Progressive Economics: An Affordable Job Guarantee Program

Fadhel Kaboub Associate Professor of Economics, Denison University President, Binzagr Institute for Sustainable Prosperity [email protected] @FadhelKaboub @BinzagrInfo Binzagr-Institute.org Akron, OH October 17, 2017

Progressive Public Policy Agenda • • • • • • • • •

Decent jobs with living wage and benefits Universal health coverage Parental leave, child allowance Free education Social & economic justice Clean air, clean water, clean energy Public transportation Better public infrastructure & safety standards etc…

How do we pay for it? • We’re told: – The government is broke; – We’ll run out of dollars; – the rich will never agree to pay higher taxes to fund all of this; – the national debt will burden future generations – Inflation, hyperinflation, Zimbabwe, Weimar Republic… – we need to borrow from China….

Two views about Money • The Commodity/Barter Money view – – – – –

First there was no money Barter became inconvenient People (not Gov.) invented commodity money Governments took over the monetary system One major problem: No historical evidence to support this story!

• The Modern Money view – Money was always introduced to society via taxation enforced by a coercive political authority – Money is not a commodity, it is a symbolic representation of socio-economic relations – Money enters the economy when Gov. spends it into existence à Monetary Sovereignty

What is Financial Sovereignty? • A financially sovereign government is a government that: – issues its own currency, – collects taxes in that same currency, – only issues bonds denominated in that same currency – operates under a flexible exchange rate regime • Let’s distinguish between: – Currency Issuers vs. Currency Users

The Spectrum of Financial Sovereignty

Modern Monetary Theory (MMT) • Gov. spends fiat money into existence • Gov. spending comes first, Tax revenues collected at the end of the year • Taxes DO NOT and CANNOT logically finance Gov. Spending • Fiat money has no intrinsic value • The tax liability is what gives the currency its value • A Gov. deficit is by definition equal to the nonGov. sector surplus. For example: – Gov. spends $100, and taxes $30 à Gov. deficit of $70 = non-Gov. sector surplus

Gov. Balance + Private Balance + Foreign Balance = 0

Plain English Translation for the U.S. Economy:

Government deficit + Private surplus + U.S. trade deficit = 0

More on MMT • Only one way to add money to the system: Government spending • Two ways to take money out of the system: taxes and treasury bond sales • Bond sales (i.e. the national debt) do not finance government spending • The federal government: currency issuers • Households, firms, states and municipalities: currency users • For a financially sovereign government, anything that is affordable in real terms, is also affordable in financial terms.

Job Guarantee (JG) • • • • •

A buffer stock for labor Countercyclical buffer stock Take workers as they are, where they are jobs first, training later Community-driven decentralized system – Funded by the federal government – Executed by local community groups

JG Explained (1) • The Gov. offers to hire anyone who is ready, willing, and able to work at a socially established living wage. • Fixed-wage/flex-quantity policy. • Countercyclical adjustment. • JG is decentralized, projects are selected based on community needs and implemented by NGOs at the local level. • Only the financing is centrally provided by the federal government.

JG Explained (2) • Private sector employers can obtain labor at a mark-up over the JG fixed wage (price-stabilization feature). • JG reduces the depreciation of skills caused by unemployment. • JG contains training component to prepare participants for private sector employment. • JG will reduce uncertainty and smooth out business cycle fluctuations.

ELR Explained (3) • JG does not displace private sector jobs. • Offers jobs which are undersupplied by the private sector. • JG jobs include: -

low-income housing restoration creation/expansions of public parks improvement of public infrastructure recycling projects environmental cleanup installation of solar energy packages

JG Projects for Skilled Workers • public school tutors, public school and/or community musicians/artists, community health care consultants, recycling consultants, community historians, community ethnographers, community statisticians, community computer assistants, community web developers and webmasters, and national translation agents. • Websites devoted to information dissipation, conservation of local/regional history, culture, and traditions. • Arts/culture revival projects, conservation of cultural heritage, youth centers, community centers, healthcare centers, …. • Such projects would involve higher ed. graduates with degrees/specializations in history, anthropology, sociology, computer science, geology, psychology, ethnography, social work, folklore studies, literature, religious studies, art, art history, photography, journalism, communications, statistics, music, dance, graphic design, and architecture

More Job Guarantee Projects • • • •

environmental cleanup, seashore cleanup anti-deforestation, anti-desertification (dune fixation) anti-salinization, flood control, storage of runoff waters creation/expansions of public parks, low cost housing, improvement of public infrastructure • recycling projects, installation of solar energy packages • construction and maintenance of small-scale irrigation systems, soil conservations, small-dam construction, watersheds protection from erosion, management of renewable resources such as forests and groundwater supplies • conservation of common pasture lands, land terracing, land consolidation, construction of biogas plants

What about…. • • • • • •

Inflation? Hyperinflation? The deficit? The national debt? The bond market? The value of the dollar? Taxing the rich, pollution gambling, speculation?

But Can We Afford it?

YES WE CAN!

Job Guarantee Wage Structure W1: skilled workers (college education, technical training, or an equivalent amount of prior work experience): $21/hour W2: semi-skilled workers (high school education, some work experience, perhaps need some additional training): $18/hour W3: unskilled workers (no education, primary school education, no training): $15/hour

Job Guarantee Cost Estimation • Assuming: – 23.4 million full-time workers. – 40 hours/week. – Annual Benefits Package: $10,000 per employee. – Annual Material Cost: $50 billion. • Net Total Annual Cost: $593.8 billion, or 3.93% of GDP. • The post-2008 recovery cost is already in the trillions, but has failed to produce any significant reduction in unemployment, poverty, and inequality.

Gradual JG Plan for the U.S. • Phase I: long-term unemployed (5.5 million) • Phase II: Add the marginally attached to the LF and those remaining in the official unemployment pool (15.3 million people) • Phase III: Add involuntary part-time workers (23.4 million people)

All figures in billions of U.S. $, except where indicated Phase 1

Phase 2

Phase 3

5.5

15.3

23.4

Total wage bill

189.7

528.7

808.7

Total benefits

55

153

234

Material cost

11.7

32.7

50

Income tax revenues

28.4

79.3

121.3

241.9 (1.6% of GDP)

674.2 (4.3% of GDP)

1,031 (6.33% of GDP)

76.3

212.5

325

Number of ELR workers (millions)

Multiplier effect

Unemployment-related savings

Total net cost

139.2 388.3 593.8 (0.92% of GDP) (2.48% of GDP) (3.65% of GDP)

Concluding Remarks • The unemployment situation calls for urgent and bold actions • The current jobs policies are too weak, expensive, and ineffective • Full employment at a living wage is possible, desirable, and affordable

Thank you! Questions/Comments

A Progressive Economics: An Affordable Job Guarantee Program Fadhel Kaboub Denison University & Binzagr Institute for Sustainable Prosperity [email protected] @FadhelKaboub @BinzagrInfo Binzagr-Institute.org

Living Wage in Akron, OH

Typical Expenses in Akron, OH

Poverty and Unemployment in Ohio

• Poverty: – Ohio: 15.8% (or 1.8 million people) – Licking County: 13.5% (or 22,868 people) – City of Newark: 22.1% (or 10,573 people) – OH Children under age 5: 26.7%

• Unemployment: – Unemployment rate: 5.4% – Underemployment rate: 9.5%

Poverty is Too Expensive!