On October 26, Pavlina Tcherneva presented her recent publication “The case for a Job Guarantee Program” at our latest edition of the New Economy Short Cuts on October 26. She was joined on the panel by MMT-expert Dirk Ehnts from the TU Chemnitz. You can rewatch the entire session here and read up on our comment of her book.
Martin Wolf, chief economist commentator at the Financial Times, had it on his list for the most important summer readings in economics. “The case for a Job Guarantee” by Pavlina R. Tcherneva challenges the idea of unavoidable or even necessary unemployment in economies today. James K. Galbraith from the University of Texas calls the Job Guarantee “the next big, common-sense idea for economic reform.”
For years now, Pavlina Tcherneva has been the leading scientist on Job Guarantees. In numerous articles, she has laid out the benefits of vanishing involuntary unemployment. In this book, Tcherneva has now laid out a comprehensive primer that is describing all facets of MMT’s most promising policy.
The thought process of the Job Guarantee starts with the assumption of unemployment as a necessary and unavoidable occurrence in modern economies neglecting the immense social and economic costs of it. In societies driven by data, the social costs of unemployment are still to be measured correctly. There are no exact estimations of the effects of unemployment on democracies as a whole or the rise of populist parties for example. Pavlina Tcherneva argues that governments could banish involuntary unemployment and its costs if they just decide to do so.
By providing work at a living wage for every willing and able person, governments would eradicate numerous disadvantages and economies and societies as a whole would come out as more resilient, socially inclusive and agile to tackle generational challenges lying ahead. Tcherneva describes the policy as a standby tool for economies. Public jobs would be provided on a decentralized level and mainly in carbon-neutral and social areas. The policy is aimed at switching the premise of an unemployment buffer stock as the NAIRU calls for, to an employment buffer stock. This means that there should always be an excess of publicly provided jobs that could be offered to willing and able workers. This mechanism makes the Job Guarantee a perfect policy to cushion negative employment effects during crises. As seen in recent months, unemployment numbers in the USA skyrocketed which lead to crippling demand and heavy social costs for US-citizens. With a Job Guarantee intact, laid-off workers wouldn’t have had to fear the existential threat of losing their jobs and the internal demand of the US-economy would have had an automatic stabilizer.
In addition to acting as a buffer during crises, the Job Guarantee would also be a useful tool to set a minimum wage and decent working condition standards. The goal for every economy with an implemented Job Guarantee Program remains employment in the private sector. However, with providing public jobs at a living wage and with decent working conditions, employees will only choose a private-sector job if it provides better conditions as a public job. As soon as private sector companies provide this, people will choose to work there for higher remuneration. The right to decent work was already established in the Universal Declaration of Human Rights in 1948 but economies still fail to deliver.
Another compelling argument that Tcherneva is making is that the inflationary effects of unemployment are vastly overstated, and that instead there are real costs to joblessness for individuals and communities. Unemployed individuals have shorter lives and more chronic illnesses than those who are not unemployed. A job guarantee programme that assesses the needs of communities locally, and provides adults with employment within that community, can provide a solution to this. A bottom-up approach, which encourages people to participate in job creation, can work better than a top-down, bailout-led model. Moreover, a locally administered job programme can provide valuable services to the community, including preserving the local environment.
Tcherneva is making a compelling argument for one of the most transformative public policies being discussed today. She is successfully demasking the ingrained thinking of tolerated involuntary unemployment which costs cannot be measured entirely. However, the book would have benefitted from a more precise description of how the actual program would work on the municipal level and what exact jobs could be provided for the workers. Should there be different levels of wages for different levels of skill and how would this policy work in countries in Europe who are dependent on the ECB and not on the FED? These are all questions we are excited to discuss with Pavlina Tcherneva on October the 26th at our next edition of the New Economy Short Cuts.
PAVLINA R. TCHERNEVA, Ph.D., is an Associate Professor of Economics at Bard College and a Research Scholar at the Levy Economics Institute, NY. She specializes in Modern Monetary Theory and public policy.