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Here's what we have now.
If you want to know how that changes with a Job Guarentee please read below
1. Business is tight. Employer A hires Labourer B at the minimum wage. Employer A can then pile more and more work and hours on Labourer B because B’s alternative is the dole.
If you want to know how that changes with a Job Guarentee please read below
1. Business is tight. Employer A hires Labourer B at the minimum wage. Employer A can then pile more and more work and hours on Labourer B because B’s alternative is the dole.
2. So B ends up earning far less than the minimum wage for their hours while Employer A earns super-normal profits, or perhaps even normal profits in a downturn, when they shouldn’t.
Hardly fair is it. We have a minimum wage for a reason.
Hardly fair is it. We have a minimum wage for a reason.
3. However that scenario only applies in a system that is systemically short of demand and has no alternative employers bidding for Labourer B. There are other scenarios over the business cycle.
When you get alternative employers popping up, as you do in an expansion
When you get alternative employers popping up, as you do in an expansion
4. Business is good. Employer A hires Labourer B at the minimum wage. Employer A piles on the work. Employer C pops up, but doesn’t like the unemployed because they have no idea if they will turn up.
5. Instead Employer C offers the minimum wage and promises faithfully to be nicer to employees. So Labourer B changes jobs, and Employer A is stuck because the alternative is unemployed people who they have no idea will turn up, let alone work the crazy hours now expected.
6. Then Employer C piles on the work… Rinse and repeat.
You’ll note the scenario is highly dynamically disruptive, yet this is the scenario that plays out pretty much every day in areas like the construction business.
You’ll note the scenario is highly dynamically disruptive, yet this is the scenario that plays out pretty much every day in areas like the construction business.
7. It is partially the reason why getting things completed is so difficult. The cultural dynamic is corrosive and workers walk off the job.
Now let’s look at boom time:
Now let’s look at boom time:
8. Business is really good. Employer A hires Labourer B at the minimum wage. Employer C pops up, doesn’t like the look of the unemployed and starts touting round their alternative offer at a higher rate.
9. Labourer B asks for more money, or they’ll move. Employer A doesn’t like the look of the unemployed, because they have no idea if they’ll turn up, so agrees to pay more money because there’s loads of work coming in and charges accordingly.
10. The unemployed buffer has little effect on the behaviour of business because it is a one way trap designed to frighten labour.
Now lets replay those interactions over again with a Job Guarantee in place.
Now lets replay those interactions over again with a Job Guarantee in place.
11. Business is tight. Employer A hires Labourer B at the market determined minimum wage. Employer A can no longer pile on the work onto Labourer B because there is a guaranteed decent employer who Labourer B will move to if ill-treated.
12. So Employer A has to keep the work at a reasonable level. Employer A now earns normal profits, and may move into a loss, while the worker earns the minimum wage.
Surely that is how it should be?
Let’s do the expansion phase:
Surely that is how it should be?
Let’s do the expansion phase:
13. Business is good. Employer A hires Labourer B at the minimum wage. Employer C pops up offering the minimum wage and has the choice of Labourer B or new Labourer D currently with a track record of reliability on the Job Guarantee.
14. Employer A would be happy to retain Labourer B but knows they have the option of Labourer D. Neither Employer A, nor Employer C can pile on the work, because the Job Guarantee is known to be decent.
15. So both Employer A and Employer C get the labour they require at a fair deal and stuff finally gets done.
And the boom phase.
And the boom phase.
16. Business is really good. Employer A hires Labourer B at the minimum wage. Employer C pops up offering the minimum wage because they have the choice of Labourer B or new Labourer D currently with a track record of reliability on the Job Guarantee.
17. Labourer B asks for more money. Employer A would be happy to retain Labourer B but knows they have the option of Labourer D so they turn the wage rise down. Labourer B can’t get any more money out of Employer C either for the same reason.
18. Yet still neither Employer A, nor Employer C can pile on the work, because the Job Guarantee is known to be decent. So both Employer A and Employer C get the labour they require at a fair deal and stuff finally gets done.
19. Importantly Employer Z will tend not to pop up and stay around because policy has been set sufficiently tight that the Job Guarantee buffer will not exhaust. But even if it did the Job Guarantee remains a credible threat to labour services in the private firms.
20. Nobody can become a parasite business. Competition for labour would ultimately eliminate one of the other players, force their profits down to the new normal, or drive an innovation cycle (doing more with less). All of which leads to cheaper prices, not more expensive ones.
21. The Job Guarantee wage is only paid to people working in Job Guarantee jobs. The more people on the scheme the more government spending. When they move to private sector jobs that payment stops — which automatically reduces government spending.
22. It is an ‘auto-stabiliser’. Spending goes up when the economy is down, and spending goes down when the economy is up.
So because it is carefully targeted and it automatically self-adjusts there is no requirement to correct any over spend via taxation on the other side.
So because it is carefully targeted and it automatically self-adjusts there is no requirement to correct any over spend via taxation on the other side.
23. The result of that is straightforward. The current low tax rates can stay.
It works like any Monopoly price setter you set the price and let it float. A one off price increase then competition takes care of prices after that.
It works like any Monopoly price setter you set the price and let it float. A one off price increase then competition takes care of prices after that.
24.A crucial point is that the JG does not rely on the government spending at market prices and then exploiting multipliers to achieve full employment which characterises traditional Keynesian pump-priming.
Full employment, automatic stabiliser and a fantastic price anchor.
Full employment, automatic stabiliser and a fantastic price anchor.
25. Effective demand V Aggregate demand
No more "getting on your bike" to find a job causing a brain drain leaving your own community devastated.
Give then a job where they live.
No more "getting on your bike" to find a job causing a brain drain leaving your own community devastated.
Give then a job where they live.
Between 1935 and 1943, the WPA literally built the infrastructure of modern America, including 572,000 miles of rural roads, 67,000 miles of urban streets, 122,000 bridges, 1,000 tunnels, 1,050 fifty airfields, and 4,000 airport buildings.
Also 500 water treatment plants, 1,800 pumping stations, 19,700 miles of water mains, 1,500 sewage treatment plants, 24,000 miles of sewers and storm drains, 36,900 schools, 2,552 hospitals, 2,700 firehouses, and nearly 20,000 county, state, and local government buildings
Yet, when you compare the two
They think interest rate targeting that keeps humans unemployed in a pen for years is more productive.
Than the unskilled workers who built America.
They think interest rate targeting that keeps humans unemployed in a pen for years is more productive.
Than the unskilled workers who built America.
