broadening our concept of what constitutes meaningful productive work.
Can Mitchell’s example – getting surfers to teach water safety to school children – be replicated widely enough for long enough to provide jobs that would not otherwise exist for hundreds of thousands of people?
And if so, how would it be paid for?
But it is lazy to just assume that the answers to those questions are no and it couldn’t be.
That work needs to be done.
And for a Labour Party which professes concern about the future of work the challenge should be “If not now, when?” and “If not you, who?”
55 Comments
Socialist waffle. Show me where this has ever worked? The most efficient way of ensuring wealth is created, people are motivated and freedom to choose is paramount is the capitalist system.
This does not mean we cannot have regulations to protect the environment or monopolistic behavior or some sort of welfare safety net. The current failures are due to crony capitalism, the answer is not socialism.
I remember when I just left school in the late seventies it was common for the older generation to say, "no one owes you a job, sonny". I didn't like it at the time as it seemed like they were abandoning young people. Looking forward to abandoning them when the time comes and I have the opportunity.
Seriously though I think we do owe young people a fairly easy pathway into employment. It shouldn't be such a struggle to get basic work.
Good points, ZS. In those days companies also took people straight out of high school and trained them. We do need to re-look at the path to employment these days, both for young people and older folk made redundant. I'm not sure masses of cheap, exploitable imported labour is a good thing for those cohorts.
And given young people fund the retirement of old people, there's obviously a need for reciprocity around in society: all generations contributing to other generations around them, passing on a decent society and conditions. Burke-style.
There's a big question around whether companies should be treating university essentially as a finishing school, demanding bachelor degrees where they are unnecessary for the work.
A client of mine ran the Jackson Street Petone precinct genetrification project in Petone for some years. It was funded by a targeted rate paid by those in the precinct. This former client hired ex convicts, in an attempt to train them with skills and experience to participate in the wider community.
During this clients time of leading this project work, the local crime figures dropped away significantly. The downside for this client was the ex convicts werent delivering value for money, and they ended up getting rid of him for that reason. Course, the crimes rates went up after that when the ex convicts were replaced.
While I not suggesting this client had the ideal model, the wider community including business people have to recognise they live and operate in a wider eco system, and have to realise for long term prosperity you have to give back to the community in some way. Hopefully in the challenging times ahead, those with the money abandon their take take model. I think it could be time for a hand up, rather than a trickle down. The elite cant be enjoying self isolation in lock down, and its time to smell the roses in the community gardens.
Easier pathway into employment, basic work... well, they need to learn, train for the future by getting the right skills
Given that many jobs will disappear over future decades due to AI and automation, what jobs should the "pathway" offer? Pulling trees and weeds, building cycleways? I doubt that will give them long term employment, would build skills for the next job, would lead to developing their own human capital?
If socialism is ensuring everyone has a fair shake at a decent life, then what is wrong with this? Many people leave school not knowing what their true capabilities are because schools are built on a model of one size fits all. Not everyone can go to university, and even if they did, there wouldn't be the jobs for them when they graduated. So how do we provide for the ones who don't want qualifications and just want to get on with life, the ones who don't think they are capable because they didn't fit the system model, the ones who lose a job and there isn't anyone else who will take them on? Prisons, and this is almost the only option for too many, are too expensive, as is community sentences?
You raise a valid point. When talking about schools. Anything done centrally by governments will be that. One size fit all, or they force you to fit into it. Socialism biggest problem is overtime it will deny diversity, choice, disagreement, difference etc as it will be unable to handle them. This happens under well-meaning socialist government. I do not see necessary to say what would happen under power-crazy ideologist socialism who invent something called the people and then anyone they do not like will be the enemy of the people and should be eliminated.
Unfortunately there is this pervading view that capitalism is to blame when western economies struggle - when in fact it is the opposite. 4 weeks holiday, another 12 stats, kiwisaver, bankable sick leave, extra leave, minimum wage of 18.90.... these are the precursors to the government having to step in to create jobs because employers have had enough. Just remember - most business owners can quit their business and take a decent job again - but their employees can't always do that. Minimum wage should be $10 ph, up to$10k earnt should be tax free,and the RMA should be scrapped and councils forced to rezone land so sections drop to $20k each and the flow through lifts everyone.
This idea is also expounded by Stephanie Kelton under MMT. It's a great idea, but one with many pitfalls as identified here. But I feel a crucial point is in this statement; "The jobs would be offered at a “socially inclusive minimum wage” which enables people to participate in society, have a holiday, go out to dinner occasionally, go to the football or a gig" This wage to reach this level must not be the minimum wage, or even the living wage for this to work. Done well there are many employers who work too hard to keep their wages down in the name of easy profits, who will need to lift their game, so the net result for society will be a big improvement for all.
I also think the costs are overstated, because there are significant downstream savings. This system will ultimately result in less crime and less in prison. These individuals will have the opportunities to develop discretionary spending (if they are paid enough) which will further support other employment.
Traps will be failing to regulate the parasitic parts of the economy like the banks and landlords from further trying to bleed these people dry.
I do not know enough to be able to have an informed opinion about such ideas. On the face of it, it does seem to be a very complicated way to say that government may want to undertake jobs that no one would do (as there is no money to be made) and they can employ the unemployed to do it. The starting point seems to be an inventory of such jobs, preferably prepared using a bottom up approach from small communities, to large ones to urban areas to National level etc. And then deciding to fund them (better than paying wage subsidies for businesses that have no future). The jobs can be advertised and people can apply to get them. It is volunteer based and pay is based on the level of skills required. I do not see why this should be called a job guarantee scheme though, well it is in fact a scheme to gets community benefiting but unprofitable tasks done.
I have to point out an inconsistency here.
It is precisely government mandated rates of pay that have hammered the poor and the young disproportionately. Raising the minimum wage beyond the sentimental rhetoric has the real world effect of making it less cost effective to hire people with no skills and no experience. Most businesses are not large. Most businesses will choose to employ less people than take on more people if wages rise artificially by government decree or government programs that distort the natural price discovery of a person's work based on experience and skills. If the government mandates you must pay someone with no skills and no experience a starting wage of 19$ to make something that still costs 20$, that's just not going to be cost effective, you'll increase the product's cost, and in turn the person earning more will pay more, therefore there is a net gain of zero. The government effectively killed internships then had to start a new program for internships as they made it too expensive for business to hire people with no skills and train them up so they could actually be of productive benefit. Similarly it is government regulation and taxpayer subsidisation that keeps costs of living too damn high, so real price discovery in NZ property can't be achieved through land prices, rents, etc...
It is too much government intervention that is skewing price discovery. And the answer seems to be more government. It's religious levels of insanity.
PS Banks and landlords operate under laws written by government. If they are parasitizing, it's because the government enables them through regulating the real economy into a competitive disadvantage against asset speculation and so here we are.
Rosey, I agree that on your point that it is Government actions that have resulted in the low end wage rates. Indeed I think it is worse than that. I think historically, in particular our left wing Governments, have had a target to ensure we stay as a low wage economy, at least in part to develop dependency in the Government, and as a result obedience. Essentially oppression of the masses.
As to the higher wages - you are expressing the common rhetoric around the difficulties on raising wages, but there are ways and means including with Government support. But to achieve this some regulation will need to be in place to manage it and achieve the results. Difficult is not impossible.
And your PS; exactly. But just because it is legal doesn't make it right.
I think historically, in particular our left wing Governments, have had a target to ensure we stay as a low wage economy, at least in part to develop dependency in the Government, and as a result obedience.
Really? This seems a rather whacky theory, given NZ's left-wing history of pushing for wider access to university level education and to the earning power and social mobility that came with it. They enabled far more of the proletariat to move up into the bourgeoisie.
Agree- noble cause - but unfortunately 80% of the tertiary qualifications are garbage to employers - so the student finishes with huge debt, the state has even bigger debt and they get a job on minimum wage - crowding out the school leaver who has not cost the state a huge amount but can't work
So we should fund a bunch of jobs we did not think were important when we might have been able to afford to pay for them. It's a pretty big FU to the currently employed productive low wage worker. Higher taxes, less targeted spending on them and inflation on their expenses.
If there is any useful uptake this will blow the defect right out as the costs must be similar to the wage subsidy but I guess it would keep the housing market afloat. If you could guarantee these jobs would produce inflation to help us pay for all this debt then maybe this could work.
We could just fix the problem and remove a significant amount of low wage immigrants from the labour pool and let the labour market function as it should, the private sector will make more jobs available.
I'm an MMT sceptic and after listening to an interview from Kelton, I don't think a book will convince me. For example, she tried blame Equador for dollarising without appreciating the government had a history of abusing their fiat currency so that this was preferable choice. NZ has to pay it's debts and if we don't get inflation this repayment is going to be a long slog.
Do you have some money in your pocket? that is government debt don't you know. If the government eliminated its debt then we would have no money and no savings.
https://gimms.org.uk/fact-sheets/sectoral-balances/
Some of my money is public debt, yes, but most of it is probably private. The private sector is in debt to it's self, government spending and taxation does effect this but not the way the simplistic accounting of sectorial balances explains. Banks have figured out how the private sector can make its own credit or money.
Can the MMT crowd evolve their argument please, I feel like I keep repeating my self. South America is case study after case study on the limitation of a fiat currency that MMT never deals with.
A sovereign currency is one where a country does not borrow or have debt in a foreign currency, does not operate a fixed exchange rate that must be supported or have a heavy reliance on imports, it must have a fairly balanced economy. NZ operates a successful commodity based economy and our currency is among the ten most traded.
Only the government can create net financial assets to finance our savings, banks cannot as the money they create also carries a debt liability for the private sector, they cancel each other out. https://www.economicsjunkie.com/sectoral-balances-and-private-saving/
"Only the government can create net financial assets to finance our savings, banks cannot as the money they create also carries a debt liability for the private sector, they cancel each other out."
Yes it cancels out, it does not deplete. When someone borrows money to purchase something it ends up back in a bank as someone else's deposit ready to be leant out again. They only have to find a small portion of this money to cover potential losses and some of this can come from borrowed "money" as tier 2 capital.
NZ currently tries to manage its deficit, that is rejects MMT policy. We are able to borrow in NZD or local currency for similar rates to other countries that also consider balancing the budget import. Argentina who cares less about this has a mortgage rate of 60%. You can tell me they should have just printed rather than defaulted if you want. I have to argue in the hypothetical here but if we were to run this jobs for everyone scheme we might also have to drop the policy of balancing the budget.
When loans are repaid to banks the money ceases to exist, it is not lent again and the borrower also has to find the money to pay interest, where should this money come from? Our banks are foreign owned and their profits leave the economy. The Bank Of England explains thus, " And the households and companies who receive the money created by new lending may take actions that affect the stock of money — they could quickly ‘destroy’ money by using it to repay their existing debt, for instance".
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/20…
And this does not disprove sectorial balance? "money created by new lending may take actions that affect the stock of money"
There has been household debt growth (not reduction), the creation of credit and money supply out of the direct control of government. The government removing some money may be deflationary but it in no way prevents the repayment (unless the deflation is rapid and unexpected). Sectorial balances is simplistic accounting not real economics.
MMT's suggested policy changes are academic theory there are way to many fish hooks for it to be anything but hypothetical. Your off topic, why does the government not need to manage the total debt?
The government uses monetary policy through interest rate settings to control the money supply but as we can see it is mostly ineffective and fiscal policy is a much more powerful tool. Bank created money appears in sectoral balances it is the I (investment) in the private sector. Sectoral balances were designed by an economist named Wynne Godley who worked for the British Treasury. So you think that economics should not take account of mathematics? That doesn't say much for economics then does it, although in listening to most economists mathematics is beyond their comprehension. MMT is a lens to explain the monetary system, it shows us how it works, nothing has to be changed or adopted.
A government deficit equals a private sector surplus, an explanation here. https://gimms.org.uk/fact-sheets/sectoral-balances/
If the government is putting unused resources to work then it will not cause inflation and the debt that we should be worried about is our high levels of household debt.
From a simplistic economic perspective these jobs are unproductive and just an excuse to pay higher amounts of welfare. They do have the benefit of keeping people more employable and a lot of other things but that's not relevant to MMT.
Don't try to tell me that tripling job seeker payments would not be inflationary to workers. Not that we don't want inflation, its our only way out of all this public and private debt other than defaults.
Edit: spelling
Come on, so government is sitting on profitable business opportunities that can make thousands of jobs? There is the case for combining work for a small public benefit (but not worth minimum wage) and "subsidising" it with welfare payments but the government making productive jobs this way is hypothetical.
There are lots of practical problems with these schemes, but I think we're obliged to run them in a society where we judge beneficiaries as 'undeserving'. If we're going to judge them for not working, it's hypocritical not to offer them work, given that the 'free market' isn't that good at providing full employment. There's also a huge pool of unemployed who want to work but are restricted by -- as the article mentions -- factors like childcare, or minor disabilities, that most employers don't want to deal with. This is not money going to billionaires, it's regular people who will spend it in their communities, and whose own children will be more likely to succeed when their parents have a secure income and worthwhile work.
"This to me is by far one of the most critical concerns that make this Gov't work worthwhile. This is not money going to billionaires, it's regular people who will spend it in their communities, and whose own children will be more likely to succeed when their parents have a secure income and worthwhile work."
Long ago I ready this book: The Decline of the Global Labor Force and the Dawn of the Post-Market Era by American economist Jeremy Rifkin, published in 1995. His concluding chapter stated it will be necessary for Governments to create work. Not necessarily productive work. In Germany for instance ecological requirements for "mining" manufactured goods in work centres by disassembling them rather than trashing them, or an example nearby -yesterday I saw an old villa crushed into trash by a digger. Community workers could be brought into recycle the timber.
Many jobs could be created to soak up not only the unemployed but also the "unemployable' who grew up never preparing to be employable or wanting to be employable. In my ideal world toreceive any benefits it would therefore become necessary to daily report Mon-Friday to a centre and be dispatched from there--or stay at the centre. Everything from pre-school care and education of children below school age, to adult education and training would flow through these community centres. Busing to get attendees there would be provided. A person could move up and out of these government assistance centres after gaining a private sector job, but some may end up staying within the system their entire adult lives. But the bottom line is no one is sitting home all week and getting a credit into their bank account without ever leaving home. That way of life has proven to be too corrosive to both family and society over the past 50 years, and would have never been contemplated by the pioneers of socialism in the 1930's. Working families get their kiddies out of bed every morning and off to day care or pre school. We should expect and demand no less for those on the benefits end. Nothing comfortable getting the kiddies out of bed at 6:30 in the morning so Mum and Dad can go to work. It would be called "tough love" to nforce some daily discipline in all--and insure in the process all do better than what the dole provides at present. And of secondary benefit not likely drug taking and alcohol would not be part of the daily 8 to 4 experience if they are at work or social community centres. For those who don't comply give them back the Poor House to live in-that's called carrot and stick.
A worthy topic to discuss Brian...no we shouldn't let a crisis go to waste. But I don't think Bill Cochrane's ideas go far to promote an intelligent conversation on an extremely broad topic....one that goes back at least to the 1930's when people were asking why, during the global depression, when NZ had plenty of food to feed its population; plenty of natural materials to create houses for all; etc., etc., then why were we wasting a huge pool of unemployed people to help solve the current dilemma? Major Douglas an engineer applied basic principles to this world wide problem and suggested that for the first time in history society no longer needed all available workers to produce the necessary goods, and that therefore we should decouple the age old principle of work=wages=provision of life's necessities. His idea of "social credit" failed to fly..."funny money" the experts said.
What governments did do was to create work camps and major projects ts including forest planting and building aerodrome for example. I don't think socialists were very happy with this idea!
Cochrane liked PEP schemes. Metropolitan Rentals certainly did well out of the scheme & I am sure some of the workers valued the opportunity. But in our district it was just chipping weeds along the road. A friend who was a Cpuncil supervisor said he spent most of his day getting the work team out of private properties where they preferred to "graze" for useful stuff to "convert"!
And of course we have had much talk from some pollies about "work for the dole" but such thoughts never go much traction among the left wing.
Yes Brian, good thought, but the devil is certainly in the detail. Was it Reagan who observed...."the most frightening words in the english language are...hi, I'm from the government & I'm here to help you."
In NZ, "couch warmers" get no money. People on Jobseeker Support are not paid to warm the couch. MSD says you must:
- be available for and take reasonable steps to get a suitable job
- take any offer of suitable full-time, part-time or temporary work, or work that is seasonal or subsidised
- attend and take part in any suitable job interviews we ask you to
- take and pass any drug test potential employers or training providers require
- attend and take part in interviews with Work and Income as required
- work with us to plan how you’ll find a suitable job
- take part in any other activities that we refer you to, such as attend any job training courses, seminars, work experience or work assessments (including rehabilitation, but not medical treatment) that will improve your work readiness or help you get work
- let us know how you’re meeting your work obligations as often as we reasonably require.
Being on Jobseeker Support is tough. Especially when there are not enough jobs available for everyone, but you have to put in 20 applications a week regardless or lose your only income. And that income, $250.74/week, is below the poverty line. These are people who want to work, but cannot find a job. The government should act as employer of last resort to employ them at minimum wage, until the private sector is willing to make them a better offer.
haha, what the regs say and what happens in reality are far removed I'm afraid. Note most of those requests end with "that we require". MSD is that dysfunctional and under resourced the "requirement" is rarely exercised. If it was we wouldn't have so much intergenerational unemployment
WINZ look for any reason they can find to stop paying. That is the reality. There are literally not enough jobs for everyone. That is the system we have. It is wrong to call persistent levels of unemployment an individual issue. It is a systemic issue. A Job Guarantee provides jobs when the private sector fails to provide enough.
I agree with all of that except the minimum wage is too high - we say to young people - I forbid you from working unless you can earn $18.90 ph so instead stay home and seek work and we will pay you $6 ph. If minimum wage was $10ph then we would have more opportunities
Another conundrum to ponder: what if 'meaningful jobs' to be created by the State, need, in order to be 'useful', to be sited in such places as Fox Glacier (remediating old waste dumps), Ruatoria (removing forest slash from beaches), Fiordland (trapping possums, weasels, stoats and moose), or Aoraki (removing wildling pines), but them as what need the Employment, live in Kaikohe, Otara or Wainuiomata? It's Transportation Time, again....
If this were properly organised, it would attract people. A chance to travel the country, enjoy what it offers and get paid. It most certainly does not need to sound like a punishment. If I were a lot younger than I am, I would have jumped at it. Probably would have struggled to get me back, I know this for sure as I did something a bit similar as an adult, and 3 months turned into 12 years.
I will do you a deal, Bill. We get the government to scrap all existing and new low wage temporary work visas, solely created to ensure minimum wages, maximum profit for the usual suspects. Then when our businesses all settle down to paying proper wages for work done, and those that cannot survive when paying proper wages go broke, we introduce your scheme. MMT should cover the costs.
The proposal is absolutely correct.
We run an economic system run on price stability (inflation targeting) that requires a % of the population to be unemployed through no fault of their own (where there is a minimum wage in place).
The abhorrent alternative is a slave economy with no minimum wage & full employment.
There is full justification for governments to provide jobs to the unemployed that lift the total welfare and net welfare (wellbeing) per capita.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.