Why a government job guarantee?
By Stephen Williams
Introduction
A government job guarantee (JG) is a scheme where a national government offers a job up to fulltime hours at the minimum wage to anyone of working age. It would therefore eliminate involuntary unemployment and underemployment, the latter being where people have some work but want more. The Job Guarantee idea emerged independently from the late US economist Hyman Minsky and Australian economist William Mitchell, a co-founder of modern monetary theory (MMT). The purpose of the JG (along with adequate pensions for non-workers) is to eliminate poverty and all the harm associated with it, while also helping to stabilise the economy.
A Job Guarantee in Summary:
- A government-paid job for anyone of working age up to fulltime hours
- All JG participants would be on the minimum wage: the JG sets minimum wages and conditions
- A JG provides a real job with sick pay, annual leave, etc
- People would be employed where they currently live
- JG jobs would be decided at the local level, often by councils
- Ideally they are temporary jobs until the person is employed in the regular job market (public or private)
- Skills training is made available to JG participants
- JG spending helps to stabilise the economy by dampening boom-bust cycles and inflation.
The purpose is to eliminate poverty and all the harm associated with it, while also helping to stabilise the economy.
How could the Australian government afford to pay for these jobs?
As MMT shows, governments like the Australian government have no strict budget constraint. What matters is total spending (demand) in the economy relative to sustainably managed productive resources. In other words, the prudent limit to government spending is determined by inflation (an indicator of our productive capacity) and what the natural environment can sustain. Every dollar the Australian government spends is a new dollar creating at the moment of spending, rather than tax dollars or borrowings.
How would the Job Guarantee help control inflation?
Inflation rises if the cost of production rises or if demand rises relative to supply. So the cost of labour is important. Employers prefer to hire those already in jobs rather than the unemployed. However, if there are no unemployed, employers should be less reticent to hire people from the JG pool, who have shown their ability to work. Since those in the JG pool are on the minimum wage, an employer only has to beat that wage to attract workers rather than bid up wages in the regular job market. Also, since economics is about eliminating inefficiency, it is far better, if possible, that people of working age are being productive and are in routine working habits rather than being unproductive.
What would the jobs be?
A JG job would be useful work that needs to be done but is not currently done by the public service or the private sector. Step one would be to increase the size of the regular public service to where it should be even before a JG scheme is rolled out. In step two, the JG jobs will likely be in environmental care and personal care, determined at the local level by councils and not-for-profits. Much current voluntary work could become JG work. Jobs would be matched to people’s skills and interests as much as possible. Note that people could work where they now live rather than being forced to move house. JG work would also include training where appropriate.
Isn’t the JG just another version of work-for-the-dole?
No. It provides a real job at the minimum wage, with all the conditions associated with a regular job. JG workers could be sacked if they don’t meet normal work expectations.
Has a Job Guarantee scheme been tried anywhere else?
Yes. Argentina trialled a scheme from the early 2000s. There has been a limited scheme running in India since 2005.
What about a universal basic income (UBI) instead?
While some people advocate for a JG plus a UBI, JG experts generally do not like the idea of a UBI: (1) a JG for all people able to work, plus adequate pensions for those not able to work, would lift all Australians out of poverty; (2) a UBI would be inflationary; (3) fulltime hours could be reduced to four or perhaps even three days per week, freeing up time for recreation, arts and crafts, and so on.
Other issues
The JG is not just a job-creation scheme but is also designed to stabilise the economy by helping to dampen boom-bust cycles and inflation. It would work most effectively when combined with progressive taxation, free universal basic services, and the elimination of all the rorts and unfair advantage that plagues our politics and economic system (especially unearned income). The definition of fulltime hours and a reduction in the qualifying age for the age pension may be needed to reduce production to within ecological limits. This would require a change in values from the current growth-at-all-costs ideology.
Further information
The MMT Podcast: ‘What is the job guarantee?’ https://www.patreon.com/posts/41742701
Kelton, S (2020) The Deficit Myth, https://www.amazon.com.au/Deficit-Myth-Monetary-Peoples-Economy/dp/1541736184
Modern Money Lab (Adelaide): https://modernmoneylab.org.au/
Prof William Mitchell blog: https://billmitchell.org/blog/
Tcherneva, P (2020) The Case for a Job Guarantee, https://pavlina-tcherneva.net/the-case-for-a-job-guarantee/
