Matt Yglesias Gives a Thumbs Down on a Job Guarantee

     Greg and I were just discussing the JG and then I came across this post by Yglesias where he is cool to the idea. He thinks that the government should send people checks during a recession but no JG.

      "When I wrote my previous skeptical post about a "jobs guarantee," I hadn't quite realized that this idea is an element of the catechism of Modern Monetary Theory. I think MMT proponents have a lot of excellent points to make and that an awful lot of people in Washington, D.C., would do well to expand their intellectual horizons and conceptual diet with a bit more MMT reading. At the same time, decades of unwarranted marginalization in the economics profession have instilled in Team MMT a certain spirit of sectarian dogmatism that I think sometimes impedes clear thinking."

     "As I see it, the idea of a "jobs guarantee" bundles two concepts:

• Should there be a program in which money is given to people who can't find jobs in the labor market?
• Should receipt of that money be made conditional on performing make-work labor for the government?

    "My view is "yes" and "no" and therefore that we should have a generous welfare state but not a federal jobs guarantee. When left-wing people say they want a jobs guarantee, I take it that they are saying they want more generous treatment of jobless people and a floor on living standards. Those are fine ideas. But why insist on delivering that generosity in the specific form of "here's a make-work job for you to do in exchange for a check"? Why not just hand over the check? That way you don't need to cut as many checks to people supervising the work, obtaining the equipment to do the work, etc."

      http://www.slate.com/blogs/moneybox/2014/01/16/jobs_guarantee_more_trouble_than_it_s_worth.html

      I agree with him on both counts regarding MMT: yes it has many valuable insights, and yes some of its proponents can get a little dogmatic on certain points. The worst offenders are usually not guyls like Warren Mosler or Randy Wrey but commentators who are passionate about the ideas but may not understand it in a theoretically such a deep way. 

    I do have to say I disagree with him on the question of JG. Again, this goes back to my previous discussion with Greg on a favored policy of Sumner-the wage subsidy. There are first best, second best, and third best policies. Often policies of fourth, fifth, sixth, and beyond to boot. Often you have to choose from a menu of less than ideal choices. 

   I think a JG is the best imaginable policy. I think that both the WS and sending a check are second or third policies. I think that overall you're helpoing people a lot more by offering them jobs than just sending a check-though I certainly would support doing this in many cases and for everyone if there's no JG. The Diary of a Republican Hater Greg-among other things (LOL)-gave a pretty good description of the difference between say a JG and WS:

    "I too think some WS should be in place even with a JG. The JG is intended to solve the involuntary unemployment problem, the WS is intended to help the income distribution and AD problem while possibly also incentivizing the private sector and keeping the JG pool as small as possible."

   "I think what you want it is for people to get better paying jobs in the private sector over time. A JG acts as a defacto min wage, one can always go earn the JG wage if desired so private sector guys must pay at least that wage with better bennies or lose employees to the JG. WS will make sure that if a certain sector of the economy loses market share, say coal companies, then the falling wages in those sectors will be supported for a while and those workers can transition to something else."

     http://diaryofarepublicanhater.blogspot.com/2014/01/is-this-best-republicans-can-do-in.html

     So it's not really either/or with the JG and WS-for liberals. Sumner and other conservatives will want just the WS and they might hope it would in time weaken the minimum wage as well as welfare programs like TANF.

      What Yglesias is talking about here is a little different yet again-he's talking about a fiscal 'helicopter drop.' Australia did this in 2009-where every household in the country received something like a $1000 check from the government. I support such HDs in certain situations as well. However, a HD is meant for the start of a really bad recession like in 2009 where you need a quick rise in AD and you need to give a little relief to many who are struggling. 

     What Yglesias seems not to quite get about the JG is that it isn't necessarily government employment-it can be, however it can also be a job in the nonprofit sector or indeed the private sector. However, the government facilitates the job. The function of this is much different than a one time HD. Nor is it the same as the government sending a check every week. It's meant to deal with involuntary unemployment.

     When someone is out of work for awhile there is an erosion in skills and employers don't see them as employable-who can forget those notorious ads a few years ago where there were job ads that stated you must already be employed now. It would also as Greg mentioned serve as a de facto MW. What we are dealing with to an extent is a liberal version of welfare to work which goes back to Hyman Minsky who was not a fan of welfare as such-though he saw it preferable to the alternative.

     With the JG there is a kind of normative judgement as well that it's preferable to work than not to, though I think it's also positive: sending checks which I do support are nevertheless a temporary solution. If a person is going to truly get themselves back on their on feet they need a job. Even if the JG doesn't pay so much it should put them in line for better jobs than if they are sitting at home collecting a check. 

     Again, I don't see collecting a check at home or a HD as competing policies to the JG, just different policies with different but complementary objectives.