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Episode 103 – Anatomy of a Job Guarantee with Fadhel Kaboub
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What can we say about the job guarantee that hasn’t already been said? Quite a bit, actually, as you’ll see in this and upcoming episodes.
This week Fadhel Kaboub is talking to a mellower Steve, fresh from the hospital and still on the mend from Covid19. Fadhel begins with the reality that capitalism is a brutal system that constantly leaves people behind. It’s driven by technological change, and as this develops, we require some workers with new skill sets, while others are rendered virtually obsolete. We don’t have an existing system bringing them into the new technology.
We count on individual workers to do this on their own, to somehow anticipate technological change, take time and money from their own budget, so to speak, to invest in learning new skills that will be useful for this new industry that doesn’t exist yet and somehow be ready to go to transition to those new jobs. And those jobs sometimes are in a different location. Sometimes they’re completely in a different country, a different part of the world. So that is the absurdity of the system that we leave this up to individuals to struggle.
A job guarantee will treat training and education as part of the job. Advancing technology tends to be more capital intensive, requiring a smaller workforce. What do we do with all the surplus labor? Fadhel explains why it’s not enough to provide a basic safety net, such as healthcare and social services, though they are desperately required as well. Work is more than an income, with well-proven benefits to individuals and families beyond the paycheck. JG advocates like Pavlina Tcherneva and Fadhel speak of a “care economy” of the most valuable work from a broader human and social perspective. Fadhel says it’s “a social, economic and political consensus, a social contract that doesn’t throw people under the bus as the economy changes over time.”
Steve asks Fadhel about the job guarantee in a mixed economy and command economy. They discuss workers’ coops and the aversion, from some on the left, to state control. Fadhel reminds us the JG talks about federal funding. Everything else, from job creation to implementation and management, is done at the local level through a participatory democracy model.
Some tricky questions arise. Who defines local? Is it state, municipal, county?
How many grassroots voices do we have in the decision-making process? Is all the money going to go to the same city council officials who will hand out these contracts to the same developers who exclude minority groups from access to jobs, who always invest in the wealthier part of town? So those are important details so that we don’t end up feeding the system and recreating the same problem. So grassroots participation, community participation is important. It can’t be just symbolic.
Fadhel talks about the role of nonprofit organizations, which are important not only because they are existing organizations we don’t need to invent or create from scratch. They’re also in touch with the people who need the most services, so are in the best position to speak to what will benefit them.
The interview covers the UBI, with enough information to handle any debate. Fadhel explains the meaning of “buffer stock,” with examples of how economists normally use the term. He reveals the real reason UBI is being heavily promoted by Silicon Valley.
Steve and Fadhel look at the need for independent media like Real Progressives. Democracy without a fourth estate is not a democracy. The privatization and monopolization of the media over the past 40 years has served to destroy local journalism, meaning we don’t have full-time reporters covering local news, city councils, how the money is spent.
This episode covers much more than can be described here. You’ll just have to listen for yourself.
Dr. Fadhel Kaboub is an Associate Professor of Economics at Denison University and President of the Global Institute for Sustainable Prosperity.
global-isp.org
@FadhelKaboub
Macro N Cheese – Episode 103
Anatomy of a Job Guarantee with Fadhel Kaboub
January 16, 2021
[00:00:03.000] – Fadhel Kaboub [intro/music]
The idea of a UBI being the solution to all of our problems is the most ridiculous thing. We have a climate crisis, we have an inequality crisis, a social justice crisis. Somehow, a thousand dollars a month is going to solve all of these things.
[00:00:21.000] – Fadhel Kaboub [intro/music]
The job guarantee simply steps in and says we’re going to hire the surplus labor that the private sector is not interested in hiring during a recession. And we’re going to pay that labor a living wage with benefits, so that people can survive and thrive within the community.
[00:01:26.670] – Geoff Ginter [intro/music]
Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:34.560] – Steve Grumbine
All right, folks, and this is Steve with Macro N Cheese. This is my first podcast since coming back from Covid-19. I had double pneumonia, viral and bacterial, acute respiratory failure. It’s still haunting me. I got to tell you, this is no joke, folks. The fog and the fatigue that come with Covid-19 are just unbelievable. And with support from hundreds of you, we’ve been able to put together some money to be able to help us get through the unpaid leave at work and take care of some of the medical bills.
And so as I was sitting there in the hospital, all I could think about was how important a federal job guarantee would be to have right now at this particular period of time with so many people out of work, thousands and thousands, hundreds of thousands of people losing their jobs right now. We have a Congress that is more focused on impeachment and gotcha politics than making sure the common man has a job or has a roof over his head or has their bills taken care of and food. And so as I was thinking about this, I reached out to my good friend Fadhel Kaboub, who really requires no introduction.
But Fadhel is one of the foremost experts on the federal job guarantee. And, so I figured, let’s get Fadhel in here to talk about the specifics, not just a standard job guarantee discussion. I want you to understand what makes this such a game changer, why this is so vital to a vibrant movement, especially a movement that wants to have revolutionary aspects to it, that holds its elected officials accountable, that actually takes the time to be able to give the stiff arm to the man and provide a living wage and living benefits.
It’s just such a game-changer. And so I asked Fadhel to come on. And with that, I want to thank you all for your support once again and thank Fadhel. Fadhel, thank you so much for joining me today.
[00:03:36.040] – Fadhel Kaboub
Well, thank you, Steve, for having me. I want to start by saying welcome back, we’re glad you’re doing better and wishing you a full recovery, speedy recovery from this horrific virus that’s affected millions of people around the world. So thank you again for having me on the show. I’ll start with a plug for my friend’s book, “The Case for a Job Guarantee” by Pavlina Tcherneva. You’ve had Pavlina on the show several times, obviously, and the listeners are probably very familiar with her work.
But that’s a reference point for anybody who is new to the topic to check out the book and Pavlina’s work at the Levy Institute and elsewhere. So I want to start by stating how brutal the system is, not just in terms of our crisis right now with the covid crisis, with the lack of health care resources and support for people who have been displaced for health reasons or for economic reasons, and segue into why the job guarantee is important.
So capitalism is this brutal system that doesn’t guarantee access to employment for people who are ready, willing and able to work. The core feature of capitalism is the fact that it’s driven by technological change. And by definition, technological change means we’re always creating new techniques, new machinery, equipment, technology, and that new technology will always displace older technology, which means workers who are associated with an older technology, with the older skills, by definition, will always be displaced.
So this is the common feature of the system. And yet we don’t have a system in place that takes workers from that older, obsolete technological space and helps transition them into the new economy using the new technology and so on. We count on individual workers to do this on their own, to somehow anticipate technological change, take time and money from their own budget, so to speak, to invest in learning new skills that will be useful for this new industry that doesn’t exist yet and somehow be ready to go to transition to those new jobs.
And those jobs sometimes are in a different location. Sometimes they’re completely in a different country, part of the world. So that is the absurdity of the system that we leave this up to individuals to struggle. And of course, in that process, not everybody makes it through that transition. That’s one component. The other thing about these technological transitions is that they always move us towards much more capital-intensive economic system, which means it becomes labor displacing by definition.
So what do we do with workers who are left behind? We have no system in place that guarantees employment. Some countries have systems in place that guarantee a basic safety net like access to health care or access to unemployment benefits or social services. But that doesn’t replace the need for employment, especially if people are actually mid-career or still young and actually want to work.
This is the thing, because work is something that defines who we are as individuals, that allows us to thrive as human beings. Most people are not looking just for the income. The income is part of it, of course. It’s important. But the most important thing is that sense of belonging, sense of contributing to society, connecting to the community, and from a broader social and political perspective, we all know that when people are engaged in economic activity, they’re more likely to be politically active, socially aware and contribute to their community in the broadest sense of the term.
So these are kind of the obvious issues and the literature on the job guarantee and many of us working in this space have been working on designing this automatic stabilizer, this job guarantee system where anybody who’s displaced from the workforce, for whatever reasons, is able to find a source of employment that complements what the private sector does, complements what the government, traditional government sector does, and is primarily focused on what we call the care economy.
Caring for people, caring for the community, caring for the elderly, for children and caring for the planet, because that’s the most valuable work, valuable from a broader human and social perspective. And that’s the type of work that’s often neglected by the metrics of the market because it doesn’t generate profits and doesn’t generate, quote-unquote, “economic growth” in the traditional kind of narrow sense of the term. So we have all of these benefits.
[00:08:46.890] – Grumbine
Let me ask you a quick question, Fadhel. In terms of market, does this only work in a market economy? This could work in a command economy, too. There’s nothing that prevents this from working in a mixed economy in which we have. What are your thoughts on that? I’m sorry to derail you. I just want to get your take on that.
[00:09:04.780] – Kaboub
Of course, you can design a job guarantee in any economic system, command economies, obviously, you lose the freedom of choice and things like that, but mixed economies, and we can talk here about the Scandinavian model, which is actually the closest you can think of in terms of job guarantee and safety net system, especially a country like Sweden historically had a very strong commitment to full employment.
And it is a mixed economy in the sense that the government and labor have a very important political and economic role. Think of this tripod system where you have government, business and labor unions building consensus around all major economic and social issues. If the country enters a recession because of technological transition, because of international trade competitiveness and things like that, and the country feels like there’s a major need for a technological upgrade in the private sector and that would displace workers, you can’t do that without actually having workers at the table.
Without having governments, elected officials who represent the people be part of the conversation about what happens to those workers that will be displaced because of this technological transformation. In the US, for example, this happens without having workers on the table, sometimes with governments participating and encouraging the private sector to displace workers. So we’re talking about a social, economic and political consensus, a social contract that doesn’t throw people under the bus as the economy changes over time.
[00:10:45.310] – Grumbine
Could a co-op work within the space or is it completely incompatible?
[00:10:50.780] – Kaboub
Tell me more what you mean by co-op?
[00:10:53.630] – Grumbine
So could a co-op environment be funded by the federal government to provide the employee ownership of those workplaces, whether they be retail, whether they be trades, whatever, could that work as opposed to the non-profit model? Could the opportunity to work with an employee like co-op or are they completely incompatible?
[00:11:16.310] – Kaboub
No, I would say that it would be possible within a job guarantee system. Obviously, all of this is designed by law. So whatever lawmakers decide is going to fall under the umbrella of a job guarantee, federally funded as long as you set certain criteria. For example, the co-op has to service certain neglected area, geographic area of the economy. We have food deserts all over this country. Right?
So if co-ops are going to serve that community and serve that particular part of the system and by all means, it needs to be supported, and that’s one way to rebuild communities from within. We always talk about the role of the nonprofit sector, and that’s an important component. But anything that allows us to weave a new socioeconomic fabric into neglected areas of the economy to lift people from those communities would be a huge improvement.
[00:12:14.270] – Grumbine
Awesome. I know that many of the objections that we hear from people, especially on the left, is they don’t want more state control. They want the freedom. They want the ownership. They want the means of production – which is clearly the socialist aim – as the working class. So I guess the question becomes, if you were pitching this to the left, who has an aversion to state control to some extent, what would your message to them be?
[00:12:43.170] – Kaboub
So all the literature on the job guarantee is very clear that we’re talking about federal funding for job creation at the local level, but the selection of the projects, the implementation of the project, the hiring and firing, the training, the assessment, the auditing, all of this is done at the local level in a participatory democracy type of model, participatory budgeting, participatory planning, participatory auditing.
Now, to put more details to what we mean by local and participatory, is it the local municipality? Is it the state? Is it city council officials who make these decisions? That remains to be defined and that’s defined by legislation. How much grassroots voice do we have in the decision-making process? Is all the money going to go to the same city council officials who will hand out these contracts to the same developers who exclude minority groups from access to jobs, who always invest in the wealthier part of town and things like that?
So those are important details so that we don’t end up feeding the system and recreating the same problem. So grassroots participation, community participation is important and it can’t be just symbolic. So this is where the role of nonprofit organizations, because these are existing organizations, we don’t have to invent them or create them. They are already doing this work in the sense that they are in touch with unemployed individuals.
They’re in touch with individuals who need social services. They’re already dealing with homelessness. They’re already dealing with hunger, with food deserts, with the opioid crisis. The reason they exist is because the state and the market and the federal government have failed to address those issues, have failed in delivering services or addressing the roots of the problem. So they’re already there as a complement to the system.
The only problem is that they tend to be underfunded and understaffed on a permanent basis and they lose even more funding during bad economic times like right now during the pandemic when their services are needed the most, right, because the economy is weaker and there’s less charitable contributions and fewer federal dollars coming in terms of grants and things like that.
So if we introduce a job guarantee system that says you already know the needs of the local community, which are different from city to city and state to state, so you can micro target the needs and identify the actual problems that your clients deal with, your community deals with. The problem is you have no resources. You rely exclusively in many cases on volunteers, on charitable dollars and grants. We’re going to provide additional funding through a federal job guarantee program that allows you now to hire and train full-time people from the community in order to address the needs of that same community.
And it doesn’t have to be overwhelming. We’re talking about a small nonprofit organization in a small town. You don’t have to hire 500 hundred people. You can start with five people and scale it up to 10 and 20 as needed so that the training component is not overwhelming. And one of the things that those organizations would do is, number one, assess the needs of the community.
Number two, assess the types of skills and experiences that they need to find in order to meet the needs of the community. And number three, look within the community to identify if we have within the unemployed and underemployed population if we have those skills and experiences to match the needs of the program. And if the skills and experiences match, then we have a system. If the skills and experiences needed are lacking or not up to par, then there is room for on the job paid training in order to build capacity within the community to meet that challenge.
So the job guarantee includes a training component, an educational component. But it’s like the model that labor unions use, which is on-the-job paid training and apprenticeship and mentorship. This way you’re not told, “Well, we need to do this work, but you don’t have the skills. So why don’t you go spend six months or a year acquiring those skills, pay for it out-of-pocket or with student loans, and then maybe when you come back we’ll need those skills.” So that’s why we talk about a job guarantee with on-the-job paid training.
[00:17:24.670] – Grumbine
So what about a place like Real Progressives, for example. We’ve got a nationwide and actually, in many cases, a global network of volunteers that work to support all kinds of media opportunities for other like-minded organizations covering events, things like that, web dev, all these different aspects of it. Without us being in a local community where people are sitting there hanging out with each other would that pertain to a place like RP? Would this be a place where we could say, get an editor in chief, or we could get a web developer that would normally have been a volunteer, but now we’re paying them a job guarantee wage for the support?
[00:18:02.810] – Kaboub
This is a very important question. Very good question, Steve. So let me back step for one second and talk about the role of an organization like Real Progressives, independent media, media in general. And this is one of the things that we lost over the last 40 years, which is independent voices and the Fourth Estate. Remember, democracy without a Fourth Estate is not a democracy.
And the role of the Fourth Estate is to be independent, to provide that additional check on the political system, on the executive branch, and to inform the public about what’s going on. So with the privatization of the media that happened over the last few decades, we’ve lost that, and we’ve lost it, especially at the local level.
Think of all your local newspapers and media organizations that have lost local reporters, which means nobody’s reporting on city council. Nobody’s reporting on how money is spent. There’s very little transparency, which means we lose the democratic process. So if we as a society value that as an important service to the community and if the market is not doing it, if government funded organizations like NPR and so on is not doing it, then there is room for nonprofit independent media organizations to step in and do the work.
And as far as I’m concerned, a job guarantee should cover job creation to restore the democratic process because that’s a valuable contribution to society. So based on those criteria and standards, I think independent media would qualify for a job guarantee program.
[00:19:42.600] – Grumbine
That’s awesome, that’s very, very powerful. So with that in mind, one of the things that I think people don’t understand about a job guarantee is the macroeconomic component of the automatic stabilizer. I know this is for people that are students of the job guarantee, this is probably just a rehash. But I think there’s a lot of people out there that are still kind of caught up in a very different battle of morals, as opposed to understanding the macro underpinnings of a federal job guarantee. Could you break down the macro benefits and the purpose behind the macro automatic stabilizer that comes with a federal job guarantee?
[00:20:24.510] – Kaboub
Absolutely. So let me give you a concrete example. Let’s say we’re looking at a small town of 5,000 or 10,000 people in a small midwestern region, and let’s look at it from a Chamber of Commerce perspective. There’s a network of businesses, restaurants, grocery stores, entertainment services in that particular town. And then all of a sudden, the economy enters into a recession, national global recession, which means many of the residents who live in that town have lost their jobs, have lost their income.
And now this means that they’re spending less in the local economy. They’re not going out to restaurants. They’re not getting more entertainment or clothing or transportation or cleaning services or whatever the local community network of businesses are providing. So now, because people lost their jobs because of a national recession, in the local economy, all of a sudden you have fewer customers walking through the door and buying stuff, which means businesses are losing revenue.
And if I’m a restaurant owner and I’m losing 20, 30 percent of my business and revenue, then I’m going to lay off some of my employees. I’m going to have to cut costs. So now we’re feeding that recession with more unemployment. And the longer this goes, the deeper we get into the crisis. And of course, this is a nationwide problem. What does the job guarantee do in this situation?
The job guarantee steps in immediately and guarantees employment to anybody within that community who is ready, willing and able to work at a living wage with benefits. And we can be as generous as we want with the benefits package and so on, which means you immediately on day one of what would have been a severe recession, you put a backstop to the whole process by underwriting people’s income.
Instead of going from a full-time job income to zero, you’re going now into a guaranteed basis where everybody can continue going out to a restaurant, can continue sending their kids through the summer camp and continue buying from local retail services, which means as a business owner, I’m not losing 30 percent of my business. Maybe I’ll lose three to five percent or whatever it is.
But in general, because people have a guaranteed income and a guaranteed access to a job during a recession, they know that they can continue spending more or less at the same standard, at the same level. And that’s a very important stabilizer for the system because it stops a recession from turning into a deep crisis immediately and it feeds positive expectations because business expectations are extremely important, and investment decisions.
Though, if we’re talking about a business that was planning to expand again — I’m a restaurant owner and I’m a great chef and I’ve been successful over the last five or ten years. And now it’s time to open a second restaurant in the other part of town that involves a massive financial commitment. I’ll have to rent the place and renovate it and bring all the professional equipment, expensive equipment that I need for the kitchen and to train employees and so on.
So making that decision sometimes involves getting a loan from a bank or $200,000 to renovate the place and buy all the equipment and so on. I’m going to think twice before committing to a $200,000 loan because that could ruin my business if I can’t really generate the revenues to make it happen. So what if I’m in the process of getting the loan? I just got the loan. I started renovating the thing.
I’m on the hook for a lot of monthly payments now, and then all of a sudden a recession hits and I open up and that restaurant is not successful and my older restaurant is not successful either. Then how do I make the monthly payments? This is a serious problem, which means if I live in a world where I know there is a job guarantee, which means members of my community, even if there is a recession, even if they lose their job, they’re still going to be able to come and eat lunch at my restaurant or have dinner or birthday parties at my restaurant, then I can sleep better at night knowing that I can commit to that investment.
I can commit to hiring contractors, which creates jobs in the community. I can commit to hiring staff and hiring a new chef to serve in that new restaurant. So that’s how when you kill that negative expectation, that pessimism about the future, that doesn’t let me sleep at night, then I can commit to job creation and economic development.
But you take the job guarantee out of the picture and all of a sudden I’m on the hook and I’m not going to take that risk, which means I’m not creating those jobs for the contractors, for the delivery people, for the cleaning staff, for the waiters, for the new chef and sous chef that I’m hiring and so on. That’s why it’s a stabilizer and it guarantees that we build communities from within without having to live with the threat of a recession, of a crisis, of unemployment.
[00:25:46.520] – Grumbine
Would it be inappropriate to look at this through the stock-flow consistent modeling in understanding the flows in and out of the state versus the Fed versus trade imbalances? I know we don’t typically track this at the state level, but if you think about it, the sectoral balance approach here, it makes the case for that automatic stabilizer with the job guarantee if you just look at flows? Can you expand on that or is that just a dead end?
[00:26:14.420] – Kaboub
Oh, it’s a good question, but I’ll try to keep it kind of macro and simple in a sense. So if the private sector is shrinking in terms of economic activity and the federal government steps in to fund, for example, a job guarantee, then the federal government is running a larger deficit and that spending is going to the private sector. So it’s like as the private sector is shrinking its economic activity, the government sector, the federal government sector, is stepping in to fill the gap. And that’s something that the MMT analysis typically shows all the time.
But in this context, think of that additional deficit that the government is introducing is spending dollars where it’s needed the most. In other words, instead of the federal government handing out tax cuts to Wall Street or oil companies, in this case, that deficit is going to the bottom of the income scale or what would have been the bottom of the income scale if we don’t have a job guarantee. And as a result, you’re setting that minimum floor for the economy and you’re supporting the private sector directly.
[00:27:32.390] – Intermission
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[00:28:21.480] – Grumbine
So if I’m working at Walmart, for example, and Walmart sees that I have disposable income through whether it be some sort of a basic income scheme or something else, Walmart then can look at that and say, hey, we don’t have to adjust our salary. In fact, maybe we can even cut some benefits, and we could absorb and subsidize our bad hiring practices using these additional funds. I know this is more micro than macro, but my question is, how does that play into the job guarantee macro perspective that girding away of predatory hiring practices and subsidizing of shit wages.
[00:29:04.740] – Kaboub
So that is a very good question, Steve, and it brings into focus the idea that a job guarantee is not a silver bullet to solve all of our structural problems. So in the example you mentioned, if the federal government, for example, guarantees support for lower income families in terms of having access to food stamps, having access to child care, having access to subsidized health care or whatever you want to call it, that prompts a private business to say to their lowest income workers, well, now the government is paying for part of your rent and part of your food and part of your health.
I don’t really need to give you a raise because you’re doing fine. Right? I’ll just give you the minimum wage and you get all the other subsidies from the government and you’ll be fine. That would not be obviously ideal. We want to raise the standards, but also we want to make sure that businesses are not taking advantage of this. So, yes, we want universal health care. Yes, we want universal childcare and so on. But we need to raise the minimum wage.
We need to have the wage be a living wage, to have minimum standards for workers in the private sector. To expand on this idea a little bit and to bring it into, I guess, a hot topic that many people have been debating over the last few years. What if the federal government provides a universal basic income, not social services, not rent support and child support and things like that, but really a basic income, $1,000 a month for everybody.
And now back to your example about somebody working at Walmart. Now, all of a sudden, they get $1,000 a month. Will Walmart increase their wage? Will Walmart provide any additional benefits? Probably not, because they’re going to use that same argument, say, well, now the government is helping you pay for your rent and part of your food. So I’m going to even lower your wage to a minimum wage as opposed to a living wage.
And I think this goes beyond Walmart. I think Walmart is kind of a small piece of the puzzle here. This is really about the uberization of the economy. It’s about the gig economy. And that’s why a lot of these UBI experiments, you see them coming out of Silicon Valley. Silicon Valley CEOs who sponsor these studies and experiments, which as far as I’m concerned, they don’t meet any scientific academic standard because what they do is basically say, “Oh, we’re going to test this idea, we’re going to experiment.
So let’s go to a low-income community somewhere, identify a couple of hundred low-income people and give them $500 a month or $800 a month as a basic income, as an experiment for UBI and then track their progress. See how they’re doing, their stress level, their health level, if their kids are well-fed, if this will actually improve their life.”
And I can tell you this without having done the experiment, that, yeah, if you go to the lowest income community, underpaid, unemployed, single parents struggling to pay the bills with two or three kids, and you give them five hundred dollars a month, I can tell you that their life will be better, but I’d rather see those additional $500 be an additional $2,000 coming from the actual job that they currently have so that they’re not underpaid.
I’d rather see the health improvement for their kids nutrition and quality of life not come from those 500 experimental dollars, but come from a universal health care system that is afforded to them as a human right, not as a charity from a Silicon Valley CEO. So that’s really the fine line that we have to walk here, because I see a lot of really progressive, well-meaning individuals who say, well, I’m not going to be against the universal basic income because it gives individuals who need it the most that additional $1,000.
I see the appeal for it because, yes, $1,000 is helpful. But let’s keep our eyes on the bigger prize, on the structural transformation, because I guarantee you that if we have a universal basic income, the style that Silicon Valley CEOs are promoting, the uberization of the economy, what we’re going to see is major cuts in social services across the board. And we’re going to see more uber like companies pop up with zero hour contracts, no benefits, minimum wage jobs, because their logic will be, well, you already get a basic income from the government, so your rent is kind of covered.
Some of your food is already covered, but you’re not independent. You’re not thriving. So you have to hustle for work in the gig economy, and we’re here to serve. We’ll give you flexible hours. We’ll give you your own schedule and that kind of thing. I think that’s a very dangerous thing for us to move in that direction. And if you don’t mind taking this a bit further, the idea of a UBI being the solution to all of our problems is the most ridiculous thing I see in the public discourse in the last few years.
We have a climate crisis. We have an inequality crisis, the social justice crisis. Somehow $1,000 a month is going to solve all of these things? Like the planet is on fire. People want to work. We have technology to do the hard work to decarbonize the economy. And somehow the solution to all that is $1,000 a month for everybody. That is just absurd.
[00:34:41.470] – Grumbine
It’s ridiculous. Let me take that a step further, though. One of the big things that I have railed on, especially on this – Pavlina says “status quo UBI” – is, quite frankly, the price anchor. OK. They’re not guaranteeing you anything. They’re giving you money. So there’s nothing to guarantee. Let’s say they give you $600 a month, but the vaccine is $601. OK. There’s nothing there preventing gouging and stuff.
There’s no price controls. There’s no price anchor. There’s no nothing. So when you talk about a complete lack of guarantee, to me the most destabilizing thing would be a UBI. It may work for a little while until things catch up. Then all of a sudden they absorb that slack in the economy, prices go up. There’s no price anchor. How do you establish a price anchor? What is a price anchor and why does the job guarantee provide that whereas the UBI does not?
[00:35:39.670] – Kaboub
Yeah, that’s a very good question. So here I want to use a little bit of a technical term, but it’s a very simple technical term. I’ll give you a couple of examples to clarify. We often refer to the job guarantee as a buffer stock system, as a buffer stock mechanism. So fancy word for a relatively simple concept that we use all the time in this country and other parts of the world. A buffer stock is usually used in the context of commodities. So we look at key commodities in the system that are critical for price stability, like food items like corn, wheat.
You are in Brazil, coffee, key commodities and say, well, it’s important for the price of this commodity to stay stable. Think of corn or wheat, for example, as just basic things here in the US. If the price of corn fluctuates, goes close to zero and then skyrockets, it not only affects the farmers, the producers, in terms of their ability to actually stay in business, especially if prices drop close to zero, and it also affects all of us consumers because that’s the basic input in a lot of the food items that we consume, because that will produce now food price inflation and make food unaffordable in some cases for consumers.
So we have a vested interest as a society to keep the price of key commodities stable within a reasonable range so that it’s reasonably profitable for farmers to stay in business and make a living. And it’s affordable for consumers and it doesn’t go into skyrocketing mode. So how do we do it? The federal government steps in and establishes what we call a buffer stock mechanism for wheat and corn and other basic food commodities and so on.
So the government steps in and becomes the buyer of last resort when there is a massive surplus of wheat or corn, which would normally drive the price of wheat or corn to zero when there’s so much surplus. So the government steps in and buys all the surplus up to a point where the price moves away from zero and moves back within that reasonable range that allows farmers to stay in business and keeps the price of that food item reasonably affordable for consumers.
The government also steps in in the opposite scenario, where if there is a huge shortage of corn or wheat or any other basic commodity, normally the price would skyrocket and people will go without food because there are shortages. So then the government steps in with that buffer reserve that we built over time, steps in and becomes the seller of last resort of that commodity like corn or wheat or whatever it is. In this way, the government will keep selling and adding to the supply for the system up to the point where the price is tamed all the way back down to that reasonable range where it’s reasonably profitable for farmers to stay in business, reasonably affordable for consumers to be able to buy that commodity.
And we do that all the time in the US and other parts of the world. We pick key commodities, and we stabilize them with that price anchor mechanism, with that buffer stock mechanism. The only problem is that we don’t do this to the most valuable commodity in the system, which is labor. We don’t guarantee that the price of labor remains affordable and reasonable for people to survive because the effective minimum wage, not the legal minimum wage, the effective minimum wage for somebody who lost their job is zero.
We wouldn’t let that happen to the price of corn or wheat or coffee or whatever. But somehow we let that happen for human beings. We let their wage move to zero during a crisis. So the job guarantee simply steps in and says we’re going to hire the surplus labor that the private sector is not interested in hiring during a recession. And we’re going to pay that labor a living wage with benefits so that people can survive and thrive within the community.
And that becomes the price anchor in the labor market, because if that’s a guarantee that anybody in the system is guaranteed a living wage at $18 an hour plus benefits, then that becomes the new effective minimum wage and minimum standard for society. So now all other businesses have to compete and meet that standard because why would I quit a community development job guarantee that pays me a living wage and benefits and provides health care and child care and retirement benefits, and I’m part of a union, too, that is committed to community development and labor standards and environmental standards and so on.
Why would I quit that and go work for McDonalds or for any other business that underpays me? Doesn’t give me any benefits? Doesn’t give me any upward mobility? Doesn’t provide child care or any of that? So if you’re a business and you’re looking for workers, you need to meet that new standard. So it becomes an anchor in the sense that it also forces the biggest corporations to redistribute away from shareholders and the top one percent towards the working class, towards their own workers.
So that also has an equality and social justice and economic equality component to it. And to give you an example, I always use just to remind people how important this is and the fact that we’ve done this before in other contexts. Remember the transition from slavery, right? When society decided, you know what, it’s unacceptable for farmers to have slaves and not pay them, and treat them the way slaves were treated in the history of this country and beyond, and that from now on, you can’t do that.
You have to pay people a decent wage and there’s going to be social standards and labor standards and so on. What did slave owners say? They said, “Well, that doesn’t fit my business model. My business will be destroyed if I have to pay workers a wage.” And what did society say?
[00:41:55.860] – Grumbine
Too damn bad.
[00:41:57.020] – Kaboub
Society said, “Well, you know what? If you can’t survive, if your business model doesn’t survive, then you should be out of business and somebody else will step in and do the job and do it right and pay people decent wages.” I think today we have to do the same with the minimum wage system that we have and the lack of benefits that we have. We’re going to set the standard and say, well, if you can’t compete and somebody else will get the job done.
[00:42:23.220] – Grumbine
That’s absolutely perfect. Let me ask you. You spoke about all the different work that needs to be done in general, especially in light of all the other things that are going on, like a Green New Deal and like the climate. And I think that people sometimes forget what it takes to actually mobilize a nation. Like we talk often about World War II, how we were able to mobilize the entire country. It seems like the federal job guarantee mixed with a just transition, which I’d like you to expand upon, is also a vital cog in addressing those very serious needs for mobilizing for climate change. What are your thoughts on that?
[00:43:08.720] – Kaboub
So let me start by making a statement and then explaining what I mean by it. I truly believe that the size of the job guarantee system will be extremely small. Number two, the size of the job guarantee system over time will get even smaller and smaller. And this is what I mean by that. So from an MMT perspective, we understand that the federal government has much more spending capacity than what we’re told. And we’ve been advocating for a Green New Deal to address the climate crisis, to address the socio-economic exclusion crisis, the inequality crisis and so on.
And part of that Green New Deal, a core feature of it, not just a nice add-on, a core feature is a job guarantee as a just transition component, especially for workers who will be displaced from the fossil fuel industry. As we decarbonize the economy, a lot of people will lose jobs in those industries, but we’ll create millions of jobs in other industries. The skills required for the old industries versus the skills required for the new industries will not necessarily match perfectly.
So we’re going to have to guarantee employment for workers as they transition from the older jobs to the newer jobs. We’re going to have to guarantee employment for some workers at the same income level. So I talked earlier about a living wage and benefits that might be kind of the long term job guarantee standard, but for the immediate transition, especially this massive rapid decarbonization that we need to do in the next 10 years, I think we’re going to have to go to coal miners and fossil fuel workers who are making six-figure income and guarantee a transition at that level or something comparable to that level.
We can’t just tell them, “You know what? You’re going to move from a six-figure income in the trucking industry or fossil fuel industry, and now we’re going to give you $15 an hour with maybe health care.” That’s just not reasonable, not acceptable. And this is one of the main reasons a lot of workers and unions in that particular industry are saying – I mean, literally behind closed doors – they say “We’re on board. We need to transition away from this. We need clean air, clean water. We need a better future for our kids.
But come on, you want me to give up a six-figure income and take a minimum wage job and you call that just transition?” Of course, it’s not. It’s an insult to anybody. So we need to be serious about this rapid, just transition, not just empty promises and words, but it has to be a guarantee, at least for a particular category of workers that guarantees that same level of income and guarantees on-the-job paid training so that they can transition to a similar level of income beyond the job guarantee.
When I said that I believe that the size of the job guarantee will be relatively small, it will get smaller in the long run, this is what I mean. I mean that if the federal government of the United States has much larger spending capacity than what we’re told, then this is what we need to put in place. Number one, universal basic services that is fully funding the educational system, health care system, guaranteeing the basic human rights.
And that in and of itself will absorb millions of people over time into these industries, into those jobs, and will pay them not the basic income, not a job guaranteed minimum wage or living wage income, but pay them at scale. If we’re fully staffing educational services at current pay scale with benefits, then we’re not talking about minimum wage and slightly above minimum wage jobs. We’re talking about actual salaries for staff and long term positions with retirement benefits and so on.
So that’s going to be the thing that’s going to absorb most of the employment moving forward. This second layer in an MMT-informed world is going to be the job guarantee, which means people who couldn’t find employment, don’t have the skills, don’t have the experience, for whatever structural reason, we guarantee employment in community development in the care economy with on-the-job paid training and educational benefits and training benefits so that over time those individuals will acquire skills, will acquire experience and will acquire educational and vocational training skills that will actually allow them to transition back into higher paying either main line government jobs or private sector jobs, which means the size of that job guarantee component over time will shrink because people will transition upwards as opposed to remaining permanently in that category.
It’s a permanent safety net. It’s a permanent buffer. But the individuals in it, if we design this the right way with the actual benefits and the actual incentives and the broader ecosystem of support, then we will guarantee that the job guarantee component will actually move people out and up quickly. Relatively quickly. And then the third layer underneath the job guarantee would be guaranteeing a generous income support for people who can’t work. Remember the job guarantee is for people who want to work but can’t find employment.
So, people who can’t work for health reasons or whatever reasons, we guarantee those universal services that everybody gets no matter what, plus a generous income support to allow them to live independently with dignity and so on. So that’s why I believe that an MMT-informed, Green New Deal transition will actually be the major absorber of jobs and will be the major stimulator for private sector jobs in the greener and more sustainable economy, because this will be a major boost to private sector job creation, too. It’s not all going to be government employment. So that’s how I see it going forward.
[00:49:15.360] – Grumbine
Now, that’s fantastic. Let me ask you this final question. It’s kind of a big deal to me. So the idea here is of universal basic needs and the idea of expanded Social Security. So we’ve got two things at play here. Number one, Social Security is a system that’s already in place that can be used to provide a basic income for those who fit the qualifications that you laid out so well previously. But the idea of universal basic needs, the government shields the regular person from the ebbs and flows of the business cycle on the other side of this. The regular person just simply gets the services, whether it be health care, whether it be shelter, whether it be food to alleviate food insecurity, whether that be school lunches, whatever the program is, whatever those things are, those are real services.
The costs may rise or fall in the back end, but the government would be the buffer between the people and those services. So I guess what I’m saying is, is that the UBI scheme is typically leaving you wide open for gouging. There’s nothing there to prevent it. But in a universal basic services model, which is counter to many of the Silicon Valley folks who would like do away with the social safety net and say, here’s your money, go run with it. Talk to me a little bit about the concept of universal basic services and even the viability of expanding Social Security to take on that BI role.
[00:50:42.470] – Kaboub
Yeah, you’re absolutely right. When the government provides universal basic services, it does shield individuals from the abusive pricing behavior of key corporations and the health insurance industry and the food industry and the energy industry and so on. But that doesn’t mean also we should just let the government absorb and be passive in that relationship. That also means that the government has actually a huge bargaining position to tax and regulate and influence the pricing behavior of those corporations, even though the government is paying for it.
It doesn’t mean that we as a society should just let those corporations abuse the fact that the government is willing to pay whatever they’re going to charge. On the Social Security thing – absolutely! We already have a basic income system in place. It’s just very stingy and it’s very exclusive and it can be much more generous. And part of the reason is because we live in this world with the belief that the Social Security system is going broke, that the Social Security Administration and its trust fund needs to collect more tax revenues in order to serve the retirees and the elderly, or we’re going to have to cut benefits to retirees, which goes completely against the reason why the Social Security system was created in the first place, which is to allow people to live and thrive in dignity in their elderly days.
So MMT unpacks that and turns that on its head by saying, well, the federal government can actually afford much more generous Social Security benefits. And that would be the place for that generous income support that I talked about earlier – is to expand the Social Security benefits beyond the current constraints that we have. So, again, universal basic services not only provide the services needed by the public, but also shields us from the abuse and the fluctuations of the market system. And we have the logistical administrative infrastructure for it that can be expanded in a matter of weeks, literally.
[00:52:53.620] – Grumbine
That’s absolutely amazing. So with that in mind, Fadhel, let me close this out here with . . . In a federal job guarantee arrangement during this Covid-19 pandemic, how might this have saved us with hundreds of thousands of people being laid off right now, how might this have prevented some of the more gross inequalities and gross abdications of responsibility to the voting people? How might this have substantively changed the material conditions for the average person?
[00:53:30.900] – Kaboub
Very good question. So had we had this job guarantee and universal basic services system in place before the pandemic hit, as soon as the pandemic started, we could have said to people, listen, this is a public health crisis, a pandemic. People need to stay home. So now a lot of people are losing their jobs in the private sector because they have to stay home, because they can’t work remotely. Some jobs can’t be done remotely.
Then that becomes your job guarantee, because your most important job right now is to stay home. The individuals who work in the gig economy and don’t have stable sources of income, you transition immediately into a system where we pay a basic income support that sustains them at the same level via Social Security payments, Social Security transfers.
We could have also done this on the back end by saying, you know what, we’re going to hit the pause button on all mortgage payments, all interest payments, all debt payments, and sort this out with the financial industry on the back end, but sort it out in the sense that says this is not a pause button where after nine months you’re going to receive the big bill, you’re going to have to pay for it. I’m talking about like literally making time stop.
And then you go back to making regular payments without any penalties, without having to pay $10,000 at once in unpaid bills. There are lots of things that could have made this crisis much more humane and reasonable from a public health, from a mental health perspective, from an economic perspective. Instead, we got too little economic relief, too little, too late for so many people, unfortunately.
And we haven’t been able to put an end to the public health crisis in itself because we shut down the economy for a little bit, realized that the government is really not providing the economic relief needed for people to stay home. So we went back and reopened and that was the big second wave that we’re struggling with right now. So a job guarantee system, the way we’ve been discussing today, could have made that economic crisis almost unfelt by the general public if we had these mechanisms in place.
[00:55:53.430] – Grumbine
It’s amazing that they would bundle this under, quote-unquote, “socialism” and beat it like McCarthy era ghost. This is the kind of stuff that in order for us to prevent widespread class warfare in terms of what you see, the capitol siege, you see all these people that are voiceless, the poor, the working class, misguided, horribly wrong, whatever, but desperate. And it’s a shame because these underlying things get lost in the headlines of the day. But the fact is that we’re all striving for shelter.
We’re all striving for a life of balance with food security and health care. And we’re not looking to starve and we’re not looking to be desperate. And our leadership leaves us in such a precarity of life that it’s amazing that we haven’t torn ourselves asunder. I mean, completely ripped ourselves apart from the inside out. And current events show that we’re very close to something really bad if we’re not going to address these material conditions. People are going to step up and step out and it’s not going to be the way we want it to come down.
It’s not. They have no voice. They have no power. They feel the elections aren’t fair. There’s so many things going on that make something like a job guarantee so vital to bring any kind of sense of stability to the average person’s life. So I really appreciate you taking the time to go through this today, Fadhel. This has been an eye-opener for me. And I appreciate everyone suffering through my voice. With that, Fadhel, thank you again so much for joining me, sir.
[00:57:35.870] – Kaboub
Thank you again for having me. It’s always a pleasure and it’s good to have you back and thank you again for all the work you’re doing on this front, even in these personal conditions where your health is on the line as we speak. And yet you’re so committed to delivering this message, educating the general public. And to emphasize what you just said a few minutes ago, the tragedy of all of this is that this is all unnecessary pain.
[00:58:02.390] – Grumbine
Yes.
[00:58:03.020] – Kaboub
That we actually have the resources, financial and productive resources, to make everybody’s life better. I think this is what this podcast is about. This is what Real Progressives is about. It’s about delivering the message that all of this pain and austerity is unnecessary.
[00:58:19.970] – Grumbine
Couldn’t have said it better myself. Thank you so much, Fadhel. Folks, with that, Steve Grumbine, Fadhel Kaboub, Macro N Cheese. We’re out of here.
[00:58:34.860] – Ending Credits
Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
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Featured in the podcast:
The Case for a Job Guarantee by Pavlina Tcherneva
The Job Guarantee – Working Paper No. 902 by Pavlina Tcherneva
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What can we say about the job guarantee that hasn’t already been said? Quite a bit, actually, as you’ll see in this and upcoming episodes.
This week Fadhel Kaboub is talking to a mellower Steve, fresh from the hospital and still on the mend from Covid19. Fadhel begins with the reality that capitalism is a brutal system that constantly leaves people behind. It’s driven by technological change, and as this develops, we require some workers with new skill sets, while others are rendered virtually obsolete. We don’t have an existing system bringing them into the new technology.
We count on individual workers to do this on their own, to somehow anticipate technological change, take time and money from their own budget, so to speak, to invest in learning new skills that will be useful for this new industry that doesn’t exist yet and somehow be ready to go to transition to those new jobs. And those jobs sometimes are in a different location. Sometimes they’re completely in a different country, a different part of the world. So that is the absurdity of the system that we leave this up to individuals to struggle.
A job guarantee will treat training and education as part of the job. Advancing technology tends to be more capital intensive, requiring a smaller workforce. What do we do with all the surplus labor? Fadhel explains why it’s not enough to provide a basic safety net, such as healthcare and social services, though they are desperately required as well. Work is more than an income, with well-proven benefits to individuals and families beyond the paycheck. JG advocates like Pavlina Tcherneva and Fadhel speak of a “care economy” of the most valuable work from a broader human and social perspective. Fadhel says it’s “a social, economic and political consensus, a social contract that doesn’t throw people under the bus as the economy changes over time.”
Steve asks Fadhel about the job guarantee in a mixed economy and command economy. They discuss workers’ coops and the aversion, from some on the left, to state control. Fadhel reminds us the JG talks about federal funding. Everything else, from job creation to implementation and management, is done at the local level through a participatory democracy model.
Some tricky questions arise. Who defines local? Is it state, municipal, county?
How many grassroots voices do we have in the decision-making process? Is all the money going to go to the same city council officials who will hand out these contracts to the same developers who exclude minority groups from access to jobs, who always invest in the wealthier part of town? So those are important details so that we don’t end up feeding the system and recreating the same problem. So grassroots participation, community participation is important. It can’t be just symbolic.
Fadhel talks about the role of nonprofit organizations, which are important not only because they are existing organizations we don’t need to invent or create from scratch. They’re also in touch with the people who need the most services, so are in the best position to speak to what will benefit them.
The interview covers the UBI, with enough information to handle any debate. Fadhel explains the meaning of “buffer stock,” with examples of how economists normally use the term. He reveals the real reason UBI is being heavily promoted by Silicon Valley.
Steve and Fadhel look at the need for independent media like Real Progressives. Democracy without a fourth estate is not a democracy. The privatization and monopolization of the media over the past 40 years has served to destroy local journalism, meaning we don’t have full-time reporters covering local news, city councils, how the money is spent.
This episode covers much more than can be described here. You’ll just have to listen for yourself.
Dr. Fadhel Kaboub is an Associate Professor of Economics at Denison University and President of the Global Institute for Sustainable Prosperity.
global-isp.org
@FadhelKaboub
Macro N Cheese – Episode 103
Anatomy of a Job Guarantee with Fadhel Kaboub
January 16, 2021
[00:00:03.000] – Fadhel Kaboub [intro/music]
The idea of a UBI being the solution to all of our problems is the most ridiculous thing. We have a climate crisis, we have an inequality crisis, a social justice crisis. Somehow, a thousand dollars a month is going to solve all of these things.
[00:00:21.000] – Fadhel Kaboub [intro/music]
The job guarantee simply steps in and says we’re going to hire the surplus labor that the private sector is not interested in hiring during a recession. And we’re going to pay that labor a living wage with benefits, so that people can survive and thrive within the community.
[00:01:26.670] – Geoff Ginter [intro/music]
Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:34.560] – Steve Grumbine
All right, folks, and this is Steve with Macro N Cheese. This is my first podcast since coming back from Covid-19. I had double pneumonia, viral and bacterial, acute respiratory failure. It’s still haunting me. I got to tell you, this is no joke, folks. The fog and the fatigue that come with Covid-19 are just unbelievable. And with support from hundreds of you, we’ve been able to put together some money to be able to help us get through the unpaid leave at work and take care of some of the medical bills.
And so as I was sitting there in the hospital, all I could think about was how important a federal job guarantee would be to have right now at this particular period of time with so many people out of work, thousands and thousands, hundreds of thousands of people losing their jobs right now. We have a Congress that is more focused on impeachment and gotcha politics than making sure the common man has a job or has a roof over his head or has their bills taken care of and food. And so as I was thinking about this, I reached out to my good friend Fadhel Kaboub, who really requires no introduction.
But Fadhel is one of the foremost experts on the federal job guarantee. And, so I figured, let’s get Fadhel in here to talk about the specifics, not just a standard job guarantee discussion. I want you to understand what makes this such a game changer, why this is so vital to a vibrant movement, especially a movement that wants to have revolutionary aspects to it, that holds its elected officials accountable, that actually takes the time to be able to give the stiff arm to the man and provide a living wage and living benefits.
It’s just such a game-changer. And so I asked Fadhel to come on. And with that, I want to thank you all for your support once again and thank Fadhel. Fadhel, thank you so much for joining me today.
[00:03:36.040] – Fadhel Kaboub
Well, thank you, Steve, for having me. I want to start by saying welcome back, we’re glad you’re doing better and wishing you a full recovery, speedy recovery from this horrific virus that’s affected millions of people around the world. So thank you again for having me on the show. I’ll start with a plug for my friend’s book, “The Case for a Job Guarantee” by Pavlina Tcherneva. You’ve had Pavlina on the show several times, obviously, and the listeners are probably very familiar with her work.
But that’s a reference point for anybody who is new to the topic to check out the book and Pavlina’s work at the Levy Institute and elsewhere. So I want to start by stating how brutal the system is, not just in terms of our crisis right now with the covid crisis, with the lack of health care resources and support for people who have been displaced for health reasons or for economic reasons, and segue into why the job guarantee is important.
So capitalism is this brutal system that doesn’t guarantee access to employment for people who are ready, willing and able to work. The core feature of capitalism is the fact that it’s driven by technological change. And by definition, technological change means we’re always creating new techniques, new machinery, equipment, technology, and that new technology will always displace older technology, which means workers who are associated with an older technology, with the older skills, by definition, will always be displaced.
So this is the common feature of the system. And yet we don’t have a system in place that takes workers from that older, obsolete technological space and helps transition them into the new economy using the new technology and so on. We count on individual workers to do this on their own, to somehow anticipate technological change, take time and money from their own budget, so to speak, to invest in learning new skills that will be useful for this new industry that doesn’t exist yet and somehow be ready to go to transition to those new jobs.
And those jobs sometimes are in a different location. Sometimes they’re completely in a different country, part of the world. So that is the absurdity of the system that we leave this up to individuals to struggle. And of course, in that process, not everybody makes it through that transition. That’s one component. The other thing about these technological transitions is that they always move us towards much more capital-intensive economic system, which means it becomes labor displacing by definition.
So what do we do with workers who are left behind? We have no system in place that guarantees employment. Some countries have systems in place that guarantee a basic safety net like access to health care or access to unemployment benefits or social services. But that doesn’t replace the need for employment, especially if people are actually mid-career or still young and actually want to work.
This is the thing, because work is something that defines who we are as individuals, that allows us to thrive as human beings. Most people are not looking just for the income. The income is part of it, of course. It’s important. But the most important thing is that sense of belonging, sense of contributing to society, connecting to the community, and from a broader social and political perspective, we all know that when people are engaged in economic activity, they’re more likely to be politically active, socially aware and contribute to their community in the broadest sense of the term.
So these are kind of the obvious issues and the literature on the job guarantee and many of us working in this space have been working on designing this automatic stabilizer, this job guarantee system where anybody who’s displaced from the workforce, for whatever reasons, is able to find a source of employment that complements what the private sector does, complements what the government, traditional government sector does, and is primarily focused on what we call the care economy.
Caring for people, caring for the community, caring for the elderly, for children and caring for the planet, because that’s the most valuable work, valuable from a broader human and social perspective. And that’s the type of work that’s often neglected by the metrics of the market because it doesn’t generate profits and doesn’t generate, quote-unquote, “economic growth” in the traditional kind of narrow sense of the term. So we have all of these benefits.
[00:08:46.890] – Grumbine
Let me ask you a quick question, Fadhel. In terms of market, does this only work in a market economy? This could work in a command economy, too. There’s nothing that prevents this from working in a mixed economy in which we have. What are your thoughts on that? I’m sorry to derail you. I just want to get your take on that.
[00:09:04.780] – Kaboub
Of course, you can design a job guarantee in any economic system, command economies, obviously, you lose the freedom of choice and things like that, but mixed economies, and we can talk here about the Scandinavian model, which is actually the closest you can think of in terms of job guarantee and safety net system, especially a country like Sweden historically had a very strong commitment to full employment.
And it is a mixed economy in the sense that the government and labor have a very important political and economic role. Think of this tripod system where you have government, business and labor unions building consensus around all major economic and social issues. If the country enters a recession because of technological transition, because of international trade competitiveness and things like that, and the country feels like there’s a major need for a technological upgrade in the private sector and that would displace workers, you can’t do that without actually having workers at the table.
Without having governments, elected officials who represent the people be part of the conversation about what happens to those workers that will be displaced because of this technological transformation. In the US, for example, this happens without having workers on the table, sometimes with governments participating and encouraging the private sector to displace workers. So we’re talking about a social, economic and political consensus, a social contract that doesn’t throw people under the bus as the economy changes over time.
[00:10:45.310] – Grumbine
Could a co-op work within the space or is it completely incompatible?
[00:10:50.780] – Kaboub
Tell me more what you mean by co-op?
[00:10:53.630] – Grumbine
So could a co-op environment be funded by the federal government to provide the employee ownership of those workplaces, whether they be retail, whether they be trades, whatever, could that work as opposed to the non-profit model? Could the opportunity to work with an employee like co-op or are they completely incompatible?
[00:11:16.310] – Kaboub
No, I would say that it would be possible within a job guarantee system. Obviously, all of this is designed by law. So whatever lawmakers decide is going to fall under the umbrella of a job guarantee, federally funded as long as you set certain criteria. For example, the co-op has to service certain neglected area, geographic area of the economy. We have food deserts all over this country. Right?
So if co-ops are going to serve that community and serve that particular part of the system and by all means, it needs to be supported, and that’s one way to rebuild communities from within. We always talk about the role of the nonprofit sector, and that’s an important component. But anything that allows us to weave a new socioeconomic fabric into neglected areas of the economy to lift people from those communities would be a huge improvement.
[00:12:14.270] – Grumbine
Awesome. I know that many of the objections that we hear from people, especially on the left, is they don’t want more state control. They want the freedom. They want the ownership. They want the means of production – which is clearly the socialist aim – as the working class. So I guess the question becomes, if you were pitching this to the left, who has an aversion to state control to some extent, what would your message to them be?
[00:12:43.170] – Kaboub
So all the literature on the job guarantee is very clear that we’re talking about federal funding for job creation at the local level, but the selection of the projects, the implementation of the project, the hiring and firing, the training, the assessment, the auditing, all of this is done at the local level in a participatory democracy type of model, participatory budgeting, participatory planning, participatory auditing.
Now, to put more details to what we mean by local and participatory, is it the local municipality? Is it the state? Is it city council officials who make these decisions? That remains to be defined and that’s defined by legislation. How much grassroots voice do we have in the decision-making process? Is all the money going to go to the same city council officials who will hand out these contracts to the same developers who exclude minority groups from access to jobs, who always invest in the wealthier part of town and things like that?
So those are important details so that we don’t end up feeding the system and recreating the same problem. So grassroots participation, community participation is important and it can’t be just symbolic. So this is where the role of nonprofit organizations, because these are existing organizations, we don’t have to invent them or create them. They are already doing this work in the sense that they are in touch with unemployed individuals.
They’re in touch with individuals who need social services. They’re already dealing with homelessness. They’re already dealing with hunger, with food deserts, with the opioid crisis. The reason they exist is because the state and the market and the federal government have failed to address those issues, have failed in delivering services or addressing the roots of the problem. So they’re already there as a complement to the system.
The only problem is that they tend to be underfunded and understaffed on a permanent basis and they lose even more funding during bad economic times like right now during the pandemic when their services are needed the most, right, because the economy is weaker and there’s less charitable contributions and fewer federal dollars coming in terms of grants and things like that.
So if we introduce a job guarantee system that says you already know the needs of the local community, which are different from city to city and state to state, so you can micro target the needs and identify the actual problems that your clients deal with, your community deals with. The problem is you have no resources. You rely exclusively in many cases on volunteers, on charitable dollars and grants. We’re going to provide additional funding through a federal job guarantee program that allows you now to hire and train full-time people from the community in order to address the needs of that same community.
And it doesn’t have to be overwhelming. We’re talking about a small nonprofit organization in a small town. You don’t have to hire 500 hundred people. You can start with five people and scale it up to 10 and 20 as needed so that the training component is not overwhelming. And one of the things that those organizations would do is, number one, assess the needs of the community.
Number two, assess the types of skills and experiences that they need to find in order to meet the needs of the community. And number three, look within the community to identify if we have within the unemployed and underemployed population if we have those skills and experiences to match the needs of the program. And if the skills and experiences match, then we have a system. If the skills and experiences needed are lacking or not up to par, then there is room for on the job paid training in order to build capacity within the community to meet that challenge.
So the job guarantee includes a training component, an educational component. But it’s like the model that labor unions use, which is on-the-job paid training and apprenticeship and mentorship. This way you’re not told, “Well, we need to do this work, but you don’t have the skills. So why don’t you go spend six months or a year acquiring those skills, pay for it out-of-pocket or with student loans, and then maybe when you come back we’ll need those skills.” So that’s why we talk about a job guarantee with on-the-job paid training.
[00:17:24.670] – Grumbine
So what about a place like Real Progressives, for example. We’ve got a nationwide and actually, in many cases, a global network of volunteers that work to support all kinds of media opportunities for other like-minded organizations covering events, things like that, web dev, all these different aspects of it. Without us being in a local community where people are sitting there hanging out with each other would that pertain to a place like RP? Would this be a place where we could say, get an editor in chief, or we could get a web developer that would normally have been a volunteer, but now we’re paying them a job guarantee wage for the support?
[00:18:02.810] – Kaboub
This is a very important question. Very good question, Steve. So let me back step for one second and talk about the role of an organization like Real Progressives, independent media, media in general. And this is one of the things that we lost over the last 40 years, which is independent voices and the Fourth Estate. Remember, democracy without a Fourth Estate is not a democracy.
And the role of the Fourth Estate is to be independent, to provide that additional check on the political system, on the executive branch, and to inform the public about what’s going on. So with the privatization of the media that happened over the last few decades, we’ve lost that, and we’ve lost it, especially at the local level.
Think of all your local newspapers and media organizations that have lost local reporters, which means nobody’s reporting on city council. Nobody’s reporting on how money is spent. There’s very little transparency, which means we lose the democratic process. So if we as a society value that as an important service to the community and if the market is not doing it, if government funded organizations like NPR and so on is not doing it, then there is room for nonprofit independent media organizations to step in and do the work.
And as far as I’m concerned, a job guarantee should cover job creation to restore the democratic process because that’s a valuable contribution to society. So based on those criteria and standards, I think independent media would qualify for a job guarantee program.
[00:19:42.600] – Grumbine
That’s awesome, that’s very, very powerful. So with that in mind, one of the things that I think people don’t understand about a job guarantee is the macroeconomic component of the automatic stabilizer. I know this is for people that are students of the job guarantee, this is probably just a rehash. But I think there’s a lot of people out there that are still kind of caught up in a very different battle of morals, as opposed to understanding the macro underpinnings of a federal job guarantee. Could you break down the macro benefits and the purpose behind the macro automatic stabilizer that comes with a federal job guarantee?
[00:20:24.510] – Kaboub
Absolutely. So let me give you a concrete example. Let’s say we’re looking at a small town of 5,000 or 10,000 people in a small midwestern region, and let’s look at it from a Chamber of Commerce perspective. There’s a network of businesses, restaurants, grocery stores, entertainment services in that particular town. And then all of a sudden, the economy enters into a recession, national global recession, which means many of the residents who live in that town have lost their jobs, have lost their income.
And now this means that they’re spending less in the local economy. They’re not going out to restaurants. They’re not getting more entertainment or clothing or transportation or cleaning services or whatever the local community network of businesses are providing. So now, because people lost their jobs because of a national recession, in the local economy, all of a sudden you have fewer customers walking through the door and buying stuff, which means businesses are losing revenue.
And if I’m a restaurant owner and I’m losing 20, 30 percent of my business and revenue, then I’m going to lay off some of my employees. I’m going to have to cut costs. So now we’re feeding that recession with more unemployment. And the longer this goes, the deeper we get into the crisis. And of course, this is a nationwide problem. What does the job guarantee do in this situation?
The job guarantee steps in immediately and guarantees employment to anybody within that community who is ready, willing and able to work at a living wage with benefits. And we can be as generous as we want with the benefits package and so on, which means you immediately on day one of what would have been a severe recession, you put a backstop to the whole process by underwriting people’s income.
Instead of going from a full-time job income to zero, you’re going now into a guaranteed basis where everybody can continue going out to a restaurant, can continue sending their kids through the summer camp and continue buying from local retail services, which means as a business owner, I’m not losing 30 percent of my business. Maybe I’ll lose three to five percent or whatever it is.
But in general, because people have a guaranteed income and a guaranteed access to a job during a recession, they know that they can continue spending more or less at the same standard, at the same level. And that’s a very important stabilizer for the system because it stops a recession from turning into a deep crisis immediately and it feeds positive expectations because business expectations are extremely important, and investment decisions.
Though, if we’re talking about a business that was planning to expand again — I’m a restaurant owner and I’m a great chef and I’ve been successful over the last five or ten years. And now it’s time to open a second restaurant in the other part of town that involves a massive financial commitment. I’ll have to rent the place and renovate it and bring all the professional equipment, expensive equipment that I need for the kitchen and to train employees and so on.
So making that decision sometimes involves getting a loan from a bank or $200,000 to renovate the place and buy all the equipment and so on. I’m going to think twice before committing to a $200,000 loan because that could ruin my business if I can’t really generate the revenues to make it happen. So what if I’m in the process of getting the loan? I just got the loan. I started renovating the thing.
I’m on the hook for a lot of monthly payments now, and then all of a sudden a recession hits and I open up and that restaurant is not successful and my older restaurant is not successful either. Then how do I make the monthly payments? This is a serious problem, which means if I live in a world where I know there is a job guarantee, which means members of my community, even if there is a recession, even if they lose their job, they’re still going to be able to come and eat lunch at my restaurant or have dinner or birthday parties at my restaurant, then I can sleep better at night knowing that I can commit to that investment.
I can commit to hiring contractors, which creates jobs in the community. I can commit to hiring staff and hiring a new chef to serve in that new restaurant. So that’s how when you kill that negative expectation, that pessimism about the future, that doesn’t let me sleep at night, then I can commit to job creation and economic development.
But you take the job guarantee out of the picture and all of a sudden I’m on the hook and I’m not going to take that risk, which means I’m not creating those jobs for the contractors, for the delivery people, for the cleaning staff, for the waiters, for the new chef and sous chef that I’m hiring and so on. That’s why it’s a stabilizer and it guarantees that we build communities from within without having to live with the threat of a recession, of a crisis, of unemployment.
[00:25:46.520] – Grumbine
Would it be inappropriate to look at this through the stock-flow consistent modeling in understanding the flows in and out of the state versus the Fed versus trade imbalances? I know we don’t typically track this at the state level, but if you think about it, the sectoral balance approach here, it makes the case for that automatic stabilizer with the job guarantee if you just look at flows? Can you expand on that or is that just a dead end?
[00:26:14.420] – Kaboub
Oh, it’s a good question, but I’ll try to keep it kind of macro and simple in a sense. So if the private sector is shrinking in terms of economic activity and the federal government steps in to fund, for example, a job guarantee, then the federal government is running a larger deficit and that spending is going to the private sector. So it’s like as the private sector is shrinking its economic activity, the government sector, the federal government sector, is stepping in to fill the gap. And that’s something that the MMT analysis typically shows all the time.
But in this context, think of that additional deficit that the government is introducing is spending dollars where it’s needed the most. In other words, instead of the federal government handing out tax cuts to Wall Street or oil companies, in this case, that deficit is going to the bottom of the income scale or what would have been the bottom of the income scale if we don’t have a job guarantee. And as a result, you’re setting that minimum floor for the economy and you’re supporting the private sector directly.
[00:27:32.390] – Intermission
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[00:28:21.480] – Grumbine
So if I’m working at Walmart, for example, and Walmart sees that I have disposable income through whether it be some sort of a basic income scheme or something else, Walmart then can look at that and say, hey, we don’t have to adjust our salary. In fact, maybe we can even cut some benefits, and we could absorb and subsidize our bad hiring practices using these additional funds. I know this is more micro than macro, but my question is, how does that play into the job guarantee macro perspective that girding away of predatory hiring practices and subsidizing of shit wages.
[00:29:04.740] – Kaboub
So that is a very good question, Steve, and it brings into focus the idea that a job guarantee is not a silver bullet to solve all of our structural problems. So in the example you mentioned, if the federal government, for example, guarantees support for lower income families in terms of having access to food stamps, having access to child care, having access to subsidized health care or whatever you want to call it, that prompts a private business to say to their lowest income workers, well, now the government is paying for part of your rent and part of your food and part of your health.
I don’t really need to give you a raise because you’re doing fine. Right? I’ll just give you the minimum wage and you get all the other subsidies from the government and you’ll be fine. That would not be obviously ideal. We want to raise the standards, but also we want to make sure that businesses are not taking advantage of this. So, yes, we want universal health care. Yes, we want universal childcare and so on. But we need to raise the minimum wage.
We need to have the wage be a living wage, to have minimum standards for workers in the private sector. To expand on this idea a little bit and to bring it into, I guess, a hot topic that many people have been debating over the last few years. What if the federal government provides a universal basic income, not social services, not rent support and child support and things like that, but really a basic income, $1,000 a month for everybody.
And now back to your example about somebody working at Walmart. Now, all of a sudden, they get $1,000 a month. Will Walmart increase their wage? Will Walmart provide any additional benefits? Probably not, because they’re going to use that same argument, say, well, now the government is helping you pay for your rent and part of your food. So I’m going to even lower your wage to a minimum wage as opposed to a living wage.
And I think this goes beyond Walmart. I think Walmart is kind of a small piece of the puzzle here. This is really about the uberization of the economy. It’s about the gig economy. And that’s why a lot of these UBI experiments, you see them coming out of Silicon Valley. Silicon Valley CEOs who sponsor these studies and experiments, which as far as I’m concerned, they don’t meet any scientific academic standard because what they do is basically say, “Oh, we’re going to test this idea, we’re going to experiment.
So let’s go to a low-income community somewhere, identify a couple of hundred low-income people and give them $500 a month or $800 a month as a basic income, as an experiment for UBI and then track their progress. See how they’re doing, their stress level, their health level, if their kids are well-fed, if this will actually improve their life.”
And I can tell you this without having done the experiment, that, yeah, if you go to the lowest income community, underpaid, unemployed, single parents struggling to pay the bills with two or three kids, and you give them five hundred dollars a month, I can tell you that their life will be better, but I’d rather see those additional $500 be an additional $2,000 coming from the actual job that they currently have so that they’re not underpaid.
I’d rather see the health improvement for their kids nutrition and quality of life not come from those 500 experimental dollars, but come from a universal health care system that is afforded to them as a human right, not as a charity from a Silicon Valley CEO. So that’s really the fine line that we have to walk here, because I see a lot of really progressive, well-meaning individuals who say, well, I’m not going to be against the universal basic income because it gives individuals who need it the most that additional $1,000.
I see the appeal for it because, yes, $1,000 is helpful. But let’s keep our eyes on the bigger prize, on the structural transformation, because I guarantee you that if we have a universal basic income, the style that Silicon Valley CEOs are promoting, the uberization of the economy, what we’re going to see is major cuts in social services across the board. And we’re going to see more uber like companies pop up with zero hour contracts, no benefits, minimum wage jobs, because their logic will be, well, you already get a basic income from the government, so your rent is kind of covered.
Some of your food is already covered, but you’re not independent. You’re not thriving. So you have to hustle for work in the gig economy, and we’re here to serve. We’ll give you flexible hours. We’ll give you your own schedule and that kind of thing. I think that’s a very dangerous thing for us to move in that direction. And if you don’t mind taking this a bit further, the idea of a UBI being the solution to all of our problems is the most ridiculous thing I see in the public discourse in the last few years.
We have a climate crisis. We have an inequality crisis, the social justice crisis. Somehow $1,000 a month is going to solve all of these things? Like the planet is on fire. People want to work. We have technology to do the hard work to decarbonize the economy. And somehow the solution to all that is $1,000 a month for everybody. That is just absurd.
[00:34:41.470] – Grumbine
It’s ridiculous. Let me take that a step further, though. One of the big things that I have railed on, especially on this – Pavlina says “status quo UBI” – is, quite frankly, the price anchor. OK. They’re not guaranteeing you anything. They’re giving you money. So there’s nothing to guarantee. Let’s say they give you $600 a month, but the vaccine is $601. OK. There’s nothing there preventing gouging and stuff.
There’s no price controls. There’s no price anchor. There’s no nothing. So when you talk about a complete lack of guarantee, to me the most destabilizing thing would be a UBI. It may work for a little while until things catch up. Then all of a sudden they absorb that slack in the economy, prices go up. There’s no price anchor. How do you establish a price anchor? What is a price anchor and why does the job guarantee provide that whereas the UBI does not?
[00:35:39.670] – Kaboub
Yeah, that’s a very good question. So here I want to use a little bit of a technical term, but it’s a very simple technical term. I’ll give you a couple of examples to clarify. We often refer to the job guarantee as a buffer stock system, as a buffer stock mechanism. So fancy word for a relatively simple concept that we use all the time in this country and other parts of the world. A buffer stock is usually used in the context of commodities. So we look at key commodities in the system that are critical for price stability, like food items like corn, wheat.
You are in Brazil, coffee, key commodities and say, well, it’s important for the price of this commodity to stay stable. Think of corn or wheat, for example, as just basic things here in the US. If the price of corn fluctuates, goes close to zero and then skyrockets, it not only affects the farmers, the producers, in terms of their ability to actually stay in business, especially if prices drop close to zero, and it also affects all of us consumers because that’s the basic input in a lot of the food items that we consume, because that will produce now food price inflation and make food unaffordable in some cases for consumers.
So we have a vested interest as a society to keep the price of key commodities stable within a reasonable range so that it’s reasonably profitable for farmers to stay in business and make a living. And it’s affordable for consumers and it doesn’t go into skyrocketing mode. So how do we do it? The federal government steps in and establishes what we call a buffer stock mechanism for wheat and corn and other basic food commodities and so on.
So the government steps in and becomes the buyer of last resort when there is a massive surplus of wheat or corn, which would normally drive the price of wheat or corn to zero when there’s so much surplus. So the government steps in and buys all the surplus up to a point where the price moves away from zero and moves back within that reasonable range that allows farmers to stay in business and keeps the price of that food item reasonably affordable for consumers.
The government also steps in in the opposite scenario, where if there is a huge shortage of corn or wheat or any other basic commodity, normally the price would skyrocket and people will go without food because there are shortages. So then the government steps in with that buffer reserve that we built over time, steps in and becomes the seller of last resort of that commodity like corn or wheat or whatever it is. In this way, the government will keep selling and adding to the supply for the system up to the point where the price is tamed all the way back down to that reasonable range where it’s reasonably profitable for farmers to stay in business, reasonably affordable for consumers to be able to buy that commodity.
And we do that all the time in the US and other parts of the world. We pick key commodities, and we stabilize them with that price anchor mechanism, with that buffer stock mechanism. The only problem is that we don’t do this to the most valuable commodity in the system, which is labor. We don’t guarantee that the price of labor remains affordable and reasonable for people to survive because the effective minimum wage, not the legal minimum wage, the effective minimum wage for somebody who lost their job is zero.
We wouldn’t let that happen to the price of corn or wheat or coffee or whatever. But somehow we let that happen for human beings. We let their wage move to zero during a crisis. So the job guarantee simply steps in and says we’re going to hire the surplus labor that the private sector is not interested in hiring during a recession. And we’re going to pay that labor a living wage with benefits so that people can survive and thrive within the community.
And that becomes the price anchor in the labor market, because if that’s a guarantee that anybody in the system is guaranteed a living wage at $18 an hour plus benefits, then that becomes the new effective minimum wage and minimum standard for society. So now all other businesses have to compete and meet that standard because why would I quit a community development job guarantee that pays me a living wage and benefits and provides health care and child care and retirement benefits, and I’m part of a union, too, that is committed to community development and labor standards and environmental standards and so on.
Why would I quit that and go work for McDonalds or for any other business that underpays me? Doesn’t give me any benefits? Doesn’t give me any upward mobility? Doesn’t provide child care or any of that? So if you’re a business and you’re looking for workers, you need to meet that new standard. So it becomes an anchor in the sense that it also forces the biggest corporations to redistribute away from shareholders and the top one percent towards the working class, towards their own workers.
So that also has an equality and social justice and economic equality component to it. And to give you an example, I always use just to remind people how important this is and the fact that we’ve done this before in other contexts. Remember the transition from slavery, right? When society decided, you know what, it’s unacceptable for farmers to have slaves and not pay them, and treat them the way slaves were treated in the history of this country and beyond, and that from now on, you can’t do that.
You have to pay people a decent wage and there’s going to be social standards and labor standards and so on. What did slave owners say? They said, “Well, that doesn’t fit my business model. My business will be destroyed if I have to pay workers a wage.” And what did society say?
[00:41:55.860] – Grumbine
Too damn bad.
[00:41:57.020] – Kaboub
Society said, “Well, you know what? If you can’t survive, if your business model doesn’t survive, then you should be out of business and somebody else will step in and do the job and do it right and pay people decent wages.” I think today we have to do the same with the minimum wage system that we have and the lack of benefits that we have. We’re going to set the standard and say, well, if you can’t compete and somebody else will get the job done.
[00:42:23.220] – Grumbine
That’s absolutely perfect. Let me ask you. You spoke about all the different work that needs to be done in general, especially in light of all the other things that are going on, like a Green New Deal and like the climate. And I think that people sometimes forget what it takes to actually mobilize a nation. Like we talk often about World War II, how we were able to mobilize the entire country. It seems like the federal job guarantee mixed with a just transition, which I’d like you to expand upon, is also a vital cog in addressing those very serious needs for mobilizing for climate change. What are your thoughts on that?
[00:43:08.720] – Kaboub
So let me start by making a statement and then explaining what I mean by it. I truly believe that the size of the job guarantee system will be extremely small. Number two, the size of the job guarantee system over time will get even smaller and smaller. And this is what I mean by that. So from an MMT perspective, we understand that the federal government has much more spending capacity than what we’re told. And we’ve been advocating for a Green New Deal to address the climate crisis, to address the socio-economic exclusion crisis, the inequality crisis and so on.
And part of that Green New Deal, a core feature of it, not just a nice add-on, a core feature is a job guarantee as a just transition component, especially for workers who will be displaced from the fossil fuel industry. As we decarbonize the economy, a lot of people will lose jobs in those industries, but we’ll create millions of jobs in other industries. The skills required for the old industries versus the skills required for the new industries will not necessarily match perfectly.
So we’re going to have to guarantee employment for workers as they transition from the older jobs to the newer jobs. We’re going to have to guarantee employment for some workers at the same income level. So I talked earlier about a living wage and benefits that might be kind of the long term job guarantee standard, but for the immediate transition, especially this massive rapid decarbonization that we need to do in the next 10 years, I think we’re going to have to go to coal miners and fossil fuel workers who are making six-figure income and guarantee a transition at that level or something comparable to that level.
We can’t just tell them, “You know what? You’re going to move from a six-figure income in the trucking industry or fossil fuel industry, and now we’re going to give you $15 an hour with maybe health care.” That’s just not reasonable, not acceptable. And this is one of the main reasons a lot of workers and unions in that particular industry are saying – I mean, literally behind closed doors – they say “We’re on board. We need to transition away from this. We need clean air, clean water. We need a better future for our kids.
But come on, you want me to give up a six-figure income and take a minimum wage job and you call that just transition?” Of course, it’s not. It’s an insult to anybody. So we need to be serious about this rapid, just transition, not just empty promises and words, but it has to be a guarantee, at least for a particular category of workers that guarantees that same level of income and guarantees on-the-job paid training so that they can transition to a similar level of income beyond the job guarantee.
When I said that I believe that the size of the job guarantee will be relatively small, it will get smaller in the long run, this is what I mean. I mean that if the federal government of the United States has much larger spending capacity than what we’re told, then this is what we need to put in place. Number one, universal basic services that is fully funding the educational system, health care system, guaranteeing the basic human rights.
And that in and of itself will absorb millions of people over time into these industries, into those jobs, and will pay them not the basic income, not a job guaranteed minimum wage or living wage income, but pay them at scale. If we’re fully staffing educational services at current pay scale with benefits, then we’re not talking about minimum wage and slightly above minimum wage jobs. We’re talking about actual salaries for staff and long term positions with retirement benefits and so on.
So that’s going to be the thing that’s going to absorb most of the employment moving forward. This second layer in an MMT-informed world is going to be the job guarantee, which means people who couldn’t find employment, don’t have the skills, don’t have the experience, for whatever structural reason, we guarantee employment in community development in the care economy with on-the-job paid training and educational benefits and training benefits so that over time those individuals will acquire skills, will acquire experience and will acquire educational and vocational training skills that will actually allow them to transition back into higher paying either main line government jobs or private sector jobs, which means the size of that job guarantee component over time will shrink because people will transition upwards as opposed to remaining permanently in that category.
It’s a permanent safety net. It’s a permanent buffer. But the individuals in it, if we design this the right way with the actual benefits and the actual incentives and the broader ecosystem of support, then we will guarantee that the job guarantee component will actually move people out and up quickly. Relatively quickly. And then the third layer underneath the job guarantee would be guaranteeing a generous income support for people who can’t work. Remember the job guarantee is for people who want to work but can’t find employment.
So, people who can’t work for health reasons or whatever reasons, we guarantee those universal services that everybody gets no matter what, plus a generous income support to allow them to live independently with dignity and so on. So that’s why I believe that an MMT-informed, Green New Deal transition will actually be the major absorber of jobs and will be the major stimulator for private sector jobs in the greener and more sustainable economy, because this will be a major boost to private sector job creation, too. It’s not all going to be government employment. So that’s how I see it going forward.
[00:49:15.360] – Grumbine
Now, that’s fantastic. Let me ask you this final question. It’s kind of a big deal to me. So the idea here is of universal basic needs and the idea of expanded Social Security. So we’ve got two things at play here. Number one, Social Security is a system that’s already in place that can be used to provide a basic income for those who fit the qualifications that you laid out so well previously. But the idea of universal basic needs, the government shields the regular person from the ebbs and flows of the business cycle on the other side of this. The regular person just simply gets the services, whether it be health care, whether it be shelter, whether it be food to alleviate food insecurity, whether that be school lunches, whatever the program is, whatever those things are, those are real services.
The costs may rise or fall in the back end, but the government would be the buffer between the people and those services. So I guess what I’m saying is, is that the UBI scheme is typically leaving you wide open for gouging. There’s nothing there to prevent it. But in a universal basic services model, which is counter to many of the Silicon Valley folks who would like do away with the social safety net and say, here’s your money, go run with it. Talk to me a little bit about the concept of universal basic services and even the viability of expanding Social Security to take on that BI role.
[00:50:42.470] – Kaboub
Yeah, you’re absolutely right. When the government provides universal basic services, it does shield individuals from the abusive pricing behavior of key corporations and the health insurance industry and the food industry and the energy industry and so on. But that doesn’t mean also we should just let the government absorb and be passive in that relationship. That also means that the government has actually a huge bargaining position to tax and regulate and influence the pricing behavior of those corporations, even though the government is paying for it.
It doesn’t mean that we as a society should just let those corporations abuse the fact that the government is willing to pay whatever they’re going to charge. On the Social Security thing – absolutely! We already have a basic income system in place. It’s just very stingy and it’s very exclusive and it can be much more generous. And part of the reason is because we live in this world with the belief that the Social Security system is going broke, that the Social Security Administration and its trust fund needs to collect more tax revenues in order to serve the retirees and the elderly, or we’re going to have to cut benefits to retirees, which goes completely against the reason why the Social Security system was created in the first place, which is to allow people to live and thrive in dignity in their elderly days.
So MMT unpacks that and turns that on its head by saying, well, the federal government can actually afford much more generous Social Security benefits. And that would be the place for that generous income support that I talked about earlier – is to expand the Social Security benefits beyond the current constraints that we have. So, again, universal basic services not only provide the services needed by the public, but also shields us from the abuse and the fluctuations of the market system. And we have the logistical administrative infrastructure for it that can be expanded in a matter of weeks, literally.
[00:52:53.620] – Grumbine
That’s absolutely amazing. So with that in mind, Fadhel, let me close this out here with . . . In a federal job guarantee arrangement during this Covid-19 pandemic, how might this have saved us with hundreds of thousands of people being laid off right now, how might this have prevented some of the more gross inequalities and gross abdications of responsibility to the voting people? How might this have substantively changed the material conditions for the average person?
[00:53:30.900] – Kaboub
Very good question. So had we had this job guarantee and universal basic services system in place before the pandemic hit, as soon as the pandemic started, we could have said to people, listen, this is a public health crisis, a pandemic. People need to stay home. So now a lot of people are losing their jobs in the private sector because they have to stay home, because they can’t work remotely. Some jobs can’t be done remotely.
Then that becomes your job guarantee, because your most important job right now is to stay home. The individuals who work in the gig economy and don’t have stable sources of income, you transition immediately into a system where we pay a basic income support that sustains them at the same level via Social Security payments, Social Security transfers.
We could have also done this on the back end by saying, you know what, we’re going to hit the pause button on all mortgage payments, all interest payments, all debt payments, and sort this out with the financial industry on the back end, but sort it out in the sense that says this is not a pause button where after nine months you’re going to receive the big bill, you’re going to have to pay for it. I’m talking about like literally making time stop.
And then you go back to making regular payments without any penalties, without having to pay $10,000 at once in unpaid bills. There are lots of things that could have made this crisis much more humane and reasonable from a public health, from a mental health perspective, from an economic perspective. Instead, we got too little economic relief, too little, too late for so many people, unfortunately.
And we haven’t been able to put an end to the public health crisis in itself because we shut down the economy for a little bit, realized that the government is really not providing the economic relief needed for people to stay home. So we went back and reopened and that was the big second wave that we’re struggling with right now. So a job guarantee system, the way we’ve been discussing today, could have made that economic crisis almost unfelt by the general public if we had these mechanisms in place.
[00:55:53.430] – Grumbine
It’s amazing that they would bundle this under, quote-unquote, “socialism” and beat it like McCarthy era ghost. This is the kind of stuff that in order for us to prevent widespread class warfare in terms of what you see, the capitol siege, you see all these people that are voiceless, the poor, the working class, misguided, horribly wrong, whatever, but desperate. And it’s a shame because these underlying things get lost in the headlines of the day. But the fact is that we’re all striving for shelter.
We’re all striving for a life of balance with food security and health care. And we’re not looking to starve and we’re not looking to be desperate. And our leadership leaves us in such a precarity of life that it’s amazing that we haven’t torn ourselves asunder. I mean, completely ripped ourselves apart from the inside out. And current events show that we’re very close to something really bad if we’re not going to address these material conditions. People are going to step up and step out and it’s not going to be the way we want it to come down.
It’s not. They have no voice. They have no power. They feel the elections aren’t fair. There’s so many things going on that make something like a job guarantee so vital to bring any kind of sense of stability to the average person’s life. So I really appreciate you taking the time to go through this today, Fadhel. This has been an eye-opener for me. And I appreciate everyone suffering through my voice. With that, Fadhel, thank you again so much for joining me, sir.
[00:57:35.870] – Kaboub
Thank you again for having me. It’s always a pleasure and it’s good to have you back and thank you again for all the work you’re doing on this front, even in these personal conditions where your health is on the line as we speak. And yet you’re so committed to delivering this message, educating the general public. And to emphasize what you just said a few minutes ago, the tragedy of all of this is that this is all unnecessary pain.
[00:58:02.390] – Grumbine
Yes.
[00:58:03.020] – Kaboub
That we actually have the resources, financial and productive resources, to make everybody’s life better. I think this is what this podcast is about. This is what Real Progressives is about. It’s about delivering the message that all of this pain and austerity is unnecessary.
[00:58:19.970] – Grumbine
Couldn’t have said it better myself. Thank you so much, Fadhel. Folks, with that, Steve Grumbine, Fadhel Kaboub, Macro N Cheese. We’re out of here.
[00:58:34.860] – Ending Credits
Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
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The Global Institute for Sustainable Prosperity
Featured in the podcast:
The Case for a Job Guarantee by Pavlina Tcherneva
The Job Guarantee – Working Paper No. 902 by Pavlina Tcherneva