from the road centre for international
economics and finance at brown
university
this is the road center podcast i'm mark
blythe
on this episode i talked with economist
pavlina chernova
about a policy proposal that's having a
moment here in the u.s
the creation of a federal jobs guarantee
as pavlina describes it
it's not just a good idea but in the
face of our economic environmental and
epidemiological crisis
it may be a necessary one pavlina is
assistant professor of economics at bard
college and author of the case for a job
guarantee
a financial times best book of the year
she is also a leading figure in the
world of modern monetary theory
which as you'll hear in our conversation
is deeply connected to her conception of
how this kind of policy would work
we talked about how a jobs guarantee
would function in america
why it may be better for the economy
than universal basic income another
proposal that is having its moment
and why now may be the moment for this
type of intervention
here is my conversation with pavlina
welcome pavlina it's great to chat to
you thanks for having me mark
why do you think now is the moment where
people are receptive once again to the
idea
of the federal government or if you
don't live in the united states the
central government
actually giving people guaranteed
employment what is it about this moment
that's made this
topical again yeah i think there are a
number of reasons why
the conversation is reviving i think
part of it has to do with the fallout
from the 2008 financial crisis
i mean we endured some of the highest
unemployment rates uh in the postwar
history
and then slogged through the longest
jobless recovery
that we had seen i mean it took 12 years
to bring unemployment down to 3.5
percent
and you know if you look at it
regionally you know there are
communities across the united states
that are perennially
in the double digits and i think we were
rethinking economics on many multiple
levels you know
how the financial sector should work
what public policy should do but
jobs was one of those conversations
that was left on the back burner which
is the reason why we went through a very
prolonged jobless recovery and now
people are saying
okay how can we move forward you know we
we're looking for structural solutions
and the job guarantee is that sort of
policy response
um that attempts to
add to the safety net if you will
a public option uh for bad for for
like a better word um a traditional
program
just a promise that if you go and look
for a job you can find it and that we
have
multiple ways of of dealing with
unemployment so um
that i think is part of the conversation
but of course
the danger is that you know attention
will wane once the crisis has left us
and so it's important when we articulate
what the job guarantee is
to talk about it not just as a crisis
program that we just pull out of a
pocket and implement
now and then forget about it five years
later when it's actually doing its magic
so i want to talk about two ideas one
which has also got a great deal of
public currency and is often seen
as the alternative proposal um to a jobs
guarantee which is
universal basic income and then the
other one is
active labour market policies because in
a sense
the active labor market policies and the
jobs guarantee are pushing in the same
direction
right what they're trying to do is get
people into work and also compress
wages and raise the wage floor so that
basically you have a better kind of
capital labor share
whereas ubi seems qualitatively
different is promised upon the fact that
the world of work is going away
so how do you think about those two
alternatives vis-a-vis
the job guarantee program on the ubi
question i am not convinced
by the argument that the world of work
is going away
now that comes from two places typically
one is that maybe there is some
technological armageddon that we are
facing
and on this issue i'm with the
roboticists
they don't believe that we are anywhere
near um that technological
uh those kinds of technological
advancements to displace our jobs
um the second thing is that you know
we've had these conversations about
technology taking away jobs for very
very long time
and my position is that you know 80 of
the jobs of the future we haven't even
conceived of today
so the question is what will that world
of work look like tomorrow i think
that's the anxiety that
a lot of people are feeling and you know
there is a little bit of resignation
that if we just can't create
jobs by god let at least give people
income
which i you know i'm sympathetic to the
view but i'm not sympathetic to the view
that we cannot create jobs
because there are plenty of um things
that we need to do that are not done we
acutely
uh see this and feel it in our
communities in our
you know public social life that you
know there's dilapidated infrastructure
there are communities in disrepair there
are environmental problems
i mean their care needs there's lots of
work to be done and we just
need to be able to do it so the job
guarantee will be one mechanism you know
not the only one but it will be one
mechanism to deliver some of those
social services that are missing
now on the second question of labor
active labor market policies now
that is a question of how we restructure
the world of work going forward
um and you know we need a multi-prong
and a
a you know attack clearly uh because we
have had
the hollowing out of the manufacturing
sector middle-income jobs etc the loss
of union work as well and some of the
protections that came with those good
jobs and the gigification of course it
works so um
what can we do going forward should we
accept sort of the precarity
um or can we actually create a new world
of safe and secure work
you know the example i often give is
manufacturing
that was extremely dangerous in the last
century
you know the 19th century it was very
poorly paid and it was not a good job
and yet today we identify manufacturing
with the good jobs and the good
communities they engendered
so today 80 of our economy is a service
based economy
what can we do to restructure service
work to provide the same kind of support
um an income for working people the job
guarantee is the
is basically the standard the public
um wage floor if you will that then the
economy will need to match
and so in that sense it is it is a
structural reform of a very particular
kind
it secures the floor so the active labor
market side of this coming at this from
a kind of more
scandinavian labor market one is that's
fine we totally get the floor
but there's a problem with the floor and
the you don't really get any kind of
incentive to increase productivity if
you have a floor and it's just the floor
that model is much more focused upon a
training component
and essentially compressing wages to
force firms to go out of business
if they're inefficient and redeploy
labor to those more productive parts of
the economy
is there a way in which the job
guarantee can basically be shaped
to have that type of positive thing that
comes off of more active labor market
policies
absolutely these are not either or one
way to think about this is that um
the job guarantee is not just securing
the floor but
it is a stabilizer economic stabilizer
and the way it can accomplish this
is if it actually effectively transition
transitions people back
into private sector employment uh or
other forms of more stable sector you
know non-profit public sector employment
when the economy recovers now
that kind of transitional aspect to the
job guarantee would work
exactly if we have the appropriate
training education
apprenticeships and auxiliary if you
will
service support services to help people
be successful in whatever they want to
do
so i think that these are these go hand
in hand
what i think is a bit more problematic
is if we have
active labor market policies without a
job
guarantee then what happens is that we
are kind of shuffling people
along the unemployment line if you will
some lose their jobs or they get them
and it is um it will be a known
situation for somebody
and when we talk about productivity i
usually
um like to put the emphasis on an
economy that has some unemployment
however small or large
that is zero productivity you could
argue it's even negative productivity if
we account for all the social costs of
unemployment
so employing the unemployed is more
productive
than uh having unemployment so
with that in mind it's obviously better
to employ resources than not employee
resources
your jobs guarantee and your sort of
broader work is associated with
a school called modern monetary theory
and on the podcast we previously spoken
to stephanie kelton
uh i myself has been described basically
as mmt adjacent
i like that one that's a good one so i
want to talk about the relationship
between the jobs guarantee
and mmt do you have to have a kind of
mmt economy for the for this program to
work
or can you do it without actually the
type of re-engineering and rethinking
the economy that mmt demands
well maybe it's worth saying that mmt
typically
is a a descriptive analytical project
it's a framework of analysis of thinking
and
there are few proposals that come out of
the mmt
body of work the job guarantee is one of
them so why isn't that fit why the
homology between the two
that's right okay and so mmt highlights
the important powers of the government
in delimiting their monetary system okay
you know one of the things that we say
is that the currency is a public
monopoly and there are a whole host of
implications that follow from that but
what that means in simplest terms
is that the state the government has
exclusive spending
powers that no other agent
has the second mmt component that
is probably not very familiar to folks
is that
um government by virtue of the monetary
system
creates a certain kind of unavoidable
unemployment
and when the public sector imposes taxes
whatever they are
fines fees dues you know unavoidable and
escapable
they're all in monetary terms we all
have to pay them
um and if we're unable to acquire the
resource to pay them we're in trouble
but it is the government as this the
ultimate source
of of the financing right of of the
currency that settles those debts and
dues
so in a way in a somewhat abstract way
that
the tax system creates unemployment
monetary unemployment when you say
unemployment is somebody seeking
wage work and if you then create
unemployment but then you abdicate your
responsibility for solving the problem
of unemployment then you have
you know a dysfunctional macro model so
in that sense the job guarantee
is is essential and you know i should
add here you know why does the
government impose these tax liabilities
and obligations on the public sector
it's not because it needs
funding but it because it needs
resources you know somebody has to sell
something
to the public sector in exchange for
currency and usually they provide
uh labor uh and resources and so the tax
system actually reorganizes our
collective public provisioning
and so the job guarantee is that missing
piece you can actually employ the
unemployed
in that process of organizing uh for the
community as a whole for the
for the economy as a whole so i see how
it follows from that framework as you
put it
but um gordon brown for example when he
was labor
uh prime minister actually not just
chancellor he kind of ran a day fact to
a job guarantee at the start of the
crisis
and there have been other attempts i
mean india is not running a sort of an
mmt economy they have the largest
jobs guarantee program so is it a
necessary homology or you know can you
do this without in a sense going full
mmt
i'm just wondering because i can see how
people are either attracted to mmt
and perhaps not the job program people
like the job program because they like
it better than ubi but they're a bit
concerned about do i need to buy mmt
and just trying to tease out the
necessary kind of relationship between
them
yeah i think that it is not necessary to
understand
why mmt and the job guarantee had
attached at the hip
it helps but if you
do not if you're not convinced by the
mmt premises
i think that we can agree on the fact
that the public sector is nevertheless
always responsible for macroeconomic
stabilization
or the fallout from unemployment so in
some in some
sense these costs of unemployment are
already part and parcel of the budget
now what mmt does say is that if you
have sovereign
currency or monetary system um that is
not
um you know you're not pegged to some
other currency or you're not part of a
monetary union you have a lot more
fiscal
space you are able to address public
concerns in much
more aggressive manner but it's still
true
that if you're part of the eurozone you
still have to deal with unemployment
you still have to bear those costs and
they will be resources that will be
expend
and it is better to employ people than
not
um employ them and so i think that um
the merits of the job guarantee
are there even if you don't have
monetary sovereignty but granted they
will be you know much more careful
budgeting resource allocation that might
come into consideration and
smaller policy space so let's turn to a
much more micro level
so i've lived in the united states for
about 30 years
and one of the sort of the definitions
of the us that i i walk around in my
pocket with
is this is a place where if you're
unemployed it's your fault
as opposed to in countries where i grew
up where it was very much the case if
i'm unemployed it's the government's
fault and you need to do something about
it
how do we deal with that difference in
political culture if you want to
basically
have a program that says no honestly
this isn't really anyone's fault it is a
macroeconomic problem
and it is the government's
responsibility to do something about it
and it can do something about it
how do how do you fight against those if
you will folk wisdoms
that ultimately if you lost your job
even if there's a big crisis it's your
job
it's your problem because 90 of people
didn't lose their jobs even if 10
percent did
yeah there are those folk wisdoms
that can be deployed effectively i think
by policymakers
um i think the counter argument to that
is that
at least in recent history the job
guarantee has been pulled i mean we've
been polling that idea that the
government is responsible
for providing employment opportunities
to the unemployed since
at least the late 60s and
it consistently polls very well upwards
of 60 percent
more recently though and especially
after the great financial crisis
um the gallup poll came out with a with
the number of uh
70 to 73 percent the most recent polls
uh from 2019 are again
up you know in the mid 70s high 70s i
mean it pulls
really very well and it's a bipartisan
um
support and in a way that that sounds
you know a little shocking in light of
the folk tale
you know why would people be supporting
it if they're this in the same
breath they're also saying it's your
fault i think it's because the lived
experience for most people
is that their jobs are insecure um that
uh they don't know when one a good one
will be around the corner
they know somebody who's unemployed uh
who's working sending hundreds of
resumes
so i think that there is definitely a
not necessarily going to dissinglance
but there
there are two tales if you will of
america
you know the very precarious labor
market experience and
and you know the need the need for for a
job
so if we look at the world from the lens
of what the job guarantee is trying to
solve
we have labor force participation has
fallen particularly since the great
recession even though it's up
so when you say four percent
unemployment it depends on what you mean
relative to what potential labor force
participation is
we live in a world in which it seems to
be very hard to generate any inflation
which strongly suggests again
there are unemployed resources which
could be usefully put to work
we face a climate disaster which we were
told three years ago we had 12 years to
fix and so far we've done the square
root of nothing
so this would seem to be a policy that
kind of checks a lot of boxes
so why then would it be that for example
private sector businesses
would be against this what's in the
current system that stops us moving
right what's the political economy that
stops us going this way
you know i'm not so sure that private
the captains of industry right now are
out there
talking against it that's i think not
our current problem although the
the the political economy concern that
you know koletsky
identified long ago is not to be ignored
now
i don't think this is an unsurmountable
problem a lot of people
say well captains of industry will
always oppose it um but
as you mentioned in the in our
introduction india
has an enormous job guarantee program
um and it covers many households 30
percent of households
and clearly captains of industries
didn't you know
uh didn't win they you know there will
be an
ongoing debate and uh
i think uh needs to defend the need for
the program
but you know laws are being passed and
they can be
passed when you say the job unity checks
in a lot of boxes i think
that is absolutely correct and it is
maybe um that we haven't paid attention
for a very long time
to this need of the public sector um to
do the heavy lifting i mean i've i
talked to you know uh
congressional aides sometimes and you
know
i use the new deal program and and and
for
relatively progressive folks and they
say oh yeah the ccc i didn't think about
that
now why didn't we think about that
because we have just you know forgotten
that history that very critical
important history and i think
people are awakening a little bit that
you know we could just use that tool yet
again now the climate uh disaster is the
most important thing i
i think that you know anyone needs to be
working on and so in that sense the job
guarantee is an ally
and what i'm hoping to do in my work is
just to articulate
why it makes good economic sense and
that
we there is no trade-off between jobs in
inflation
jobs and technology jobs and climate and
these
goals can be accomplished together so
the one question of course that everyone
is going to ask whether or not they
you know think about mmt budgetary
categories or not and let's face it most
people don't
is how much is this going to cost so you
did a study
where you basically budgeted for 15
million people in this program at 15
bucks an hour
also including which i thought was quite
generous full benefits
on a reasonable standard and i believe
also in the study was
affordable uh daycare which is something
that the vast majority of americans
simply don't have
so that 15 bucks when you add in
benefits and you're in daycare has got
to be about 26 27
an hour if you're doing that for 15
million people what does that add up to
as a kind of proportion of gdp
what would it be like we're spending
equivalent to what we spend on x
right what would that be okay so we are
you know
about one percent of gdp uh you know one
and a half percent of of gdp
think of it as maybe
two-thirds of the military annual
military budget
okay to employ 15 million people with
very
generous benefits now i wouldn't even
think about it this
way like that would not even be the way
that i would approach the question
one thing that um i want to stress is
that when we were doing these
cost financial cost estimates we didn't
really
reduce all of the other social costs of
unemployment
you know we didn't uh reduce the cost of
for example the impact on
incarceration you know in the in the
state of new york it costs 70 000
per year to lock up a person and a
person who doesn't have a
job um you know goes back to prison at a
higher rate
um and we know the jobs program for my
inmates um
uh you know reduce recidivism a lot so
we didn't even account for
for those kinds of costs and there are
many others i mean
uh you know how many kids go hungry to
school
and they have you know need for
additional
help and other programming there's just
countless
if you were to account for all of these
you could argue that
you know it's budget neutral but that's
not
what i think matters in this case
for two reasons the first is that
um the cost of unemployment already
there they're already baked in so you
gotta just simply choose you either pay
for unemployment or you pay to hire
people
the second reason is that we know that
unemployment
yo-yos in a sense that it shoots up in
recessions comes down in
expansions now the public sector does
the all the automatic spending
to stabilize the economy price
unemployment insurance food support
earn income tax rate you name it that is
an automatic counter-cyclical function
the public sector
must perform and it only it can perform
it the private sector cannot
so the budget will expand and it will
shrink
naturally um and so the number
it could be a moving target we could
chase that number it could be
zero uh or it could be a little bigger
depending on the crisis that's upon us
but it's immaterial because this is the
function of the government and from an
mmt perspective we know that
when you have sovereign monetary system
you are able to more effectively employ
the
public spending powers to stabilize the
economy so what would
be the difference if we had had a job
guarantee in place
and we were facing the pandemic that
we're facing how would the world look
different
you know i i think that we would have
been better prepared
to deal with a pandemic you know think
of how much
we the environmental problems didn't
stop just because we stopped going to
work
right but you know california is still
burning and somebody has to go and fight
the fires
um you know there's still floods there's
still hurricanes um
the work needs to be done and so it just
so happens that it's also
a bit easier to do this kind of outdoor
environmental work
in the middle of a pandemic but then
think of the other needs
you know the the challenges that we had
with contact tracing
the the the shortage of dispatchers when
so many people were calling and
trying to go to the hospital um there
were some real
needs in public services that if we were
thinking in terms of
a public health jobs corps
if we were thinking in terms of
preparedness to respond to climate
problems
we will have on standby if you will you
know a
um a public service army to address to
tackle these
these problems but i i want to give you
the example again of india
because not only is the job guarantee
program the largest
in the world but it has been the only
lifeline that people have had
during the pandemic it's only rural
employment guaranteed rural employment
but many people who lost their urban
jobs moved back to the villages
and they had no jobs but the job
community created them and the demand
picked up
um the hours were used up quite quickly
the guaranteed days were used up quite
quickly people were clamoring for more
um
there were strong calls for urban
guarantee what i'm saying is
is that even in the middle of the
pandemic people can figure out how to do
useful community work
and you don't have to be a terribly poor
country to figure this out we can
certainly do it as well
i think on that note that's a pretty
good case for a job guarantee i want to
thank you for being with us today
pavlina carnival thank you very much
thank you so much great talking to you
thank you
this episode of the road center podcast
was produced by dan richards
for more information go to
watson.brown.edu
roads thanks for listening
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