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Tuesday, September 13, 2011

Seriously: This Program really will solve the jobs crisis

Honest. This will work. I've run it by an actual economist and everything.

So far, no-one has been able to poke holes in this idea from a macroeconomic point of view. The quibbles have all been about the nature of the compensation. Look, it may well be true that YOU can't live on ten bucks an hour (a figure I settled on mostly because it made the math easy). But lots of people can. Lots of people wish they made that much.

The Program is one of those "employer of last resort" dealies. "Last resort" employment is directed at people who are desperate. If you've been unemployed for more than a year, you ought to be feeling desperate indeed.

Remember: The best way to raise wages across the board is for the country to attain full employment. This plan will do that. For precisely that reason, the big corporations would probably try to squelch the idea. Mass unemployment depresses the cost of labor. That's why so many companies are doing well right now, even though we remain mired in a recession.

Once again, I present...The Program. This time pay attention, dammit. 

*  *  *

We've devoted the last few posts to Obama's "jobs" plan, which is mostly a matter of tax cuts. Tax cuts don't work. Payroll tax cuts make life easier for people who already have jobs, but they won't create jobs, and they won't make funding Social Security any easier.

How many jobs would Obama's plan create? No-one can say for sure. The folks at Moody's tell us that the plan would generate 2.6 million new jobs. Of course, the Moody's crew helped get us into this mess when they handed out AAA ratings to crap securities backed by crap mortgages, so forgive me if I remain un-awed by their genius.

For the sake of argument, let's say they are right. How much will each job cost?

The calculation is simple. (Here's a calculator.) Obama's proposal will cost $447,000,000,000. Dividing that number by 2,600,000 gives us $171,923 per job. I'd find that result more encouraging if the amount of jobs we got for the money was sufficient. But 2.6 million jobs aren't enough.

Presumably, if more people have jobs, demand will increase, which will stimulate new business. Even so, I think Moody's pulled that 2.6 million number out of its collective rectum. Aside from the tax cuts, most of Obama's program will go toward maintaining unemployment insurance and giving aid to the states. Those moves will preserve the status quo. I guess it would be better to preserve the status quo than to let things become even worse. But let's face it -- the status quo sucks; we need more radical action.

Look at the problem another way. How many people need jobs? And how much money would it take to give a job to everyone who wants one?

The Economic Policy Institute says that we are down roughly 11 million jobs.
right now the gap in the U.S. labor market is around 11 million jobs when you take into account both the number of jobs we are down since the start of the recession and the number we should have gained to keep up with normal growth in the working-age population.
I'm not sure if that is THE correct figure, but it sounds about right, so let's use it.

We're talking about 11 million folks desperate for work -- so desperate that even people with college degrees should be willing to work at crappy, low-paying jobs, at least until the economy rights itself and more opportunities for advancement open up.

Let's give these people the opportunity to join a jobs program which I, for want of a better term, will call The Program. The Program will offer a job to anyone who really, really needs one.

How much should people on the Program be paid? Well, one must consider variables. Parents with underaged children need a bigger paycheck than single people do. Rents are hideous in some cities. And of course, some workers are very skilled; many are not.

For present purposes, let's say ten bucks an hour. On average.

Why? Because that figure is higher than minimum wage. You can live on ten bucks an hour. You will not live well, but you won't be living on the street. Believe me: There are a lot of people out there who envy those who make ten bucks an hour.

Most of all (for the purposes of this post), the calculations are easy if we use that number. A person making ten bucks an hour makes $400 a week or $20,800 a year.

And now we know how much money is required to give those 11 million people jobs for one year: $228,800,000,000.

That's roughly half the amount of money Obama is asking for his plan. So we can stretch this out for two years. Two years of guaranteed full employment for everyone.

(Some people say that business cannot tolerate "uncertainty." Well, I just took care of the uncertainty thing right there, didn't I?)

I can hear you screaming: "But if the government is to be the employer of last resort, you need to shell out for a lot more than the cost of labor! You need plants, equipment, raw materials..." The old school term would be "the means of production." I hope that phrase is still permitted.

Guess what? All of that "means of production" stuff is already out there, provided by capitalists all across America.

No, I'm not talking about expropriating it. Nope nope nope. Don't put words into my mouth.

Here's the pitch: Tell employers all across this nation that if they hire workers enrolled in the Program, the Program will pay the cost of labor. The employers will get the added benefit of that labor -- and the cost to them will be zero.

Think about it. Just about every restaurant in America is understaffed, because the profit margin is so narrow. Every store could use a little more help. So could manufacturing, to the extent that American manufacturing still exists. Lots of places would be able to keep longer hours.

Would the Program be "socialism"?

In a previous post, I said that history is not Calvinball: You can't make up the rules as you go along. Well, the English language is not Calvinball either. Traditionally, the word "socialism" refers to government control of the means of production.

That is not what the Program would give us. Nope, nope, nope.

Businessmen would have total control of their businesses. They would make use of the Program only if they want to do so. It's voluntary.

I think they'll want to. What businessman would ignore a chance to get free labor?

Is this like unemployment insurance or welfare? Nope nope nope. People on the Program are required to work.

Would Program workers be given cozy sinecures? Would they be encouraged to be lazy? Nope nope nope. At any time, a bad Program worker could be fired and replaced by a more competent Program worker. These workers would have every motivation to excel, in order to keep their jobs after the two year mark.

What if a Program worker wants more than ten bucks an hour? Simple. That worker should polish his or her resume and scan the internet for high-paying employment -- same as now.

Would the Program depress wages? Hell no! By offering jobs that pay slightly more (though not a lot more) than minimum wage, there would be upward pressure on wages, at least at the lower end of the economic spectrum.

Besides, full employment raises wages across the board. We saw this during the Clinton years. As wages rise, large numbers of people head into higher tax brackets. That's how Clinton was able to get the government out of the red. That is the only way to pay back the national debt.

What about health care? A huge sticking point, admittedly. I've ignored it because (frankly) I wanted to keep the numbers simple in order to get the basic idea across. But I think this issue could be worked out. Personally, I would like to see the government provide health care to Program workers.

(I'd also like to see student loan payments temporarily postponed, or at least reduced, for people on the Program.)

I can see only one real problem. What about those employers (Wal-Mart comes to mind) who would fire current workers in order to hire Program workers?  If that sort of thing happened on a massive scale, the Program would be defeated.

I fear that this aspect of the Program would require regulation and oversight. The Program must have rules. The rules would insure that, in any given place of business, the proportion of non-Program workers could not go down. If it did, then that firm could no longer make use of the Program.

For example: If a small museum had a staff of 20 in 2010, it could not reduce its staff to 19 and then hire a Program worker. It could, however, keep the staff at 20 and then bring in a 21st worker from the Program. The gift shop could always use an extra hand.

Arguably, the Program should be restricted to smaller businesses. Firms would be allowed to hire only a limited number of Program workers.

If you wanted to start up a company, wouldn't you like to have three or four workers (maybe more) with a labor cost of zero, or close to zero? I think there would be a lot more start-ups. A lot more entrepreneurship. A lot more risk-taking.

Write Obama. Write your representative. Write your senator. Tell them to get with the Program.
Why are you re-posting this?! Now I wrote my congressman twice!

He is going to think I am idiot?
Previously, several readers raised valid concerns about the Program. These have yet to be addressed. The concerns all boil down to this question: Why subsidize only businesses that create relatively low-wage jobs when the country needs to create well-paying jobs and reduce inequality?

The incentives in the Program are not aligned with the requirements of a viable long-term strategy. I see no reason why this must be so.
No, I'm glad he reposted it. I would totally start up a new business if I could get a few workers for free for two years. That would be enough time to get it up and running. In fact, I'm thinking of starting one anyway. I may as well sell my product/s or services as someone else's.
Jotman: I'd like to do lots of things to reduce inequality. For one thing, you could pay for the Program -- and extend it over more than two years, if needed -- by returning to Reagan-era tax rates on the affluent. That would help.

Beyond that, full employment raises wages across the board and thus reduces inequality. I seem to recall that a guy named Karl once said that, and he wasn't the only one. It's also the lesson of history. It's actually common sense.

Like it or not, it also seems to be the lesson of history that you fill up the lobs at the bottom before moving up.

Suppose The Program offered $40,000 a year jobs. You can easily see the problems. First, the money to pay for it all becomes harder to raise -- either that, or you get only halfway to the goal of full employment, which means that there would be no upward pressure on wages. Second, there would be massive incentive for people to quit their jobs at Wal-Mart and get with The Program. And that would defeat the purpose of The Program.

If you really need $40,000 a year, as I said -- polish up your resume and look for work on the internet, same as now. It'll be a lot easier to find that kind of job in a period of full employment.

Is this a panacea or a new economic system? No, I am not here offering my take on "How I"d run the zoo." I'm simply trying to come up with a politically do-able temp fix that will bring us closer to full employment.

Of course, politics are so nutso right now, it's a little hard to say what is and is not "do-able."
i think you are delusional - there's no cheap energy any more so these pie-in-the-sky plans aren't goin to work. We can't just pretend that we're not insolvent during continuing climate catastrophe "lead" by a completely corrupt government working solely for corporate America while the rest of us are hung out to dry.
I saw a program on the local news this morning that helps people in poverty. $20k is poverty. And one of the experts interviewed mentioned that anyone in poverty these days is in serious straits because these levels were set decades ago. We can quibble over the ability to live on $10/hr and how that is more per hour than the seriously lagging minimum wage, but that got me, Anonymous 3:46 who can't even make up a nym...Joseph isn't delusional. We all are. We've been focusing on miniscule tweaks to a seriously out of date minimum wage which isn't half of what someone needs to get by in this world.
Where's the mass motivation to fight going to come from if it's only going to be over crumbs?
As per the reference to climate by Anonymous -- surely taxpayer incentives ought to favor companies that create jobs that are environmentally sustainable.

Will the program really reduce inequality?

It looks to me as if the business owner will be earning profit on those $10/hr jobs provided free to him from the state. So the government is subsidizing the profits of some business owners, but not others.

Why reward a subset of business owners (those who create low-paying jobs), while doing nothing for business owners who create well-paying (often high-tech or environmental) jobs? First, it's not fair. Second, it's not what an advanced developed country should be doing. It's the latter group that is more worthy of incentives.

Well-paying jobs create good jobs, because well paid employees have more money to spend on services -- eating out, etc. They don't shop mainly at WalMart. They don't eat at mainly at McDonalds. You create the most well-paying service jobs (even better than $10/hr) as a biproduct of providing incentives for the creation of high paying jobs.
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