Achieving full employment with a job guarantee

The Labour Party launched a new website today called “Your Britain“. On the home page it says:

“This is the online home of Labour ideas and policy development. By joining in you can play a part in developing our next manifesto.”

I’m not a Labour Party member, never have been, but boy do we need a strong opposition at the moment. I don’t feel we have one now, but this new site seems like a good idea, and non-members are allowed to contribute, so I thought I would “join the debate” as they say and post a policy idea. My idea (not my idea, but the idea I put forward), was for a full job guarantee as advocated by proponents of MMT. Here is what I submitted. Not hopeful it will do any good, but with a bit of luck, someone might read it and want to find out more:

“At the moment, we are in the middle of an unemployment crisis. The financial crisis led to a sharp increase in unemployment, and while unemployment has fallen since it’s peak, at current rates of change, it will take at least 10 years before unemployment reaches pre-crisis levels. I don’t think it is acceptable that we should have to wait that long.

At the moment, when people are made unemployed, they have the welfare state to fall back on. While prevailing wisdom seems to be that our welfare state is overly generous, and discourages work, those actually dependent upon it know otherwise. I think we can do a lot better. Instead of paying people not to work, I propose the introduction of a full job guarantee.

In essence this would mean creating the offer of employment, paid at the living wage, to anyone willing and able to work. The Government would pay the wage, but the task of creating appropriate job opportunities would fall on local government and the thrid sector. The Future Jobs Fund demonstrated that there is no shortage of worthwhile work in the community to be done, and this ethos could be built on and expanded with a job guarantee.

As the jobs would pay a living wage, this would become the de facto minimum wage without the need for legislation. Private sector employers would need to offer attractive wages and/or terms and conditions in order to hire from the pool of job guarantee workers, but in return, they would be recruiting job ready, motivated workers with the basic skills so many employers claim people are lacking at present.

People would be able to remain in their job guarantee jobs indefinitely, but the focus would be on providing the individuals with the skills and training required to transition to jobs in the private or regular public sectors. While the jobs would pay a living wage, there would be no prospect of promotion or a pay rise while the individual remained in the job guarantee job, thus encouraging workers to seek work outside the job guarantee.

The size of the pool of job guarantee workers would depend upon the state of the economy. That is to say it would operate in a counter-cyclical manner. When the economy is weak, the job guarantee would expand. When it recovers the job guarantee pool would contract.

This policy would be affordable. For a net cost of around 1% of GDP per annum (and significantly less once the economy strengthens), we could have genuine full employment in this country for the first time in over 40 years.

A job guarantee would act as a beefed up automatic stabiliser, so that when the next recession hits, it will be much less painful, and the recovery much more swift.

This would be a true growth policy as eliminating involuntary unemployment would eliminate millions of wasted man hours per year and enable us to produce near maximum potential output.”

Here’s the link: http://www.yourbritain.org.uk/agenda-2015/policy-commissions/stability-and-prosperity-policy-commission/true-full-employment-through-job-guarantee-scheme

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6 thoughts on “Achieving full employment with a job guarantee

  1. There is a huge literature on this subject much of which I’ve read. I’m afraid you are simply repeating things that were being said 20, 40 and 60 years ago. Plus you are making all the same mistakes. History repeats itself.
    For example, re the idea that the relevant employees get more than the minimum wage, that would just cause hundreds of thousands of people already on the minimum wage to quit their jobs and get one of your “job guarantee” jobs. The net effect, as you say, is rise in the effective minimum wage.
    If that has no effect on total unemployment, then fine. But as the minimum wage rises, there has to be SOME POINT at which employing the unskilled or semi-skilled becomes non-viable.
    Re the idea that a significant proportion of the unemployed can be found temporary subsidised jobs in the public sector, I think that’s pie in the sky. No doubt a few tens of thousands can be found jobs that way. But there are strict limits to the number of unskilled youths that a library or local authority office can make use of.
    Re the idea that training can be incorporated with JG schemes, there is empirical evidence that this is a waste of time. And there is a simple theoretical reason: the characteristics of efficient training are incompatible with the characteristics of JG schemes. That is, EFFICIENT training involves classes or ten or twenty or more people with one teacher, and leading to a recognised qualification. That’s what happens in schools, universities, etc. Also courses last for a SPECIFIC PERIOD.
    In contrast, JG people must be available for regular vacancies if labour supply to the regular jobs market is not to be constrained. That means JG people doing training are likely to quit half way thru their courses. If labour supply IS CONSTRAINED, that’s inflationary, which means demand has to be reduced, which raises unemployment.
    I listed some of the literature on my blog here:
    http://ralphanomics.blogspot.co.uk/2012/01/effect-of-temporary-subsidised.html
    Though that material will possibly be getting slightly dated. Though on the other hand, when it comes to JG, the same arguments just go round and round in circles decade after decade, so perhaps there is no such thing as “dated” in this connection.

    1. Ralph,

      You seem fixated on the idea that JG jobs could only be created in the public sector, but there are thousands of charities and social enterprises that have the capacity to create jobs.

      Raising the minimum wage would virtually eliminate tax credits which would create space to cut or eliminate National Insurance on employers. The increased cost for employers need not be that great, and should be compensated for by increased sales.

      There is also no reason why any training could not be flexible enough to continue once someone moves on to other work. Night school is one example, Apprenticeship Training Agencies are another.

  2. i like the idea i think – i worry about the following:

    1) i wonder if it’s any different to much-better-benefits-plus-universal-workfare – and lots of charities and social enterprises compete with ‘private’ organisations for customers as well as workforce

    2) i wonder if it would need the same sort of surveillance, restrictions on other income and some sort of rules framework to stop people using it as some sort of retainer type of thing

    1. I think those are reasonable questions to ask. I know through discussions with anti-workfare people that they have reservations about this idea as they think it would be very easy to turn it into workfare, but I don’t see it that way. I think most people who are out of work are desperate to find some work and if the option for a JG job was available, most would jump at the chance, so there would be no need for compulsion. I don’t think it would work as well if people had to take a job or risk being sanctioned. I also think there are many people on sickness benefits who would like to work, but jobs with enough flexibility for them to be able to do just don’t exist at the moment. A JG could help with this.

      On competition between the private sector and social enterprises/charities, I agree there could be a danger that a charity in direct competition with the private sector could gain an advantage through us of subsidised labour. This would have to be taken into consideration when creating the roles, but I don’t think it is an insurmountable problem.

      On your second point, I’m less concerned. We already have a very bureaucratic system of checks and balances for people claiming benefits. I wouldn’t have thought any more would be needed to police a job guarantee scheme. The rules could simply be that the person turns up for work and makes an effort.

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