The Job Guarantee. Problems from a Left Perspective.

There’s no doubt that a JG program along the lines we might imagine it to be, and along the lines advocated by the leading names of MMT: Warren Mosler, Bill Mitchell and  others would be highly desirable.

We could have an economy run to ensure almost full employment except for a  JG rate of about 2%. Then maybe there would be another 2% who were in receipt of unemployment pay due to their being temporarily between jobs. We could allow a reasonable period of time for that to occur -say about 3 months. The JG could have a part to play in young people’s apprenticeship schemes too. There could be some relaxation in the principle of “public purpose” if job training was combined with education. The JG could pay a living wage meaning that the wage was more than just enough to stay alive but it was enough to enjoy life too.

The problem, for me, and I suspect others on the left, is that we fear it won’t turn out quite like that. There’s no guarantee, or even likelihood,  that the JG will end poverty. It would depend on the wage the JG pays relative to the cost of living in the locality. If you’re living in London and depending on the rental property market you’d need an income much higher than anything I’ve seen proposed for the JG to be above any reasonable definition of the poverty line.

Incidentally, this posting was prompted by a discussion between Neil Wilson and others (including myself) on his very good blog:

http://www.3spoken.co.uk/2015/11/job-guarantee-jobs-for-people.html

“Very good” doesn’t mean we always agree, BTW,  as this exchange shows.

PM: “We don’t want to get into the situation, for example, where we’re threatening young mothers with loss of benefits for not taking up the JG or getting into disputes with the mentally ill as to their capability for work.”

NW: “I’m afraid that isn’t your choice. That is the choice of the society you live in and how they perceive those individuals”.

Which is a fair enough comment of course, but if it looks, from a left perspective that there are too many devils-in-the-JG-detail for comfort why would the left want to aggressively pursue the concept of a JG? Why not just leave it ” to the society (we) live in ” to come around to the idea ? That’s not likely to happen for a very long time, though. Either the JG is pushed by the left or it just won’t happen at all. Another problem, again at least for me, is the language used to promote the idea of a JG and it being a “buffer stock”. We are real people. Yes we want to work and make a contribution but we don’t want to be a “buffer stock” in the same way as we can have a buffer stock of bales of wool or kilos of butter.

While MMT and concepts like the JG are useful they only go so far. MMT doesn’t say anything about how wealth and incomes should be shared out. If we don’t address that question, and keep on addressing it then we’ll end up with just as much poverty in the future even though society as a whole could well be richer.

There could well be very much higher rates of JG work as the not-so-innocent fraudsters in Government deliberately shift essential work into the JG sector. The JG would be a very powerful weapon and used in the hands of the fraudsters to reduce wages. We could, for example, have a JG now in parts of the EU which paid say €7 ph or whatever was just slightly higher than social benefits. So in Greece we’d have 25% on a JG instead of 25% unemployed.

There’s no way any of us with a leftist perspective would support that. If anyone is contributing to society by working, the old principle of Labour’s Clause 4 applies: “To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible etc..”

Having a JG, even on a so-called living wage, doesn’t change that one bit!

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12 responses to “The Job Guarantee. Problems from a Left Perspective.

  1. “If you’re living in London and depending on the rental property market you’d need an income much higher than anything I’ve seen proposed for the JG to be above any reasonable definition of the poverty line.”

    Forget about the JG for a moment. Nobody has a ‘right’ to live in London. There is only so many locations around and if you exclude others you should pay for the privilege. You can ‘increase’ the amount of land by taxing it heavily, which means locations such as brownfield sites are brought into use, but this is limited.

    At one extreme, there are the multi-£-million buy-to-leave flats in London standing empty. The only thing which gives them value is the fact that they are in London i.e. agglomeration benefits (actual or potential).

    At the other end, the abandoned streets in seaside towns, the reverse applies. If one house is standing empty in a road, it makes the area a bit less attractive and so depresses the value of the other houses a bit. If two are empty, that depresses the values by more than twice as much. The effect is geometric and reaches a tipping point, so once a third or half the homes on a street are empty, the others are now virtually unsaleable.

    Both of these problems are solved by a tax on location values, excluding buildings/improvements. Location values are created by the community – better schools/hospitals, public infrastructure spending (some corrupt, this problem needs to be solved!), neighborhood, levels of crime, etc and not the individual.

    All these ‘London Weighted’ wages , ‘Help to Buy’ (which should be ‘Help to Sell’) do is push up land (house) prices even further. What annoys me is the amount of right wing propaganda about this and how they sucker in lefties.

    Back in the days of ‘Georgism-without-LVT’ which the UK had until the 1980s, i.e. rent controls, high taxes on rental income, caps on mortgage-to-income ratios etc, there was a rapid increase in owner-occupation rates and hence much greater wealth equality.

    This also showed up as greater equality in disposable incomes after housing costs. Very few people had to pay rent and didn’t pay much when they did, and rental income collected privately net of income tax was 0.1% of GDP rather than 3%.

    What I suggest is that the government should collect the location rent and distribute it as basic income. The average household in the average household’s Citizen’s Income and Land Value Tax cancels to zero. Yes, this will redistribute money from rich to poor and technically “taxes don’t fund spending” so it is really LVT/CI with a very small extra CI on top. It won’t cause inflation in the current environment.

    I leave you a last question Peter – what about these junior doctors working all hours God sends (albeit for a tasty salary) but who are probably all still renting? Are they ‘working class’ or ‘middle class’?

  2. ” Nobody has a ‘right’ to live in London.”

    We can say this if we choose. We can also say no-one has a right to live in the SE of England. Or we can say no-one has a right to live within a 100km radius or 200 km radius or whatever. So where do we draw the line here? Where do they have a right to live?

    The same arguments apply to those who might have been born and brought up in a rural area which has recently become very expensive . Like parts of Oxfordshire for example.Do we go in for social cleansing in parts of the country?

    “Are they ‘working class’ or ‘middle class’? ”

    They’re whatever you want to call them. These terms have different nuances either side of the Atlantic. But, in principle, and as Marx said, Capitalism “has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers.”

    But I’m not sure about poets. There can’t be too many who are labouring, as poets, for wages !

  3. “So where do we draw the line here? Where do they have a right to live?”
    You have the right to live in the average location where you will pay nothing (LVT/CI cancels.) Remember, in the current system land rent is privately collected by bankers as mortgage interest and landlords as rent. We are just collecting that rent for the Public Good.

    If you want to live in a better location you compensate the people who live in worse locations. Land is just a good like anything else. You should pay for it, even if you are poor. Similarly if you want to eat more crackers, you spend more of your income on crackers. if you want to spend more on land you pay more for land. Yes there will be a few ‘poor widows’ but the numbers are widely inflated to try and defeat any sort of progressive tax reform like this. You could just as well argue fuel duty punishes the poor, and to hell with the environment!

  4. “Do we go in for social cleansing in parts of the country?”
    It is not “social cleansing” as people (poor or not) are fully compensated from being excluded from a location.
    Surely you cannot be arguing that the current system is better?

  5. I don’t get how you can’t get this Peter!

    “We can say this if we choose. We can also say no-one has a right to live in the SE of England. Or we can say no-one has a right to live within a 100km radius or 200 km radius or whatever. So where do we draw the line here? Where do they have a right to live?”

    Peter there is literally not enough locations in London for people to live there! You can’t magic up some more. You can raise London wages, but until you nationalise the land the ‘housing costs’ problem is still there, like with the Junior Doctors example shows. People are still paying private rent to landlords and banks.

    The “beauty” of the current system is that it is purely redistributive and upwards redistributive too: all the gains to property owners from higher property prices necessarily are someone else’s loss, someone who is poorer (at least in land).

    At the same time as it rewards richer rentiers it punishes poorer workers (and businesses, but they are ambivalent about it).

    The typical case that I have seen many times is people from the North moving to the South: yes, there are more jobs in the South, thanks to extraordinary government subsidies to London and other “core” Tory areas, including colossal subsidies to house speculation that then boost incomes and jobs in the financial and building trades in the South.

    People moving from the North to the South do get some of the government supported jobs in the South, but then promptly leave a large chunk of their new found wage in much higher rents or house prices to the Tory voters of those areas.

    Look at all the policy announcements the Tories have made: the big ones have always been about bigger cheaper government sponsored loans/handouts to South East property speculators.

    Usual quote from George Osborne:

    “A credible fiscal plan allows you to have a looser monetary policy than would otherwise be the case. My approach is to be fiscally conservative but monetarily active.”

    Here “fiscally conservative” means “cut spending on the Northern scroungers” and “looser monetary policy” means “bigger cheaper loans to aspirational South East property speculators”.

  6. I hope readers of comments can tolerate more quotes on the “Blow you! I am all right Jack” politics common in the UK among teh fickle middle classes:

    You might want to read this one in full, it explains a lot:
    http://www.telegraph.co.uk/comment/columnists/rachelsylvester/3556538/Brown-and-the-conservatory-building-classes.html
    “”The problem with Gordon,” a senior minister said to me recently, “is that he doesn’t understand why anyone would ever want to build a conservatory.”
    There is a growing concern in the Government that the Prime Minister is alienating the aspirational middle classes who put Labour into power in 1997 and have kept it there ever since.
    … Although Mr Brown talks a lot about aspiration, he means it in the sense that people at the bottom of the pile should be able to get to the middle, rather than that those in the middle should aspire to get a little bit further towards the top.
    His preoccupations with child poverty, Africa and banning plastic bags are all very worthy – but they leave the conservatory-building classes thinking: what about us?
    … With the cost of housing, energy, childcare and food going through the roof, people who are relatively well paid can no longer afford to live the way they did even a year ago. As the middle classes book holidays in Torquay rather than Tuscany, drink tap water instead of San Pellegrino and put the conservatory they had been planning to build on hold, they start to question the amount they have to pay to the Government.”

    http://www.theguardian.com/politics/2012/may/25/labour-tory-voters-south-election
    “Flint, the shadow energy secretary, also holds a position as the party’s champion for the south-east. She writes: “We have to win votes from the Tories as well as from the Liberal Democrats. The collapse of the Liberal Democrat vote alone will not be enough to win in 2015. We have to continue to focus on those voters who supported Labour in 1997 but voted Conservative in 2010.”
    She adds: “We went into the last general election promising a ‘future fair for all’, but too often, when we thought we were talking about fairness, we were actually talking about need.” She claims that for many swing voters in the south-east “fairness is as much about exchange – taking out once you have put in – as it is about need. They want ‘fairness for my family as well.’”

    I’ll repeat here the classic, and sincere (yet read between the lines) relevant part of Blair’s pivotal speech:

    http://www.britishpoliticalspeech.org/speech-archive.htm?speech=202
    “I can vividly recall the exact moment that I knew the last election was lost. I was canvassing in the Midlands on an ordinary suburban estate. I met a man polishing his Ford Sierra, self-employed electrician, Dad always voted Labour. He used to vote Labour, he said, but he bought his own home, he had set up his own business, he was doing quite nicely, so he said I’ve become a Tory. He was not rich but he was doing better than he did, and as far as he was concerned, being better off meant being Tory too.
    In that moment the basis of our failure – the reason why a whole generation has grown up under the Tories – became plain to me. You see, people judge us on their instincts about what they believe our instincts to be. And that man polishing his car was clear: his instincts were to get on in life, and he thought our instincts were to stop him.”

    Note the euphemism “get on in life” for “milk the benefits of incumbency”,
    What Blair understood very well is that the right mainline policy was to give “aspirational” voters an ongoing stream of the benefits of incumbency via higher house prices, because the “aspiration” so-called Middle-England voters (especially middle aged and older property owning female ones) have is for massive tax-free effort-free windfall capital gains (cashed in via low rate remortgages)

    What he didn’t understand was economics:

    “First, let us get the fundamentals right. Look at the Tories – two recessions, one of which wiped out a third of our manufacturing base; borrowed their way into the record books; the pound devalued; North Sea oil money gone; all the money from asset sales gone. It is sometimes said, you know, that the Tories are cruel but they are efficient. In fact, they are the most feckless, irresponsible, incompetent managers of the British economy in this country’s history. (Applause)

    Labour will be the party of sound finance and good housekeeping. World interest rates and inflation rates are low; in Britain we will keep them this way. There will be defined targets set and kept to. Losing control of public finance is not radical, it is just reckless, and we will not do it. Gordon Brown, the Iron Chancellor (Applause) – it can be a tough job and he does it brilliantly. They say it is easier to get past security at our Conference without a pass than to get a spending commitment past Gordon! And in case anyone is in any doubt, that is how it is going to stay.”

    You could argue “austerity” politics really started in full with the fiscal surpluses in the late 1990s and the acceptance of them as “normal.” The Major government ran large deficits and house prices did not rise much, so they lost once the Labour Right got into power.

  7. Peter, can you do a post on foreign trade and ‘capital flight’? Neil W has came up with an interesting idea:

    Much of the ‘capital flow’ comes from monetary creation – aka loans.

    “Borrowing in GBP to buy USD assets ought to alter the FX supply/demand balance and push the GBP down (a classic carry).

    The open question for me is how does the market settle in aggregate, how much does bank lending play a part in that, and what would happen if you restricted lending by policy (say making loans for currency sales/purchase of foreign assets unenforceable)?

    Currency markets are very simple. It’s raw supply and demand. There are no market makers and every open trade has to be settled with delivery of the currency at 10pm GMT every day.

    That means you have to get hold of the real thing and give it to somebody else or get out of the market. So the actual final liquidity in the market that allows things to move comes from people actually changing what they hold over a daily basis. Those playing Contracts for Differences and throwing ‘forward next’ are just greasing the daily wheels with liquidity.

    Overall net short positions from an aggregator still have to be delivered. You have to supply pounds and take US dollars. That means getting the pounds in the first place and is an obvious control point in the system.

    Currency areas are not necessarily the size of the country that owns the currency. They can be bigger or smaller than an individual country. What size they are depends upon how the country uses the monopoly power of the currency to influence activity.

    Purchase of foreign assets would require either equity or foreign sourced loans.”

    What is your view on this idea? Could you do a post on foreign trade?

  8. Neil has a bunch of other posts on the topic:
    MMT and Russia (2014):
    http://www.3spoken.co.uk/2014/12/russian-roulette.html?m=1
    Scottish Independence Myths – How to buy imports?
    http://www.3spoken.co.uk/2014/08/scottish-independence-myths-how-to-buy.html?m=1
    More support for MMT’s external sector analysis:
    http://www.3spoken.co.uk/2013/01/more-support-for-mmts-external-sector.html?m=1

  9. Link to actual comment is here but I added in some stuff from Neil’s post for context:
    http://www.bondeconomics.com/2015/09/introductory-comments-on-interest-rates.html?showComment=1443409917548&m=1#c2241877395069362678
    ‘Bond Economics’ is good blog too BTW.

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