Bernie Sanders knows it — a Job Guarantee is the more effective, less costly answer to unemployment in Australia, writes Dr Steven Hail.
Both major parties and most commentators jumped on the idea and it seemed an easy target.
The Greens were promising to make a payment of over $20,000 a year to every Australian adult and it seemed they didn’t have a way to pay for such a policy.
Let’s do the maths. The gross cost of the policy would be about $440 billion a year. Given that total federal spending on absolutely everything comes to about $480 billion a year at the moment, this is obviously a lot of money. Even if you net out the entire social security and welfare budget, government spending would still rise by well over 50%.
Of course, you could just spend this money into existence, if you were the Government. The trouble is that on this scale such a policy would be wildly inflationary. To prevent the inflation, you could double GST, eliminate all tax concessions, including on super and put income tax rates up by 10 or 15%. But good luck getting people to vote for that. More than likely, it would lead to all sorts of cuts to public services and privatisations. The opposite policies to those for which the Greens normally argue.
But we should thank Senator Richard di Natale. He has at least started a national conversation on poverty and underemployment. We have seen both inequality and underemployment rise in Australia since the 1970s and these trends need to be reversed for the sake of our young people and for social cohesion.
There is an alternative policy, which is affordable, not inflationary, which can eliminate involuntary unemployment and do much to end poverty — it's even attracting attention both here and overseas. A job guarantee. Bernie Sanders is developing legislation for such a program in the USA, as are more than one other potential Democratic presidential candidate for 2020.
In Australia, GetUp! has just launched a new campaign for economic fairness, entitled Future to Fight For and the first plank is an Australian Job Guarantee. This commitment is backed by Nobel prize-winner Joseph Stiglitz, by the former chief economist on the U.S. Senate Budget Committee Stephanie Kelton and, incidentally, by me.
A job guarantee would offer a government job to everyone who would like to take such a job. They could work from one to 35 hours a week, and receive a full-time equivalent wage of about $40,000 a year, plus super and other benefits. If about 700,000 took you up on such an offer (the number currently unemployed, in an economy with only 200,000 job vacancies), the net cost would start at 2% of GDP (or less) and fall over time, including capital and administrative costs.
It would stabilise the economy across the economic cycle, as it would expand in scale during a downturn and shrink in a boom. It would set an effective minimum wage and working conditions across the economy and empower low-paid workers and people in insecure employment. It would help sustain and invigorate rural and remote communities. It would involve spending government money when, where and on who it ought to be spent. It would, if well-designed, eliminate many of the non-pecuniary costs of unemployment and the adverse social consequences of underemployment and poverty. It should nourish self-respect, give people a sense of purpose, contribute to social inclusion and end economic insecurity for many.
Then, there is the concept of a job bank, in which the jobs available for people to draw on in each local community would depend on the community itself. It's not a "one-size-fits-all" package. It is important that most of the jobs are not dependent on prior learning; that they do not involve direct competition with local private sector businesses; that they contribute to the well-being of participants; and that they contribute towards the well-being of non-participants.
A local job bank might include
- Environmental and ecological repair
- Small-scale infrastructure
- Small-scale solar
- Working in charities/not-for-profits
- Assistants for teachers
- Transport (in some areas)
- Help for the aged
- Art, drama, writing, research
- Services currently not provided
- Optional training
Over time, it may be that the security of an available job will encourage people to move to a shorter working life and shorter working hours, but this must be done equitably. It is not desirable to allow a separation of the population into two parts — "haves" with respected jobs and earned income and "have-nots" who are out of work or insecurely employed and considered consumption machines rather than fully rounded contributors to social well-being.
At this point in history, even if it was not inflationary, a universal basic income would not be the best policy to use to address inequality and underemployment.
The Guardian’s editorial opinion headline is correct. The job guarantee is a ‘policy whose time has come’.
You can follow Dr Steven Hail on Twitter @StevenHailAus, as well as on Facebook at Green Modern Monetary Theory and Practice. His new book, 'Economics for Sustainable Prosperity', is due to be released by Palgrave Macmillan in July.
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