The topic of this module’s discussion may be captured in these questions: What kind of employment policy best expresses our goals and values? What goals and values should be prioritized in employment policy (e.g., price stability, full employment, widespread prosperity, sustainability, and liberty, to name a few values that might be relevant)? What does the future of employment look like? How can we make an employment policy work towards such goals effectively in the real world?
Background:
Involuntary unemployment is an extremely harmful condition, yet in the US and around the world, millions of people are subjected to it. Worse still, there are millions of underemployed (e.g., part time workers who would prefer full time work) and discouraged workers (who are not actively looking for work but would nevertheless prefer to work) in the economy.
Sometimes people moralize about the unemployed or underemployed – people will say that it is your fault if you can’t find a decent job. Yet it is simply false to say that there are enough jobs to go around. By design, there aren’t enough jobs to go around under the current policy regime, which deliberately maintains a positive rate of unemployment in the hope of suppressing inflation (this is the NAIRU approach). Thus, we find ourselves in the contradictory position of blaming people for their un- or underemployment while also maintaining a large population of unemployed people on purpose (to suppress inflation). Under the status quo, to deal with the unemployed morally and politically, we in the US attempt to make use of unemployment insurance, training programs, and welfare systems.
If you find yourself unsatisfied with that status quo, you might wish to consider whether an alternative policy approach might to better. The purpose of this discussion is to consider a couple options currently receive a lot of attention: Job Guarantee proposals and Universal Basic Income proposals. To do that, consider the following.
First, please watch/listen to the following discussions of Universal Basic Income and Job Guarantee proposals:
Yang, Andrew (2018), “The Politics of Automation” (Links to an external site.) (this is obviously from a political event, but its inclusion here shouldn’t be construed as a political endorsement in any way)
There is a ton of discussion of these issues out there, and I’ve chosen these because they’re relatively short and digestible – if you find anything else you’d like to bring to our attention, that might make for a great discussion post.
Second, please give my personal summary of the issue at hand a read, as I think it can help you organize some of the issues you might like to discuss (and if you think my summary is at all lacking, you are encouraged to point out where you think it falls short):
Here is my super-simplified summary of what each option is, as well as some discussion of a few of the points they raise against each other.
The NAIRU approach is business as usual. The idea is to maintain a positive level of involuntary unemployment (millions of people) in order to suppress inflation. It’s important to recognize that this is not a ‘hands off’ approach. The NAIRU approach is to use central bankers’ monetary policy (tools like interest rate manipulation and asset swaps) to influence unemployment and inflation indirectly. The idea is usually that higher interest rates discourage lending and thus increase unemployment as the economy ‘cools off,’ while lower interest rates encourage lending and thus decrease unemployment as the economy ‘heats up’ (this, however, is somewhat contentious). In the US, this is done by the Federal Reserve, in the UK it’s the Bank of England, in Japan it’s the Bank of Japan, and so on. The NAIRU approach is an attempt to put responsibility for maximal employment and stable inflation on the shoulders of central bankers with only monetary policy tools. (Remember, the Federal Reserve cannot add or subtract money from the private sector by spending or taxing; only Congress can do that.)
The Universal Basic Income (UBI) approach covers a range of policy proposals according to which everyone is guaranteed a minimum income of some amount – Andrew Yang is perhaps the most visible defender in public right now. Usually, proponents will insist that the universal adjective is important – it doesn’t matter how poor or rich you are; receiving the basic income is unconditional (though a conditional basic income approach is another policy option in principle). One take on UBI is that it might be liberating to decouple a certain amount of income from labor – the basic income gives you some minimal income under your discretionary control, regardless of what you’re doing. Another take is that the policy might be useful in the face of a contracting labor market – the fear is that there won’t be enough jobs in the future for the general population, so income needs to be decoupled from employment. In the video above, Yang offers further arguments.
The Job Guarantee (JG) approach is the kind of policy supported by people like Stephanie Kelton, Warren Mosler, and Pavlina Tcherneva. The idea here is to end the miseries of involuntary unemployment by offering a minimum wage job to anyone who wants one. The usual proposals are federally funded and locally administered. They have to be federally funded because only the federal government can spend money into existence to fund the program on a nondiscretionary basis (‘nondiscretionary’ here means that funding isn’t tied to the whims of Congress, but rather the funding is set up to respond to demand for the program, inflation, and/or other relevant metrics, depending on the exact proposal). Local administration is important to many proponents because they want a democratic, bottom-up program that responds to local needs (and knowledge of those needs), not the authority of a central bureaucracy. The idea is that the jobs are temporary and transitional – something to do until you can find something better in the private sector. People can take Job Guarantee jobs to the extent that private sector demand for labor is less than full employment (which is the normal condition), and fluctuations in demand for labor no longer result in millions of involuntarily unemployed people. The private sector can pull people from the job guarantee program simply by offering something better than the government’s minimum wage and benefits package. This need not be inflationary in the long run, proponents argue, because the government is not competing with the private sector by bidding up the price of labor – all the government does is set a minimum price. Moreover, proponents often argue that the program could help stabilize inflation by anchoring the price of labor to the government’s minimum and by utilizing the full productive capacity of the economy (the labor of everyone who wants to work).
Jobs guarantee proponents often object to UBI proposals on the grounds that UBI proposals don’t contribute to stabilizing inflation. Job Guarantee proponents sometimes argue that UBI adds money to the economy without any guarantee that the spending will correspond to any real productive activity. Also, UBI does not anchor wages to a minimum price – private sector employers do not have to compete with it to entice workers to work for them, but they do have to compete with job guarantee positions if they want to pull workers from the job guarantee pool.
UBI proponents often object to Job Guarantee proposals out of political concerns about how the program could be administered effectively, where the UBI is perfectly simple to administer (everybody gets paid the basic income on a regular schedule – it’s as easy as crediting accounts and/or mailing checks). They also sometimes object that basic income is more liberating than a Job Guarantee would be, since what you do with your time is up to you, no input from a Job Guarantee office whatsoever. Additionally, UBI proponents sometimes worry that future automation will drive unemployment in the future, so UBI can support continued consumption in the population at large supported by a specialist workforce. In response, Job Guarantee proponents sometimes emphasize that there’s virtually unlimited desire for jobs that can’t be automated, especially in the so-called caring professions.
Both Job Guarantee and UBI proponents object to the NAIRU approach on such grounds as that the NAIRU approach can’t deal with the political realities of unemployment, underemployment, and discouraged workers. In effect, they claim that the status quo is unacceptable and that we can do better, and then they offer a key policy that they think could get us to a better place.
NAIRU, UBI, and JG are not the only options for unemployment policy, of course, and ways of doing each differ substantially in the details. Also, I have mentioned only a few points that these positions sometimes raise against each other. So, if you have other ideas you might like to explore or defend, please share!
