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0:16
civics of the policy proposal so here's
0:23
an overview I'll talk about the causes of unemployment the appropriate goals for a sovereign government and by that
0:31
we mean what we've been talking about all day one with a sovereign floating exchange rate non convertible currency
0:38
cost of unemployment bill was getting into this in his last comment some
0:43
lessons from the New Deal which we gradually forgot and then abandoning the
0:51
commitment to full employment and this is almost the exact title of a book written by Bill Mitchell that is very
0:58
good talking about this period and then pavlina will take over and talk about
1:05
the job guarantee program in both theory
1:10
and practice and how this can be used to achieve what we think are the
1:15
appropriate goals of a sovereign government and contrast that with the
1:20
view that growth alone is an appropriate goal and then conclude so anyway the
1:27
causes of unemployment I I want to look at two different kinds of problems the
1:35
first is short run causes of unemployment for example we find
1:41
ourselves in a deep financial crisis with unemployment rates that are
1:47
approaching great depression levels and what causes that and then turn to over
1:57
the long run we also operate with chronic unemployment that is we don't
2:04
normally achieve full employment and i'll talk about two problems there first
2:12
demand gaps and second structural unemployment that is growth without job creation so in the
2:21
current crisis we lost over 8 million approaching 9 million jobs already and I
2:26
put already down because I don't believe we're anywhere near through the crisis I
2:32
think this is 1931 that is were two years into the crisis and we could very
2:39
well see continued job loss for many years but even if we only take the
2:48
official projections of the so-called experts who do believe that we're
2:54
starting on the road recovery even they agree that unemployment is going to remain high for years so even if it
3:01
doesn't get worse they are saying the best-case scenario is very high unemployment for a long time the lost
3:12
opportunities from this period Warren is talking about the lost output and so on
3:17
of course we've got that but we also are losing opportunities for people who
3:22
should have been coming into the labor force in the past two years for example my college graduates who are finding it
3:29
very difficult to get any a kind of job much less a decent job we have people
3:36
who have had to take part time employment rather than full-time employment and of course career
3:43
advancement has been hindered by the downturn so there are lots of lost opportunities because of the crisis I
3:51
think that I if we do a careful assessment of the number of jobs that we
3:58
need right now it's probably well above 20 million jobs because not only do we
4:04
have to replace the jobs that have been lost and make up for the jobs that should have been created to take care of
4:11
the people who would have come into the labor force if it had been operating
4:16
at a higher capacity but also even at the business cycle peak back in two
4:21
thousand seven we were nowhere near full employment so to provide enough jobs to
4:27
take care of those and get us to something close to full employment we're
4:32
going to need 20 million jobs well over 20 million jobs probably and just
4:38
contrast that with what Obama was promising when he came into office we're going to either create or save two to
4:45
three million jobs obviously it's far too little nobody really is looking at
4:50
big enough numbers I am told by people who work with politicians in Washington
4:56
that a new jobs bill is still possible but they're talking about tens or maybe
5:03
hundreds of thousands of jobs it's not going to be adequate nobody is thinking on the scale of the kind of program we
5:11
need we need a massive number of jobs now the problem is that Washington
5:19
during the first two years the crisis really wasn't focused on job creation it was closed on Main Street we all know it
5:26
was focused on saving Wall Street maybe it needed to do that we probably have
5:31
different opinions over whether that was necessary or not but in any case the
5:37
problem is that right now both the politicians and the population at large
5:43
believe we've already spent so much money how can we possibly afford to
5:48
create 20 million jobs now it's too late we're not going to be able to save Main Street because we spent too much on Wall
5:56
Street and so I think that this confusion about what's affordable has
6:01
become the major barrier now there always is a barrier to proposing this program we've always encountered
6:08
resistance to the idea that the government should be responsible for ensuring full employment and we'll try
6:14
to make that case but now this affordability and oh no we've already spent so much money on Wall Street that
6:21
we can't possibly afford a reasonably sized Employment Program
6:28
that now the deficit hysteria is the main barrier to getting us out of this
6:35
deep recession that I think will continue for many years so that is sort
6:41
of our short run unemployment problem dealing with crisis and getting things
6:46
going but we have had a long run employment problem and that really
6:54
results from two really different causes
7:00
first is and Bill was alluding to this and this is dealt with in his book that
7:06
i mentioned that unemployment came to be used as a policy tool that is
7:13
unemployment was not a problem to be tackled by government policy no
7:19
unemployment became the policy tool to deal with the supposed problem of
7:27
inflation so policy actually I was
7:33
targeting unemployment using that to
7:39
keep inflation rates low and so I know all the economists or anyone who studied economics them knows about the the NAIRU
7:45
approach we're trying to get unemployment up high enough that it will prevent inflation or prevent inflation
7:53
from accelerating and so that is the use
7:58
of unemployment as a buffer stock that is and Warren describe this process
8:05
those unemployed people are supposed to help keep wages from rising and then that helps keep the pressure off prices
8:13
and so it keeps inflation low or marks call to the reserve army of the unemployed and so it's sort of ironic
8:20
that you had people like Milton Friedman adopted Marxist ideology that we need
8:26
that unemployed reserve army to keep labor in check ok so that was
8:34
one aspect of the problem and then there is another aspect a structural unemployment problem I'm not going to
8:41
read the the long quote here but the ILO has I produced a lot of research on
8:48
structural unemployment and they noted in 2007 the date is important because
8:54
this is the peak of the business cycle that we had 200 million unemployed
9:00
people around the world no doubt this is a vast undercount okay I don't want to argue about that but obviously it is a
9:07
very large number and they emphasize this is in spite of strong economic
9:14
growth and unemployment every region in the world has to face major labor market
9:20
challenges so what what they're saying is that strong economic growth is not a
9:25
solution to this unemployment problem it is going to exist even with strong economic growth okay and why is that it
9:34
is because growth fuels productivity growth which they said averaged 26
9:44
percent up to that business cycle of peak over the past decade on average around the world but jobs had only grown
9:52
by sixteen point six percent and meanwhile of course populations are also growing and so the unemployment problem
9:59
is becoming worse in spite a very strong productivity growth in fact it's not in spite of its because of its because
10:07
labor is becoming more productive that we don't need as many workers in order
10:13
to have economic growth and again The Economist in here will recognize this is David Ricardo's machine problem so David
10:20
Ricardo pointed this out back in the 1820s he said this is going to be a
10:25
continuous problem that through labor-saving technological advance we're
10:31
going to create a growing pool of unemployed labor that we can't put to use so
10:36
cardo was very pessimistic about the long-run outcomes we were able to put
10:44
this off for a very long time because we were able to find ways around this problem by opening up new markets
10:51
creating new sources of demand but it has become a chronic global problem that
10:58
growth alone will not create enough jobs okay so what do we think should be the
11:07
goals of a sovereign government now I think there are many we have mentioned several times that we conceived of in
11:14
John Kenneth Galbraith terminology there is a public purpose so there are things
11:19
we want the government to provide for us okay maybe we want decent social
11:25
security for the age but I'm taking a step back from that and just in the most
11:30
general terms possible what are the most important things that a sovereign government should do for us well it
11:38
ought to ensure that we have full use of domestic resources and it has the fiscal
11:47
capacity to do this economic growth and promoting economic growth alone is not
11:54
going to give us full capacity use so we think that government ought to be
12:01
focusing on full employment because it's much more important to have labor fully
12:06
employed than it is to have say our agricultural resources fully employed
12:12
although we ought to aim for that too but let's make full employment a primary
12:19
goal and as Warren keeping it keeps emphasizing for political reasons not
12:25
really free economic reasons we need to make price stability also a goal and the
12:31
problem is that for a very long time orthodoxy is thought these two goals are completely in conflict you cannot have
12:38
both of these at the same time you either can have full employment and then you're going to have inflation
12:44
or you can have price stability but you're going to have to have a lot of unemployment okay so what we're trying
12:50
to do is to promote a program that can give you full employment with price
12:57
stability okay and that this should be the goal of sovereign government and our
13:04
argument is it has the capacity to do this okay bill sort of got into this in
13:10
his last comment and because I presume most people here are not academic
13:16
economists what I'm going to say it's pretty obvious to you but to academic economists this is all new now they
13:24
recognize that unemployment does have a cost and that is ok you don't fully
13:31
utilize you get these open gaps as bill was talking about all right we lose some
13:37
net income because those people could have been working and earning income and producing goods and services GDP could
13:44
have been higher and so that's what economist focus on and it's significant okay and as bill and Warren have been
13:52
arguing though the losses in the past two years are just tremendous in terms
13:58
of lost GDP ok so that's one thing but the sociologists and political
14:06
scientists would point to these other things which are also huge and they're almost always ignored by economists okay
14:14
just run through very quickly poverty social isolation crime regional
14:21
deterioration because unemployment usually is regionally concentrated in all the Americans note we can identify
14:28
parts of the country that suffer from unemployment to a greater extent than
14:34
others health issues family breakdown school dropouts you know this is well
14:39
established in the literature outside economics it promotes violence ethnic
14:45
hostility even terrorism the loss of human capital because when people are
14:51
unemployed for long periods of time they become unemployable I partly
14:57
because of behavioral changes but also because of the way that potential
15:03
employers perceive them two years unemployed I don't want to take a chance
15:08
on you so they whether it's a real human capital loss or perceived capital loss
15:14
it will prevent them from having the same job opportunities that they would
15:20
have had if we hadn't gone through this two-year period okay and hysteresis
15:25
long-term unemployed become unemployable okay because of these all of these
15:31
things that I mentioning here okay you become homeless and this is going to
15:39
have a very long-term impact on your employability okay benefits of full employment again the economies are going
15:46
to point to the first one they produce goods and services they add to GDP of course that is a big benefit but there
15:53
are lots of other social and political benefits of achieving full employment on
16:00
the job training and skill development so if you're employed you will be
16:06
increasing your human capital poverty alleviation I'll mention this again in a
16:12
few minutes community building social networking Pauline and we'll talk very
16:17
briefly about Argentina we went down there and we saw the benefits to communities of creating jobs and areas
16:25
that had had no jobs before a jobs program was created social political and
16:34
economic stability are all promoted by full employment and then finally there's
16:41
this notion that our colleague Matt force debtor is written about and unfortunately he was going to be here
16:47
but he couldn't there are positive feedbacks reinforcing dynamics so in a
16:54
sense there is a multiplier effect of all these things so if you just add up the benefits okay we get more GDP we get
17:01
poverty alleviation and so on there also is a multiplied impact greater than the sum
17:07
of these individual benefits from achieving full employment okay well we
17:17
went through a period similar to what we're going through now and of course we
17:23
had two major reforms that I think had a huge impact on our experience in the
17:33
post-war period the first was that finance was downsized and constrained
17:40
read John Kenneth Galbraith the great crash and it will sound extremely
17:46
familiar the account he gives the kinds
17:52
of financial institutions innovations practices that were all put in place the
17:57
rising inequality the growth of finance all previous to the 1929 crash sound an
18:04
awful lot like what we went through in the past decade okay anyway we massively
18:09
downsized finance and mostly that was not the government downsizing the markets downsized it this time around we
18:17
prevented the markets from doing the downsides markets wanted to downsize Wall Street okay and if we had left him
18:22
alone they would have done it but we stopped him this time and then we constrained them and this helped to
18:30
promote financial and economic stability in the post-war period the other kind of
18:37
reform that we had was the direct job creation we created about 13 million
18:42
jobs in the you know the alphabet soup of programs that we had so I've listed some of these here and the unemployment
18:51
rate was greatly reduced by these programs and Marshall is written on this
18:58
because I know some writers have argued that it didn't reduce the unemployment rate but that's because they counted
19:04
these 13 million people is still unemployed even though they're showing up to work so it really it was a
19:09
political decision I made now to understate the true impact
19:16
of the new deal now the problem is that gradually this first reform was eroded
19:24
in the post-war period because financial institutions found ways around the
19:29
constraints which of course is natural profit seeking behavior by growing
19:35
competition from unregulated financial institutions the so-called shadow
19:41
banking system and a regulatory response to that oh the commercial banks that are
19:47
heavily regulated can't compete with the shadow banks that are lightly regulated so we need to reduce the regulations
19:53
okay so for all those reasons we got rid of most of the New Deal constraints on
19:59
finance and of course the problem with the second the direct job creation is
20:04
that in the post-war fairly rapid economic growth we came to believe we
20:11
don't need these programs growth alone trickle down rising tide raises all
20:16
boats in all these arguments that the growth will create the job so we don't need the government to engage in direct
20:23
job creation in the post-war period for
20:30
the first two decades or so we had the Golden Age of capitalism highest
20:37
sustained growth rate we had no financial crises a 20-year paranormally
20:42
in US history every 20 years we had a depression okay we not only didn't have a depression we had no financial crises
20:49
so we had minor recessions but we
20:54
recovered quickly but it wasn't true just for the US and bill could tell you the same story about Australia and it
21:00
wasn't just true for the developed nations the developing world also had the highest sustained growth it had ever
21:07
experienced in fact it was better than our industrial revolution the developing
21:12
world was growing faster than the UK did during the industrial revolution so it
21:18
it was a golden age of capitalism we had
21:25
a commitment to high employment now bill would talk about a commitment to full employment in Australia and they
21:31
probably came close to achieving that in the u.s. we never really embraced that
21:37
but we did embrace high employment okay I we achieved unemployment rates for
21:44
white males of three percent okay almost as good as Australia but there's only white males okay we were not really
21:51
committed to full employment including women and especially african-americans
21:58
and so their unemployment rates were much higher than this we had the lot of
22:04
people miss named the 1946 act they say the full employment act but it wasn't the full employment it was the
22:10
Employment Act okay but it did commit the government to trying to maintain a
22:16
low unemployment for most groups if not full employment we had the creation of
22:22
the u.s. middle class over this period they were sustained by jobs and decent
22:28
wages the problem is Minsky started writing in 1957 arguing that yes we have
22:37
created the conditions for economic stability a generally high wage economy
22:43
a high consumption economy constrained finance economy and all of these things
22:50
are conducive to rapid economic growth with financial and economic stability the problem is stability is
22:56
destabilizing okay so he predicted that the financial institutions are going to gradually break free of these
23:02
constraints are going to engage in risky or behavior and he also foresaw that we
23:10
could start to get inflationary pressures building even before we get to full employment in this kind of economy
23:17
I don't have time to go into that but anyway in the in 1962 in spite of this
23:26
go an age the u.s. rediscovered poverty found out that actually we still had
23:32
poverty in 1962 and so this was sort of a shock in Washington it's a book by
23:37
Michael Harrington pointed this out and so they decided that we need a war on
23:43
poverty and Minsky actually was involved in this war on poverty he was close to
23:48
shriver and Hubert Humphrey and he wrote lots of letters to them and actually
23:56
wrote papers and was writing a book on poverty and employment at this time he
24:04
was at UC Berkeley and he said the problem of the war on poverty is that
24:09
you're focusing on the supply side you're trying to stimulate the supply-side economic growth is going to
24:17
create jobs and then we just need to make sure we have workers that are ready for the jobs so we need to emphasize
24:23
more training and getting people to change their behavior get rid of the culture of poverty the Moynihan thesis
24:30
and so on and then we'll have welfare for the people who aren't able to work
24:35
okay so that's what the war on poverty was Minsky said this is going to fail and he wrote letters to all these people
24:42
and saying the war on poverty is not going to reduce poverty it's going to fail why because first ISA is
24:49
demoralizing you're telling people who are unemployed or an end poor that you
24:55
got to reform yourself first okay and then maybe you'll be able to get a job without supplying them a job so even if
25:02
they did it even if they went to school got educated God training we're not creating any jobs for you okay there was
25:10
no significant job component in the war on poverty and Minsky calculated that if
25:18
we just supplied one minimum wage job to each poor family we would lift
25:24
two-thirds of all poor families out of poverty even if the minimum wage pays a
25:30
total annual income below the poverty line the family is still getting income
25:35
from sources and so he actually you know went into the data and calculated one minimum wage job per family would eliminate two
25:43
thirds so in instead of the war on poverty he said give him jobs you'll get
25:48
rid of two-thirds poverty later Stephanie and I calculated the same thing in the Clinton boom came up with
25:55
exactly the same number one minimum wage job per family would eliminate two-thirds of poverty okay the final
26:06
objection that Minsky had was he said okay you're going to provide welfare maybe that's a good thing the problem is
26:13
Americans are not going to support support a generous enough welfare safety net in order to lift people out of
26:20
poverty and of course that prediction turned out to be true yes we gave welfare but it was never enough to lift
26:27
a family out of poverty what we really needed to do was give him jobs and Americans he argued will support that
26:34
Americans believe that if you work you ought to be able to get out of poverty but Americans don't support giving
26:39
welfare to lift people out of poverty now I the poverty rate did fall and some
26:45
people have wrongly said it was the war on poverty but it wasn't it had nothing to do with it okay if you actually look
26:51
at the data the reduction of poverty rates from 1962 to 1973 which was a
27:00
large reduction of the poverty rate fell almost in half it was an almost entirely
27:05
due to social security payments to the elderly so we greatly reduced the
27:12
poverty rates of the elderly that had nothing dude war poverty gave Social Security and the other was a civil
27:18
rights movement that increased the labor market outcomes mostly for African
27:24
Americans okay and that was a long term trend actually that had been going on since World War two it was just a
27:30
continuation of the trend and actually for African Americans poverty rate continued to fall till Reagan for the US
27:39
as a whole is stopped falling in 1973 okay so anyway the war on poverty did
27:46
fail just as Minsky argue that it would okay from 73 forward the US and Bill
27:55
argues in his book I most or is a bill all all other developed nations
28:03
abandoned the commitment to high employment and full employment outside
28:09
the US and I this was associated with the rise of free market ideology we can
28:16
all remember Reagan's campaign against welfare queens who supposedly Drive
28:22
Cadillacs government is the problem the supply side trickle down economics is
28:28
all we need Clinton arguing that we need to end welfare as we know it and I
28:35
actually think there was a very good aspect to Clinton's agenda areas that we
28:41
need to change the way that Americans look at poor people we need to make them
28:46
see them as deserving poor and the only way to do that is to get them off welfare and into jobs I think that was
28:52
completely correct the problem is Clinton didn't give him any jobs okay said we're going to take away welfare now you go get a job but he didn't
28:59
provide the jobs if he had provided the jobs it would have been I think a successful policy Bush of course talking
29:06
about the ownership society if you're interested you can go to the leaving Institute I've wrote a paper in 2005
29:11
that said the this promotion the ownership society for most Americans the only thing they own is our house and
29:19
what we have got going on in the United States writing this 2005 is a way that's
29:24
going to ensure the Americans are just going to lose their homes okay so it's actually going to reduce ownership and
29:31
society and then finally we under
29:37
Clinton the Democrats sort of very strangely and ironically became the
29:42
party of fiscal responsibility which has always been the role of the Republican now it became the primary policy of the
29:50
Democrats we got a balanced budget and they learned the wrong lesson from the Clinton years when we ran a budget
29:57
surplus because the economy performed very well in terms of growth of course
30:03
it was a debt household debt fueled boom which was absolutely destined to
30:12
eventually collapse but the lesson they learned was Oh budget surpluses lead to
30:19
rapid growth okay when actually it's a rapid growth that created the budget surpluses so anyway they Democrats
30:27
become the party that's always advocating tightening fiscal policy and
30:32
finally we had the rise of something that takes a variety of names jamie
30:39
Galbraith called it though the predator state many people call it financialization or neoconservatism or
30:46
neoliberalism Minsky actually called it the rise of money manager capitalism and
30:52
that that I over the past decade well longer than that but over the past
30:59
decade has built up the conditions that finally led to this crisis this is my
31:06
last slide yes now pavlina is going to take over and talk about the specific policy proposal
31:16
okay this is the final stretch so hanging there so today most of the day
31:23
we have mostly focus on our operational understanding of government spending so
31:29
now we get to the vision how do we utilize this operational understanding
31:34
of government expenditures to get past the obsession with the financial ratios
31:40
with these numerical measures of government success and actually get to the real thing talk about financial
31:47
ratio in context of what's happening to the real economy so the our vision is
31:54
I'd say a smithy envision Adam Smith its vision Adam Smith said that the wealth
31:59
of a nation rests within its people so this is what Bill was talking about not wasting human resources so how do we do
32:06
that so this is what we think of features of responsible fiscal poly
32:12
policy we don't use unemployment and human livelihoods as means to check
32:17
inflation this whole idea that brandi was addressing that somehow unemployment
32:23
is a necessary evil and we have to put up with it in order to maintain price
32:28
stability there is the empirical evidence first of all is very spotty on
32:33
this economy is constantly redefined their NAIRU or their inflationary barriers and you know you look at the
32:40
data it's very difficult to find this particular level so let's just measure a
32:47
fiscal policy in terms of employment creation effects this is how we tend to
32:53
see things and if so long as we're living in a monetary production economy
32:59
where the access to livelihood is a wage paying job then that should be the
33:05
criteria for responsible fiscal policy
33:10
but you know we can debate that these are the questions that sort of emerged from from the historical perspective the
33:16
Randy provided and also you will see how we believe that this kind of approach utilizes this operational knowledge that
33:25
we've just built to build a very sustained of system so we are redefining sustainability in terms of employment
33:31
creation price stability as opposed to certain debt GDP ratios we have to
33:39
switch the conversation we really need to reorient our thinking about fiscal policy I like to argue that it's done in
33:46
a backwards way that what we are attempting to do is plug some demand gap whatever that means and Randy's was
33:53
alluding to this you know we we fixed some growth rate you know we come up with measures of potential output we
34:00
don't really know how much labor went into the production of that potential output would happen to the structure of
34:05
the economy how much was you know output produced by labor replacing technology we have no sense of this sort of dynamic
34:12
forces that are determining output so we we like to measure potential output in
34:18
terms of men and women put to work so the way to flip fiscal policy is not to
34:24
target a demand gap is that's not very clear what that means but instead to
34:29
target a labor demand gap and you know
34:36
we were arguing that this delivers more bang for the buck we do not know today
34:41
how much more even if we agreed that maybe deficit spending our is sustainable right even if even in the
34:48
most sympathetic i would say commentators to the deficit say look we need to push for that we got a def
34:53
suspend we still don't know how much we need to spend how large deficit spending
34:59
is large enough to produce the real outcomes that we are aiming for so what we are proposing is that we actually tie
35:06
deficit spending directly to the objective and you know exactly how much you need to spend how many people do you
35:13
want to put to work obama wants to save and create three to four million people okay put them to work you know exactly
35:18
what your wage bill is going to be you're going to find out your materials and your cost if you want to create 10
35:23
million jobs you know what your budget is going to be and you have directly achieved the goal as opposed to going
35:29
backwards through this vision of producing growth and hoping that somehow
35:35
the growth will lift up all boats and trickle down to the economy and the kind of job Joe so we we see a
35:43
responsible fiscal policy as an employment stabilization via direct job creation and we see direct job creation
35:50
is a permanent feature of policymaking it's because the objectives are to
35:57
guarantee full employment not for the short run but also for the long run in other words this is very different from
36:03
depression economics which is pro Krugman's you know euphemism that you
36:08
know finally the return of Keynesianism is because we're in a depression no we would like to achieve sustainable fiscal
36:14
policy throughout the short and the long run okay so what is the job guarantee in
36:19
theory let me just synthesize some of these ideas very quickly there is an alternative to deny there is we can use
36:27
unemployable or employed pool of labor as the buffer stock not the reserve army of the unemployed so I'll explain a
36:34
little bit what what that means this is the job a guarantee bill refers to this
36:40
program as a job guarantee their various other public service employment direct job creation you name it but what that
36:47
basically means is that you provide an unconditional offer of a public sector
36:52
employee job to at a minimum wage to anyone one who wants to work this way as
37:00
a permanent program and conditional program it maintains and it attains and
37:06
maintains for employment okay so essentially the features of the job guarantees that this is a bubble of
37:12
policy this is not trickle down economics it is a policy that hires off
37:17
the bottom it deals precisely with those that are either never employed or the
37:24
ones that are last into a job and first out of a job so it's a bottom-up
37:30
approach it operates with flexible markets via a buffer stock mechanism so
37:36
this is the part that we need to explain how the job guarantee serves as this buffer stock and I'm using you know bill
37:42
Mitchell's terminology here who basically you know made the case number
37:48
of years ago that just like any you know commodity buffer stock you can stabilize the price of that of that
37:55
stock by simply selling selling it when
38:00
it is you know the price is too high buying it when the price starts falling so you can envision labor as being a
38:07
kind of buffer stock where you offer an employment to all those who want a job
38:14
at a base wage and as that would be your
38:19
stimulus essentially that produces growth as that demand trickles up to the economy and the private sector
38:25
rejuvenates and starts demanding labor then the private sector will be able to
38:30
hire from the public sector pool by bidding up the wage once the private
38:37
sector has been saturated or has hired
38:44
as much as they as they desire if you observe sort of an overheating economy
38:49
inflationary pressures the private sector decides that it needs to downsize then those workers will be laid off and
38:56
instead of moving into unemployment they move into the public sector buffer stock
39:02
so essentially what this program does is it establishes a wage floor to labor
39:08
today the wage floor of labor is essentially zero because you can hire
39:13
somebody that is willing to work at a premium above the zero wage there or
39:18
earning at the very moment so this is how we could talk more about this sort
39:26
of mechanism but this is a program that then deals with any kind of unemployment
39:33
that you are trying to solve cyclical unemployment the long-term structurally
39:40
unemployed seasonal unemployment as well as the entrance into the labor market
39:45
you know my college students that are looking for a job the benefits of this
39:52
program of course is that it also creates an employable pool of labor and it maintains and enhances a human
39:59
capital we like to always argue that this / offers both the job as well as an
40:05
opportunity to improve skill to train enough for training and education it's a targeted program as opposed to this this
40:13
indiscriminate aggregate demand management program that the plan that we seem to be implementing today or in the
40:20
way fiscal policy is conducted today it's very targeted you know where the unemployed are you take the contract to
40:27
the worker you deal with distressed areas you look at their resources you
40:33
look at their needs and you mobilize them so it's a very targeted approach it also is an approach that takes workers
40:39
as they are you're not trying to you know educate people and hopefully they
40:45
will find they will become employable in the eyes of the private sector and find employment you provide the opportunity
40:52
and then also you provide other opportunities to train to become employable and transition to the private
40:59
sector so this program can be seen as a transitional employment program its
41:06
safety net that captures the unemployed and prepares them for private sector work if they so desire of course the
41:15
project's have to be useful and valuable we all think that there are plenty of useful things to do so just to summarize
41:23
is the voluntary program nobody is forced into working for it for this job
41:29
guarantee the spending level is always at the right level however many people show up for it that's how much you spend
41:35
you don't spend more than necessary and you don't understand in a sense and it
41:42
has the transformative impact on workers on firms on communities and on the
41:47
economy i think i've already said a lot of a lot of the things that i've listed here I know firms also benefit from this
41:54
because it replaces unemployed with employable workers it reduces their training costs they have a visible pool
42:01
of labor they know what these potential private-sector workers have worked what
42:08
kind of experience they have received and so they benefit from that as well this is a policy that can lift the floor
42:17
so are going back to the earlier discussion about taxing the rich and how do we redistribute while you could you
42:22
can improve the income distribution by lifting the floor and if you set the wage of the appropriate level then that
42:29
would lift people out of poverty okay it's a permanent program and by
42:35
permanent program again I just want to emphasize that it just doesn't it doesn't mean more demand it might mean
42:40
more better distributed demand okay the job guarantee the macro stability the
42:47
just let me touch on this once again that the wage provides an inbuilt inflation control mechanism then this is
42:54
because the compensation package establishes the floor this is the floor
42:59
to a standard of living for the entire nation again you spend on this fixed
43:06
price floating quantity rule this is what the previous speakers were alluding to previously you fix the price of Labor
43:13
and then let the blood the budget float with with the needs of the economy when
43:18
the economy decelerates the budget expands as those workers enter the
43:24
public sector as the econo Blue it has an expansionary effect when the economy growth the budget automatically
43:30
contracts US workers move out into private sector jobs so that's the counter cyclical mechanism and we we
43:37
just become benchmark for the prices to the extended wages are an input of
43:42
production of all reproducible assets then that will serve as an anchor to
43:48
prices as well okay so full full
43:53
employment and price stability also promotes currency stability and the idea
44:01
here is that we you know we are establishing better anchors than the current system we use labour as that
44:10
anchor this is not a solution for all labor market problems
44:15
we can use this program as an institutional vehicle as a program to
44:21
address specific goals may one urban you know in a city renewal maybe you want
44:27
green infrastructure investment you can use those resources then to direct them to the specific things you want to do
44:33
they there will be other things that you might want to be you know deal with labor market discrimination other things
44:40
this is not a panacea for all labor market problems but it's definitely better than the unemployment buffer
44:46
stock so let me very briefly talk about Argentina Argentina is one of the most recent cases of implementing a program
44:53
that mimics the job guarantee it is not job guarantee i want to emphasize it's actually a limited program but it was a
45:01
large-scale program it was implemented quite quickly and an hour view effectively so we have been studying
45:07
this program and looking at the macro effects as well as going to projects and visited those projects to see what they
45:13
did and how they impacted people now even though it was a smaller program it
45:20
still exhibited the features that I was just discussing of this sort of macro
45:25
Universal job guarantee program the Argentinian program was implemented as
45:30
an emergency measure it was depression economics how people took to the streets they demanded from the government jobs
45:36
the government gave them jobs and they gave them jobs the program was running up and running in a few months just like
45:44
the New Deal era experience we were able to organize things to do for the
45:50
unemployed relatively quickly it was a part-time job it offered four hours of
45:55
community work to the unemployed heads of households at a minimum hourly wage and two million people showed up for
46:02
work this is about thirteen percent of the labor force in Argentina and Argentina granted is coming down from
46:09
twenty-five percent of an unemployment so they you know their levels were close
46:15
to our real actual unemployment levels but higher than our official levels they
46:20
had this program had a considerable impact on the poor and especially on women and minorities who had access to this job it was
46:27
counter-cyclical it stabilized output prices and currency you look at the data
46:32
and you find all of those indicators stabilized GDP growth was between eight
46:40
and twelve percent from 2003 to 2007 and only in the last year dipped to five
46:46
percent so if job creation that produces growth as opposed to the other way
46:52
around the government budget moved into surplus the variety of things going on
46:57
there but of course you're generating a large you know a large amount of income
47:02
switch are being taxed the multiplier effect of this program I've looked at some of the measures and some of the
47:08
more conservative measures are is 2.57 meaning that for every dollar spent on
47:13
the program you're creating two point six dollars and of output now and what
47:21
happened did people get stuck in the public sector now actually what happened was that as the economy recovered many
47:27
workers transitioned into private sector jobs it has it was organized in a very
47:34
interesting way I can tell you about all those institutional details how it was administered how it was how the
47:40
resources were mobilized but suffice to say it was federally funded locally administered the government actually
47:47
maintained a database of skill and experience of the unemployed help them
47:53
transition to private sector jobs as well and from our visits as well it was
48:00
obvious what kind of impact this program had on the poor it empowered it provided
48:07
on the job training every project that we went to see had an adjacent room with literacy education with training with
48:14
various other courses that they can take I like to see this is like a new form of
48:19
microfinance as opposed to lending to people you just give them a grant for the wages and for the materials get them
48:25
on their feet get them to produce something and pretty much every project that we saw was some
48:31
people that set up shops carpentry shops or baby clothes tailoring shops or toy shops something that they could then
48:38
sell on the market but there were also products that were freely distributed to
48:44
the poor lots of food kitchens daycare center public libraries elder care
48:52
centers for the abused etc again the employers have hired from the pool in
49:01
the economy the economy stabilized very quickly one benefit of this was that it
49:06
formalized the informal sector in Argentina actually there's a very large share of the economy that's a great economy those that used to work under
49:14
the table where you should social security tax which cards they would be when they transition to private sector
49:21
jobs now they were working under contract the program established a wage
49:27
floor from all the people that transition you know a sort of the wage
49:32
floor because the limited program but from all the people that transition from the public sector job to the private
49:39
sector they were all hired at a premium ninety-seven percent of those were hired at a premium and communities were
49:46
transformed i can give you lots of examples but what was interesting is that the unemployed themselves proposed a lot of these projects they were the
49:53
ones that actually invented the kinds of things that they did they did massive landfill cleanups and recycling
49:58
initiatives and on and on and on so these are some some pictures of of
50:04
projects that we visited and you know lots of food kitchens they were lots of
50:09
poor poor communities but there were things like health promotion programs
50:14
subsistence farming there were a lot of projects outside of the Greater Buenos
50:21
Aires area which we visited the dealt with the agricultural projects you know water irrigation clay pits etc so again
50:29
growth itself is not the appropriate target and it's are you know you have to you have to wet it to job creation it
50:38
can promote inequality in this sort of progra for growth at all costs approach
50:44
can promote inequality it can harm the environment we haven't really said anything about the environment yet so we
50:52
are you know we are really looking at a bottom-up approach and that looks at
50:57
full employment through direct job creation a job guarantee we view this as
51:02
a program for shared prosperity you can set an environmentally sustainable
51:08
growth path and maintain price and currency stability we can do it we have
51:15
done it once in the past is have other countries in one form or another it's
51:21
the right thing to do I think we could debate this but you know I want to get
51:26
back to the point about having access to a job as a basic human right and I in my
51:34
opinion i think obama just needs a Roosevelt Ian resolve we could talk more
51:39
about this later but you know just the wage bill just the wage bill of hiring
51:46
20 million people a day I think Warren has proposed a tower of dollars an hour
51:52
or you could do a living wage of ten twelve dollars an hour we're looking at 350 to 500 billion dollars compare this
52:00
you know to the other expenditures but i want to emphasize costs here not in
52:06
terms of financial costs art is not necessarily the problem i just want to show you that in perspective you could
52:13
get deliver so much more bang for the buck in real in real terms if you target
52:19
your programs so we have a deficit in convictions I think deficit in
52:26
cleverness not necessarily an ability to fund and let me end with a couple of
52:31
quotes one is by FDR that says that you know the liberty of a democracy is not safe if its business system does not
52:38
provide employment and producing distribute goods in such a way as to sustain an acceptable standard of living
52:45
and the last quote is the a quote from Cannes this is
52:51
something that we as academics constantly run against and that's this idea that we have to keep five percent
52:58
or ten percent of the population in idleness the conservative believe that there is some law of nature which
53:04
prevents men from being employed that it is rashed to employ men or women and
53:09
that it is financially sound to maintain a tenth of the population in idleness is
53:15
crazily improbable the sort of thing which no man could believe who had not
53:20
had his head followed with nonsense for years and years thank you yeah yeah wait
53:32
a Warren reminded me that you know as I said they have been many countries that have done this in one form one another
53:38
Bill Mitchell has been working on the South African program but India passed a
53:43
job guarantee law which basically guarantees a hundred days of community
53:49
work to the unemployed and it's a law that's still being worked out but there
53:56
is a movement out there I mean people are recognizing the benefits the very many benefits of this approach and so I
54:03
think there are plenty of examples to to look to
54:15
you
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