A Job Guarantee is a federally funded, locally administered programme that offers anyone willing and able to work a community job at a socially inclusive minimum wage.
This eliminates involuntary unemployment, sets a floor price for labour below which we deem employment to be exploitative and ensures a minimum standard of living below which we deem people to be unable to fully participate in the economy.
This page answers some common questions about how a Job Guarantee works, as well as providing links to resources for those who wish to learn more.
What is full employment?
Mainstream economists and politicians will typically claim that somewhere around 5% unemployment is actually full employment, and below that rate we will experience excessive inflation. However in many countries after WWII unemployment rarely reached above 2% for over 40 years. A Job Guarantee defines full employment as 0% involuntary unemployment. That is, anyone who wants to work, can have a job.
What is a socially inclusive minimum wage?
It's tricky to put a number into a document like this that is intended for global consumption over a long period of time, but basically a socially inclusive minimum wage means you have enough money to take care of your basic needs, then consume some of the output you produce. An example is that if you're working full time at a factory that makes widgets, then you have enough money to pay for housing, food, clothing, utilities and buy a widget every now and again. Another way of putting it is that a socially inclusive minimum wage is one that allows you to fully participate in the economy and society by taking part in social activities that cost money (such as meeting a friend at a cafe and not having to ask them to buy the coffee every time).
How would the government pay to employ everyone who was unemployed by the private sector?
Several modern economies such as the USA, Australia, Canada, New Zealand, Japan and the UK are what's called "Monetarily Sovereign". This means they issue their own non-convertible currency on a floating exchange rate. They don't run a gold standard, they don't peg their currency to a foreign currency, and they don't issue debt denominated in a currency they do not issue. These countries are not financially constrained, but rather are constrained by the output available for sale in their own currency. Thus they can afford to hire anyone currently unemployed without increasing taxes, cutting spending or "borrowing" in private bond markets. These countries can run deficits indefinitely. The school of macroeconomics that provides the theory that backs this up is called Modern Monetary Theory.
Won't "printing money" to create jobs for all unemployed people cause hyper inflation?
Inflation becomeas a problem when spending in an economy excedes the potential output of the economy. In other words, each unit of currency (dollar, pound, yen etc.) is a claim to some resources available for sale in that currency. If there is more currency than there are things for sale, then prices are bid up and inflation can become a problem. When people are involuntarily unemployed by the private sector - meaning that they are willing and able to work, but are unable to find a job - this is a sure sign that there is output available for sale in the domestic currency that is not being purchased. A monetarily sovereign government can always purchase surplus output without inflation risk so long as it does not compete with the private sector for the same resources. By setting a "floor price" for labour and defining a socially inclusive minimum wage paid to all job guarantee employees, a government can maintain a buffer stock of employed labour from which the private sector can always hire by simply offering more than this minimum under comparable labour conditions. As such the currency issuing central government will never compete with the private sector for this labour, and inflation will not be a problem.
If the government creates jobs for all unemployed people won't they just be "bullshit jobs"?
The key to the Job Guarantee is that it is federally funded but locally administered. Communities have the ability to self determine and organise to their own benefit, but under the umbrella of government funding which would bring with it certain conditions. Everyone will have access to a job that is adapted to individual ability by their community, achieving full employment. What could you get done in your community if the federal government provided funding?
So what types of work would be included?
The Job Guarantee is a "counter cyclical" economic measure that offsets a private sector downturn to prevent recessions and eliminate involuntary unemployment. As such, it needs to provide an "elastic" labour force, available for hire by the private sector when the economy picks up again. This means that large scale infrastructure projects, while vital services that should be provided by a government, are not worthwhile Job Guarantee jobs. Rather, a Job Guarantee would focus on community employment. Things like local education, training and skill sharing, visual and performing arts, environmental management, local food production, aged care or community safety. A Job Guarantee could also recognise what has been traditionally unpaid care work such as child rearing and care for elderly or disabled relatives with a socially inclusive minimum wage. This has the potential to revolutionise economic outcomes for women who have long been disadvantaged by their over representation in unpaid care work. The Job Guarantee, being locally administered, also provides scope for economically disadvantaged communities such as indigenous people or ethnic minorities to experience full economic participation at the same time as retaining a level of self determination and empowerment. The exact nature of the work will vary from place to place and from time to time. Again, the question is up to you: look around you and talk to local council authorities. What could you get done in your community if the federal government guaranteed funding to hire anyone unemployed by the private sector?
Isn't automation going to eliminate all jobs?
While it's ludicrous to think that self driving cars and voice activated mobile phones are going to eliminate all human endeavour, it is true that many workers will be displaced by technological change (as they have been for centuries). A Job Guarantee allows these people to be compensated for their meaningful contribution to their community using their unique skills, knowledge and time. This work may be valuable to the community but cannot be provided profitably by the private sector. In other words, automation and technological change eliminate jobs where humans compete with machines for labour efficiency, but there will always be plenty of things that need doing, and people willing to do them.
What about disabled or elderly people who can't work?
A Job Guarantee programme matches jobs to people, and not the other way around. As such, if your community cannot find a way for you to provide a meaningful contribution or you are unable to do so due to impairment or disability, then you qualify (by definition) for another social security payment. Since a Job Guarantee programme has no profit motive and is focused on providing everyone who wants to work with the opportunity to do so, the opportunity exists for many people who may be deemed unemployable by the private sector to take part in meaningful community work and to be compensated for doing so.
What about people who refuse to work?
Historically, we can see from the very low unemployment rates present in economies where governments had a stated full employment policy that voluntary unemployment in a healthy society is negligible. However we may find that after 40 years of punishing neoliberal austerity that some people are unwilling to engage in community work when the programme is introduced. Being completely unwilling to take part in such a programme when the definition of "job" can be modified to fit in with the skills, experience and preferences of the participants is unlikely. Due to the very low percentage of people that have remained voluntarily unemployed historically, we can simply provide a subsistence level wage (much lower than the JG) for those who refuse to participate entirely, while also providing options for people who might need access to counselling or personal development services to help them transition into employment via a Job Guarantee.
Why create jobs when we could just give people money?
It's true that a more generous unemployment payment given to the unemployed would have the effect of counter cyclical fiscal stimulus that would offset a private sector downturn and avoid a recession. This stimulus would create new private sector jobs, however it would not eliminate involuntary unemployment because no private sector in the history of money has ever created enough jobs for everyone. Involuntary unemployment is particularly bad among young people. If their first experience of the work force is to be given money for doing nothing, how can we expect them to be productive workers in the future? It is better for them to gain skills and experience in a real job that will make them more effective private sector employees. Providing income without employment also does nothing to offset the effects of the "last fired, first hired" preferences that the private sector has for skilled employees. It does nothing to eliminate discrimination, or to preserve "human capital" and keep a "labour ready" workforce of effective and efficient employees. Work is a healthy undertaking. Work is what we do for other people, and hobbies are what we do for ourselves. If a government provides only a cash payment then it abdicates responsibility for helping people maintain or enhance their skills, ready for when private sector employment becomes available. A government that provides only a cash payment also abdicates it's responsibility for ensuring everyone is able to fully participate not only in the economy, but also in their community.
Is this communism?
No, if you want to give this a political label it would fall under the banner of Social Democracy.
Is a Job Guarantee means tested?
No, a Job Guarantee provides anyone who turns up and does the work the same wage regardless of what they earn at other times. This makes it the ideal tool for facilitating a transition into paid private sector employment. By allowing people to work flexible hours in a Job Guarantee job, we can provide the ability for them to find work they want to do in the private sector and work their way into a full time position over time.
Further information on a Job Guarantee:
- Pavlina Tcherneva discusses the Job Guarantee - https://vimeo.com/83813741
- Bill Mitchell: What is a Job Guarantee? - http://bilbo.economicoutlook.net/blog/?p=23719
- Minsky and the Job Guarantee - http://www.economonitor.com/lrwray/2013/06/08/minsky-and-the-job-guarantee/
- The State Theory of Money and a Return to Full Employment - https://independentaustralia.net/politics/politics-display/we-once-had-full-employment-and-we-can-do-it-again,9554
- 1945 White Paper of Full Employment (Australian Government) - http://www.billmitchell.org/White_Paper_1945/index.html
- The Job Guarantee in Practice (CoFFEE) - http://e1.newcastle.edu.au/coffee/pubs/wp/2006/06-15.pdf
- Centre of Full Employment and Equity (known as CofFEE) - http://e1.newcastle.edu.au/coffee/
- Modern Money Network: Job Guarantee - http://www.modernmoneynetwork.org/?q=content/job-guarantee
Why not a UBI?
What is Universal Basic Income (aka Basic Income/Basic Income Guarantee/BIG/BI/UBI)?
The definition provided by the BIEN (Basic Income Earth Network) is: "a periodic cash payment unconditionally delivered to all on an individual basis, without means test or work requirement". It further notes:
- Periodic: it is paid at regular intervals (for example every month), not as a one-off grant.
- Cash payment: it is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not, therefore, paid either in kind (such as food or services) or in vouchers dedicated to a specific use.
- Individual: it is paid on an individual basis - and not, for instance, to households.
- Universal: it is paid to all, without means test.
- Unconditional: it is paid without a requirement to work or to demonstrate willingness-to-work.
There is a wide spectrum of detail when it comes to specific policy proposals, but by way of building some consensus the BIEN include this note on their website:
"A majority of members attending BIEN's General Assembly meeting in Seoul on July 9, 2016, agreed to support Basic Income that is stable in size and frequency and high enough to be, in combination with other social services, part of a policy strategy to eliminate material poverty and enable the social and cultural participation of every individual. We oppose the replacement of social services or entitlements, if that replacement worsens the situation of relatively disadvantaged, vulnerable, or lower-income people."
This sounds great, what's wrong with it?
If we were to truly provide a basic income in accordance with the definition above, then it would be either hyper inflationary or have no impact on poverty. Every unit of currency (dollar, pound, yen etc.) represents a claim on resources available for sale in that currency. If we were to simultaneously increase every person's claim on resources by the same amount, then prices would immediately inflate to eliminate any benefit.
But what about all those successful Basic Income trials!
If we look at the definition above, it is clear that there has never been a trial of Basic Income. The various experiments that people claim are Basic Income trials are nothing more than minor tweaks to existing government transfer payments or redistributive tax policies. They all fall into one of the following categories:
- A citizen's dividend: taxes paid on resource usage by minor or other extractive industries are distributed to citizens as a dividend. This is not periodic because the amount paid varies according to economic output.
- A payment to everyone in a whole town or region: where an area is suffering extreme disadvantage experiments have been undertaken which replaces punitive and restrictive social security or welfare payments with an unconditional payment. This is periodic and unconditional, but highly targeted by region and usually in response to extreme economic disadvantage or poverty. The results of these experiments cannot be extrapolated out to a similar payment being provided to everyone in the country, but they do demonstrate that providing less punitive transfer payments are beneficial.
- A payment to unemployed people for a fixed period of time without obligation and regardless of employment status: again, these are highly targeted and in response to economic disadvantage.
- A payment provided to (almost) everyone with additional income taxes on higher income earners to "claw back" the payment: this is no different from a means tested transfer payment, except now we are trying to impose higher income taxes on people already adept at tax minimisation.
None of these scenarios fit the definition of a Basic Income provided above. They are nothing more than a means tested transfer payment or redistributive tax measure by another name, with no economic novelty whatsoever. In truth, no real world UBI proposal or trial fits the definition above. Indeed, there is only one version of the UBI that fits the definition above (by definition) and anything is not universal nor is it unconditional, and Basic Income proponents know that the only "real" BI proposal doesn't actually work.
With automation destroying all jobs, a Job Guarantee is just coercion to perform useless tasks! If we pay people a basic income they will find other meaningful ways to contribute to their community
As discussed above, a Job Guarantee provides federally funded but locally administered community jobs suited to the skills and preferences of those involved. Work is what we do for other people, and hobbies are what we do for ourselves. All a Job Guarantee does is compensate people adequately for their contribution to their community, at times when they are unable to find private sector employment. This achieves exactly what the UBI aims to achieve, but in an economically realistic fashion.
A Job Guarantee, not a Basic Income, is the key to eliminating poverty and involuntary unemployment.
If you would like to review further resources comparing the Job Guarantee with various incarnations of Basic Income proposals, check out the following links:
- Dr Steven Hail talking with ABC Radio Adelaide
This website is maintained by Iain Dooley. Send your questions or comments to email@example.com
Thanks to Louisa and other members of the Job Guarantee Working Group for their input on discussions of the Job Guarantee and Basic Income.
This site is available on GitHub. If you have any changes or improvements just send me a pull request. Thanks!