Warren Mosler on the Job Guarantee
The most fascinating thing in the Job Guarantee discourse is that the program is now being sold in a very different way than it used to be sold. In the 1990s, JG advocates like Randy Wray were saying that the program was a way of holding down private sector wage demands by making unemployment less palatable by pushing unemployed people into minimum-wage (the JG wage is necessarily the minimum wage) make-work jobs. These days, this language of workfare has been replaced by some kind of radical posturing that a JG “eliminates the reserve army of unemployed people” and is anti-capitalist or something.
But the dream of the 1990s is still alive in Warren Mosler’s head. Mosler is the founder, funder, and tax exile extraordinaire of the JG and MMT movement. Last month, he gave a long interview about these concepts. In the interview, he gives a very clear description of the JG that has been unaffected by the recent rhetorical shifts adopted by its proponents.
Here is a transcript of the relevant snippet:
So right now, we have what we call the Phillips Curve where we watch unemployment. And we watch various measures of it. And what we run into is, particularly in Europe now where you have the NAIRU at 10% or something, employers don’t like to hire people who aren’t working. They just don’t like to do that. And there are studies that show that. They’d rather hire somebody already working who has some kind of employment history. So you can go to their boss or their supervisor and find out whether this person has good work habits and things like that.
If they are just unemployed in the streets and they’ve been unemployed in their home and they haven’t been working, you don’t know. It’s high risk. They might be on drugs. They might not take a bath everyday. They might get into fights with their employees. Businesses don’t want to hire these people.
How do we get those people that the government doesn’t want to hire — and we don’t want to just load up the public sector — how do we get them back into the private sector? How do they transition back?
And one very effective way to do that is to give them what I call “transition jobs,” what the MMT proponents call the “job guarantee.” By offering a “transition job” — let me call it that rather than the “job guarantee” at some, and I call it a non-disruptive wage, and we can argue whether that’s $10 per hour or $15 but it’s just a numerator; it doesn’t matter in theory. Having these people come into this job makes them now a whole lot more employable and they will then transition into the private sector.
We can then use fiscal expansion — lower taxes or higher public spending, but let’s start with lower taxes — to create more aggregate demand so that sales will go up and [companies] will start hiring these people out of the transition job where you can’t get a raise in pay into the private sector. And they’ll pay more than the transition job. There will be a spread. And that will transition these people out of the public sector and into the private sector.
The problem I see with these MMT proponents is they say they want a job guarantee and the first question is: what are they all going to do? And when they start explaining the types of jobs they are going to do: wrong answer. What they are going to do is transition into the private sector over some period of time: six months, a year, two years. And that’s the whole point of getting them into this job guarantee is to transition them into the private sector. It’s not about what they are going to do.
Mosler is very clear here. The idea is to make unemployed people more attractive to private employers by having them do any kind of make-work job at a non-disruptive minimum wage. The goal of this job is to prove to private employers that they are viable workers, increasing their odds of being hired. The goal is not to “load up the public sector” by permanently hiring folks into it. It’s a transition job. For real public sector work, you would presumably hire in the normal way we hire public sector workers like teachers.
There is a lot of room to quibble with Mosler’s idea here. If employers are hesitant to hire unemployed people, then why wouldn’t they also be hesitant to hire people “employed” by the JG program? Will they not be smart enough to realize that the people in that program are the same kind of people they would otherwise be reluctant to hire?
But the point of this post is not to argue the merits of Mosler’s idea. It is simply to raise awareness of what this idea actually is. There is widespread confusion about what the JG is and where it came from. It is workfare and always has been.