The MMT job guarantee: return to the workhouse or marketing error?

The main proponents of MMT (Modern Monetary Theory), like  Bill Michell and Warren Mosler, have been lately pushing further their “Job Guarantee” proposals, that of a job paid by the state, something in the vicinity of the minimum wage, for anyone “willing to work” who can’t find a better paid job in the regular private or public sector.

I have no objection on the monetary policy side of things (it’s consistent with the rest of MMT) and not even in principle if we lived in perfect societies where everyone unemployed is willing and able to work and can be allocated to a useful but previous uneconomic task friction-less, then it could possibly even work.

Unfortunately the real world is not like that. The Job Guarantee is not a new idea. It’s not even an idea, it has been done in practice, particularly in Europe, under various schemes which are operationally very similar, even if they were not universally applied and not called job guarantees, but they give a lot of material that can be useful to extrapolate the difficulties a full scale scheme would encounter.

At the very basic level a job guarantee is strictly speaking a logical oxymoron: a job cannot be a job if it’s guaranteed. The proof is simple. Let’s imagine we have an unemployed individual person with no desire to work, but with a desire to get the wages from the job guarantee (if they are above non-working welfare benefits, which is what the MMT proponents want as far as I know). How would this person operate? Probably thus:

  1. Go to a job guarantee office to get allocated a place
  2. Turn up but refuse to do anything
  3. If “fired”, go back to #1

So it is not a job as you don’t have to work. It’s just daily detention for some welfare claimants. There is no escape from this: either you remove the job part (people can just turn up to collect the money) or you remove the guarantee part (people who don’t work go back to regular unemployment, so they are not guaranteed a job). Which brings us to this invariant:

You can have a job that’s not guaranteed, or a guaranteed income that’s not a job, but not both at the same time.

It could be argured that the job guarantee only applies to people “willing to work”, and that those who aren’t are simply disciplined out of the system.

The problem is that, if you assume that people running the work scheme are trying to get something useful done, they will manage their workers the same way as regular employers do and fire, or refuse to employ in the first place, the people who are not at least marginally productive. This will also include the objectively willing being useless and those who could be useful but are not willing, because you cannot operationally distinguish them: a good actor pretending to be unable will be virtually impossible to distinguish from someone who is genuinely useless. That brings us to our second invariant:

Willingness to work is not an observable characteristic (in a non-totalitarian state)

The only way I can think of to resolve that problem is to organise the job guarantee in the form of prison work, that is a coercive labour camp, or the Victorian workhouse, which even the Victorians finally had to admit was impractical even when armed with a diabolically repressive moral code. This is not acceptable in a modern civilised state (even non-democratic ones).

Picture of 19th century workhouse

A Job Guarantee centre?

In fact it could be said that the entire unemployment problem is, at all times, an issue of unwillingness to work at the margin. We could probably employ all the unemployed in the world as garden gnomes paid $1 a month, and there would probably enough demand for live garden ornaments for next to nothing. Virtually all able bodied unemployed could do this task. Most would, rightly, be unwilling to at this price.

When pressed, some commentators in favour of the scheme will water it down to some support for say charity workers being paid by the state. This is not a job guarantee as charities have objectives to fulfil and will only employ workers that have positive productivity, they have no need for people who are simply useless, or negatively productive (require surveillance to prevent them from doing damage, or extra work to undo the damage they cause through ineptitude or inadequation to the tasks at hand). Therefore, unless coerced into becoming labour camps, charity or other voluntary sector organisations will operate like the paid-for economy does: as a market which matches demand and supply, some of which, unemployment, doesn’t clear.

Reduced to that form, it could still be useful, but the description is misleading: not only this is not a job guarantee, but it does not need to be introduced as a grand new scheme. The government is already tasked with doing things that are uneconomic, and it should be enough to simply add to the credit of local or national government departments, so that they employ people the usual way (temporary jobs for temporary credits, which might include paying voluntary sector organisations’ workers if that’s the most expedient way to achieve public good objectives). The level of subsidy can be tweaked until the unemployment level goes down, within the limits imposed by the requirement that the market for jobs still clears, that is (almost) all credits being spent and not saved due to the lack of applicants.

Once we’ve accepted the job guarantee is not guaranteed, we’re left with a temporary increase in government expenditure, and there’s no reason to invent a nomenclature and separate bureaucracy for something that’s already part and parcel of government operations.

Not only would this be silly, but it’s a massive marketing error from MMT proponents. If the job guarantee is about matching government expenditure with the unemployment situation, it’s acceptable to many constituencies in the spectrum of public economic opinion, while presented as a “job guarantee” scheme that cannot possibly work in reality and is very naturally mistaken for unacceptable things, it’s unacceptable to virtually everyone except a fringe. This might induce many of them to reject the whole of MMT en bloc, for no good reason as the rest of MMT is solidly grounded in common sense.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s