Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Hallaway. So, Tracy, we
Speaker 1: kind of have an extremely timely episode today given the news.
Speaker 1: This is going to be one of those episodes where
Speaker 1: we have to definitely make sure that we say what
Speaker 1: day we are recording and what time. But it's Job's day.
Speaker 1: It's Job's day, that's right. It's July two twenty, so
Speaker 1: depending on when you're listening to this, take that into account.
Speaker 1: And just about thirty minutes ago, we got the June
Speaker 1: jobs report, and at least on the headline measures, it
Speaker 1: was definitely better than expected. Yeah, I'm looking at those now.
Speaker 1: So we have four point eight million jobs added versus
Speaker 1: expectations of what was three points some thing, do you remember, Joe, Yeah,
Speaker 1: three point two million, three point two million. Yeah, so
Speaker 1: a huge beat on the expectations. And uh, I'm looking
Speaker 1: at the chart. I know you've been debating about how
Speaker 1: best to chart all these various economic indicators, but you
Speaker 1: know it looks like a v if you just sort
Speaker 1: of look at the pure headline. I mean it is
Speaker 1: jobs are coming back sooner than expected, I would say,
Speaker 1: and faster than expected. But of course there's all kinds
Speaker 1: of caveats in there, including the fact that most of
Speaker 1: these uh, the snapshot of the economy was taken prior
Speaker 1: to this re acceleration of the virus. So of course
Speaker 1: there's a in the US anyway. UM, so there's a
Speaker 1: sense in which this is dated. Also, you know, you
Speaker 1: have to look at permanent job losses, which continue to
Speaker 1: rise even as uh the total job losses continue to
Speaker 1: come down. So I think, like you know, on the headline,
Speaker 1: it's good, it's good that the unemploy him at rate
Speaker 1: is already backed down to eleven. That's still worse than
Speaker 1: it ever was during the Great Financial Crisis. Like, you know,
Speaker 1: let's hopefully the the headline trend continued. So for now,
Speaker 1: I guess that's that's hopeful news. I mean, I do
Speaker 1: think there's a sense that unemployment is becoming obviously more
Speaker 1: of an issue. Like we are expecting the virus to
Speaker 1: re emerge at various points in time until we get
Speaker 1: a vaccine, we're expecting multiple waves of infections, and that means,
Speaker 1: you know, whenever the government orders people to stay confined
Speaker 1: or stay in lockdown, that we are probably going to
Speaker 1: see a hit to employment, and it's not through anyone's
Speaker 1: faults per se. It's basically policy ordained unemployment, and so
Speaker 1: we as an economy or society need to start talking
Speaker 1: about that and how we kind of figure it out absolutely,
Speaker 1: and this really sort of like gets to the key things.
Speaker 1: So it's like, we have these mets even if it's
Speaker 1: getting better, and it is, we have this massively high
Speaker 1: unemployment rate. We had a massively high unemployment rate just
Speaker 1: a decade ago, and we went between the last crisis
Speaker 1: in this one, we had elevated unemployment on a historical
Speaker 1: basis up until extremely recently, like maybe like en we
Speaker 1: might have been close to what economists might call full employment.
Speaker 1: So that's a very nebulous term. But there is this
Speaker 1: permanent feature, it seems, of these economy and arguably even
Speaker 1: going back to uh the post dot com era as well,
Speaker 1: when when they first when the term jobless recovery first
Speaker 1: started talking that like underemployment or elevated unemployment seems to
Speaker 1: be a more or less permanent feature of the economy,
Speaker 1: and periods of when we could say anyone can get
Speaker 1: a job who wants one seemed to be depressingly rare
Speaker 1: crisis or no crisis. You mentioned full in empoyment there,
Speaker 1: and I mean, as you point out that in itself
Speaker 1: is kind of a weird idea. You know, the notion
Speaker 1: that because we have an unemployment rate at something like
Speaker 1: three or four percent, that we're at full employment even
Speaker 1: though millions of people still don't have jobs. It's it's
Speaker 1: kind of funny that that's the accepted norm. And again,
Speaker 1: I think one of the things about the coronavirus crisis
Speaker 1: is one of the unique things about the crisis is
Speaker 1: that it is opening up these bigger conversations about what
Speaker 1: employment should mean. Yeah, totally. And also, like even prior
Speaker 1: to the crisis, economists needed to do some soul searching
Speaker 1: because you know, we got down to some four percent
Speaker 1: unemployment as recently as earlier this year, but there was
Speaker 1: a point you know, in seventeen or sixteen and like, oh,
Speaker 1: unemployment camp go below five percent, then it went below
Speaker 1: that's like uneppoyment campo. And we never got to associate
Speaker 1: with surgeon inflation. So they're just all kinds of reasons
Speaker 1: to just sort of rethink employment in this country or
Speaker 1: in any economy and what we're capable of and how
Speaker 1: many people are left behind unemployed, unemployed, uh, in jobs
Speaker 1: that don't pay them well, even during the so called
Speaker 1: boom time. All right, well, let's do some rethinking around
Speaker 1: jobs now and then who do we have on So
Speaker 1: I'm very excited we have a guest today who I
Speaker 1: wanted to talk to for a long time. She is
Speaker 1: an associate professor and director of the economics program at
Speaker 1: our College. She's also a fellow at the Levy Institute.
Speaker 1: She's also the author of a new book called The
Speaker 1: Case for a Job Guarantee. And Uh. Our guest is
Speaker 1: Pavilina Cherniva. She is out with this new book and
Speaker 1: we're going to talk about the Job Guaranteed. So, Pavilina,
Speaker 1: thank you very much for joining us. Good to be
Speaker 1: with you. Hi, Tracy, Hi Joe, Pavilina. You know, obviously
Speaker 1: modern monetary theory MMT a lot of attention paid to it,
Speaker 1: especially in recent years, especially now people rethinking the potential
Speaker 1: for fiscal sustainability. But one big component of it which
Speaker 1: probably has gotten a lot less attention. There are at
Speaker 1: least certain people within the sort of m m T
Speaker 1: sphere who think that an important aspect of it is
Speaker 1: essentially targeting the unemployment rate directly, that the unemployment rate
Speaker 1: itself currently eleven point one percent, is a policy choice,
Speaker 1: and that the government can essentially guarantee everyone a job
Speaker 1: if they like. So talk to us about how the job,
Speaker 1: what the job guarantee is first of all, and how
Speaker 1: it fits into the MMT world. Yeah, thanks, I really
Speaker 1: like how Tracy put it in the introduction policy ordained unemployment.
Speaker 1: So in COVID it's pretty straightforward because you know, we
Speaker 1: had to close down businesses, we have to shut our
Speaker 1: many sectors, and we're told to go home. So that
Speaker 1: was a very explicit, if you will, policy guidance, and
Speaker 1: we saw a spike in unemployment. But most people probably
Speaker 1: don't think about it this way in normal times that
Speaker 1: actually we have unemployment as a perennial feature in the
Speaker 1: economy and the fact that it's positive unemployment is again
Speaker 1: policy ordained. So you know, there are various ways in
Speaker 1: which you could look at this. I mean, the one is,
Speaker 1: of course, the niro, the nebulous term that Joe was
Speaker 1: referring to. That is this idea, this notion that there
Speaker 1: is some optimal level of unemployment that would be consistent
Speaker 1: with price stability. And you know, we've watched this conversation
Speaker 1: evolved even over the last few months before COVID, where
Speaker 1: the FED was questioning the nature of the NIHRO, questioning
Speaker 1: whether there there is such a relationship, or if it
Speaker 1: has broken down, or whether keven a causal relationships. So basically,
Speaker 1: we don't know. We we don't really know what that
Speaker 1: low level of unemployment is that won't trigger inflation, and
Speaker 1: it turns out we can go even lower than what
Speaker 1: we thought before. So but what's important about this is
Speaker 1: that the NIRO for a long time has been used
Speaker 1: as a policy guide nish what does NIU stand for? Again,
Speaker 1: always forget the NIUS the non accelerating inflation rate of unemployment.
Speaker 1: It's the level of employment that might be consistent with
Speaker 1: stable prices. And because we know the FED has a
Speaker 1: dual mandate to keep price stability and maximum employment or
Speaker 1: achieve price stability and maximum employment, and so that the
Speaker 1: theoretical and this so called empirical term is his concept
Speaker 1: is the NIRO. But what's interesting about that is that
Speaker 1: it is used as a policy guide. You know, like
Speaker 1: models have some NIRO number where if the unemployment rate
Speaker 1: the act to unemployment rate breaches that number, then the
Speaker 1: models might indicate some price, increased wage inflation, et cetera.
Speaker 1: The thing is that it is this concept exists only
Speaker 1: for unemployment. We don't have a concept like this for
Speaker 1: any other economic phenomena out there. Right, we don't talk
Speaker 1: about a natural rate of hunger, a natural rate of homelessness,
Speaker 1: and natural rate of illiteracy. Right. We only for unemployment
Speaker 1: we do that, and so it's actually sanctioned. Positive level
Speaker 1: of unemployment is sanctioned by policy. And then on the
Speaker 1: fiscal side, we do a whole bunch of fiscal policies
Speaker 1: in the name of job creation. But as you were
Speaker 1: saying at the beginning, we never have enough employment opportunities
Speaker 1: for all people who are looking for work. So it's
Speaker 1: really a policy ordained unemployment rate. As of what M
Speaker 1: m T says and what the job guarantees says is that, well,
Speaker 1: the unemployed are already the charge and the responsibility of
Speaker 1: the public sector. The unemployed are already they already required
Speaker 1: various forms of assistance. But also unemployment in and of
Speaker 1: itself inflicts high costs on the economy. So unemployment is
Speaker 1: paid for, so to speak. So the job guarantee is
Speaker 1: a better way of dealing with unemployment by simply are
Speaker 1: employing the unemployee and expending public money for direct hiring
Speaker 1: to both stem all of these various costs of unemployment,
Speaker 1: reduce existing financial and real costs, and create from something
Speaker 1: of social varcument. So, just to ask a really basic question,
Speaker 1: but when we talk about jobs guarantee, what do we
Speaker 1: mean exactly? And I mean, I'm aware there are different
Speaker 1: iterations of how this might work, but how do you
Speaker 1: specifically think about it? I just think of it as
Speaker 1: a public employment option. So if if, for example, somebody
Speaker 1: walks into an unemployment office, you know, they can get
Speaker 1: a whole lot of assistance, unemployment insurance, help with their resume, coaching,
Speaker 1: interview skills, but they cannot get a job, you know,
Speaker 1: and they apply and the apply and apply. So if
Speaker 1: if we had devised the system where they will be
Speaker 1: on standby, a a program that will create employment opportunities
Speaker 1: in the locality, in public service, where somebody can go
Speaker 1: into the unemployment office if they have not been able
Speaker 1: to find a job elsewhere in the economy, they will
Speaker 1: be always an option. They're guaranteed at a base living wage.
Speaker 1: So it's a it's a basic job option, and you know,
Speaker 1: the philosophy behind it is there. There are many ways
Speaker 1: to rationalize, but think of it this way. You know,
Speaker 1: when when somebody doesn't have education, we guarantee it, right,
Speaker 1: they guarantee to seek in the public school. If somebody
Speaker 1: doesn't have access to retirement security, right, we guarantee it
Speaker 1: through social security. If you are food insecure, you know,
Speaker 1: we guarantee food stamps. I mean, you know there are
Speaker 1: there are these programs can be made better or you know,
Speaker 1: it depends how you think about them. But we tend
Speaker 1: to have this kind of straight solution to these various
Speaker 1: forms of economic and security. But for unemployment, when the
Speaker 1: problem is the absence of a job, we don't actually
Speaker 1: provide the job. So that's what the job variant people do.
Speaker 1: So this gets too sort of an interesting I don't
Speaker 1: know if it's a philosophical question or probably is philosophical,
Speaker 1: but it's also of course economic. Is that the what
Speaker 1: you make a distinction implicitly between job laws and income
Speaker 1: loss for losing it from losing a job, because if
Speaker 1: it's just a matter of the lost income, then in
Speaker 1: theory you could say Okay, we could have an unemployment
Speaker 1: insurance program that doesn't run out as long as you're
Speaker 1: looking for a job, and it uh covers your entire
Speaker 1: salary or some sort of like essentially a basic income.
Speaker 1: So the question is why, in your view does it
Speaker 1: make more sense for the government to guarantee people a
Speaker 1: job as opposed to just lost income. Well, I should
Speaker 1: make it clear that it's not a displacement for income
Speaker 1: support the job guaranty, and it's a new program, an
Speaker 1: additional program. But it's true unemployment is brings higher costs
Speaker 1: beyond just the loss of income. And we macro economists
Speaker 1: don't really think about this very much, but even the
Speaker 1: cognitive sciences psychologists think about this a fair amount. And
Speaker 1: there's really good work that is documenting the impact of
Speaker 1: unemployment on not just the unemployed but their families and communities.
Speaker 1: So economist talk about scarring effects. You know, we talked
Speaker 1: about the loss of income, and so unemployment insurance essentially
Speaker 1: attempts to patch that up. But we know even with
Speaker 1: unemployment insurance, your lifetime income is permanently lower as the
Speaker 1: result of unemployment. But also you start losing these other
Speaker 1: non tangibles, like for example, the social networks that you
Speaker 1: rely on to get the job. They're also physical mental
Speaker 1: health costs that are experienced not just by a person
Speaker 1: who's lost their job, but their spouses, their children. There's
Speaker 1: impact on growth standing something we talk about unemployment being
Speaker 1: literally deadly, and so just interventions that just focus on
Speaker 1: income alone just they are not going to be enough.
Speaker 1: I'm not you know, they're they're the right thing to do.
Speaker 1: We need to provide income support for people who lost
Speaker 1: their employment opportunity, but that is really just very minimum
Speaker 1: we could be doing. And what we know also from
Speaker 1: even experiments that run you know, basic income programs, we
Speaker 1: know that people still look for jobs. So if we
Speaker 1: live in an economy that guarantees unemployment, right as you said,
Speaker 1: it's a perennial feature of the economy. If we live
Speaker 1: in that kind of macroeconomic framework, then you are assured
Speaker 1: that people will not be able to find employment, even
Speaker 1: if we provide income and if if they if they
Speaker 1: seek employment. So it's it's just fixing this this one
Speaker 1: gap in the macro economic package. How did jobs guarantee
Speaker 1: change the behavior of private sector firms? Do you do
Speaker 1: you think, for instance, that they'd be competing for the
Speaker 1: same pool of labor and therefore might have to raise
Speaker 1: their own wages, or do you think there's sort of
Speaker 1: two different pools of job seekers. Well, I think that
Speaker 1: the net effect um will be positive, and I can
Speaker 1: talk a little bit about a macro model that we
Speaker 1: had developed the Leave Economics Institute. What's important, I think
Speaker 1: to notice is that the private sector doesn't really like
Speaker 1: to hire the unemployed, right. We have this odd paradox
Speaker 1: that firms, you know, prefer people that have work experience,
Speaker 1: that have shorter gaps in their resumes. They like to
Speaker 1: poach from their competitors. And what ends up happening is
Speaker 1: those who are trapped in unemployment, especially long term unemployment,
Speaker 1: are the last ones to get hired. And there's recent
Speaker 1: research that was very good that came out on what
Speaker 1: firms did after the Great Recession. They change the rules
Speaker 1: of the game. The low and the unemployment rate fell,
Speaker 1: the higher their criteria for hiring. So it's a bit
Speaker 1: of a stack game for those who are really last hired.
Speaker 1: And what the job guarantee essentially would do is provide
Speaker 1: those unemployment employment opportunities for for folks who have the
Speaker 1: hardest time. You know, catching on this job's train and
Speaker 1: those tend to be people with disabilities, people of color,
Speaker 1: you know, for my inmates, and um, we are going
Speaker 1: to provide not just an employment opportunity, but on the
Speaker 1: job training experience help with transitioning to the private to
Speaker 1: private sector job. So in the net, it will be
Speaker 1: a benefit for firms who who basically report this this
Speaker 1: this odd paradox we can't find qualified workers, and yet
Speaker 1: we're seeing a lot of unemployed people. So the job
Speaker 1: guarantee will will help with that matching problem as well.
Speaker 1: And so, but then the other question that you raises,
Speaker 1: what about wages? And here COVID is an interesting case.
Speaker 1: It has shown us how poorly paid so many people
Speaker 1: are in the labor market. And now we're debating whether
Speaker 1: we should be extending this extra six hundred dollar unemployment
Speaker 1: bonus and insurance bonus to protect the unemployed. And you know,
Speaker 1: that's really a just a reflection of how many jobs
Speaker 1: just don't provide living income for people. So the aim
Speaker 1: and the goal of the job guarantees to provide a basic,
Speaker 1: guaranteed minimum wage floor that would be a decent living
Speaker 1: wage for it below which no one will fall and
Speaker 1: what will be the impact then on the private sector, Well,
Speaker 1: there will be there will be some competition, for sure,
Speaker 1: there will be some pressure on the private sector to
Speaker 1: match that package, the wage and the benefit package. Now,
Speaker 1: you know, should this be Is this going to be
Speaker 1: a you know, a very big problem for firms. You know,
Speaker 1: it's not it's not really clear. Our model shows that
Speaker 1: the Job Guarantee actually permanently increases employment in the private
Speaker 1: sector by four million jobs. It shows a permanent increase
Speaker 1: in UH in g d P and so you know, overall,
Speaker 1: you know, firms are living in a better environment, more sales,
Speaker 1: higher profits, so some will be able to you know,
Speaker 1: most will be able to match the fifteen dollar an hour.
Speaker 1: And you know, we see this with living wage ordinances.
Speaker 1: You know, when states or cities passed higher wages than
Speaker 1: the official official minimum wage, there will be some firms
Speaker 1: who actually rely on very low wages for the existence
Speaker 1: and poverty paying wages. And and this the Job Guarantee
Speaker 1: basically says, you know, this should not be an afro
Speaker 1: economic condition. We want to assure a firm living wage
Speaker 1: for so it's a feature of the program to to
Speaker 1: weed out these uh these pay practices heefull. You know,
Speaker 1: you know something I have thought about before, and I've
Speaker 1: been thinking about it during this crisis is I look
Speaker 1: at the government. I look at the effectiveness of our
Speaker 1: state capacity in this country to do things like say,
Speaker 1: established testing protocols for COVID or hospitalization or anything else.
Speaker 1: And I have to say, like, I'm sort of like
Speaker 1: a state pessimist. It does not look like we're particularly
Speaker 1: good at provisioning anything in the public and so I'm
Speaker 1: you know, it feels like we're good at cutting checks,
Speaker 1: like we could do that if we choose to. How
Speaker 1: do How confident are you or why should we have
Speaker 1: confident that a government administered jobs program can work, can
Speaker 1: be effective, even if we decide politically we want a
Speaker 1: sort of essentially public option for employment, that it would
Speaker 1: be just well administered. Yeah, I mean, look, I I
Speaker 1: share your frustration, but it's it's not that we are
Speaker 1: bad at doing contact tracing. I think we're just not
Speaker 1: doing it. Were simply not even attempting to do the
Speaker 1: kind of mobilization and all the policies that we need
Speaker 1: for this moment. So I think the political obstacles for
Speaker 1: sure there, but I don't think that the administrative obstacles
Speaker 1: are unsurmountable. So you know, if if we had attempted
Speaker 1: and we actually have the political interest in commitment, I
Speaker 1: think that that it's workable. And let's just think of
Speaker 1: other things that we prioritize. Our administrative challenges a litmus
Speaker 1: test for guaranteed education, you know, they really are not
Speaker 1: you know, we we believe that everyone should have a
Speaker 1: guaranteed seat in the school, and so we do that,
Speaker 1: and then we handle over which schools are better and
Speaker 1: better funded and you know, how should they should be run.
Speaker 1: But there is a policy commitment to provide infrastructure and
Speaker 1: ensure those opportunities. So with the job guarantee, we will
Speaker 1: have the same sort of idea. I mean, the infrastructure
Speaker 1: is all then, and in my book, I basically argue
Speaker 1: that we shouldn't reinvent the wheel. We should use the
Speaker 1: institutional capacity that already exists, like the unemployment offices which
Speaker 1: are present in every single county across the United States,
Speaker 1: and they just need to become genuine employment offices. Public
Speaker 1: service is one thing that has been underfunded. You know,
Speaker 1: there's one aspect of the public sector that has been
Speaker 1: underfunded for me long time, in part under the guys
Speaker 1: that the government you know, is running out of money,
Speaker 1: and all of those are the myths that m MT
Speaker 1: is attempting to bust. And we have a lot of neglect.
Speaker 1: So there are problems to be solved. We have environmental problems.
Speaker 1: In short, I think that there's lots and lots that
Speaker 1: we can do, and there are groups, communities on the ground,
Speaker 1: that on the ground in every community rather that address these.
Speaker 1: So the proposal here is not to necessarily reinvent the wheel,
Speaker 1: but just to to do things better and at a
Speaker 1: bigger scale, to empower those who are already on the
Speaker 1: ground filling in these these gaps, and just match the
Speaker 1: unemployed with the kind of work that they can do.
Speaker 1: So yes, I have no illusion that like any other program,
Speaker 1: this two will have its own administrative and political challenges,
Speaker 1: but it hasn't stopped us to do other things we
Speaker 1: think are important. So I think the first step is
Speaker 1: is to you know, form a consensus that if somebody
Speaker 1: needs a job, they should be able to walk into
Speaker 1: an employment office and just get a basic job. I mean, sorry,
Speaker 1: just to press on the political point a little bit.
Speaker 1: You know, the US has a long history of pushing
Speaker 1: back on well, the American public and some parties in particular,
Speaker 1: have a long history of pushing back on any social
Speaker 1: welfare program that they think, um might undermine capitalism. And
Speaker 1: I imagine that a full job's guarantee is one of
Speaker 1: the ones that will automatically trigger, you know, accusations that
Speaker 1: we're becoming communists and all of that. How do you
Speaker 1: deal with that side of the political debate? And also,
Speaker 1: I mean this kind of touches on my biggest criticism
Speaker 1: of M m T, which is if we all agree
Speaker 1: that whether or not we can afford something isn't really
Speaker 1: the constraint, The constraint is political. Then you know, that's
Speaker 1: sort of how things have been for a long time.
Speaker 1: So how do you overcome those political barriers? The first
Speaker 1: thing to point out is that actually the job here
Speaker 1: it is, is very popular. You know, we were There
Speaker 1: have been a number of different surveys and I will
Speaker 1: admit even I was surprised to see some of the results.
Speaker 1: Um it was the Harris Hill survey. There was data
Speaker 1: for Progress survey. They are older surveys and they always
Speaker 1: consistently show more than UH support. But the latest one,
Speaker 1: even you go off in the UK, they were in
Speaker 1: the seventies, so jobs are not a partisan issue. Now,
Speaker 1: I agree with you that there's always the red herring
Speaker 1: of you know, oh, this is, you know, big government takeover.
Speaker 1: The thing to stress here is that the government there
Speaker 1: is already big government takeover, and there's already an enormous,
Speaker 1: enormous infrastructure that deals with poverty, and much of it
Speaker 1: which is connected to the problem of unemployment. And so
Speaker 1: the infrastructure is there, the spending is already already where
Speaker 1: we can can do things better by directly going to
Speaker 1: the source of the problem. So maybe there's political wrangling,
Speaker 1: but some of these social programs are pretty popular, like
Speaker 1: social security. You know that once they understand the value
Speaker 1: in the benefit of these policies, you know, they defend them.
Speaker 1: So you know, for us, the hurdle is getting there
Speaker 1: now I do hear you know this question of you know,
Speaker 1: Soviet Union tried this, and the answer is no, the
Speaker 1: Soviet Union didn't try their job guarantee. Soviet Union tried
Speaker 1: an employee of first resort. The job unantee is an
Speaker 1: employer of last resort, and it is a program that
Speaker 1: actually uh stabilizes the economy better than unemployment. So it
Speaker 1: kind of dances with the with the private sector employment,
Speaker 1: you know, and private sector employment declines, job guarantee increases.
Speaker 1: So if those aspects understood at the macroeconomic level, that
Speaker 1: doesn't mean that they won't be political hurdles, but we
Speaker 1: can begin in at least to rethink how to put
Speaker 1: in place macroeconomic stabilization policies to do the job better.
Speaker 1: I mean, I think economists understand where we something is
Speaker 1: not working. We have jobless recoveries, and that is not
Speaker 1: really kind of a tolerable situation. And we could attempt
Speaker 1: to do account of cyclical employment policy. It has been
Speaker 1: tried even in the United States. We just never really
Speaker 1: did it on a permanent basis. You know, we have
Speaker 1: experienced with direct job creation. We know we can put
Speaker 1: in place projects on short order. But I think that
Speaker 1: our thinking has really gone has gone into the more
Speaker 1: indirect approaches, the nudges, you know, attempts to incentivize private
Speaker 1: sector and it hasn't really worked terribly well. You say,
Speaker 1: you know that this is people should not think, oh,
Speaker 1: this is communism or oh this is socialism per se,
Speaker 1: because it's not trying to be the employer. First resort
Speaker 1: is trying to be the employer of last resort. So
Speaker 1: I want to ask you a question specifically about that.
Speaker 1: You know, we think about the FED it plays a
Speaker 1: role of lender of last resort. But part of the
Speaker 1: last resort is that it's implicitly worse than say, the
Speaker 1: market option. So if you have to go borrow money
Speaker 1: at the FED in the worst case scenario, then you
Speaker 1: pay some penalty rate, etcetera. Is the assumption that the
Speaker 1: public employment option would be on some level less desirable
Speaker 1: than private sector work. And then just beyond that, like
Speaker 1: what are the jobs? Like? What is what are my options?
Speaker 1: If I'm unemployed and I go to an unemployment office
Speaker 1: looking for a job. Directly, how do you conceive of
Speaker 1: what the government can, at any time in any business
Speaker 1: cycle put people to work doing in a way that
Speaker 1: would be productive and now just sort of like make
Speaker 1: work something that we call a job for the sake
Speaker 1: of calling it a job. Yeah, so the first question
Speaker 1: is really interesting, is this going to be the inferior option?
Speaker 1: I think we really don't think about this. Guarantees are
Speaker 1: everywhere the government puts in place all sorts of guarantees,
Speaker 1: So you know, think of deposit insurance. That's a government guarantee. Right.
Speaker 1: Think of interest on short term securities, that's a government guarantee.
Speaker 1: In fact, it's an employment program for bonds. And you
Speaker 1: buy and sell bonds on denand to hit that price. Right,
Speaker 1: So we we do that for bonds. Think of the
Speaker 1: gold standard. That's a guarantee. You know, that's a guarantee
Speaker 1: for the price of gold. It's in the price of
Speaker 1: the currency in the form of gold. But if you
Speaker 1: look at it the other way around, we buy and
Speaker 1: sell to hit the right price. It's a full employment
Speaker 1: program of gold. I mean, we have office stocks, We've
Speaker 1: got all sorts of guarantees who come audities. We have
Speaker 1: loan guarantees. You know in COVID, you know, the loan
Speaker 1: guarantees are the lifeline for all of these businesses that
Speaker 1: they can get the loan. They can be sure that
Speaker 1: the government will you know, wipe it off if they
Speaker 1: preserve paerol. So guarantees are everywhere. It's just we don't
Speaker 1: have guarantees for for employment and employment basically functions in
Speaker 1: this same way to provide a basic floor, basic price
Speaker 1: in the labor market. Now, what are the jobs. I mean,
Speaker 1: this is a question of administration and management in in
Speaker 1: my conception is that these are public service uh jobs,
Speaker 1: because it is really a public program. You don't want
Speaker 1: the public sector to compete with the private sector. We're
Speaker 1: not going to be building electric cars and doing things
Speaker 1: for commercial return. If it is a public objective to
Speaker 1: provide an employment safety net, it should create some sort
Speaker 1: of something of social value. And as I was saying earlier,
Speaker 1: we have lots of neglected the area. So I think
Speaker 1: that the the obvious place to go is really green
Speaker 1: green work, community rehabilitization, environmental projects dealing with things like
Speaker 1: blood control, fire prevention of the you know, the damage
Speaker 1: from hurricanes and other natural you know, natural disasters. In
Speaker 1: other words, you know, we can borrow from darts playbook
Speaker 1: and we can use some of that experience, but really
Speaker 1: adjusted for the modern you know, for the modern day.
Speaker 1: You know, a lot of environmentalists talk about trees as
Speaker 1: the lungs of urban spaces. You know, it seems like
Speaker 1: a pretty easy and straightforward thing to do, but it
Speaker 1: has huge effects on our living environment. And so that
Speaker 1: would be where I would go to create employment opportunities.
Speaker 1: But broadly I talked about care work. We have also
Speaker 1: shortages and care um for the elderly, for at risk youth,
Speaker 1: So anything and everything from you know, after school activities
Speaker 1: to classes and training, to recycling initiatives, urban campuses to
Speaker 1: community gardens, to deal with the food desert problem across
Speaker 1: the country, to dealing with the fires in California. Can
Speaker 1: you talk a little bit more about the impact of
Speaker 1: inflation if we were to have a jobs guaranteed program
Speaker 1: and you know, presumably get maybe not all the way
Speaker 1: to a percent employment, but much much closer to it. Oh,
Speaker 1: how would you see that actually impacting wages and broader economy.
Speaker 1: So one of the objectives of the job used to
Speaker 1: raise the minimum wage and firm it up. So now
Speaker 1: we have as the minimum the federal minimum wage. States
Speaker 1: and cities have higher wages. But even if you want
Speaker 1: a minimum wage job, if you're faced with mass unemployment,
Speaker 1: your wage is zero. It's ventially. You know, maybe you
Speaker 1: can get some unemployment insurance. You know, that's temporary. But
Speaker 1: if we have a public option that provides fifteen dollars
Speaker 1: an hour, then that becomes the floor for the rest
Speaker 1: of the economy. So we should expect at one time
Speaker 1: bump in wages and prices, Now will that be inflationary?
Speaker 1: So we have to look to like historical examples where
Speaker 1: we've had something similar like that. So in nine was
Speaker 1: the one time in US history when we doubled the
Speaker 1: minimum wage, So fifteen will be like, you know, doubling
Speaker 1: of the of the current minimum wage. And we were
Speaker 1: as close to full employment as we had ever been
Speaker 1: right in the post war era, and so there wasn't
Speaker 1: any material inflation of note that we we see from
Speaker 1: just this bump up in and purchasing power. Now, the
Speaker 1: program itself is designed to function council cyclically, which means
Speaker 1: that represents a stimulus. It represents fiscal contribution to the economy.
Speaker 1: So if you have COVID and great financial crisis, people
Speaker 1: are trickling into the program, They're getting wages and income,
Speaker 1: and they are then spending. That is the kind of
Speaker 1: the stimulus itself is what kick starts the private sector economy,
Speaker 1: which is facing deflation. Now, when the private sector picks
Speaker 1: up it's hiring, then the contribution is removed. People transition
Speaker 1: into private sector, better pay private sector jobs, and so
Speaker 1: the stimulus naturally and automatically shrinks, and so that is
Speaker 1: a kind of a damper on any inflationary effects that
Speaker 1: we might see in the economy. But what's interesting about
Speaker 1: about all discussions about inflation is that inflation is assumed
Speaker 1: to be a function of strong demand and too high
Speaker 1: as a demand side effect, you know, high incomes and
Speaker 1: strong aggregate demand. But we actually don't really experience that.
Speaker 1: We haven't really experienced that except after World War Two,
Speaker 1: because we've never had a type ful employment economy. We've
Speaker 1: never really had robust, strong growth that has generated this
Speaker 1: kind of demand lead inflation. What we see is, you know,
Speaker 1: things have become expensive, like healthcare, like housing, like education.
Speaker 1: You know, this is cost push inflation. It's a different
Speaker 1: sort of inflation. So you don't need to keep people
Speaker 1: in unemployed too and incomes down to tackle this sort
Speaker 1: of inflation. There are other ways of dealing with it.
Speaker 1: So just you know, just through to sum up, the
Speaker 1: program is anti cyclical. I think we have a case
Speaker 1: of mistaken identity for inflation, and we we tend to
Speaker 1: think of it that it's demand lead, but it's really
Speaker 1: you know, uh, cost cost push inflation. And we already
Speaker 1: have anti cyclical fiscal policy that that stabilizes inflation over
Speaker 1: the cycle. So the job unity will do the same. Sorry.
Speaker 1: One more question on inflation. I mean I tend to
Speaker 1: think of like our current sort of conventional approach is
Speaker 1: to the macroeconomy is, well, let's target inflation, let's make
Speaker 1: sure prices stable, and then if we're good at that,
Speaker 1: then employment will soon follow. And to me, it feels
Speaker 1: like m MT Job guarantee Aside subverts that and says
Speaker 1: let's do the employment side first, or let's focus on that.
Speaker 1: Would you expect there to be more price volatility generally,
Speaker 1: even if it's not okay, like you know, we're not,
Speaker 1: even if it's not like massive inflation. Would you expect
Speaker 1: there to be more price volatility in a system that
Speaker 1: didn't start by essentially targeting inflation? I mean, no, not necessarily.
Speaker 1: We first, we can't even hit our inflation targets, right,
Speaker 1: so we've tried for twenty years and we can generate
Speaker 1: Even so a little bit of inflation is probably gonna
Speaker 1: be a good thing. If we get this one time
Speaker 1: bump in wages and incomes at at bottom, I think
Speaker 1: that that will bring a little bit of desirable inflation,
Speaker 1: increasing incomes and profits and assets. Now volatility, and why
Speaker 1: would we expect volatility from an economy that has full employment.
Speaker 1: What we what we know from countries that have direct
Speaker 1: labor targeting is that their relative their labor market is
Speaker 1: actually more stable. Like in the US, the unemployment rate
Speaker 1: is this huge yo yo. It shoots up and down
Speaker 1: turns and then slowly going to come downs and these
Speaker 1: jobless recoveries and then shoots up again. So with the
Speaker 1: job guarantee, which is direct labor targeting, we dampen these amplitudes.
Speaker 1: So we actually the downside, we just stabilized, right, well,
Speaker 1: we don't fall into these big deflationary death spirals. Now
Speaker 1: on the upside, it's not the job guarantee that will
Speaker 1: create any price volatility. You might see volatility coming from
Speaker 1: other parts of the economy, right, We might see shortages,
Speaker 1: you know, we might get max capacity in certain industries.
Speaker 1: They may be commodity price volatility, you name it. But
Speaker 1: these sorts of things are outside of the contribution of
Speaker 1: of the policy of the program itself. You know, obviously,
Speaker 1: you know we've we've said, um, you know, you sort
Speaker 1: of like come at this from an MMT framework, which
Speaker 1: is something that pretty frequently comes up on our episodes
Speaker 1: these days. You know, when I first became aware of
Speaker 1: sort of modern monetary theory ten years ago, like, it
Speaker 1: was a lot of focus on fiscal capacity, the fact
Speaker 1: that people's conceptions of what are limiting factor with spending
Speaker 1: is misconceptions about printing money, inflation and so forth. How
Speaker 1: crucial in your view is the job guarantee to the
Speaker 1: MMT project. Is it something that you think must be
Speaker 1: central or is it something that you know, given the
Speaker 1: sort of descriptive aspects of m m T, is a
Speaker 1: choice or do you think it's sort of like a
Speaker 1: you know, cord of the whole thing. Like I feel
Speaker 1: like there's some dispute about this question. Yes, yes, I
Speaker 1: I hear that a lot, but it it is. It
Speaker 1: is a core element. And the reason is because the
Speaker 1: job cure it is not just another jobs program. You know,
Speaker 1: we can come up with all sorts of job creation programs,
Speaker 1: but for for m m T, the job guarantee is
Speaker 1: the substitute for the unemployment stabilizer. It's the substitute for
Speaker 1: the NYRO. So in the in the universe of macroeconomic policies,
Speaker 1: you know, however well intended they may be. UM we
Speaker 1: have two options treating we either have policies that nudge
Speaker 1: and incentivize that they never quite create enough jobs for all,
Speaker 1: in which case unemployment is always going to be the
Speaker 1: collateral damage when we have macroeconomic fluctuations. Or you have
Speaker 1: a policy that guarantees employment. So the two choices. So
Speaker 1: what mm Q says is that the public sector expends
Speaker 1: resources any way to deal with unemployment, and we can
Speaker 1: do it by putting in place a more robust automatic stabilizer.
Speaker 1: But there's another point I want I want to highlight
Speaker 1: that actually doesn't really get any play. M m T
Speaker 1: says that the government is the issue of the currency
Speaker 1: and it has the exclusive monopoly. Now in any echo
Speaker 1: on one course, we we teached our students that a
Speaker 1: monopolis has the exclusive prerogative to set prices. But what
Speaker 1: does that mean for for an issue of the currency.
Speaker 1: You can actually set the price of that of that currency.
Speaker 1: You can figure out the manner in which you supply
Speaker 1: that currency to the economy. So what what the job
Speaker 1: guarantee does is something very interesting. It actually sets a
Speaker 1: conversion rate through this program of currency spent in exchange
Speaker 1: to some basic labor right the way for labor, and
Speaker 1: you know, you can envision a Sennet area in which
Speaker 1: the price of labor is fixed but the budget floats.
Speaker 1: Right of unemployment accelerates, then you relax the budget, you
Speaker 1: spend as needed on buying all excess labor at this price.
Speaker 1: And then, of course, you know, when unemployment shrinks um
Speaker 1: then you reduce that expenditure. But there's always that that
Speaker 1: fixed price that you're paying, and you have a floating budget.
Speaker 1: What do we do today today? Macroeconomic policy is exactly
Speaker 1: the opposite. We fix the budget, the Congress gets together,
Speaker 1: we pass a budget for the year, and then we
Speaker 1: pay market prices for whatever output labor will be. We
Speaker 1: will we will buy for the various programs. So it's
Speaker 1: very interesting. Because we pay market determined prices, we don't
Speaker 1: quite always get all the output that we need to
Speaker 1: satisfy various public needs. The programs um don't really provide
Speaker 1: the necessary stimulus to secure tightful employment, and so it's
Speaker 1: not quite adequate. So the job guaranteed, at least with
Speaker 1: respectaful employment, has this other unique feature that only a
Speaker 1: monopolis has the prerogative right to put in place, to
Speaker 1: spend as needed at a given price to employ all
Speaker 1: excess labors as needed have. Lena, that was awesome. I'm
Speaker 1: glad we finally got you on the show. Is very
Speaker 1: timely and uh, I hope everyone reads your book. Thank
Speaker 1: you so much. It was great talking to you both. Yeah,
Speaker 1: that great. Thanks to Lena. He's really interesting with thanks.
Speaker 1: You know, I really like um the way of Lena
Speaker 1: frames the question of what we decide to fix. I
Speaker 1: think that to me is sort of the most sort
Speaker 1: of interesting and counterintuitive idea of this. Like, Okay, we
Speaker 1: guarantee that your money in the bank will be safe,
Speaker 1: we guarantee what interest you'll be able to get paid
Speaker 1: on X, like the government says all kinds of guarantees.
Speaker 1: So the idea that we would extend that to labor
Speaker 1: it's not automatically intuitive, but it's also not you know,
Speaker 1: it's really not out of the realm of lots of
Speaker 1: other things we do in the I totally agree, But again,
Speaker 1: this is sort of my main criticism of m m T,
Speaker 1: Like the constriction on the job's guarantee has always been
Speaker 1: political and not financial, because we do spend loads of
Speaker 1: money on other guarantee programs and you know, some other
Speaker 1: social programs. So like, how do you actually overcome that barrier.
Speaker 1: And even if as as Pa saying, there does seem
Speaker 1: to be you know, a groundswell of support building for
Speaker 1: a guarantee of some kind, like it still hasn't happened
Speaker 1: and it still seems quite far off in the US
Speaker 1: political system. Yeah, well, you gotta write books, and you've
Speaker 1: got to come on the Odd Lots podcast, and then
Speaker 1: influential people have to listen to the odd Lots podcast
Speaker 1: and then they're like, all right, we're gonna vote that
Speaker 1: into lot mean for me, like that actually is though
Speaker 1: the answer, it's like you just gotta it's it's political,
Speaker 1: and you just keep fighting for it like any other fight,
Speaker 1: whether it's whatever else people fight for. The other major
Speaker 1: thing that we probably could be talking about in this
Speaker 1: context is having some sort of you know, socialized medical system.
Speaker 1: But again, for the past few years we've seen how
Speaker 1: how polarizing um that whole debate became. But if you
Speaker 1: think essentials for being a complete you know, human being,
Speaker 1: probably a good job or at least a job, and
Speaker 1: medical care and you know, and she's is pavel to
Speaker 1: mention like some of these things are like really popular,
Speaker 1: even like healthcare, like it's soap polarized at the sort
Speaker 1: of like congressional level. But I don't know if probably
Speaker 1: a lot of people missed it. Just the other day,
Speaker 1: a couple of days ago, Oklahoma or is overwhelmingly decided
Speaker 1: to expand medicaid in the states, So a couple people
Speaker 1: are now going to get medicaid who were previously ineligible.
Speaker 1: A lot of these things are like popular when you
Speaker 1: actually put them at the popular level as opposed to say,
Speaker 1: the congressional level. Um, all that aside, Like, no, it
Speaker 1: does seem like, you know that, whether it's sort of
Speaker 1: the general MMT concept of okay, there's a lot more
Speaker 1: fiscal flexibility than we were like to believe, or the
Speaker 1: sort of narrow objective here of let's use that to
Speaker 1: give everyone a job. It just sort of starts by
Speaker 1: reframing people's popular conceptions. And look, you know what we
Speaker 1: see right now is um a reminder like we have
Speaker 1: so much flexibility as a country to spend and do
Speaker 1: things beyond you know that they're like we've managed to
Speaker 1: keep people's household incomes actually going up despite incredible unemployment.
Speaker 1: So we're sort of getting this real time experiment in
Speaker 1: what we can do and I think part of the
Speaker 1: premise of all of this is why do we only
Speaker 1: limited to the worst possible crisis. Why don't we take
Speaker 1: what we learn and actually created something more stable, Because again,
Speaker 1: like crises aside, we've been under employed for at least
Speaker 1: two decades. Well, I do think we've been talking about
Speaker 1: this a lot already, but I do think one of
Speaker 1: the unique things about the coronavirus is that it is
Speaker 1: going to give us a chance to have these sort
Speaker 1: of conversations about the structure of our economy. So, you know,
Speaker 1: if there's ever a moment to start talking about jobs guarantee,
Speaker 1: it's definitely this one. So it's gonna be fascinating to
Speaker 1: see what happens. Are Okay, this has been another episode
Speaker 1: of the ad Thoughts podcast. I'm Tracy Alloway. You can
Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe
Speaker 1: Wisn't Though. You can follow me on Twitter at the Stalwart.
Speaker 1: Be sure to follow our guest Pavlina Charon of Us.
Speaker 1: She's at p Charon of Us and check out her
Speaker 1: book on the Job Guarantee. Follow our producer on Twitter,
Speaker 1: Laura Carlson at Laura M. Carlson. The Bloomberg had a podcast,
Speaker 1: Francesca Levi at Francesca Today and check out all of
Speaker 1: our podcasts at Bloomberg under the handle at podcast. Thanks
Speaker 1: for listening.