A Government funded Job Guarantee programme is necessary & deliverable.
Back in the golden age of Keynesianism — after World War II and before the horrors of Monetarism rose from the ashes of the 1970s — we had near full employment in the UK. Government policy, following the recommendations of Beveridge, made sure there was enough spending in the economy and most workers could usually get work without too much trouble. But even then there were workers who were hard to employ, or there were dips in the business cycle that meant hiring eased a little. So how was full employment maintained during this period?
It was straightforward. Everybody knew that if you couldn’t get a job in local firms then you could always get a job with the local council.
Additionally, people who were disabled or injured, of which there were many after a war, were made provision for in the Disabled Persons (Employment) Act 1944, particularly Section 15 which led to the creation of Remploy — a guaranteed job for “person[s] who, on account of injury, disease, or congenital deformity, [are] substantially handicapped in obtaining or keeping employment”.
Effectively the local council (or Remploy) acted as the employer of last resort in an area.
How did this come about?
The effect is easy to understand once you realise that permanent jobs are not permanent. Thankfully we have abolished indenture. With a better offer you can move on and it is up to the employer to replace you.
If the employer cannot find a replacement the position remains unfilled and is listed as a vacancy. This effect is most pronounced in the public sector where wages cannot chase the market as quickly as the private sector. Public sector pay involves deploying public resources and that is subject to democratic controls. In local areas in the 1950s and 1960s that would involve a change in the domestic rates or business rates — the mechanism by which local taxation was imposed based loosely upon the rental value of property. Any change occurred once a year at most.
The result in the full employment era was a council that was happy to do more, but couldn’t get the staff to do it. From the worker’s point of view this looked exactly like a Job Guarantee — if they couldn’t or wouldn’t get a job in a local firm, and weren’t covered by the Remploy system, the council would find them something to do.
Almost everybody was matched to the vacancy list and the numbers were sufficiently low that the variation in the domestic rates was kept to a minimum. Local income tended to lead to local spend and that could be recovered via adjustments in the business rates — something local councils had control of at the time.
Private jobs were well paid, with decent conditions thanks to strong unions and competition for labour. Jobs with the council generally seen to have lower pay, but with a decent pension to look forward to on retirement.
Why it failed
The 1970s stagflation era and the rise of Monetarism spelt the end for local council last resort employment.
Growing unemployment meant that council vacancies were taken up and, since there was a fixed number, they ran out. Political action was too slow and unable to raise sufficient discretionary spending locally to employ everybody.
Those councils that did try to employ people found businesses lobbying the Conservative government during the 1980s over the resulting increase in business rates. Lobbying that eventually resulted in the removal of business rates from local council control.
Over the following decades local council powers to raise taxation were further curtailed until we have the current situation where councils have a great many legal responsibilities but no effective mechanism to raise funding to pay for them.
As people lost their jobs in the private sector, and were unable to find other employment, resentment built over those in council jobs who now appeared to get paid more, as unions were still strong, and had a cushy final salary pension. This was in stark contrast to the private sector where final salary pensions were being closed to new entrants and wages suppressed.
Since all public sector jobs will act as a buffer if they are not very well paid, we are now seeing the last resort function operating in the sort of jobs for which it is not appropriate. NHS wards are operating with 60% of the nursing staff they require — due to appalling working conditions — with nurses leaving the profession and moving to less stressful private occupations during economic expansions. Similarly public teaching posts lay vacant in ever increasing numbers as private schools get more demand for places. The work in these areas does not diminish though, and instead is spread across fewer staff leading to ever more intolerable working conditions for those remaining.
The Modern Money Job Guarantee
So how does a Modern Money Job Guarantee learn from history and address these mistakes?
The first, and most important, change is that the finance for a Job Guarantee is provided by the Currency Issuer, not the Currency User. A Currency User has to raise funds before it can spend, whereas a Currency Issuer spends in order to cause funds to be raised.
In the UK, Parliament is the currency issuer, in the US it is Congress, however in the Eurozone — due to the neoliberal treaties of the European Union — it would be the European Central Bank as there is no democratic fiscal authority. Under neoliberal dogma the belief is that you don’t need one.
In addition the Currency Issuer funds the Job Guarantee in an open ended manner — much as it does for state benefits or military escapades. As Modern Money tells us, this is no issue for a Currency Issuer which is limited only by what is available to buy at a price worth paying.
The Job Guarantee undertake to buy whatever spare labour hours there are for sale, wherever they are for sale within the jurisdiction.
This fixes the problem seen previously where the local council would run out of funds to hire people, or run out of authorised vacancies in the middle of a slump. The open-ended nature of a the Job Guarantee allows it to respond instantly, automatically and spatially — without waiting for any discretionary decision by committees, politicians, or bureaucrats. If you need a living wage job, you can have one — wherever you happen to live.
The central funding shows up in an area just as the level of spending is starting to drop. Since taxation rates are not altered local businesses see demand maintained and costs stay the same. Taxation is recovered via the sustained turnover and profit, and by maintaining employment in the area. In other words on the variable cost side of business, rather than the fixed cost side. This breaks the pro-cyclical decline caused previously by hiking business rates.
Businesses see a maintenance in demand for their products and services, without being forced to fund the process up front.
The Job Guarantee provides a socially minimum acceptable job at the living wage, but locally provided with reasonably work hours, holiday and sick provision. It is open to everybody at all times.
This means that if you can’t get a job in the private sector, or even if you don’t like what they have on offer, you can always get an acceptable living wage job on the Job Guarantee.
Simple competition then does the rest. Any private sector job that offers a worse deal than the Job Guarantee is eliminated — leaving in business only those firms that treat their employees with the respect they deserve. Firms have to compete for labour by offering better pay and conditions than the Job Guarantee.
Under a Job Guarantee, the parasite economy is eliminated leaving the real economy to flourish.
This helps eliminate the deterioration in pay and conditions in the private sector jobs which, in turn, stops the resentment caused by unfavourable comparisons with public sector jobs.
The Job Guarantee adds living wage workers to the employment pool of both the public and social sectors and they provide the buffer of people that move to and from the private sector over the business cycle. ‘Nice to have’ public provision can be undertaken by this army of people who are currently unutilised.
No longer are skilled public workers required to fulfill that role, so we can pay them properly, train them properly and ensure that provision is fully funded and fully staffed. A 60% staffed NHS ward is a national disgrace. Not just to the users of the service, but to those loyal and dedicated staff trying to keep the plates spinning and who are quite literally giving 166%.
Fadhel Kaboub delivers a clear concise explanation why a Job Guarantee programme is desirable, necessary and AFFORDABLE. City University London, 28 Apr 2018
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