Episode 72 – Nationalizing Payroll and The Right to a Job With Pavlina Tcherneva

Macro N Cheese – Episode 72
Nationalizing Payroll and The Right to a Job With Pavlina Tcherneva

Pavlina Tcherneva [intro/music] (00:00:03):

The pain is not shared equally. And the pain is born in these structural ways where we are attempting to build an economy on the backs of working families that earn despicably low wages.

Pavlina Tcherneva [intro/music] (00:00:19):

The subsidy that the state of New Jersey was providing through Amazon to set up warehouses there was something on the order of three to $5 billion, which would have been enough to hire every unemployed person in New Jersey at a living wage.

Geoff Ginter [intro/music] (00:01:06):

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

Steve Grumbine (00:01:34):

All right. And this is Steve with Macro N Cheese. Today’s guest is none other than Dr. Pavlina Tcherneva. Pavlina is an Associate Professor of Economics at Bard College and a Research Scholar at the Levy Institute. She is also the author of an upcoming book called “The Case For A Job Guarantee.” I’m very excited to have her on, especially under such trying times, obviously with the events of Minneapolis and the police brutality that we’ve seen and the actions across the nation.

It’s clear that unrest is bubbling right below the surface. So much of that could have been prevented within the context of the COVID-19 virus. Our federal government has not stepped up to do its job and has left people in tremendously compromised, susceptible ways of suffering. And my hope is that Pavlina and I can talk today and come up with some solutions to how we could have addressed this or how we can address it in the future. So with that, welcome! Thank you so much for joining me today.

Pavlina Tcherneva (00:02:47):

Hi, Steve. Thanks for having me.

Grumbine (00:02:49):

So let me ask you a question. You’ve got this upcoming book, “The Case For A Job Guarantee.” I’m very excited about it. I have it pre-ordered! Tell me, what’s this book all about?

Tcherneva (00:03:01):

Well, the book really is hopefully a call to rethink our most basic, maybe uncritical assumption that unemployment is unavoidable and that there’s very little that we can do about it. I am hoping that it’s a primer on the job guarantee proposal. It attempts to document all the benefits of this proposal, but what I’m really hoping with the book is to raise this question: Why have we accepted this as such a normal situation?

And we do it on multiple levels. I think just even if you asked the lay person – if you were to ask them about, you know, unemployment, they’ll say, “Yeah, well, you know, it’s normal, it’s part of life, not much you could do about it. The market is the market and, you know, competition. And you’re going to get a bunch of narratives about unemployment. Some folks will even go as far as to say, “Well, you know, it’s personal responsibility.” You’ve heard those conversations.

Grumbine (00:04:07):

Oh yeah.

Tcherneva (00:04:10):

I think I would like very much to shake that conversation even at the very basic level as we just talk to our fellow citizens. But very importantly, I also wanted to expose a major failure in my own profession, in Economics. And that is that it in fact has validated the existence of unemployment. That the way we structure our thinking about the economy, about markets, about their behavior within economics, is around this concept of the natural rate of unemployment.

And I think this is just a profound failure just at the theoretical level, at the policy level, obviously at the moral level. And we even designed policies around the concept of a natural rate of unemployment, and that wasn’t always the case. This is quite a bit of a neoliberal phenomena. The natural rate of unemployment is not a new concept.

It dates back since the late 1800s, if you will – you know, since the birth of capitalism, but we’ve gone through these ups and downs, at least in theory. And we certainly had a time in the immediate post-war era when people didn’t talk about natural rate of unemployment and very few people – you know, Hayek, Friedman – would pay lip service to some of these ideas, but no self-respecting economist would say it’s normal to have, you know, millions of people out of work.

But then in the 50s and the 60s – slowly, you know, the professionals started coming up with this concept, especially the NAIRU, the non accelerating inflation rate of unemployment, and basically formalizing this notion that as economists and as policy people, we have to choose between two evils. Either we have people without jobs or are we going to have inflation. And that’s a false choice.

And I think in part it’s because we haven’t thought about, you know, policy proposals to replace this broken system of maintaining, really keeping permanently people out of work, even in the best of times. So with this book, I’m also trying to interrogate that question and say, let’s envision a world and let’s envision a policy that actually attempts to guarantee jobs for all.

Grumbine (00:06:41):

That’s absolutely fantastic. And I feel very lucky to be on the waiting list here for the release of this book. When are we expecting it to come out?

Tcherneva (00:06:52):

The official release date is June 26th, this year 2020.

Grumbine (00:06:57):

Okay. Very good. Timely, very timely – in fact, I want to kind of set the stage. I wanted to give you an opportunity to talk about the book, but I really want to jump into the meat of why I have you on here today. Since Donald Trump started running the very first cycle, before he had ever even taken office, the resistance had begun and the resistance was really ramping up.

Dare I say, a propaganda campaign – not to say that Donald Trump is in any way, shape or form good, but they had already ramped up this what I would call Trump Derangement Syndrome almost to the point where people weren’t even willing to talk about policy. The only thing they wanted to hear is “not Trump.” And so we’ve got this moment here where millions upon millions upon millions of people are without work, and the same people that were busy resisting Trump never listened to any of the alternatives, such as a federal job guarantee.

They’re not hearing things such as nationalizing payroll. They’re not hearing any of the fiscal plans that MMTers have been talking about, long before we ever had a pandemic. But here we are now in one of the most unbelievably frightening moments in our nation’s history. We’ve got police violence. We’ve got riots. We’ve got folks that are finally standing up and saying no more, but we’ve got millions of people without work, and millions and millions of those jobs are never coming back.

Talk to me a little bit about the current environment that you’re in, as you’re trying to advance these ideas, these very necessary ideas, but in a world where the topic isn’t this, even though it’s happening right now, the topic is always centered around Donald Trump. Whether it be taking everyone’s focus off of the Green New Deal and talking about impeachment, it’s never, ever, ever on these policy spaces. So to be able to build that kind of movement, you’ve got to have almost single-focus, driven people, pushing and pushing and pushing, building that momentum. And it just hasn’t happened. And here we are. What has been your experience with that?

Tcherneva (00:09:10):

Well, the way I think about this is as a basically Titanic crashing into, you know, the iceberg – you see it, you really can’t reverse course. You can’t slow it down. And so the system is essentially, it’s sort of breaking at the seams. What is happening now is not a product of one police brutality, whether it is COVID, you know, all of the other problems that we see in the world today, are really just the tip of the iceberg.

You know, we have had for so long policies that have stretched families, communities that have used racism and sexism to create social polarization as manifests and economic polarization. I mean, one thing is connected to another and people are understandably angry. There are many who are out of work, and that adds another layer of destitution that we have not experienced in a very long time, certainly not since the Great Depression.

And whether we go through such a dramatic period of economic devastation depends very much on what we do now. And so, I think what you say is correct. People are angry and they direct their anger at leadership. We certainly have good reason to be angry at a president who incites violence, but you’re correct to say that we’ve got to be able to offer something new, something that is meaningful, that provides structural change. And that’s where the conversation needs to go in terms of rethinking this post-COVID world, right?

You hear these conversations in the articles, you know, what would the world look like after COVID? And so I think it’s really important to raise this question and I’m glad to see it from different corners, but we also have to have something specific to offer that is different from the patchwork of weak policies we had in the post-war era that were systematically weakened further in the post-Reagan era, and that created the precarity. So just to give you some examples – I know you know these numbers and you’ve gone over them many times on your show – but you know, half of Americans, about 44% of Americans earn less than $18,000.

You know, that is the median income, 44%. So, we are really looking at folks who can barely make ends meet. You cannot build an economy on such precarious economic conditions. And then when you look at who has lost jobs — you know, we say last in, first out. This has kind of been saying labor economists use to say that there are certain folks who are always the last ones to catch the train of the expansion and get some employment opportunities. But as soon as there’s a hiccup, as soon as there is a downturn, they’re the first ones to lose their jobs.

They tend to be folks with — low wage folks. And now what is happening in this pandemic? We’re noticing 40% of job losses are concentrated incomes below $40,000, right? 40%. And then, you know, 20% of job losses are between $40,000 and $100,000. And then there is, you know, another 13 or 12 or 13% above $100,000. So no, the pain is not shared equally. And the pain is born in these structural ways where we are attempting to build an economy on the backs of working families that earn despicably low wages.

And then when we have an extraordinary crisis like this, of course they are the first ones to lose their jobs. At the same time, we painfully, you know, realize how dependent we are on those folks to do some very basic work. We call them now essential workers, but, you know, we underpay them. They work in terrible conditions. They are the ones that die in the meat packing industries in order to feed the rest of us – that is such a fundamentally broken system. It cannot continue.

And what we need to, I think, arrive at is a moment of reckoning, I certainly hope of the sort that we had during the New Deal, when FDR and his team put in place what were at the time radical policy proposals. Do you imagine, you know, elderly folks without social security – zero – imagine that world of very high elderly poverty rates. So what we need to do is do something like that going forward. We know that FDR didn’t really complete the mission.

We know he had an Economic Bill of Rights and the first of those was the right to a job to everyone at all times – not just in a Great Depression, not in COVID, in a good time. If somebody needs work, that’s what we need to provide decent, not poverty paying work. So we do have a lot of work to do. And I’m hoping that this is the sort of moment of reckoning to put in place these policies.

But what I’ve been doing more recently in my writing is not just talk about the job guarantee, but again, challenge us to think about unemployment as something that’s not really natural, but it’s a policy choice. And you know, when we talk about nationalizing payroll or various other policies, there are just different ways to respond to COVID without sacrificing people’s employment.

Grumbine (00:14:46):

I really appreciate that. And I want to throw a curve ball into this a little bit. I had an opportunity to interview Eric Vaughn and Patrick Lovell and Bill Black on the 33rd anniversary of the Keating Five and the devastation and destruction brought on by The Con, so to speak, and the fraud that has been going on since redlining, on through the 70s and 80s into the Savings and Loan Crisis, into Countrywide and the ending of Glass-Steagall. And here we are, even now in this moment, suffering from the mortgage-backed security breakdown and the student debt crisis.

All of this stuff is right there as a tsunami, waiting to crash down on top of all those conditions you had just laid forward. And this system is so broken and so few are benefiting from it. And so many are really tragically devastated. I don’t know that it’s responsible for us to have anything else on our minds at this point, given how devastating the next wave of this comes through. And so as I look at what you’re proposing and I look at nationalizing payroll, that concept of it really resonated with me, because you think about how many people lost their homes over overinflated evaluations of their property and fraudulent loans, you name it.

And they lost everything – suicide’s through the roof, families splitting apart like crazy. This job guarantee is something to me. And the just transition we talk about with the Green New Deal and other things: these are not just neat ideas who, you know, Hey, this is a way to transition. I’m looking back and I’m saying, how many people really truly died? Do we know the body count? Do we understand the causation? And do we understand what this would have prevented, had we done these things in the past?

Now, we’re right in the middle of it. And we still got someone like Mitch McConnell saying he would rather the States file bankruptcy so they can loot the pension funds, than actually step in and restructure this – because somebody is making out, somebody is winning here, and it ain’t us. It’s so much bigger than that. And these are just small token things to help keep society on fumes, basically just to keep us alive. This is bigger than this, is it not?

Tcherneva (00:17:14):

Yeah, no, absolutely. I think that one way or another something will happen. And the question is, how is the system going to change? Is it going to move towards more authoritarian, reactionary kind of policies? Are we going to truly democratize the system? All of these things that you’re pointing out are this cancer that plagues our economy and which demonstrate that the economy works for a handful, you know, very few people.

And so you were talking about how the mortgage crisis devastated communities, but we’re going to see in other ways, in which our communities are going to be devastated, you know, states are going bankrupt left and right. Which means that our schools are going to suffer. We’re going to see teachers being fired. We’ve already seen community colleges closing down campuses. We’re going to probably see failed universities. Imagine, you know, if our education system is decimated and then the basic public services that States are supposed to serve are also compromised.

So with every crisis we’re outraged, and it’s amazing how much more pain folks are able to endure, but that pain is really manifested through exactly the depths of despair that you’re pointing out. So, you know, if this is the plan for the economy is to kill off people who are unable to make it, then it’s not a very good plan. But we know that all of this brings enormous instability – political, economic. So we need to make significant reforms and they have to be from the ground up.

And as I say, everything is connected to everything, you know, what is the famous quote of FDR? But you know, people who are hungry and out of a job are the stuff of which dictatorships are made. And so for me, this is the laser focus of my work – that work, good work, decent work, well-paid work, must be secured for all at all times, irrespective who you are, what your personal circumstances are. If you want a job that has to be guaranteed, because a person who has income will not just be able to pay their bills and send their kids to school and be a good member of the community.

But it ripples through the economy. You know, the fact that we have this stability, security, that we can use this manpower to restore our cities and the public needs that have been neglected. So the job guarantee is that piece really, that focuses on empowering folks to do good work. The public purpose has to be rehabilitated so that we can make the investments, whether it’s the green investments, whether it is, you know, cleaning up the devastation from pollution and providing good care services for our elderly, for our children, there’s just so much to do.

We can’t even enumerate all of it. But how to think about policy today – what is striking to me is that we have, once again, failed on multiple fronts, you know. Our European counterparts have passed much more sensible measures. They will still have to deal with the fallout of unemployment, but they’re not looking at the kind of rates that we’re looking at. And so just to give you an example, Denmark, the UK, Germany, they have various ways in which they guarantee payroll.

Governments pass budgets, which are strictly allocated to keeping people in their jobs, and subsidizing private companies so that they don’t lay off workers. So, as an example, you know, Denmark is effectively paying everybody’s wage or about 80% of everybody’s wage for three months. They put in place stricter social distancing measures to tame the virus, to create a bit more certainty in people. And also they covered bills and wages. What we did, we just surrendered to the inevitability of unemployment. We just said, “Well, you know, it’s going to be a natural artifact of the shock. People will lose jobs, so here’s some unemployment insurance, let’s make it a little more generous,” but we’ve left them jobless without any guarantee that a good job is around the corner when the pandemic is under control.

And so we have trapped ourselves into this Catch-22 situation because, you know, in my work, I talk about how unemployment perpetuates like a disease, like an epidemic. It doesn’t just affect the community. It affects neighboring communities when they lose their income and they lose their businesses, and mom and pop shops are shuttered down. And then that causes the destitution and desperation in families. And it’s not just the unemployed.

And you know, the opioid epidemic is connected to this and children do more poorly. It’s a malaise and distress that we don’t have to endure. We can simply say, “Hey, we’re going to protect your jobs.” We understand that it will be a, still a shock to the system because folks will be more cautious returning to movies, to restaurants. They will be some unemployment. It doesn’t have to be double digits. And then we will still be able to do direct employment, guaranteed employment, but deal with more reasonable numbers.

Grumbine (00:22:32):

It brings me to a thought here. I saw Stephanie, I saw yourself – literally every MMTer worth their salt – was talking about, write checks, write really big checks. Let’s get this economy going. Let’s get money in people’s hands. You had Rohan and Rashida Tlaib with the BOOST Act, yet others talking about emergency pandemic payments to families and so forth. And quite frankly, they never really transpired, at least not yet, anyway.

And you’ve got the Paycheck Protection Act that is being pushed, I believe by Pramila Jayapal and others. And you’ve seen that impact, like the airline industry as well, where they have been able to pass one bill that maybe actually help labor. But that said the idea of a basic income in the midst of this was more like crisis payments. “Let’s get through this hurdle.” But people were mistakenly calling it a UBI, even Alexandria Ocasio-Cortez went out telling people it was a UBI.

So the UBI side of the world kind of got an idea that this was the right answer, but the MMT perspective is a little bit different. And I was wondering, given the fact that so often the job guaranteed and UBI, rightly or wrongly, are often at odds with each other and tie it against each other. Can you explain the difference between the crisis payments MMTers were talking about through this COVID-19 process, and simultaneously the nationalizing payroll and the job guarantee? I know it’s a lot, but those three things seem to be intertwined at various levels.

Tcherneva (00:24:05):

Yeah. I mean, I think that the very first thing that we needed to do is obviously protect jobs because this wasn’t a demand side shock. People didn’t suddenly stop going to the restaurants because they lost jobs. It’s that they were asked not to go, right? So we actually asked people to stop working. Like that was really the issue. We asked them to stop producing, to stop going to the establishments except for the essential part of production.

So this was largely a supply shock. And what we needed to do is just weather the storm by keeping people in jobs. But we know that in the United States, our labor market is so weak by comparison to our European counterparts, that we actually lack basic institutions and safety nets. A lot of people work just precarious, unstable jobs, you know, odd hours. The Uberization of jobs is much stronger here in the United States. So we do have a lot of self-employed folks and they could have also benefited from the government paying their payroll.

But then there are folks, the gig worker or the freelance worker who have occasional work, so they will need some sort of income support. So absolutely, you know, you need to make sure that there is emergency income support for those people because they have not benefited from labor contracts, from stable employment, from, you know, benefits like hazard pay or paid leave. I mean, they’re just far too many people who didn’t have those institutions to protect them. So I would have done it.

You know, I would have done the protections for firms through the employment guarantee. I would have done the cash income support through these various measures of expanding eligibility, as we attempted to do for unemployment insurance and making it more generous for those who are in through the cracks, but also start planning now for the job guarantee tomorrow. And even in the midst of a pandemic, we needed to mobilize and mobilize to create safety equipment, to create masks, to make sure that our food production system is done under safer conditions, which may mean more workers, right?

It may mean more space, may mean a little bit more precautions, like sanitation workers that may need to be hired to clean up the establishments that wouldn’t normally have an army of sanitation workers. So you see, we need work done even in the midst of a crisis in order to protect people. So no doubt, unemployment will be one of the things that will happen because of the reduction in overall business activity. But if we approach this issue with the idea of protecting jobs, protecting people in precarious jobs and creating jobs tomorrow, we would be so much better prepared in going forward.

UBI, they have gotten a little bit of a boost through this crisis mode, but I don’t think this moment is really a illustration why we need to move to a UBI world. Like what is that post-work-world going to look like if 40% of the labor market doesn’t have employment, 30% doesn’t have jobs? That’s not a UBI world I think anyone of us likes, and as I keep saying in my work – work is more than just the lack of income. Work is about validation, being part of a community, being recognized about doing something you enjoy, that, you know, people appreciate the fruits of your labor.

We are not just going to get income, and then somehow self-organize and self-determine, when we live in places where slumlords, you know, charge high rents or when we don’t have access to loans and local banks. There are so many other various ways in which folks are marginalized, that income cannot really empower them in ways that I think the UBI is suggesting. So, you know, what we need obviously is some sort of support for people who can work, want to work.

And some for people who cannot work for whatever reason. So, you know, as you know, for me, the UBI, the way I see it, as, you know, generous social security, early retirement, generous Pell grants, free-education – like that to me is very sensible UBI kind of support. And it’s more of a basic services, I suppose, and provisioning of essential public goods.

Grumbine (00:28:16):

That’s fantastic. I like the way you said that. I sit back and I think to myself, you know, so many people are living in fear right now as they speak of the job loss. And I talk to people on a daily basis who are sick, afraid to go to the doctor for fear of losing everything because of a bill that comes through, terrified of bankruptcy, terrified of student loans. You know, even though they’re in forbearance, this is not a gift. As we’ve learned, this is interest piling up in places.

There are all kinds of shenanigans going on that do not benefit the people. And I look at this and I say to myself, the Bernie Sanders movement was such a powerful force outside of Bernie – just the multi-racial, multi-gender intersectionality that provided us a full-blown look-see at what a new tomorrow might be. And it kept reminding me of one of the things that I love the most about the job guarantee. And that is that with the job guarantee, people oftentimes underestimate the power of revitalizing democracy, because if you’re administering this at the local level, that means that regular people are going to want to be involved in the production of what jobs are going to be funded, how it’s administered.

So now all of a sudden, all those people that wanted to reform the Democratic Party suddenly have a vehicle at the local grassroots level to really enter into the political game and take over their local party chapters and so forth, get into elected offices and, really, fundamentally change the way politics works. I see the job guarantee as a Trojan horse to revitalize democracy. What are your thoughts on that?

Tcherneva (00:30:05):

I mean, I would hope that it’s a welcome structural change, but I see what you’re saying. Essentially, that the way policy is structured is such that regular folks don’t have a voice and they don’t really have the means to self-determine. So in a way it’s absolutely correct. If you create first the guarantee, the promise that if somebody needs work, that will be provided that in itself is quite empowering. But also if that is, as I and others have proposed, in work that rehabilitates our neglected communities and provides care for people who are really struggling, that in and of itself is also an enormous transformative change.

Now, to be able to participate meaningfully in the local work, people try to do this on volunteer basis, but you know, that that is sort of under duress. There are many people who are just juggling many jobs and they can’t even enjoy their community, right? So I think that we can make our communities better in many other ways, you know, we can enhance the arts. We can add other things that are quality of life enhancements. And so the job guarantee has these multiple ways in which we improve people’s lives from participation, to public goods provisioning, to rehabilitating communities, to creating some basic economic security.

And from there, I think it does have the possibility to tip the scale of what we value because you know, in the current paradigm, unless it is some sort of work that generates commercial return, it’s undervalued. And yet most of the work that is important to us, like education, like our healthcare, is in fact work that is not produced for commercial return, or at least it shouldn’t be no matter how much we try to make it produce a commercial return.

So the true essentials of life are not profit-generating, they are because we believe in providing the good life for individuals and for their communities. So I think it does have this potential to democratize our thinking about what kind of work we value, who we value, how they should be paid, that, you know, no one, no matter where they come from should work and are in poverty wages and establish a basic standard, decent standard, that also values public service work. So yeah, I think it has significant democratizing potential.

Intermission (00:32:49):

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Grumbine (00:33:37):

Let me ask you another question. Obviously the neoliberal, Silicon Valley gig economy that has kind of erupted seems to be kind of on life support as well in different ways. But that said a lot of the progressive movement has capitulated to this concept like there is no other alternative, which seems to be the go-to move for a lot of our folks is that as soon as something comes up, we feel like there’s no alternative, that’s it in stone, we can’t move it.

We can’t change it. We’re done. And then we do the give up strategy. And what I’m wondering is how does the job guarantee impact the gig economy? How does it impact the military as employer of last resort? And how does it fundamentally change the way we see the public purpose?

Tcherneva (00:34:24):

Yes. I mean, I agree that there is this resignation. When we talk about technology, there’s a lot of folks feel this sense of resignation, right? The robots are marching in, and I am of different persuasion. I don’t think that’s the threat that folks are experiencing. I think the threat that they’re truly experiencing is management is outsourcing. Yes, of course there is labor-replacing technology and technology is being used, right, to create more difficult working conditions.

But I don’t think technology is the enemy. I would love to see some jobs that are permanently, you know, automated. Meat packing is extremely dangerous, life-threatening work. It should not be done by people – not in these circumstances, in these conditions – embrace technology. So I find it a little bit disappointing that we are somehow able to envision technological solutions to problems, but the one problem like replacement of jobs, we are not able to envision a solution for that.

And the solution seems to be quite straightforward, it’s care work, right? We care for each other. We are social animals, you know, human beings need contact. And you know, I’ve said this before, and many of us have said this, are there any limits to which we can take care of each other? We can educate each other. We can improve our environment, or we can produce things that we all enjoy and love and do it by involving anyone who needs work.

So these things for me, this is a false dichotomy. They’re not pitted against each other. I think that the gig workers, if Uber is the way of things, a standard has to be preserved. Just because there is a new way of taxiing people from their airports, doesn’t mean that those folks should not be earning decent basic wages. So I think whichever way work is going to be transformed, and it surely will be, with contribution from technology there are basic principles we need to preserve — that if you’re going to be working, you should have some very basic labor and wage protections.

Grumbine (00:36:29):

I want to talk to you about the race to the bottom. We oftentimes even not in the crisis that we’re in. I look back during Governor Rick Perry’s days as the governor of Texas. And I can look over there at Brownback in Kansas. And I see these governors who, in fairness to them, they are stuck in a dog-eat-dog world where states are competing against each other for businesses, because that’s the way it’s structurally set up for it.

And Rick Perry would brag about how he was able to steal companies from wherever they were and lure them down there to Texas. Well, the problem is, is that when he lures them with a sweetheart giveaway on taxes and he lures them by cutting social spending, because States have to have a balanced budget, or they have to have some sort of revenue to pay their expenses as a currency user, in this scenario, they leave behind an entire area that no longer has work. Those people are trapped.

The revenue has dried up, the race to the bottom becomes real because now their state government starts going on life support. And all of a sudden we see more and more and more islands of despair and destitution, similar to what we see in Detroit and Flint, Michigan, and other places where there was once great industry. And it is now a ghost town that’s left in shambles. Can you relate the race to the bottom and the job guarantee and how that might prevent such arduous situations from coming up? This is clearly a part of the American economy, this whole race to the bottom.

Tcherneva (00:38:08):

Yes, that’s right. I mean, just like the threat of unemployment creates a race to the bottom, right? The looming threat of unemployment is the most effective tool to reduce wages, right? And to eliminate hard-fought benefits from before. So if you don’t eradicate once and for all the threat of unemployment, then it’s very easy to dismantle all these other various protections that were put in place. You make the fight to improve minimum wages so much harder.

And you know, that kind of displacement effect – with the rise of the freelance worker, as opposed to, you know, the stable employee – the outsourcing, that is a race to the bottom, a function of unemployment. But you’re correct to say about States. That’s a really, really important point. States are essentially engaged in an arms race, that’s it. Who is going to reduce their taxes lower and further for companies to come in and set up shop, establish headquarters?

But we know what it is. They do this arbitrage. You know, as soon as the benefits expire companies then they jump ship. They go to the next state. And so this is an unwinnable war. And what’s interesting is the Kaufman Foundation, I think, Kansas City has good research on this arms race, essentially that says it doesn’t create net new jobs. It’s extremely costly for States, but the job impact is negligible. And if you just account for jobs lost with this, you know, moving across borders, the net job effect is very, very small. So enormous resources are spent.

If States were able to just use that funding to create direct employment, they will be better off. And at one point I had looked at the subsidy that the State of New Jersey was providing to Amazon to set up warehouses there. And it was something on the order of $3-5 billion, which would have been enough to hire every unemployed person in New Jersey at a living wage. So we’re not even thinking about this the right way. We are only spending more than what’s necessary. I mean, in the MMT community, you know, we are very clear that it’s not the number that matters. It’s how you spend the money, right? What is the bang for the buck that you get? You know, like stop obsessing over numbers.

But we are spending a lot more without generating what we need. And my other work on just fiscal policy: I also highlight how just stabilization policies are much the same way. You know, we try to spend, spend, spend into a very leaky economy, an economy that doesn’t create good jobs and doesn’t create them quickly. And instead, you know, we sort of stuff the coffers of the financial sector, and we support profits without supporting wages. And so yes, there is a race to the bottom on multiple levels – at the macroeconomic level, at the state level, at the very micro firm level.

And we just need a paradigm shift to actually create this bubble up economy. So the job guarantee does that by just firming up an uncompromising wage floor and wage benefit package below which no one will fall and that it provides that job security. So now that obviously has important implications on those in the labor market who have the worst bargaining power. So that already off the bat makes things so much better for folks and McDonalds that are protesting sexual harassment, right? You know, now you can walk away from the job, you know, that’s another tool of negotiation, right?

But if you don’t, if you cannot walk away from your job you endure the inhumane conditions, because you have to feed your family, right? So it’s very important, you know, from the ground up at the micro level that really helps. On the state level it helps, just as you said, states have these balanced budget amendments and they cut in the midst of a recession. I mean, we’re seeing this already, you know, that the education budgets in New York City were slashed and we are proposing new budgets, but we’re spending on COVID, which really needs to be federal expenditure.

And so what one hand gives the other one takes away and jobs will be lost. Not today? They will be lost again tomorrow. I mean, they’re obviously lost today – but those that are not lost today may be lost tomorrow. And so we need to also help states, if states are going to have balanced budget amendments, that actually means the opposite of devolution, right? Instead of devolving federal responsibility at the state level, let states have discretionary power on how to organize projects, but provide funding for these social policies, including the job guarantee.

So that is also a bottom-up policy. And then of course at the macro level, we’ve talked about how the job guarantees is a stabilizer far better than a unemployment stabilizer. So that is also a bottom-up macro economic bubble up mechanism.

Grumbine (00:43:06):

This is such an important point because I, at one time worked at a state agency here in Pennsylvania and we had a $600 million budget shortfall. And, you know, the concern was the bridges already D-rated, there’s all these problems with schools, all these different things. And you look and you say to yourself, where’s the money coming from to get the state back up and running? Well, the minute you start trying to raise taxes, you have the other people trying to do what they can do to flee and so forth.

Then you start looking at the federal mandates, unfunded mandates that the federal government has placed on states. And I think to myself, what would possibly be the purpose of placing unfunded mandates on the states? Why are we not in the business of providing some sort of a cushion to ensure that states are not put in these race-to-the-bottom situations? What is the advantage, or what is the purpose here? And I’m curious, why do we have unfunded mandates that create these unemployment situations?

Tcherneva (00:44:09):

Yeah. I mean, this is, you know, really a post Reagan-strategy to basically reduce government and, you know, it’s a defund and destroy. That’s essentially it. I don’t have like a better, more polite explanation than simply the aim to privatize public essential government functions. You know, and we’ve seen the most egregious examples of this when whole cities, instead of being managed by their city councils, you know, there’s a private company that come in, sweeping in to run the city’s affairs. You know, the city is a city, it has a public purpose. It’s not a business enterprise.

And then of course, what we see is cutting from the municipal water system, from basic infrastructure, people are drinking poisoned water. I mean, no surprise, but the devolution, the process of devolution that began under Nixon, and was accelerated under Reagan, had a very clear mission to simply reduce the size of government and worse, privatized many functions.

And so what that did is not only put responsibility on states to do essential things, but the net effect was also reduction in grants and aid and funding. So it’s the Hunger Games. That’s basically what we have been experiencing living through. And it is gratuitous suffering. And we have the power of the public purse to change that. And we most certainly have the capacity to create employment opportunities. We don’t have to reinvent the wheel. We have a good playbook. We know how to do it. We just need to do it better. We need to do it for the modern day.

Grumbine (00:45:37):

One of the things that jumps out at me is the ”Reopen America” folks. They didn’t see any alternatives. They had no idea that there was a way of doing things without jeopardizing people’s health. They thought this virus to be a scam, a hoax, the things coming out of it’s just unreal, but there was a very impassioned plea to reopen America. I think part of that is from the capitalists that want to see their businesses open. I think some of it is from small businesses that are really going belly up because of a lack of support.

But I think also it’s from workers that don’t have any idea that there are alternative ways of doing things. And I’m just curious as to what your take is on how not only the job guarantee, but nationalizing payroll, and quite frankly, just the lens of fiscal policy through MMT, how we might have been able to handle the concept of “Reopen America” differently. Because from my talks with Steve Keen, this pandemic we’re experiencing right now, coupled with climate change issues that we’re going to be facing soon as well.

This is kind of the new norm and we didn’t do very good. We didn’t handle this very well. We didn’t message well. We didn’t have solutions. We didn’t have anything. What do you think in terms of what would your message be to “Reopen America” folks who maybe think that’s the only answer?

Tcherneva (00:46:58):

There are two essential, I think, lessons from the “Open America” phenomena. The first is that the threat of unemployment is an enormous fear in folks, right? If we, again, shifted this paradigm and didn’t accept the inevitability of unemployment, our job would have been done better. So what our European counterparts did is they protected jobs. So people were paid to stay home, and they felt more comfortable to stay home because they didn’t have the uncertainty of a job loss.

So that would have been the first thing. We wouldn’t have rushed to open America, but also European counterparts help businesses with paying their bills because obviously businesses are losing sales and revenue. And so they also have mortgages and they have overhead and bills to pay. So it was a two-pronged strategy. So essentially, at least Denmark attempted to put their economy on freeze and allow people to make their financial commitments without fear of loss of employment. Now, the loss of business, I think is a real fear, because if COVID is with us for some time – no effective means of testing treatment, vaccination, et cetera, you name it – that will mean decline in economic activity.

And so a business, a mom-and-pop shop, is fearful for their very existence. And there are some surveys that have come out recently that more than half of businesses think this is an existential threat to them. And even if they reopened, whether they reopen or not, that threat doesn’t go away precisely because people will not rush back to the restaurant because of COVID. So what do we do? You know, those folks lose their businesses, right? They will be on the street. We could mobilize – I mean, my main message from the beginning on this was mobilize, mobilize, mobilize.

We knew about the virus in December when we were watching what was happening in China; whether we have the full information or not is irrelevant. We know enough about public health to know that we can crank production and we can look to see whether we are prepared. So we could have been cranking safety equipment production, and putting in place protocols – just planning in the background, planning for the eventuality. That’s my lesson going forward.

We can start planning a job guarantee now and a Green New Deal now, because the lesson for policy has to be preparedness and prevention rather than crisis response. So we know that unemployment will occur again for some other reason, whether it is a financial crisis, whether it’s a flood, whether it’s a hurricane, we need to have a preparedness response to employ the unemployed, but we know that all those looming crises need other work, too.

We need to prevent fires. We need to prevent floods. We need to prevent the destitution with these natural disasters and start rehabilitating the environment. So if we arrive at this understanding that we should not wait until the crisis is upon us and start thinking about government and employment and projects just a little bit ahead, I think we will be so much better off.

Grumbine (00:50:15):

Very good! In talking with Nathan Tankus, Nathan has put out some information about local complementary currencies in the space where the federal government hasn’t done its job. It’s left its own opportunities to the wind here. And the idea here of states stepping in and figuring out alternative ways to hire people and to keep the economy going. What are your thoughts about the UNI and other things that might allow for a local job guarantee in the midst of these crisis times?

Tcherneva (00:50:48):

Yes. When all else fails, you know, you look for new solutions. So absolutely of the history of various local currencies as communities trying to do something good and useful when the public sector, the federal government, refuses to step in. And I think what is also important from Nathan’s work is that we are already breaking so many of the rules in terms of sovereign financing. I mean, we as financing left and right entities, businesses, corporations that wouldn’t ever have this direct access to the public purse, you know, the Federal Reserve.

And so why shouldn’t we create UNIs and then have the Fed backstop them? There seems very little logic in the current environment to say, “Well, oh no, this cannot be done,” but we certainly can now buy corporate bonds. But again, you see our thinking is still top-down, not-bottom up. If the Fed is going to use its emergency power to bail out the corporate sector – now, that of course providing additional support for states and municipalities – why not people, right?

Why not, you know, direct accounts at the Fed? Why not backstop local currencies that are used for employment purposes? So I think that is not only just creative solutions in times of – you know, desperate times when the state doesn’t have resources – but also the current environment demonstrates that we’re clearly capable to do this at various other levels. I would still prefer that the federal government steps in and provide the adequate funding, you know; we don’t need to let a thousand currencies bloom so that we can run a job guarantee.

It’s great. It’s very exciting actually, how communities are doing it, but that is still predicated on this insane incapacity that we believe that the federal government has. And so this is, as I say, you know, I think MMT is a precondition for almost every progressive policy that we want. And we want it at a level that guarantees rights by everyone because local currencies will not be able to guarantee employment for everyone, you know, maybe within a town, right. But our goal, aspiration, is for this to happen in every corner of the country for every single individual. And so for that, I much prefer the public purse to be employed.

Grumbine (00:53:12):

I love it. There’s a couple things that jumped out at me here. Number one is going back to the idea of labor unions and organizing. And you mentioned about how people can leave a bad situation and really put the screws to the business that has put the bad situation on them. You know, I think to myself, when I used to be a member of the local CWA 2222, part of Verizon, and when we would go on strike and a lot of us guys would go jump and start delivering pizzas at the local Domino’s or whatever it was that was available.

And a lot of people didn’t have any work coming in. And we were in a professional, albeit blue-collar type career. We were making good money. The idea of being able to jump to a job guarantee in the midst of a strike and have a income while you’re negotiating. To me, this is a great sell to labor unions. I mean, this is an opportunity to really get labor unions engaged in pushing and helping advance the concept of a job guarantee. What do you think about that?

Tcherneva (00:54:13):

I think that we should be natural allies. It’s important to recognize that we haven’t always been natural allies in the sense that at least during FDR’s time, the projects that FDR created were not always supported by unions with the idea that, you know, those projects might be taking some good union jobs. And there was some tension. I think it was resolved by FDR using union input in the job creation. The most popular ones was the green projects.

Unions thought that youth programs were not really a threat to union jobs, but I think that is still a world in which unemployment looms large. Now what would a world that has banished the threat of unemployment look like and what would be the work of unions? How would you negotiate? And you know, what kind of power will you have within your own industry? You actually don’t have to deal with the threat of unemployment.

I think that the unions can use their time in much more productive ways to improve the working conditions of their union members. So I think we are absolutely natural allies. And I think another reason why we’re natural allies is because most work in the United States is service work and it is under paid. It’s not sort of the good-quality union manufacturing jobs of the past, and teachers are being unionized, you know, nurses and others, but you know, they’re still at the lower end of the wage spectrum.

So this idea of raising the floor, you know, a job guarantee – establishing a firm, living wage floor – makes, I think, union work so much easier for service unions as well. So I think we’ve had some sympathy and excitement from some quarters, the unions. And I think that that conversation is important, especially if it comes to the point that we plan. I think that job guarantee workers themselves should be permitted to form a union as well. So it’s the same fight. And I think that the more we realize, you know, the commonality, I think the better,

Grumbine (00:56:21):

You know, I want to make a little bit of an anecdote here. We’ve been trapped in our house – four people, a kid with autism that’s bouncing off the walls, a seven-year old, who is just absolutely flying off the walls as well. And two parents that are still working albeit remotely, And the schoolwork that our daughter has in first grade, mind you is outrageous. Like she had so much homework to do during this stay at home. And it wasn’t easy to do.

I mean, Melanie was going crazy trying to help our daughter get this thing done. And I kept thinking to myself, although I didn’t want to say it out loud and perturb anyone. And I kept thinking, wow, what a great opportunity for tutors, retired teachers, whatever, to work individually with students to help them get their homework done when parents aren’t really necessarily equipped to do some of this stuff. There was a real opportunity for a job guarantee type role right here in the midst of this pandemic.

Tcherneva (00:57:18):

Oh my goodness. I have a seven year old in my house. You and me exactly the same thoughts I can tell you. And they have a lot of work, you know, and they have a lot of assignments and they have a regular one hour meeting with their teachers almost every day. But I think they should have, you know, three hours, four hours maybe because it’s fun. I see for my daughter, it’s fun to see her friends online. The teacher does some interactive activities and exercises with them and you know, it has that social element that I can certainly not provide.

You know, she keeps asking me to jump on the trampoline with her. It’s not. And they like that the teachers are providing some instructional content, and they themselves have children in their own homes. And so I could see how my daughter’s teacher can not obviously run her normal class cause she’s homeschooling her own kids. But there are so many people who don’t have work. There are students who are coming out of educational programs, college students, university students who could be plugged in exactly as tutors, who could start running little sessions. Absolutely.

I think there’s so much to do. And this idea that just because we’re shuttered at home, there isn’t work to do, and we can’t do it. You know, the job guarantee is somehow it’s more difficult to run because we’re all staying home. Really. I don’t think it’s correct. You know, elderly folks need to be looked in on, somebody needs to pick up the phone, maybe, you know, run a little session, whatever it is. There’s so many people in isolation. So I think that you’re absolutely right. Lots that we can do even now.

Grumbine (00:58:59):

No, I appreciate that! Hey, final point. You know, obviously African-Americans have been hit incredibly hard by the virus. The mortality rate within the African American community is significantly higher than that of others. And a lot of that stems from a lack of access to health care. And a lot of that also stems from situations that I believe a job guarantee could have prevented as well. But one of the big things is, is that we look at people that are insulated somewhat from the financial destitution of a depression.

You look at the people whose generational wealth is nonexistent and they’re dependent on a paycheck. They don’t have any familial wealth. They don’t have anything to fall back on whatsoever. And this crisis has been particularly difficult for people of color and others who are marginalized throughout history. What is your thoughts there in terms of messaging to them how this might be a benefit within their community and something they can start rallying around?

Tcherneva (01:00:02):

Yes. All of the problems that we’ve discussed in the economy and in the labor market need to have a very clear understanding of how systemic racism affects those outcomes. Whether it is, as you said, folks who don’t have generational wealth for hundreds and hundreds of years, African-Americans who go to education, but their educational returns don’t materialize. They don’t translate into income returns, into well-being, however measured.

I mean, these are systemic and long trends that also need to be broken up and access to decent employment is one way. By no means I’m going to say that it’s going to address all forms of systemic racism, but to have the ability to work in a decent, well-paid job and not to be always the person who is again “last hired/first fired,” the person who was put in the most dangerous situations, the ability to walk away from an abusive employer.

I think that those who were systemically marginalized and discriminated, African American community, people of color, they will naturally benefit the most from those sorts of protections that the job guarantee will provide.

Grumbine (01:01:16):

And with that, I want to thank you so much for taking the time with us. I know that you’ve been involved in a few other projects. If you wouldn’t mind, just close us out and let us know what you’re working on, where we can find you and any other goodies that might be of interest that we can find and support you in.

Tcherneva (01:01:34):

Oh, thank you very much. A recent project has been very exciting and interesting to highlight with several female scholars, we drafted an op-ed on democratizing work that was actually an initiative by a colleague of mine, Isabelle Ferreras. She drafted the op-ed and put in the job guarantee in that op-ed as well as democratizing the workplace within the private sector and calling for environmental remediation.

What’s exciting about this is that this op-ed literally overnight gathered support around the world. Now 6,000 people have signed on around the world. It was published in 26 languages and in 40 papers, but there is again a global understanding that our goals and our objectives are connected. And also for me personally, it’s very interesting because the job guarantee is this solution outside of the market, that is by the public sector for the public purpose.

But indeed lives of working people can be improved materially, if we also try to democratize the workplace, the private firm. And so I think that these are also natural alliances and we were thinking about, you know, various forms in which we can tackle these two challenges. You can’t democratize the firm if you have the threat of unemployment, but the threat of unemployment can’t truly be solved with a job guarantee if you don’t have also more power within the firm. So keep an eye out for that.

Grumbine (01:03:03):

Very, very good. I’m very excited about the book. Again. I did purchase it. Can’t wait to read it, and I just want to thank you again for all the selfless work you do and being such a great spokesman for these causes. And I just want to thank you for being a good friend. So thank you for joining me today!

Tcherneva (01:03:21):

Likewise, Steve. Always appreciate your work and thank you for carrying on. Appreciate the forum.

Grumbine (01:03:29):

You got it. All right. This is Steve Grumbine and Pavlina Tcherneva. We’re out of here. Thanks.

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