Unemployment insurance for the 21st century

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80 comments

1. w November 12, 2009 at 12:00 pm

   warren mosler has been talking about this and more for years
   1. eric November 12, 2009 at 8:39 pm

      “you’re going to have to cut off unemployment benefits to get people to show up–and even then you’re basically warehousing people at an alternate site rather than having them sit at home”

      Yes, after a brief period, cut off the benefits, and give them work instead. That would be fairer–why should my taxes pay a laid-off high wage worker more than a laid-off low-wage worker?

      And you’re not warehousing them, you’re having them do important work–potentially more important than the dumb thing they were doing before… Look at the great CCC projects.
2. But What do I Know? November 12, 2009 at 12:25 pm

   I think in most places you actually make more on unemployment than minimum wage. For example, my limited dataset of people on dole says they get about $1500 per month, which is more than working full-time at minimum wage (about $1200 per month by my calculation) — and unemployment doesn’t have FICA taxes (I think) and you don’t need to do anything to get it. . . Correct my numbers if they’re wrong, but for something like this to work you’re going to have to cut off unemployment benefits to get people to show up–and even then you’re basically warehousing people at an alternate site rather than having them sit at home.
   1. Skippy November 12, 2009 at 10:07 pm

      Old saying in the trenches of construction: Better to stay home and lose nothing, than take a job for a job sake and go broke.
3. DownSouth November 12, 2009 at 12:31 pm

   On a somewhat related note, PBS has a program on the Civilian Conservation Commission which employed 3 million during the Great Depression:

   http://www.pbs.org/wgbh/americanexperience/ccc/
   1. But What do I Know? November 12, 2009 at 1:20 pm

      @DownSouth

      Thanks for the clarification on the unemployment numbers. I’d be all for a program that would give people useful jobs which would maintain old skills and teach them new ones–I just don’t think the government is capable of doing such a thing on a nationwide scale. I guess I’m in Dave of Maryland’s camp on this one–the government (federal, state, local) is already responsible for so many jobs that a new program would invariably compete with them and simply create more red tape. . .
      1. But What do I Know? November 12, 2009 at 1:21 pm

         D’oh! That was for stf–my apologies. . .
4. stf November 12, 2009 at 12:35 pm

   BWdIK,

   1. 50% or more of the unemployed are not eligible for unemployment benefits. Much more if you include those not in the labor force.

   2. You don’t necessarily have to cut unemployment insurance. Wray has noted before that the two aren’t inconsistent. Indeed, one receiving benefits could raise income by taking a JG job, too. Then there would be a higher return to working than not working.

   3. The JG wage is a political issue. Setting it at the minimum wage is the least disruptive economically, but that doesn’t mean you can’t set it higher.

   4. People working are not “warehoused.” It’s well known that people not working see skills deteriorate, while also contributing (in the aggregate) to various social ills, which bring additional economic costs. Further, every person researching the JG has suggested job training and re-training as a core portion of a well-designed JG program.
5. Ryan November 12, 2009 at 12:42 pm

   This plan sounds great, except for one thing I can’t get around. I don’t understand how this wouldn’t compete with the private sector. If my city wants a new park, they would natural submit a request for a JG project rather than contract it out to a local contractor to build it because they would just have to pay for materials under JG. It seems that any new projects and resources would naturally flow to JG for the labor need. This would decrease employment in the private sector industries that perhaps would have otherwise received the contract. Can anyone explain how this does not occur?
6. zanon November 12, 2009 at 12:50 pm

   Mosler & Wrap are both post-keynesians. This has been a staple of PK thought for a while — not sure who came up with it first, but it isn’t that different from the 1930s WPA.
   1. stf November 12, 2009 at 1:12 pm

      Yes, you have to be careful that you don’t compete with the private sector. But the idea that there’s NOTHING worthy of being done that the private sector doesn’t already do (or the JG program couldn’t subsidize hiring low-wage workers on the part of exisitng private contractors or even non-profits for) is simply putting your head in the sand.

      And the fact that mistakes were made in past, probably misguided attempts at implementation is a non-starter. What large scale govt or non-govt venture hasn’t? Defense? Education? Health care?
      1. stf November 12, 2009 at 1:13 pm

         Oops . . that was intended for Dave from Maryland.
7. Dave of Maryland November 12, 2009 at 12:51 pm

   This has all been tried before.

   Back a dozen years ago there was a big push to get welfare mothers to work for their welfare. The local governments were to provide them with work of some sort. What sort of work did they get? Cleaning toilets at city hall, for the most part. This not only displaced genuine city workers, but the amount the mothers were paid fell sharply below what the city had previously paid their now displaced workers.

   Why were cities & counties so limited? Why could they not have found more worthwhile work? Simple. Real work, with real results, would be in competition with private enterprise. Say the unemployed were put to work repairing roads. Well, there are already private contractors who do that & who don’t want to loose their jobs. Since then, with increasing privatization of government functions, I am not certain that even cleaning toilets is available.

   Again & again we come back to Upton Sinclair’s 1934 campaign for governor of California: EPIC, which stood for End Poverty in California. Sinclair’s proposal was to set up factories to employ the unemployed, producing real goods. With all the outsourcing that’s gone on the last 15 years, there are just scads of things we could jolly well make on our own. When was the last time you saw a shirt made in one of the 50 United States of America? Upton promised that as soon as the economy recovered, the state factories of California would be shut down, but, alas, he was opposed by every business interest in the state & so lost his bid.

   So, so far as the state giving real work to its unemployed citizens, it’s a complete non-starter.

   An alternative idea, that the state sets up some sort of investment bank & advances money to entrepreneurs to set up factories IN AMERICA, to employ AMERICANS, would be the solution. Pity not a single state has the necessary money, or (in the case of North Dakota) unemployed citizens.

   I’ve long wondered why the state of New Mexico, for example, tolerates its impoverished citizens, as it is one of the poorest states in the nation. Yet it has a fabulous double-track railroad that runs, east to west, through the state. Dozens of freight trains a day, in both directions, use it. Were the state to set up a railroad siding in Grants & then build factories along it, those factories would have easy access to raw materials, as well as easy access to markets in Los Angeles & Chicago.
8. S November 12, 2009 at 1:02 pm

   This is nothign more than traidng welfare for workfare. The idea that this is a demand problem rather than a supply problem is a good starting point. The dirty little secret is that the light at the end of the tunnel is a frieght train heaidng for the middle class. Had bank debt been liquidated and on dwon the cap structure, the ramifications would be a natural reset – the evil deflation. Would the economy shrink, yes. But what is the difference between that and a middle income earner taking a minimum wage job combing sand? I posit nothing. The GDP in the US is pumped up by trillions in debt. Exactly how does GDP grow $4 trillion in a decade without creating a job. SPX earnings have doub;ed in the meantime. How is that? We all know so no need to belabor the point. There is absolutley nothign creative about this program. Indeed ROI on government spend is negative. And in the process you manage to pump up commodities prices which further devalues the middle class. It is ironic that all the solution peddlers always have an idea to soften the blow of their free market jihadism.yet another case of treating the symptoms.
   1. stf November 12, 2009 at 1:05 pm

      “ROI on government spend is negative”

      What’s the ROI on involuntary unemployment?
      1. S November 12, 2009 at 2:31 pm

         a necessary cost of capitalism – and the fertilizer for regrowth. been so long i know its easy to forget
9. Kurt November 12, 2009 at 1:15 pm

   First, I agree with Ryan. In times of high-unemployment (today), the JG would be less likely to compete withe private sector as there is too little demand. But, if JG is supposed to be countercyclical, how will it wind down when the economy recovers? What’s to prevent a city from converting city services to JG? Once that city park is built, why not have JG continue maintenance and upkeep instead of the Parks Department? Good management and oversight could keep this to a minimum, but there will be a strong temptation skirt the rules with shell non-profits that submit the proposals. (Disclaimer: I live in Chicago, so I’m predisposed to assume that lots of cousins and in-laws and close friends will appear out of the woodwork.)

   Second, will the job skills and training be relevant? A friend of mine has been unemployed for several months. While he hated his last job (car salesman, can you blame him?), what he needs most to be productively employed is Word and Excel skills. Obviously, any organization will have opportunities for him to learn those skills, but most infrastructure projects are instead going to need a lot of hammer-swinging, concrete-pouring, pipe-laying people. The skills that the white-collar unemployed have will still atrophy or, like my friend, not be built at all.

   I suppose the latter could be addressed if the JG also included a job training or cross training component (and possibly a job-placement function). So, in addition to performing projects, they would actively work to get people off the JG dole.
10. Edward Harrison Post authorNovember 12, 2009 at 1:22 pm

    Randall Wray (who wrote the original post) caught wind of this post and emailed me saying that analyses have shown that two-thirds of measured poverty would end if we could get one of these jobs per household

    That certainly goes a long way toward eliminating welfare, fighting crime, and reducing imprisonment.
    1. ScottB November 12, 2009 at 2:11 pm

       Ed, thanks for posting on this interesting issue. I have a number of (somewhat disjointed) comments.

       A point of reference: the minimum weekly payment for unemployment insurance in the state of Washington is $155 per week, but temporary bump-ups from the state and feds now put it at $225. The maximum is $611.

       We’ve already eliminated half of welfare. In the state of Washington, compared with pre-TANF (the “new” welfare enacted in the mid-1990s), inflation-adjusted per capita welfare payments are down 60 percent, food stamp outlays are about the same, and the poverty rate is higher. We’ve pushed many, many people off of welfare onto… I’m not sure what.

       TANF was all about “if we just get these folks into the labor market, then they will get to a sustainable wage through the magic of the wage ladder.” This turns out not to be the case. I have documented the median increase in wages for low-wage workers in the state of Washington for years, and it runs in the neighborhood of 35 cents an hour per year. That means if you get that $7.25 per hour job, you’ll make it to $10 an hour (in real terms) in about 8 years. Whoopee. Not anywhere close to self-sustaining. During recessions, that wage step-stool gets lower.

       The Urban Institute documented that about half of all the old welfare (pre-TANF) recipients had both a) low aptitude and b) a serious life issue such as mental illness, drug addiction, history of being abused, etc. Many of these people are not going to be contributing much in the way of productive labor.

       Mr. Wray says there are an additional 15 million people who would be willing to work for decent pay. Since when is $7.25 decent pay???

       Imagine you are a skilled trades person, accustomed to earning, say, $30 per hour. You’re unemployed, construction is in the dumps, so in addition to your unemployment benefits, you take on a minimum wage job doing construction. What happens when the economy recovers? What kind of wage do you think employers will be offering to a guy or gal who’s been working at $7.25?

       Put people to work in factories? Are we going to compete with the Chinese, Vietnamese et al at $7.25 per hour? Making what, at what prices?

       There are a lot of things we could do, such as:

       –more shared leave programs, where instead of laying off 10 percent of the workforce, a company cuts everyone’s hours by 10 percent, and much of the 10 percent cut in pay is backfilled by unemployment insurance.

       –we have the lousiest retraining programs of any developed nation. We need more and better retraining with more and better income support while workers are getting retrained. Right now, for most programs, the only income support one gets is the six months of unemployment insurance benefits.

       –there is a lot of good work that could be done through a jobs program run through non-profits, I’m thinking especially of social services and arts. But not at $7.25 per hour.

       –strengthen the ability for unions to organize. Yes there are all sorts of issues with unions, but they are the only force out there supporting higher wages. Anyone have a better idea?

       –let the value of the dollar fall. We are out of sync with other countries, let’s take the hit and become more competitive.
    2. Dave Raithel November 13, 2009 at 1:19 am

       “…two-thirds of measured poverty would end if we could get one of these jobs per household.”

       But this must assume there is some other wage earner in the household? That is about the only measure suggesting $7.25 times 40 times 52, with some benies, is reasonable. We are otherwise talking about adults living like college students, or recent HS grads who have thrown in to rent an apartment together. It’s better than the third world (nice electronics) but more like Eastern Europe post the fall than the America my parents had …

       I know that Wray is building on Minsky – when “the market” (i.e. the capitalists) fail(s), government (as our agent) is the employer of last resort.

       I am struck that his suggestion is perceived more a threat to other poorly paid workers than it is justified against those who repudiate Feinberg’s dicta …
11. bobh November 12, 2009 at 1:22 pm

    Reducing the number of unemployed leads to higher labor costs for capitalists, which leads to increased offshoring of jobs. The solution is to quickly get U.S. workers adjusted to third world standards of living. I read it in the New York Times:

    http://www.nytimes.com/2009/11/11/business/11views.html
12. Hawaii Dave November 12, 2009 at 1:23 pm

    Imagine a small town where the big local employer goes bust (or moves) putting the majority of people in the town out of work. There simply wouldn’t be sufficient jobs locally to absorb all the newly unemployed.

    Would this program force them to move? And if so, to where? And what about the two earner family where only one loses their job?
13. winterwarlock November 12, 2009 at 1:42 pm

    those with means are much better off creating their own job program. others are better off working in their community toward cultivating deficient talents.

    government is going to shrink dramatically, then continuously – parabolically. That is a done deal. everything at the fed level is temporary, because the cost is exponentially greater than the benefit (opportunity cost).

    once the states lock up, and that is imminent, many who failed to adapt will be locked. mobility, mobility, mobility.

    once again mad professor, it was a pleasure.

    just a few magic kernels of corn, to make reindeer fly.
    1. winterwarlock November 12, 2009 at 2:13 pm

       OTTAWA (CBC) – A recently opened Asian supermarket was fined $610 Wednesday for doing business on Remembrance Day morning, violating an Ottawa bylaw that prohibits stores from opening until ceremonies have finished at the National War Memorial.
       1. winterwarlock November 12, 2009 at 6:40 pm

          here’s your program:

          they have to admit they have no idea what they are doing;

          they have to admit that most current jobs are make-work;

          they have to pay labor 51%;

          they will not want to pay the few so much, despite the absolute necessity in order to create induction, the example required to demonstrate the profit in working again, to re-boot the labor engine;

          they will recognize that the talented kids are working full speed ahead on new economies, and the remainder have never had an example of real labor in their environment;

          they will talk and talk until their system crashes;

          we will remind them that, in order to install a new economy for them, we needed to be able to kick the old motor over one more time;

          all will be lost, and there will be pain.

          the computers are building barriers between and among consumers and producers. You just need to know enough about computers to get around those barriers.

          (they is the nexus)

          latest talk: “we may have bottomed, but it will be a long, hard hall back up, with recovery in 2013, and in the meantime state revenues will lag, and I’m retiring.”
          1. winterwarlock November 13, 2009 at 2:40 am

             Labor works under a labor superintendent, but those superintendents were systematically removed from the system before most of the current crop of workers had a chance to understand the operation.

             A programmer can work directly under corporate, government, or labor management. Only the latter belongs to labor for the purpose of computing 51%. The same goes for doctors in a hospital.

             Generally speaking, star labor, high-end talent, gives up short-term earnings, for stable earnings, greater stability / NPV, by sharing with less capable labor, creating the middle class. (have you checked the difference in pay between the doctor and the janitor in a hospital lately. The doctor is actually stealing from the janitor, in both absolute and relative terms. Quality has no need to steal.)

             They removed the labor superintendent, who both managed this process and also identified talent from the community for renewal, then pitted high-end labor against low-end labor, domestically, and finally rolled out labor arbitrage globally.

             Corporation uses a stick, and government uses a carrot, but both seek to seperate consumers from producers, for the purpose of installing a financial pyramid to exploit labor. That is now becoming increasingly transparent for everyone to see.

             An effective labor superintendent can not afford to pick up a tool, except for the purpose of discovery; there is simply too much to consider. Everyone else in the system looks only at what lies before them, for short-term profit, or lack of experience.

             One way or another, everyone pays when labor gets shorted by greed, compounded with misdirection. The only question is the penalties and interest due when time overcomes the deception, and everyone’s level of participation is revealed. It all comes out in a series of washers.

             There are plenty of good ideas; that is not the problem. The problem is removing the kernel that resides within the protection of the pyramid. He will use women, children, the infirm, greed, experts, executive scapegoats, whatever he can to prevent discovery. The process of discovery is part science, but mostly art; there is no substitute for experience.

             Who to fire? That is the question. The rest is auto-catalytic. The Law of Retribution ensures the outcome. In this case, however, the line is pavement. We cannot cross it, overshoot and return, in the normal way, to restore equilibrium (the states are about to hit the pavement at a high velocity).

             It is the disingenuous doctor, because of the number of them times their output gap times their negative multiplier rate across the economy times the speed to their discovery, not the corporate executive, who simply followed his lead, and rolled out the same process across all sectors globally. The ineffective group within the old family nucleaus is not the brains; it simply supplies the capital.

             Happy hunting.
             1. winterwarlock November 13, 2009 at 3:41 am

                Don’t give the finance guys more credit than they are due.

                The corporate doctors combined their psychographic conclusions, obtained in physical, psychological, and emotion experimentation in the concentration camps, with the public utilty holding company, demographic ponzi scheme model, and rolled it out globally, through the multi-nationals.

                Ah Professor Moriarty, we meet again!
14. DownSouth November 12, 2009 at 1:42 pm

    If Obama doesn’t get a handle on this, it is going to be his Waterloo. As far as the public is concerned, unemployment is by far the #1 issue, twice as salient as healthcare reform, and over four times as salient as banking reform.

    IN RECESSION THAT HIT CLOSE TO HOME FOR MOST, VOTERS ARE DOWNBEAT ABOUT PROSPECTS FOR QUICK RECOVERY, WANT MORE GOVERNMENT ACTION ON JOBS

    When asked what additional actions they think the government should take, a majority of voters support five initiatives:

    • 87 percent say they support passing a major new job creation tax credit for businesses that create jobs in the United States in the next two years (56% support strongly, 31% somewhat).

    • 81 percent support extending unemployment insurance benefits for those who have lost their jobs during the recession and are unable to find new jobs (48% and 33%).

    • 71 percent support putting unemployed people back to work at government-funded public service jobs that help meet important community needs (41% and 30%).

    • 63 percent favor giving a new round of tax rebates to lower- and middle-income Americans (35% and 28%).

    • 52 percent support providing increased federal assistance to state and local governments to prevent additional layoffs of government employees because government layoffs add to unemployment and harm vital services (23% and 29%).
    http://www.epi.org/page/-/tracking_the_recovery_survey/20090930_hart_poll_pr.pdf
    1. bobh November 12, 2009 at 2:01 pm

       Down South,

       Yeah, except Obama won’t do any of these things. I voted for him and was full of hope when he won, but I now think it would have been better for the country if he had lost to McCain-Palin. He has emptied the treasury to start a new bubble to enrich his banker supporters. He will soon solidify and expand control of the health care system by the insurance and pharmaceutical industries in order to give himself a “victory.” He has sold out gays, excused CIA torture, and will soon escalate the unwinnable war in Afghanistan. And while doing all of this, he is discrediting Democrats and liberals and making it appear that they have nothing to offer to solve the terrible national problems he inherited. McCain/Palin would have done the same things, and when it all collapsed Republicans would have taken the blame which might have cleared the way for the kind of programs you suggest. Obama, who came into office because of the support of liberals and populists who wanted change and had an unprecedented historical opportunity to make these kinds of changes, has refused to articulate or mount any kind of a liberal or populist approach to the problems we face or to use his position and rhetorical skills to explain why the right wing is wrong and how the rich and the corporations are hurting ordinary Americans. Instead he has tried to curry favor with Republicans, who screw him anyway, and treated left-of-center Democrats like lepers. He thinks he can get re-elected in 2012 with this strategy and with the same shallow, feel-good generalities that got him elected last year. I have begun to cringe when I hear him speak. There is not much there but charisma, ambition and marketing. At least Jimmy Carter had principles. I don’t think Obama believes in anything, and the Democrats will take eight years to recover from him when he loses in 2012.
       1. Vinny G. November 12, 2009 at 4:43 pm

          Ditto. I voted for Oh’bama, and really had my hopes high on him. What a major disappointment. The guy is weak, has no balls, just compromises left and right. All talk and no action. Just good ole’ bullshit. I wish I had voted for McCain/Palin, that way we’d be guaranteed a swift and total economic collapse that would have cut through the denial and forced this nation to actually tackle its problems. With Oh’bama we’ll still face total collapse, just that the agony will take longer.

          Vinny
15. Ina Pickle November 12, 2009 at 2:00 pm

    The problem that I see immediately is the tendency to drive wages down. If you really aren’t paying for the wages and capital costs of your workers, you are getting them at a ridiculous discount. Sure, that encourages employment, but it crowds out innovation, it gives a competitive advantage to people who aren’t paying their real costs of production, and it generally provides downward pressure on wages it seems to me.

    Also, I’m with Dave: it means that people will be menially employed so that they don’t invade other sectors. Otherwise, you’d have one person working in the architectural design division for minimum wage — that’s not even being paid by the company — and one at full pay and benefits? How long are you going to keep that second person on??

    I think that the WPA is a spectacular idea: big infrastructure projects are desperately needed, and traditionally the role of government. Why not stick to something similar to that, rather than a longer term solution that might warp the labor market worse than it already is? In short, I believe that this plan would be reimporting those low-wage jobs we’ve been exporting for awhile. I’m not sure how that helps us.
    1. Dave of Maryland November 12, 2009 at 3:26 pm

       The problem with WPA type projects is you litter the landscape with the results. The country is full of parks & benches & such. Japan has been trying this the last dozen years or so & it has lots of nice things to show for it, but it’s economy is still in the toilet. And will remain there until they figure out how to get real jobs.

       If factories here are in competition with factories overseas, there is a solution for that: Tariffs. Tariffs have a function, one well-known to Teddy Roosevelt: Equalize the costs of production among the various nations, so that no nation is a net exporter & no nation a net importer. So far as is possible, nations are to be self-sufficient. Do I care what the Chinese will do if we stop buying their goods? No, I don’t.

       Or you repudiate the debt, nationalize industry (what industry is left) & get Communism. Gus Hall, where are you when we need you? Presently we are madly generating tinder & desperately seeking a spark. This is insane.
    2. Michael Cain November 13, 2009 at 12:04 am

       “The problem that I see immediately is the tendency to drive wages down. If you really aren’t paying for the wages and capital costs of your workers, you are getting them at a ridiculous discount.”

       Indeed. Give me a week in any sizable city or county, or any of the states, and I can find a dozen large software projects that need doing. The private sector’s price tag for these is hundreds of thousands, or even millions, of dollars, so the projects don’t get done.

       A federal program might start at $7.25, but that’s not enough to hire programmers. OTOH, in the right places and times, I can hire plenty at $25 or even $20 per hour, and grossly undercut outfits like EDS and Deloitte. Similarly, I know a bunch of entrepreneurs with good ideas for a software project, but who can’t raise enough money to pay a dozen programmers market rates for a year to build the product.

       There will be lots of pressure to expand the program to include skilled labor at much more than minimum wage, but at a discount to the prevailing private sector wages.
16. Froggy November 12, 2009 at 2:13 pm

    Once you create this monster, it will insist on being fed forever. Countercyclical restraints would never be heeded and frankly, economic downturns are generally short in duration (the current one notwithstanding) so the idea of ramping up and unwinding this is a complete absurdity. Does anybody believe that the Fed is competent to unwind ZIRP at the proper time? The massive bureaucracy of this is 1000x more complex than what the Fed’s challenge will be, and we’re talking about people’s lives not interest rates and liquidity in the banking system.

    Environmental regulation, labor union self interest, capital gains taxes, corporate taxes, government debt, civil service rules, and a hundred other sets of handcuffs imposed to solve problems that in many cases do not exist continue to hamstring economic growth, efficient capital distribution, and ultimately job creation.

    Until the shackles are removed, we can’t grow. It reminds me of how we fight our wars since WWII, with one hand tied behind our back. If you are going to war, bring the full spectrum of combat power to bear on the enemy, utterly destroy and defeat him or don’t bother. Same deal here. Unleash the full entrepreneurial power of the American people and remove all of the stops. Overleverage substituted for this in the past decade and we are reaping the consequences.
    1. DownSouth November 12, 2009 at 6:13 pm

       Froggy,

       A recent poll showed that by a 3-to-1 margin respondents indicated it would be better to invest in job creation, education, and energy independence than it would be to focus on cutting government spending and reducing the deficit (see p. 28):

       http://epi.3cdn.net/4fc2e76fd3593d283f_qtm6bx19l.pdf

       However, our politicians only listen to people who believe like yourself–the 24%–and turn a deaf ear to the other 73%.

       Do you believe this is fair?

       Do you believe this is how a democracy should work?

       If the politicians continue to ignore the will of the overwhelming majority of the people in favor of opinions expressed by a minority like yourself, what do you believe will be the eventual outcome?
17. Ed November 12, 2009 at 2:18 pm

    I’d like to suggest this article on Slate as a starting point:

    http://www.slate.com/id/2235377/

    In 1999, there were 108 million private sector jobs in the US, as far as well can tell. In 2009, about 108 million private sector jobs in the US. The US population has grown by 26 million in that decade. Also, at no time since the Great Depression has the private sector created enough jobs to keep up with population growth. The balance has always been filed with government jobs.

    At the moment its a lunatic fringe idea, suggested by nuts like Rifkin, to suggest that the global economy just can’t create enough jobs to keep up population growth. I’m not sure why this is the case? The world added an extra 2.5 billion people in the last thirty years, the US at least another hundred million. We’ve added technology such as robotics and information technology that have enabled us to produce more with fewer workers. With incomes stagnating, it looks like you can’t expect increased consumption of whatever to make up the difference.

    To be contrarian, what is wrong with straight welfare? How many jobs in the US are really productive, as opposed to paper shuffling (see the health care industry)? It goes against all sorts of economic axioms to suggest that yes, the world can reach a condition of “peak jobs”, but the twentieth century was really unprecedented in terms of population growth.

    Keep in mind that for the non-elderly in the US, you need to be employed to pay for healthcare. This wasn’t the case in the Great Depression. People are less likely to have extended families to fall back on, and fewer people can just go back to their farms and live a subsistence lifestyle. In other words, Americans are more dependent on just having a job in the 1930s. The welfare state is somewhat more extensive -for the elderly and retired! Mass unemployment should work out somewhat differently.

    Thinking about unemployment really needs to be much more out of the box.
    1. Dave of Maryland November 12, 2009 at 3:31 pm

       <iAt the moment its a lunatic fringe idea, suggested by nuts like Rifkin, to suggest that the global economy just can’t create enough jobs to keep up population growth. I’m not sure why this is the case?

       It might just be that electricity is excessively efficient. It might be that we should restrict its use.

       To be contrarian, what is wrong with straight welfare?

       How many jobs in the US are really productive, as opposed to paper shuffling (see the health care industry)? It goes against all sorts of economic axioms to suggest that yes, the world can reach a condition of “peak jobs”, but the twentieth century was really unprecedented in terms of population growth.

       Keep in mind that for the non-elderly in the US, you need to be employed to pay for healthcare. This wasn’t the case in the Great Depression. People are less likely to have extended families to fall back on, and fewer people can just go back to their farms and live a subsistence lifestyle. In other words, Americans are more dependent on just having a job in the 1930s. The welfare state is somewhat more extensive -for the elderly and retired! Mass unemployment should work out somewhat differently.
    2. Dave of Maryland November 12, 2009 at 3:35 pm

       I had a post started but hit the wrong key & it posted. Apologies.

       At the moment its a lunatic fringe idea, suggested by nuts like Rifkin, to suggest that the global economy just can’t create enough jobs to keep up population growth. I’m not sure why this is the case?

       It might just be that electricity is excessively efficient. It seems to become more so with every passing year. It might be that we should restrict its use.

       To be contrarian, what is wrong with straight welfare?

       The problem with welfare is that you DO NOT, for any reason, want a large, idle population. Such people are easily led, easily whipped into mobs, which can have unfortunate consequences.

       If the goal of business is to make money, the goal of government is to KEEP PEOPLE OCCUPIED. Doesn’t make any difference what they do or how much money they make or even if they’re happy or not, though, of course, we would hope otherwise. I suggest we throw out GDP in favor of median income & the unemployment rate, as a better yardstick of national wealth.

       Uncontrolled, rising unemployment is the most dangerous thing that can happen to a nation.
18. MG November 12, 2009 at 2:23 pm

    In theory, this proposal has several appealing points and remodels a system that really needs to be reformed. Unemployment insurance in the U.S. is based on a late 19th century/early 20th century model and an economy where manufacturing was a key contributor in terms of GDP & the number of jobs.

    Still, there are several key missing points and holes in the reform as outlined above including the governance model for the ‘councils’ (which easily could turn into political patronnage jobs), how additional benefits including health care would be handled, and exactly what types of jobs would be eligible.

    This is DOA as a concept though because of the terminology used by the author. It is easy to shut down with simple and easy words that resonant with people and get them emotionally & engaged. Always surprised that Democrats do such a piss poor job of wording their proposals and generally lack an understanding of how common voters will perceive them. Using the term “New Deal 2.0” alone likely turns off at least 40%-45% of eligible voters and probably even more.
19. converger November 12, 2009 at 2:29 pm

    How soon we forget. This is a great idea. But not a new one.

    Jimmy Carter enabled the Comprehensive Employment and Trainng Act (CETA), which provided public sector minimum wage jobs for me and pretty much everybody else I knew during the late 1970’s – an absolutely miserable time to be a young person entering the job market, as many people in my age cohort can testify. Basically, local governments used it as a cheap labor pool. Building of long-term job skills was uneven at best. But needed public sector work got done that would have otherwise languished, and people were able to get by in difficult times.

    You *could* expand it into the not for profit private sector as well, using a mechanism similar to work study at colleges across the country – if you pony up money to hire someone for a job that maintains and builds skills, the government matches it, or even just adds a good benefits package. It means that instead of minimum wage, a qualified person can actually get a living wage doing real stuff, in a job where they actually learn something. In fact, you could build some excellent apprentice and vocational programs around something like this, with incentives in the form of benefits assistance by the government when companies hire out of the JG pool.
    1. ScottB November 12, 2009 at 2:57 pm

       CETA did funnel money into non-profits. I know, I worked in a CETA-funded position for several years in the late 1970s. The organization did good stuff–crisis intervention, counseling, youth programs, etc.
20. MG November 12, 2009 at 2:31 pm

    Reality though about the unemployment numbers is that if you really tease them out, workers with at least a bachelor’s degree have an official employment rate of 4.7% according to the BLS (think this is right but it is around 5.0%). Even if you the U6 number, I would bet it is still no higher than 6.5% or so. Unemployment rate for those with a graduate education is generally not available (at least I didn’t see it on BLS) but I would bet it is incredibly low especially in healthcare provider professions, accounting, and engineering fields for those with some experience.

    The people that have really taken it on the chin in this unemployment market on the whole are those with no work experience (e.g., recent college graduates), those with a high-school education or less, and professionals in their late 40s & up. Americans are concerned about unemployment and the economy. No denying that but it really is a group of “have” and “have nots” in terms of the job market.
21. stf November 12, 2009 at 2:54 pm

    That’s just stupid.
22. ScottB November 12, 2009 at 2:59 pm

    Of course, another solution is to cut the work week.
23. Jojo November 12, 2009 at 3:17 pm

    The REAL problem is that there are too many people and not enough jobs to go around.

    Despite people claiming to be doing the work of two or three people due to layoff’s/firing’s, productivity was UP 9.5% last month! What could be the cause of such a large increase when less people are working? Increased automation and efficiency are the only reasonable answers.

    What we need to do is kill off the excess people and reduce the birth rate worldwide!
24. davver November 12, 2009 at 3:20 pm

    I believe there is already a real world example of this proposal. Its called Japan during the lost decades. Plenty of useless infrastructure make work jobs over there. Unemployment was and is way lower then ours. Somehow, though, it doesn’t seem to have worked.
25. Marshall Auerback November 12, 2009 at 3:27 pm

    I’d like to respond to Dave of Maryland’s point. First of all, this isn’t an “either/or” proposition. Government as ELR should be a permanent, countercyclical feature of the economy, but in the current circumstances, it will not in and of itself totally solve the unemployment problem. Once you have this incorporated as a permanent institutional feature of government, it’s much easier to play around with it and raise the pay, benefits, etc. It can also help to reform health care insofar as ELR could offer a robust “public option” to people within the program, so you could reform our system from the bottom up. The most important thing is to get it introduced with a minimum of political and economic disruption. It’s a buffer stock to control prices AND generate fuller employment. You might still need additional spending (or tax cuts) to generate higher paying jobs and help increase aggregate demand. But ELR is not a program that operates by “priming the pump,” i.e. by raising aggregate demand.
    As Pavlina R. Tcherneva and Randy Wray have argued, (http://www.cfeps.org/pubs/wp-pdf/WP43-Tcherneva-Wray.pdf),
    ELR hires off the bottom; it is a buffer-stock program and as such, it will stabilize the price of the bufferstock – in this case, wages at the bottom. The goal is full employment, but with loose labor markets. This is virtually guaranteed if ELR hires off the bottom. With ELR, labor markets are loose because there is always a pool of labor available to be hired out of ELR and into private firms. Right now, loose labor markets can only be maintained by keeping people out of work—the old reserve army of the unemployed approach. The ELR compensation package should provide a decent standard of living even as it helps to maintain wage and price stability. The size of the living wage will depend on each individual country. A package of benefits could include healthcare, childcare, sick leave, vacation, and contributions to Social Security, so that years spent in ELR would count toward retirement.ELR experience prepares workers for post-ELR work–whether in the private sector or in government. Thus, ELR workers should learn useful work habits and skills. Training and retraining should be an important component of every ELR job. Finally, ELR workers are engaged in useful activities. In advanced nations for example, they can focus on the provision of public services, such as environmental clean-up. However, developing nations like Argentina may have much greater need for public infrastructure—for roads, public utilities, health services, and education. It’s worked in Argentina via the Jefes program and could easily be implemented in the US.

    I personally would add that there is nothing wrong with doing something for the most disadvantaged to start with. The last president who did that was LBJ.
    That said, a number of these jobs are not “dead end” jobs. As Randy Wray suggested in “Understand Modern Money”, ELR workers could be assigned to a number of jobs that are not currently undertaken by profit seeking firms, but which are nevertheless socially valuable, such as public school classroom assistants (ELR workers could be particularly valuable for students whose first language is not English), safety monitor (ELR workers could be assigned to public school grounds, playgrounds, subway stations, street intersections), neighborhood clean-up/highway clean-up, day care assistants for children of other ELR workers, library assistants, ELR artists or musicians (much as FDR’s New Deal employed both Jackson Pollock and Wilhem de Koonig), low income housing restoration projects (such as Carter’s “Habitat for Humanity” type low-income housing restoration), or use of the same people for green tech assistance (installation of solar panels on homes, for example). ELR could also be used as a subsidy for a worker retraining in another profession, or perhaps incorporated into some forms of education assistance, much like the GI Bill. We could implement a national service requirement under ELR, much as some countries now have a military draft. ELR could also be used as an alternative to ‘junior year abroad’ and thereby help a student defray the costs of university tuition fees, or a Peace Corps type program for domestic functions. There are any number of possibilities that could be addressed through this program.
    1. Dave of Maryland November 12, 2009 at 3:43 pm

       Let’s see if I can do a better job with italics.

       Government as ELR should be a permanent, countercyclical feature of the economy, but in the current circumstances, it will not in and of itself totally solve the unemployment problem. Once you have this incorporated as a permanent institutional feature of government, it’s much easier to play around with it and raise the pay, benefits, etc.

       It can also help to reform health care insofar as ELR could offer a robust “public option” to people within the program, so you could reform our system from the bottom up. The most important thing is to get it introduced with a minimum of political and economic disruption. It’s a buffer stock to control prices AND generate fuller employment. You might still need additional spending (or tax cuts) to generate higher paying jobs and help increase aggregate demand. But ELR is not a program that operates by “priming the pump,” i.e. by raising aggregate demand.
       As Pavlina R. Tcherneva and Randy Wray have argued, (http://www.cfeps.org/pubs/wp-pdf/WP43-Tcherneva-Wray.pdf),
       ELR hires off the bottom; it is a buffer-stock program and as such, it will stabilize the price of the bufferstock – in this case, wages at the bottom. The goal is full employment, but with loose labor markets. This is virtually guaranteed if ELR hires off the bottom. With ELR, labor markets are loose because there is always a pool of labor available to be hired out of ELR and into private firms. Right now, loose labor markets can only be maintained by keeping people out of work—the old reserve army of the unemployed approach. The ELR compensation package should provide a decent standard of living even as it helps to maintain wage and price stability. The size of the living wage will depend on each individual country. A package of benefits could include healthcare, childcare, sick leave, vacation, and contributions to Social Security, so that years spent in ELR would count toward retirement.ELR experience prepares workers for post-ELR work–whether in the private sector or in government. Thus, ELR workers should learn useful work habits and skills. Training and retraining should be an important component of every ELR job. Finally, ELR workers are engaged in useful activities. In advanced nations for example, they can focus on the provision of public services, such as environmental clean-up. However, developing nations like Argentina may have much greater need for public infrastructure—for roads, public utilities, health services, and education. It’s worked in Argentina via the Jefes program and could easily be implemented in the US.

       I personally would add that there is nothing wrong with doing something for the most disadvantaged to start with. The last president who did that was LBJ.
       That said, a number of these jobs are not “dead end” jobs. As Randy Wray suggested in “Understand Modern Money”, ELR workers could be assigned to a number of jobs that are not currently undertaken by profit seeking firms, but which are nevertheless socially valuable, such as public school classroom assistants (ELR workers could be particularly valuable for students whose first language is not English), safety monitor (ELR workers could be assigned to public school grounds, playgrounds, subway stations, street intersections), neighborhood clean-up/highway clean-up, day care assistants for children of other ELR workers, library assistants, ELR artists or musicians (much as FDR’s New Deal employed both Jackson Pollock and Wilhem de Koonig), low income housing restoration projects (such as Carter’s “Habitat for Humanity” type low-income housing restoration), or use of the same people for green tech assistance (installation of solar panels on homes, for example). ELR could also be used as a subsidy for a worker retraining in another profession, or perhaps incorporated into some forms of education assistance, much like the GI Bill. We could implement a national service requirement under ELR, much as some countries now have a military draft. ELR could also be used as an alternative to ‘junior year abroad’ and thereby help a student defray the costs of university tuition fees, or a Peace Corps type program for domestic functions. There are any number of possibilities that could be addressed through this program.
26. Dave of Maryland November 12, 2009 at 3:53 pm

    Let’s see if I can do a better job with italics. I see the answer is no. Apologies again.

    Government as ELR should be a permanent, countercyclical feature of the economy, but in the current circumstances, it will not in and of itself totally solve the unemployment problem.

    Agreed, the government should do this, but unless it produces product for profit, where will it get the money?

    That said, a number of these jobs are not “dead end” jobs. As Randy Wray suggested in “Understand Modern Money”, ELR workers could be assigned to a number of jobs that are not currently undertaken by profit seeking firms, but which are nevertheless socially valuable, such as public school classroom assistants (ELR workers could be particularly valuable for students whose first language is not English), safety monitor (ELR workers could be assigned to public school grounds, playgrounds, subway stations, street intersections), neighborhood clean-up/highway clean-up, day care assistants for children of other ELR workers, library assistants, ELR artists or musicians (much as FDR’s New Deal employed both Jackson Pollock and Wilhem de Koonig), low income housing restoration projects (such as Carter’s “Habitat for Humanity” type low-income housing restoration), or use of the same people for green tech assistance (installation of solar panels on homes, for example).

    These are things that city/county/state/federal government ALREADY do, to the best of their ability, within their means. The only way to do this in times of rising unemployment & falling tax revenues is if Washington prints money & hands it to the states. Only Washington can run a deficit.

    We could implement a national service requirement under ELR, much as some countries now have a military draft.

    Conscription, as we all know, is free labor. To the extent the jobs are necessary anyway, we merely displace paid labor. Conscription works with the military, since we have to have one, no private company wants to do it, and the government wants to get by on the cheap.

    Otherwise your idea is essentially a plea for Communism. I’m okay with that, actually, but some others are not.
    1. Marshall Auerback November 12, 2009 at 6:01 pm

       Dave,
       I don’t think my proposal is a plea for “communism”. It’s an adjunct to a failure of the private sector to provide full employment. I realise that some people think that anything the government does is akin to socialism, but I don’t share that perspective. I’m never going to persuade those people who view this as a theological issue, so I’m not going to try.

       So the question arose: “If you want to build a bridge in Minneapolis and use the jobs guarantee program to do so. What happens at the company who would have gotten that contract otherwise? Is this a case where the project would not have happened otherwise because it is happening in a period of recession? The mechanics of that issue need to be fleshed out for me.”

       The answer is that the more obvious jobs that you describe, such as restoration of public infrastructure and the provision of new infrastructure are probably the types of things that should be done outside the ELR program. Even though WPA workers did engage in these kinds of programs, the level of expertise, the environmental impact stuff, the higher safety thresholds, etc., probably would make these types of programs inappropriate for an ELR worker. Remember, it is not designed to outbid the private sector (and therefore become inflationary) but to provide a pool of employed workers which could eventually be drawn by the private sector. Because the government has control of the “printing press”, it can always outbid the private sector, but you don’t want to do this. You want it to act as a buffer stock, in effect using employed workers as the means by which prices remain anchored. You’re not trying to create an inflationary wage spiral, but to create a floor on wages and employment, thereby arresting debt deflation dynamics.

       Think of it more as something where ELR workers “sell” their time in exchange for dollars, rather than collecting welfare. You’re really not targeting the same people who would build a bridge in Minneapolis, which would be more of a traditional “pump priming” exercise for the government.
       1. Dave of Maryland November 12, 2009 at 7:20 pm

          Well, Marshall, what, exactly, will the government be hiring people to do? All the positions you mentioned in your previous post are, a) make-work, b) things governments already do to the best of their ability & budget, c) not appropriate for a lot of workers, d) things that are a drag on the budget & generate little additional revenue, and e) things people commonly complain the government shouldn’t be paying for in the first place. A teacher’s aid is paid sufficient to support (her)self. Not a cent more. You are dreaming if you think she’ll get medical, or pension, or more than the bare rudiments of a vacation. She won’t be able to support a family, but she will have all her time consumed. You’d get more bang for the buck if you paid her sit at home. The core reason why we work is to have money so we can DO SOMETHING ELSE. No one ever talks about how underpaying workers steals their time. Time they could better use doing something else. Something more productive.

          Yes, we can clean up the environment & build a new green energy grid, but those projects are a lot like the Saturn 5 moon project: When they’re done & they’re over, that’s it. Moreover, corporations will insist on bidding & getting those contracts. So the only thing the government would do is oversee it, while it pays for more corporate profits. This is simply no-win.

          We can’t get make-work because that costs Too Much Money. We had that debate last spring. The government cannot set up their own factories & hire people to work in them because that’s not The American Way. So we spin our wheels, uselessly.

          The rich have won. That’s about the end of it. Given enough time, the rich always win. We just have to get used to it.
       2. JTFaraday November 13, 2009 at 3:52 pm

          Someone said we don’t want large idle populations as they’ll be susceptible to demagogues, and will be rendered rebellious.

          I don’t see how this is a concern vis a vis our unemployment system. In ordinary times, I can’t think of anything more productive of docility than giving people unemployment for 6 months and then dropping them off it. See ‘ya.

          It seems to me this works as well as can be expected for people with skills, who would only degrade their skills getting housed in some government workfare program. I don’t see that cleaning toilets benefits anyone else, either.

          As for other things listed, like “teacher’s aides” these are mommy jobs. That’s who does them. No one else can afford to live off that. But just try going out to the suburbs to toss them–it works for their purposes.

          It seems to me this plan is all about taking people who already got kicked and then robbing them of their last ounce of self determination by dicating to them what they’ll do next. It’s discipline and punish, the crime of being unemployed.

          There’s no reason there can’t be two forms of unemployment. One where you leave reasonably skilled people alone to make their own decisions like the adult full citizens they are, and then cut them off.

          And another one that makes it worthwhile for less skilled workers to to improve their skills while unemployed. You can easily incorporate a flexible work schedule into that skill building program so they are doing something in return for their value-added skills building program.

          This is more or less what our unemployment system PRETENDS to do today–trade adjustment, etc– but we’re not really delivering on that. If there is a better way to deliver on that, then I’m sure it will be very popular. OTOH, I’m sure most of us are not interested in rushing people into brave new forms of bonded labor. I believe it is against MY interests as a self determining citizen to allow this kind of thinking to take hold.

          What happened to the prison gangs? All busy?
27. Vinny G. November 12, 2009 at 4:13 pm

    Now, before we get too negative here, please keep in mind that there are obvious signs of improvement in the job market. For example, about 30 minutes ago I was on the Chicago subway, where a rough-looking guy was peddling to other riders a series of new merchandise (jeans, sneakers, leather jackets, sunglasses, etc) which I presume were stolen from a store.

    This illustrates that there are plenty of job opportunities today in the America, for the 21st Century and beyond…LOL

    Vinny G.
    1. Charley November 12, 2009 at 6:10 pm

       Vinny,

       In this recession service sector employment has been falling since December 2007 – 23 months of declines. Nothing like this has ever happened before in the only sector that has shown almost constant net growth for the past 30 years. It is unprecedented in the post-war period for that sector to see that level of decline.

       It’s different this time. Go to the BLS and check out the stats.
       1. Vinny G. November 12, 2009 at 8:56 pm

          Charley,

          Indeed. And I remember the BS of a decade or so ago, when every time an inquiring mind such as myself would show concern about the mindless outsourcing of skilled jobs, we would be told that “we are going to become a service-oriented society”. Translation from doublespeak into English: hey Vinny, the little slaves in Asia will do the real work, while we’ll be a nation of 300 million non-productive paper-pushers, account managers, and hairdressers.

          I guess the little Chinese had a problem with that scenario…

          Vinny
    2. Dave Raithel November 13, 2009 at 2:02 am

       I caught you mentioning this on an earlier post today and stifled myself from saying “But he wasn’t playing porn on his laptop”, since that would have only made sense if you’d seen the Wash Po article on that social eccentricity earlier in the day … but, since you have repeated it …

       Truly, a most desultory result so far – but not for everyone’s trying. Mr. Auerbach means to distance himself from “communism”, but I can only make sense of ELR using its classical categories. ELR workers sustain the infrastructure that makes capital otherwise profitable. The problem I see is that of late (since Reagan, though I bet Richard Kline can cite earlier references), capital means to acquire existing public infrastructure in the absence of other profitable sources. All this money, no place to invest. Must acquire sewers, roads, water, jails, license bureaus (a big deal in Missouri, I shit thee not) and etc…
28. AlleyGator November 12, 2009 at 4:28 pm

    Problem being, while collecting Unemployment, one can be out looking for new jobs. And indeed one MUST be out looking for new jobs, because Unemployment doesn’t last very long. If JG are at work, they will necessarily not be out job hunting for a more productive job.

    Also, people will strongly prefer jobs that have wages comparable to their previous job, so providing a large supply of low-wage jobs isn’t necessarily going to solve much.

    I don’t think this idea is very good. Health Care for everybody is important because it’s hard to predict who will need it at any given time. Some people will never need it, others will need it continually throughout life, and to a certain extent (lifestyle matters a lot, but some people draw the short straw) the need for health care is outside of our control.

    By contrast, everybody needs a job almost all the time, and creating a nigh-infinite supply of minimum-cost labor would create scarcity of labor for those businesses who typically rely on minimum wage.
    1. Charley November 12, 2009 at 6:05 pm

       I’m with you Mickey!
29. Mickey, Akron, Ohio November 12, 2009 at 4:46 pm

    And the next step… All unemployment is VOLUNTARY because there’s a “job” waiting for you. Many mainstrean economists subscibe to this view already. If you don’t want this job then starve! It’s the free-market utopian anarchists dreamworld made into reality.

    Why don’t we admit that the jobless recovery III – the ratchet effect and longterm structural unemployment – is here to stay. There are simply more people than there are available jobs which pay a livable wage. Even people with the requisite skill sets are losing their jobs! The acquisition of skills in a jobs program for jobs that don’t exist won’t allay this structural condition.

    I have yet to hear any economist discuss the long-term consequences of technological unemployment coupled with the productivity increases resulting from the application of that technology, the benefits of which have largely accrued to CAPITAL over the course of the past few decades. And to the extent that the “reserve army of the unemployed” continues to grow it exerts downward pressure on wages even more, right? So, any discussion of full employment is out of the question because it would make labor scarce exerting an upward pressure on wages in the private sector, who would then go offshore to tap into the “reserve army” world-wide, resulting in higher domestic unemployment levels here. A vicious cycle if there ever was one!

    So I really don’t see how the proposed jobs program is deemed outside the box thinking because it does not alter the structural factors making for higher levels of unemployment in the first place. It does little to redress the imbalance between labor and capital created by supply-side economic policies over the course of the past 30 years. At most it’s a temporary bandaid that relies on the private sector for job creation but never asks if there will be a need for additional employment when the economy recovers. What if the rationalization of production and subsequent downsizing are permanent because aggregate demand in constant dollars will only be 80% or so of what it was pre-recession? I begin to think companies have already factored this into their investment calculus reducing “overcapcity” wherever possible, knowing that it will not be needed.

    Let’s really jump outside the box. Consider a reduction in the standard 40-hour work week? Instead of sharing the wealth it’s time to share the work! The Fair Labor Standards Act was passed in 1935 mandating the standard 40-hour work week. Since then productivity has increased several fold but the work week has remained sacrosanct, as if thou shalt labor 40 hours per week forever had become the 11th commandment! It’s time to reduce the work week without a reduction in wages commensurate with the increase in productivity. The work week would then be adjusted downwards gradually as productivity continued to increase. It’s time LABOR began to enjoy the fruits of their labor by not having to work 40 hours per week, if not more. I know, all overtime is voluntary anyways just like employment-at-will…

    I can hear the howls and shouts of how impractical and unworkable such a proposal is. Inflationary, blah, blah… Just remember that in the “exploitative” days of capitalism workers labored from dawn till dusk. The 16 hour day was common. Then it was reduced to 10. And finally, in the midst of the Great Depression – 1935 – it was standardized at 8 hours a day with the 40 hour work week established as the norm. And the world didn’t end! That was over 70 years ago…

    How many employees would opt for a shorter work week if allowed, perhaps even accepting a reduction in wages? And if capital had to hire – what a novel concept – more workers to maintain production it would reduce unemployment, increase aggregate demand, expand the need for production, and perhaps restore the virtuous cycle.

    I have no illusions as to the difficulties in implementing such a proposal. Opposition will come from all sides. But once the specifics had been worked out it could be phased in gradually to allow for adjustment by everyone. Reducing the standard work week addresses the issue of longterm structural unemployment better than this proposal for a temporary jobs program does.
    1. Charley November 12, 2009 at 6:06 pm

       I’m with you Mickey! This time I mean it…LOL
       1. Mickey, Akron, Ohio November 12, 2009 at 8:03 pm

          Charley,

          What happens when the quarry shuts downs because Indian marble is cheaper and John Galt can’t even find a job? No matter how qualifed he might be, wouldn’t any HR rep want to know why such a “talented” individual worked in a stone quarry all these years? He’s obviously overqualified or a “quitter”, right? I’m sorry Mr. Galt but we don’t need you because we don’t want you… STARVE!!!

          Would John still be a “producer” at this point or on his way to becoming a “looter” in this jobs program?

          LOL [Looting out Loud!]
    2. Dave of Maryland November 12, 2009 at 9:35 pm

       I agree with Mickey, but the average work week right now is 32-ish hours. And as I remember, about five years ago overtime pay was abolished, more or less. Over at Zero Hedge, someone today said the economy would have to pick up eleven million jobs just to get rid of the existing slack, before a single new job gets created. Even given the hyperbole that goes on over there, it’s not a pretty picture.
       1. Mickey, Akron, Ohio November 12, 2009 at 11:13 pm

          Dave,

          I don’t know where these figures come from or how they are computed, but I still work – on average – 40 hours a week. 32 hours is not considered full-time. In fact, I think 32 hours is the cutoff for benefits, etc. Anything more and the company may have to pay benefits that’s why 32 is a threshold benchmark.

          I assume 32 hours is an average which means that many of us who still work 40 hours per week are offset by someone working only 24. In any case, most people working only 24-32 hours per week are hpefully making enough money to scrape by, but I doubt if there saving much…
    3. Mickey, Akron, Ohio November 13, 2009 at 10:30 am

       Addendum:

       Based on what Ed has stated at the very beginning:

       “I would label it a private sector replacement for unemployment insurance.”

       In other words, the privatization of unemployment insurance with a guaranteed minimum wage job! You know, like the privatization of Social Security!

       Here’s a bit more information regarding the funding of unemployment:

       The unemployment insurance system is funded by taxes paid by employers on behalf of their employees. Most of these taxes are collected by state governments, but some are collected by the federal government. While both the federal and state taxes are technically paid by employers (although in a few states, the employee pays part of the state tax), economists generally regard the tax as falling on employees. The theory behind this is that the dollars employers use to pay the tax are part of overall compensation costs, and would otherwise have gone into employees’ paychecks. [Does this sound familiar? We can cut taxes even more…]

       The federal tax is set by the Federal Unemployment Tax Act (FUTA), and is equal to 0.8 percent of the first $7,000 paid annually to each employee. This tax is regressive; since most workers earn more than $7,000 per year, most workers are effectively paying the same flat tax of $56 per year regardless of income. The percentage of overall wages paid in FUTA taxes on behalf of high-wage workers is therefore much lower than for low-wage workers.

       So, the poor bastard who has paid into the prgram his entire life since 18 and never been unemployed, now earning $50K+ or more finds himself/herself unemployed and is supposed to buy in this? Why? A minimum wage job guaranteed for life! What consolation…

       This is just another “socialize” the COSTS of unemployment onto the backs of working people. The current funding of this program is TOO COSTLY for capital and must be dismantled. It tacitly admits that the employment outlook is BLEAK and likely to remain so for a long time. WE have to find a way to pass the costs of the employer onto the population as unemployment insurance as presently funded [see above] is an impediment to capital accumulation. Capital is saying we no longer want to pay for the costs of unemployment. It’s that simple!

       It’s also saying that a minimum wage job with “benefits” is the future for a significant proportion of the populace, with capital able to cherry pick the best and the brightest from its ranks when necessary. Otherwise, be glad you have a job.

       Now I know why Atlas shrugged…
30. Vinny G. November 12, 2009 at 5:48 pm

    Also, I would like to add that besides peddling stolen merchandise on the subway, this 21 Century America offers a plethora of other similarly lucrative work opportunities.

    For example, panhandling has now become a rapidly growing form of self-employment on the streets of Chicago, the hometown of our Great Oh’bama. Oh, and I should mention that the majority of panhandlers in this town are black, just like the great leader of our blessed nation. Oh’bama is obviously looking after his own, eh?! What a guy!…LOL

    I almost forgot, impersonating Elvis has also become common in this town as well. The other day I was taking a stroll on Michigan Ave in the “Magnificent Mile” area.Those familiar with Chicago know that the Marnificent Mile is where all the fancy stores can be found… Cartier, Bvlgari, Prada… you know, joints that criminals like banksters, Gethners, Summers, health insurance executives, and many, many other honorable pillars of our community spend the trillions they stole from their fellow Americans. Anyway, back to Elvis. During my walk on the Magnificent Mile I spotted two Elvis mimes, wonderfully performing in the bitter cold for a dollar or two in donations. They were really good, authentically dressed like Elvis, and truly talented.

    So, let’s recap. These are the areas of our economy where the jobs are during this obvious recovery:

    1. Commerce. Specifically, stealing merchandise from stores and selling it on the subway and buses.

    2. Non-profit charity-related activities. This was custom tailored to fit the needs the formerly marginalized segments of our population, such as the African-Americans. Specifically, panhandling and begging in the streets have shown spectacular growth.

    3. Entertainment. Specifically, there seems to be an explosive growth in this area, with more and more talented young (and some not so young) Americans now singing, and dancing in our pothole-ridden streets, raising everybody’s spirits and making a buck or two in the process.

    As such, let us not complain about unemployment anymore, shall we. There are evidently plenty of vacancies out there.

    Vinny G.
31. Charley November 12, 2009 at 6:03 pm

    Why not just reduce hours of work to 28 per week? (Five hours less than the average work week now, according to the BLS.) It would not cost a dime, and would not require a single bureaucrat to administer.

    I did point out last year, on this blog comment section, that such a remedy would eventually be necessary.
32. RueTheDay November 12, 2009 at 6:25 pm

    There seems to me to be a basic problem with all of these CCC/WPA/Unemployment Extension/Shovel-Ready Stimulus Project/Workfare proposals. Today’s workforce is not what it was in 1930. You have millions of unemployed computer programmers, engineers, accountants, salesmen, manufacturing experts, etc. Highly educated, highly skilled people. Paying a software engineer $7.50/hour to dig a hole in the ground is a horrible waste of time, money and human capital. How about creating workfare programs that make use of these skills – e.g., extend public WiFi to every major city in the country, have these people automate healthcare records, etc.
    1. Dave Raithel November 13, 2009 at 2:15 am

       Yep, Minsky was of the opinion that the jobs offered (created by the ELR) are ones for which workers are already suited…not that there’s anything inherently wrong with digging holes if holes need digging …
33. Edward Harrison Post authorNovember 12, 2009 at 8:52 pm

    One question I have which no one can answer is how much ‘voluntary’ unemployment would result. If you’re making $50,000 a year and get laid off, you’re more likely to simply forgo the job guarantee and look for a position closer to your previous income level. One commenter mentioned the fact that looking for a job is much, much harder if you are employed than searching full time.

    If anyone (Marshall, Scott) has an answer here, I’d love to get a feel for how this problem gets solved.
    1. ScottB November 13, 2009 at 3:32 am

       Ed, I think part of the issue is to define what “problem” we are trying to address. Is it the persistently high level of unemployment following a recession? Is it chronic unemployment, especially for people with less than a bachelor’s degree? Is it the long period of stagnant wages we’ve had over the past 30 years?

       In the near future I will have access to data for the state of Washington, for all unemployment claimants in the state, and where they are in terms of exhausting the three types of benefits–regular (26 weeks), federal, and state extended. With the occupational and wage data from that population, we will have a pretty good sample of the current unemployed.

       That’s one piece of the puzzle. Another is the significant number of people who have dropped out of the labor force due to disability–you can look at the annual BLS survey for why people aren’t in the labor force, and see particularly the large number of men who have dropped out, listing disability as a reason. I have no idea what that means, or if there’s survey data that goes into deeper detail.

       I’d be interested in your further thoughts.
34. Vinny G. November 12, 2009 at 9:18 pm

    This is unrelated, but nonetheless indicative of the times we live in, especially since I am such a careful observer of human behavior and social dynamics.

    Earlier today I went to a Whole Foods (overpriced) grocery store, and paid for my insignificant shopping with a meager $20 bill. The cashier took the money, looked at it carefully, checked it with a yellow fake-money-tester pen stores have, and then placed the bill under the money tray of his cash register. I observed the same thing at a different Whole Foods a week ago. And mind you, this store is in one of the most affluent areas of Chicago.

    A few minutes later I went to a Starbucks, and ordered a poorly brewed (and overpriced) cappuccino. This time I paid with a $10 bill. The “barrista” (as Starbucks likes to refer to their clerks) took the $10 bill, examined it carefully, raised it up into the light, and then inserted it into a safe with a slot that was apparently under the counter. This is something new, as I have been going to this cafe for a long time now, but never before have I noticed this procedure. In the past they took even $100 bills without any concern.

    And, by the way, I was not dressed like riffraff. I wore a suit and tie and briefcase, hardly the image of somebody that may pass fake money. In fact, earlier in the day a panhandler remarked that I look like a lawyer (which I took as an insult, of course…LOL)

    Nonetheless, when businesses start to worry about people dressed like lawyers possibly passing out fake $10 bills in rich neighborhoods, I’d extrapolate and say things are pretty rough out there.

    Vinny
    1. Dave Raithel November 13, 2009 at 2:21 am

       You’re freaking me out. I don’t dress like a lawyer, but I do use $20s, and places I’ve done business at for years, with people behind counters who know who I am, now routinely check them. If it happens with a $10, I’ll either move off the grid or get a better printer ….
       1. Skippy November 13, 2009 at 4:07 am

          Just a suggestion I found on another blog. You can go down to your local office warehouse and buy the same pen, then you can check any bills they hand back too you!

          Skippy…check the checkers…eh
35. Kirk Powell November 13, 2009 at 4:55 am

    Two things are at issue here: how do we prevent socialism from eating away at the heart of a free-market economy, and how do we improve employment opportunities.

    A man has a right to choose slavery. Wage-slavery is a de facto result of the reality that some people are content to take whatever life gives them. Poverty by any standards can’t replace the mental status of choosing to be mediocre. Individuals have an inherent right to make bad choices … choices like being unemployed.

    Socialism has at its heart an ideal that I embrace. I want to care for my neighbor, but should the government be involved with EVERYONE’s life ALL the time? We cannot replace personal responsibility. We cannot command it with laws. We cannot institutionalize it with programs. Choice is at the heart of every person’s ability to excell. And sometimes we make bad choices. And ultimately, we have a right to make those bad choices.

    The free-markets no longer exist. We have a fair-market that is duly regulated and has resulted in the same class structure that all economies come to: rich people and poor people.

    What seperates America is the notion that I can achieve beyond my class as established at birth. I can work hard everyday and build my assets and income into an impressive array of rewards: I have a wife and three children, my wealth is untold! My happiness is in them. Just as someone else’s happiness is vested in the dollar bills in their bank account. Happiness is a choice.

    It can be difficult to imagine, but no amount of intellectual astuteness will replace the basic animalistic desire to do the least amount of work to obtain the least amount of benefit when one is only motivated toward that end.
    1. Skippy November 13, 2009 at 8:56 am

       The Free American Thinker blog is two blocks down and on the right, to nights short movie and discussion is Pinochet the miss under stood man and lost friend.
       1. Mickey, Akron, Ohio November 13, 2009 at 10:50 am

          Skippy,

          The FAT blog… Well said!
36. MonkeyMuffins November 13, 2009 at 6:54 am

    “In my view, full employment is compatible with free market capitalism.”

    Sounds good, except:

    1) “free markets” don’t exist; and

    2) we don’t live in a capitalist system

    Other than that, as I said, sounds good.

    —

    Endnotes:

    1) tinyurl.com/ycnwwtj

    Harnessing Hippogriffs

    2) tinyurl.com/yh7feth

    What is the current American economy: capitalism, socialism or fascism?

    —

    I hasten to add, regarding number 2, that I’ve been leaning toward, “plutocratic lemon socialism”.

    I also hasten to add that I sincerely mean that this Jobs Guarantee Program (JGP) sounds good–even great, conceptually speaking–but for goodness sakes can we please stop kidding ourselves that we live in a free market, capitalist society. Seriously, it’s so obviously not the case, that our cultural mythology which coerces us to religiously believe it is the case, would be funny if the reality weren’t so deleteriously and mortally tragic.

    And if you think Status Quobama, his League of Extraordinary Gentlemen and the plutocrats who pull their strings would ever go for this JGP, I’ve got a can’t-miss toxic asset I’d like to sell you.
37. joebek November 13, 2009 at 8:51 am

    Lots of comments. Scanning through them I didn’t see anything about promoting and assisting emigration. Most of the illegals could probably successfully be absorbed by labor poor Europe. Most of the dynamic young would be far better of in countries with great prospects over the next 20 years, the BRICs for short. Most of the old would be far better off in low cost of living nations. We should plan to take US population down substantially over the next 50 years.
38. JTFaraday November 13, 2009 at 1:54 pm

    It sounds like a way to eviscerate public sector employment, “Circuit City, inc” style.

    Layoff your undereducated public sector employees–who are thus considered overpaid on a living wage plus benefits–render them “unemployed” and then re-employ them at $7.95 an hour with reduced benefits while pretending “how great that is” because “unemployed people” don’t usually get benefits, right?

    Although, it would be encouraging to folks to see some laid off Goldman Sachs traders making $7.95 an hour cleaning the public toilets in their local parks.

    I suppose that’s a perk. But what will we do with the newly displaced and homeless? (If we can’t export them back to Mexico, I mean).
39. Superintendent November 13, 2009 at 4:45 pm

    Labor is already hard at work on the next economy. Whether others wish to go, or not, is up to them.

Comments are closed.