Is Greece about to implement its own job guarantee?

Syriza swept to power in Greece last week, falling just 2 seats short of a majority after polling around 36%. 5 or 6 years ago, they were polling just 5%. The mainstream left party PASOC have gone the other way, polling over 40% on winning power in 2009, they polled less than 5% last week, a remarkable turnaround which shows just how fast things can change when countries are placed under severe economic stress.

Syriza now have a mandate to affect real change for the people of Greece. Whether they do, or even can within the confines of the Euro remains to be seen, but there have been some positive early signs. The appointment of ‘heterodox’ economist Yanis Varoufakis as finance minister is intriguing, and a central plank of Syriza’s platform is to do something to tackle the dire employment situation in Greece. Unemployment peak at oaround 28%, and remains at over 25%, while youth employment went as high as 60% in early 2013.

The New York Times reports on Syriza’s plan to use a direct public employment scheme to create 300,000 jobs. The program is due to be headed up by the deputy minister of Labour and Social Solidarity, Rania Antonopoulos, also a scholar at the Levy Institute of Bard College. Last year, she co-authored a paper on this issue entitled “Responding to the unemployment challenge: A job guarantee proposal for Greece”. It proposes the creation of jobs consisting of:

“…paid employment for 12 months per year on work project selected through a community-level consultative process from among the following areas: physical and informational public infrastructure; environmental interventions; social service provisioning; and educational and cultural enrichment. The positions would carry full legal labor rights, including normal time off. Eligibility would be extended to all of the unemployed,with a point system creating a rank order among applicants. Preference would be given to the long-term unemployed; those with low household income; members of households in which all adults are unemployed; and, finally, to workers according to the age composition of the unemployed, with the majority being over 30 years of age.”

The authors estimate that directly creating 300,000 jobs (at a minimum wage of 750 Euros a month) would create a further 120,000 private sector job indirectly through the multiplier effect, and although the net cost would be relatively high at around 1% of GDP, the act of creating the jobs would actually reduce the debt/GDP ratio, which is the supposed purpose of austerity, but which in fact has had the opposite effect.

If a policy like this could be implemented and successfully so, it would create a good example for the rest of Europe, and the whole continent is crying out for positive action on employment, including here. There are some who probably fear this good example, and so will try to prevent Greece’s experiment with democracy from being a success. It will be fascinating to see how the next few months play out.

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Objections to the Job Guarantee

On Thursday I went to Sheffield to watch an excellent lecture on the Job Guarantee by economist L Randall Wray. It was a good chance to meet some Twitter friends in person for the first time and also to see in the flesh someone whose work I’ve been following for the last three years and whose ideas I’ve blogging about for the last two. Wray was talking about the key policy proposal of Modern Monetary Theory – the Job Guarantee. The Labour Party are proposing something called a Job Guarantee, but isn’t really worthy of the name, so I was interested in what the other people at the lecture thought of the idea when fully fleshed out. The people there were probably already pretty sympathetic to the idea, and most did seem positive, asking what other economists thought of it and whether businesses would object. I also wanted to see what people who may not have heard of the idea would think of the Job Guarantee when first exposed to it, so I canvassed for some views on Reddit. Here is what I posted:

…I would like to hear your opinions of an alternative policy, which would be a job guarantee scheme. What is a job guarantee? Here are the main features:

• The government would offer a job to anyone willing and able to work.
• The government would pay the wages, but it would be up to local communities to design the jobs
• The jobs would be paid at a living wage
• On the job training would be provided

What are your first thoughts/objections?

I got a modest number of responses which were along the lines of what I expected. These are a few of the responses:

Non jobs

If a government creates jobs they will be non jobs equivalent to digging holes and filling them back up again. This argument is often used, and is kind of a misunderstanding of Keynes who said:

“If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

Source: Book 3, Chapter 10, Section 6 pg.129 “The General Theory..”

So Keynes was arguing that even paying people to perform useless tasks would be better than nothing, but something useful would be much more sensible. Similarly, even if all jobs created under a Job Guarantee were indeed non jobs, that would still be preferable to leaving people unemployed. But with clever job design though and a bit of imagination, we can do much better than that!

Too expensive

This argument is that it would be too expensive to create jobs to hire unemployed people, so it’s better to keep them on the dole and hope things pick up. But how much would it actually cost? At the moment there are around 2.1 million unemployed people. The living wage is around £7.65 an hour (higher in London, but I’ll use the lower figure here. So if we gave all the unemployed full time jobs (35 hours pw) paying the living wage this would cost:

2.1m x 7.65 x 35 (hours pw) x 52 (weeks per year) = £29.24bn. Wow, that’s a lot! But that’s only the gross cost. For the net cost, we need to deduct the cost of paying unemployment benefit (the number claiming unemployment benefit is only around half the total unemployed figure). This is:

1.01m (on JSA) x 72.4 (weekly JSA for someone over 25) x 52 (weeks per year) = £3.8bn

£29.24bn – £3.8bn = £25.44bn

There are some other costs not included about like management, administration and training costs, but there are other savings that may mean the final cost would be even lower because don’t forget, these 2 million now working will be paying income tax and national insurance. Not all will want to work full time, so the average hours worked per week on the Job Guarantee would be less than 35. You wouldn’t need to offer all 2 million a job though because as the newly employed spend their wages, this will create additional jobs in the private sector as sales increase.

Ignoring all that though and using the higher figure, for a net cost of £25bn, we could have a economy in which everyone who wants a job has one. This is about 1% of the UK’s GDP, or less than half our defence budget, or less than 20% of the welfare budget. When you look at that in context, it doesn’t seem that expensive at all. Don’t forget too, this £25bn is much higher than it would be in normal times. As the economy recovers, private businesses would be able to hire from the pool of job ready Job Guarantee workers, and the number of people in Job Guarantee jobs would shrink.

Training and education not subsidised jobs

This is what I would call the neo-liberal line. It says that unemployment mainly occurs because the unemployed do not have the right attitude or the right skills to get the jobs that are there for people who do have the right attitude and the right skills. Those who subscribe to this view argue that the role of government should be to train the unemployed to to find work. This is the strategy we have employed in the UK for at least the last 15 years. The problem is, it’s nonsense. If the jobs don’t exist, no amount of training will help every unemployed person into work. Some of them will always fail. It’s really rather cruel.

Jobs would need to be economically viable

I’m not quite sure what this means, but I think it’s the view that for something to be worth doing, it must make a profit, and that the private sector creates the wealth with which the public sector uses to provide public services. This is just not true though. Government should not be run like a business. The things it decides to fund should not rest on “economic viability”, but on whether the funding will improve the general welfare of the country.

Sounds like communism

Didn’t really get this one, but I suppose it’s a reaction to the government increasing its payroll by up to a couple of million more workers. The Job Guarantee though would only be the offer of a job. No one has to take up the offer. And rather than being communist, it’s actually pro-business in a lot of ways. Businesses often complain that the people they hire lack basic skills or the right work ethic. They view hiring the unemployed as often a risk not worth taking, so they should welcome a job ready pool of workers with recent work experience from which to hire. They just have to make the workers a better offer to the one they get in the Job Guarantee. A little competition in the labour market would be a good thing. The wages paid to Job Guarantee workers would also bolster the sales of private sector businesses.

I guess I can understand a lot of the knee-jerk reaction to the idea that the government should be prepared to give jobs to all the unemployed, but I hope the above has answered why I think these objections are ill-founded. Those who are unemployed and on benefits are already on the government’s payroll, it’s just that we are wasting their talents. Why not pay them a decent wage and get them engaged in useful work? Sounds like a win-win to me.

Failing youth jobs scheme championed by Nick Clegg scrapped

From the FT (subscription required):

“The coalition’s flagship programme to tackle youth unemployment is to be wound up early, amid claims that it has been an abject failure.

The £1bn youth contract wage incentive scheme was championed by Nick Clegg, the Liberal Democrat deputy prime minister, at the height of the recession as a way to help tackle youth unemployment. But with the jobs market rapidly improving and take-up of the programme falling substantially below projected levels, it is to be cut short next month.

Under the scheme employers were offered £2,275 if they provided a six-month “job start” for someone aged under 25.

But in the first year of the scheme up to May 2013 only 4,690 recruits completed their placements, against a target of 160,000 for the entire programme.

The scheme was supposed to last for three years from April 2012. But the Department for Work and Pensions has written to companies to warn that no claims will be accepted for any placements that start after August 6 this year – a month earlier than planned.”

This scheme relied on the private sector to employ unemployed young people and then claim back a wage subsidy from the government. The subsidy could be claimed on existing vacancies (not vacancies specially created) which was a flaw from the start, but despite this offer of a bung to the private sector for taking on young unemployed people, take-up has been woeful. While unemployment has fallen steadily over the last 12 months, youth unemployment remains high. There is still a need for more job opportunities for young people, and there is massive scope for being much more proactive in this sphere. Here are some other posts I’ve written on this subject:

The Youth Contract – Giving public money to private firms in return for?

The failure of the Youth Contract should be a lesson for Labour

The Future Jobs Fund: One of the most ineffective job schemes there’s been?

Achieving full employment with a job guarantee

 

If the private sector’s not doing it, doesn’t mean it’s not worth doing!

Regular readers will know I favour a policy known as the job guarantee. This is where the government pays the wages of anyone willing and able to work, but unable to find it. This appeals to me because I believe the following things are true:

• In our society, working (either for yourself or an employer) is seen as the norm; part of being a good member of society;
• Doing a job of work that people think is worthwhile brings a lot of benefits in terms of mental and physical health;
• People consciously or unconsciously understand this and most people want to work;
• People shouldn’t have to work for wages below a level which allows them a reasonable standard of living;
• Without active government involvement, there will never be enough jobs for all or enough jobs paying a socially acceptable wage.

So I am fully signed up to the idea that a job guarantee would be a very fine thing. Convincing others of the merits of this idea is much more difficult than I thought though! A lot of people accept there aren’t enough jobs, that wages are too low and that work is becoming more and more casualised. Despite this, they would rather leave people unemployed than have the government actually create jobs. I’m not quite sure why this is, but I it’s partly a lack of imagination (what would they do/non-jobs/digging holes and filling them in etc), and partly the usual “nice idea, but how will you pay for it” response.

It also seems to be received wisdom that the profit motive ensures that everything worth doing is already being done by the private sector, and if the private sector is not doing it, it must not be worth doing. It’s this argument I want to address now by suggesting a few areas either not being delivered or are under-delivered by the private sector, but are nevertheless quite worthwhile!

1. Adult social care – We are often told there is a crisis in adult social care. At present, private sector companies are contracted to provide a lot of the home visits to the elderly an infirm. Contracts are often awarded to the lowest bidder, which means these services are delivered on the cheap. Staff are often on zero-hours contracts, poorly paid and only permitted to spend 15 minutes or at most half an hour on each visit. They are often not even paid for travelling between visits! So why not train up some of those willing and able to work, and pay them to provide a much more comprehensive service to people in need? This would help take the pressure off our hospitals if people are being well cared for in their homes, and allow resources in the NHS to be better targeted.
2. Sports/Fitness coaches – As well as an adult social care crisis, there is also an obesity crisis. We could train people to deliver sports coaching to kids on a much wider scale. There are a lot of sports that require very little equipment, but with a coach who can inspire and importantly, a service that is free or heavily subsidised for the user, we could start to reverse the obesity trend. This again reduces expense in the long term on the NHS and kids who are fit and active do better in school.
3. Childcare – Childcare is very expensive and means that a lot of people who want to work find most of their wages are going on childcare. Training people to provide childcare would lead to lower costs, meaning work becomes a more viable option for many. In addition to this, for those who prefer to look after their own kids, could also be paid to do so. A lot of people struggle to see looking after your own kids as being a job, but it could be argued that it’s a pretty important job. The production of the future generation will always pay for the future consumption of the current generation, so if kids are brought up happy and healthy by a parent in their early years, they will likely become more valuable members of society when they grow up. Is it really that different paying someone to look after someone else’s kids, to paying someone to look after their own?

Those are just three suggestions, but I know others will have much more imaginative ideas! There are so many socially beneficial jobs that would enhance our environment that just aren’t being delivered by the private sector (at least not at a price affordable to all). We could change this, but we need to lose the private sector good/public sector bad mentality. It’s holding us back!