Solvency – Wages – vs FJG

Adam King 21 (Post-Doctoral Visitor in the Department of Politics at York University in Toronto, Ontario and Senior Researcher at the Canadian Labour Congress), “Critical reflections on the job guarantee proposal,” 02/09/2021, Studies in Political Economy 101(3), pg 230-244

Contemporary proponents of a job guarantee—both academic and activist—highlight a federal jobs program’s supposed potential to not only provide unemployed workers with gainful employment at a living wage but also serve as a means of raising the wages of private sector workers outside the JG program. They claim that this could be accomplished by the JG program absorbing the pool of the unemployed workers and thus eliminating the downward wage pressure that structural unemployment generates.24 Minsky previously argued for a “tight full employment labour market” maintained through an “employer of last resort” policy used to flexibly absorb the unemployed over the course of the business cycle.25 In this telling, the jobs program would improve the bargaining power of the working class by setting a higher floor for the bottom of the labour market, thus compelling private sector employers in need of workers to offer wages higher than those of the JG program to attract workers away from it.

There are several problems with this narrative. RecaSll that Minsky’s aim was not only to aid the unemployed but also to achieve full employment without causing the wage-price inflation that partially ended postwar full employment policy in the 1970s.26 Such a situation holds only if the wage floor set by the JG is low enough not to allow workers in the private sector to demand higher wages, or, as Seccareccia has critically characterized it, by maintaining a “loose” full employment policy in which JG wages are purposefully set low enough to not drive private sector wage growth over time.27 Wray in fact has previously argued that the existence of a JG program could be used to discipline the wage demands of private sector workers. He writes:

However, just as workers have the alternative of [JG jobs], so do employers have the opportunity of hiring from the [JG] pool. This is the primary ‘price stabilization’ feature of the [JG] program. If the wage demands of workers in the private sector exceed by too great a margin the employer’s calculations of their productivity, the alternative is to obtain [JG] workers at a mark-up over the [minimum wage]. This will help to offset the wage pressures caused by elimination of the fear of unemployment.28

Here, Wray characterizes the JG program not as a bargaining tool in the arsenal of the working class, but as a “price stabilization” mechanism that effectively pools the reserve army of labour and pays them a wage sufficiently low to allow employers to obtain (or threaten to obtain) these workers when private sector wage demands are too high.

The change from describing the job guarantee as a wage- and inflation-containing institution to one geared towards improving the bargaining power of workers is quite remarkable. One need only to take stock of the various features and benefits that Wray et al. now include in their jobs program proposals. For example, in keeping with the movement demand for “$15 and Fairness,” the Levy Institute proposes to set the wage in their jobs program at $15 per hour, which would effectively function as the new US federal minimum wage.29 As Dean Baker points out, however, there are approximately 40 million US workers currently earning less than $15 per hour—the federal minimum wage remains $7.25 per hour. This could mean one of two things: either low-wage private sector employers would have to raise wages quickly in order to retain employees, or the JG program would have to absorb a lot of displaced private sector workers.30 It is hard to imagine employers tolerating this without a substantive fight. Additionally, this does not account for whatever “spillover effects” a substantial JG-induced wage increase might generate up the income ladder (or at least proximate to the JG wage). This is not to suggest simply that significant increases at the bottom of the wage distribution are not necessary and justifiable, but rather to point out that this outcome is incompatible with JG theorists’ previous insistence that the program would serve a “price stabilization” function—at least short of some other institutional mechanism, such as coordinated wage bargaining or a broad incomes policy.

Current JG proposals also aim to provide workers with benefit packages and, notably, access to public health insurance. Although this is commendable, Wray underestimates how forceful the pull might be from the low-wage private sector to the JG program because of these features.31 In a country where low-wage workers are far more likely to be un- or under-insured, access to health benefits in the JG would likely prevent workers from leaving the program even if marginally higher paying work were to be available in the private sector. This lends credence to the argument that the only way the program might be implemented is if it contains wages and conditions significantly below those found in current JG proposals. Wray seems to assume, or predict, in his statistical models that over certain timespans the low-wage private sector would be forced to harmonize wages and conditions upwards, but Baker points out that Wray underestimates how much wage pull and price inflation private sector employers and wealthier consumers will tolerate.32 Furthermore, Wray makes clear that JG employment would not be “at-will,” as is currently the case with all nonunionized employment in the United States. JG workers would have access to a grievance process and could not be fired at the discretion of their state or local public employer without just cause. Here again, contemporary JG advocates do not appreciate how much of an improvement basic just-cause dismissal procedures in the JG would be over nearly all low-wage private sector work in the United States, and, consequently, how much this aspect of the JG might incentivize workers to enrol in the program and stay put.

These features raise an important question: does the job guarantee mean that workers always have a right to employment in the program, or only when sufficient private sector employment is not available? In other words, can a worker refuse private sector employment and still access the job guarantee program, and if so, is such a right tenable when generalized? Wray and Tcherneva both emphasize the proposal’s ability to adjust JG employment levels as conditions in the business cycle change,33 but it suggests that private sector work outside the JG program will always be preferable to work within the program. When comparing the most recent iteration of the JG proposal with the contemporary landscape of low-wage private sector employment, it is hard to imagine this to be the case.

Moreover, although the JG program is supposed to demand no education or skill prerequisites, many jobs that JG proponents imagine participants doing would in fact require considerable skill and training. For example, the National Jobs for all Coalition, an activist and research organization in the United States, proposes that the JG focus on “green jobs,” including building and retrofitting homes and commercial and public buildings; manufacturing and installing solar panels, wind turbines, and other renewable energy infrastructure; local and sustainable farming; expanding and updating public transportation; repairing roads, bridges, and other infrastructure; and training millions of teachers, health care professionals, and child care workers.34 Similarly, the Center for American Progress’s JG proposal mentions homecare workers for the elderly and the disabled; childcare workers; teacher’s aides and other educational support staff; and people trained to provide low-level emergency medical support.35 All of these jobs require significant training, skill development, and public investment, and very few could conceivably be part of a temporary program for workers displaced by private sector contraction. If the number of JG jobs is really meant to grow and shrink according to the performance of the private sector, government is highly unlikely to make significant capital investments for nonpermanent jobs. As Tymoigne points out with reference to the experiences of the New Deal jobs programs,36 skill underutilization was a persistent problem. The necessarily low wages likely to be paid in any actually-existing JG program would almost certainly repeat this problem. Nonpermanence, low wages, and limited capital investment would likely translate into people doing work that is low-productivity and requires little training or coordination. Growing the public sector workforce and increasing public investment to address the climate and care crises are reasonable,37 but conflating this with the JG and its associated features only confuses matters.

There is a fundamental contradiction at the heart of contemporary iterations of the JG proposal. The JG cannot accomplish price stabilization and wage restraint functions while also advancing working class power by removing the reserve army of labour and increasing worker bargaining power. As Wray points out, Minsky makes a distinction between moving towards full employment and maintaining full employment.38 Minsky contends that, for the most part, the former has produced inflationary pressures (particularly through incentives for private investment and generalized growth promotion) whereas little evidence suggests that maintaining low or full employment in his model would be inflationary.39 He and Wray both predict that the political shock of the program’s implementation will cause some price inflation, but they maintain that the dynamics of the JG program would be such that full employment could become a feature of the regulated capitalist labour market without driving inflation. This prediction is based on the assumption that a tight full employment labour market will also generate a dynamic wherein wages rise faster in the lagging sectors than in the leading sectors of the economy, which will help balance any inflationary pressures brought on by full employment.40 The problem with this, as Minsky himself recognizes, is that institutional mechanisms would be required to maintain wage restraint in higher wage and more productive sectors while wages were encouraged to outstrip growth in lower wage sectors.41 This lesser-noticed aspect of the proposal is markedly similar to the Swedish “wage solidarity” scheme, which had coordinated sectoral collective bargaining as its prerequisite.42 In the United States, with its decentralized bargaining system and much lower union density, no institutional mechanisms exist to play this wage-coordination role. Were a feasible JG to be implemented, it is likely that its base wage would have to be kept low and be coupled with some form of incomes policy. Even with sectoral bargaining or an incomes policy of some sort, it is questionable whether or not the conditions of a JG with rising wages in the lower rungs of the income distribution would hold, as the unravelling of centralized bargaining in the Swedish case partially indicates.43

Thus, the argument that a JG could be used to augment working class power seems to run aground on the idea’s conceptualization as a wage floor that does not encourage private sector wage demands. In other words, under present political conditions, it seems likely that it would simply be another way in which to pool the reserve army of the unemployed in a way that does not meaningfully change the composition of class forces. It seems that a job guarantee is no technocratic fix to the political problem of strengthening organized working class power.