What is the MMT-designed job guarantee? (with sources)

This post contains a summary of the MMT-designed job guarantee (MMT-JG or JG) with academic sources to learn more.

Related posts:

• Managing price stability only for some, on the backs of millions (our current system)
• Involuntary unemployment is a scourge on our society.
• Our overly-rosy unemployment statistics ignore millions.
• It is official US government policy to keep millions unemployed.
• A highly technical summary of the MMT-job guarantee (broken down for the layperson)
• MMT and its job guarantee are inseparable.
• The three policies recommended by MMT: floating exchange rate, job guarantee, and ZIRP

GO BACK TO ALL MMT RESOURCES This post was last updated September 1, 2020. Disclaimer: I have studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.

First: academic sources to learn more about the MMT-designed job guarantee.

• For a good overview of the MMT-designed job guarantee, read:
  • L. Randall Wray’s 1997 paper Government As Employer of Last Resort: Full Employment without Inflation (contains a section of common concerns with elegant responses.)
  • Pavlina Tcherneva‘s 2020 book, The Case for a Job Guarantee.
  • Bill Mitchell:
    • Post: Full Employment via a Job Guarantee
    • 2013 post: What is a Job Guarantee?
    • Every post labeled “Job Guarantee” on his prolific blog.
    • 1999 PhD. dissertation: Essays on Inflation and Unemployment (263 pages)
• For the absolute devastation wrought by not having truly full employment, read Pavlina Tcherneva’s 2017 paper, Unemployment: The Silent Epidemic.
• To understand why it is both undesirable and impossible for for-profit business to achieve and maintain full employment, and the many reasons why only a financially-sovereign central governments can indeed achieve and maintain it – in both good times and in bad – read Mat Forstater’s 1999 paper, Public Employment and Economic Flexibility: The Job Opportunity Approach to Full Employment
• For many common questions and concerns related to the MMT-JG, see the Job Guarantee FAQ (frequently asked questions) as written by Tcherneva, which contains references to several other sources. Also see the above paper by Wray, which contains a section addressing common misconceptions.
• Podcast interviews related to the job guarantee:
  • MMT Podcast:
    • Fadhel Kaboub: episode 4, May 2018: What is the Job Guarantee?
    • Rohan Grey: episode 5, July 2018: A Job Guarantee vs a Universal Basic Income
    • Pavlina Tcherneva: episode 47, April 2020: Building Resilience – The Case For A Job Guarantee
    • Vincent Huang: episode 53, May 2020: A Green Job Guarantee For China
  • Macro N’ Cheese:
    • Claire Connelly: 2017: A Universal Basic Income vs A Job Guarantee
    • Pavlina Tcherneva: July 2019: Genuine Hope: Completing the Roosevelt Revolution
• Finally, in order to fully understand MMT’s job guarantee, you must also understand the MMT that lies underneath it. Hare is a great set of first papers for doing just that.

Sources: Bill Mitchell’s 2009 post, The dreaded NAIRU is still about! Bill Mitchell’s 2013 post, Why we have to learn about the NAIRU (and reject it) Flavia Dantas, L. Randall Wray’s 2017 paper, Full Employment: Are We There Yet? Matt Forstater’s entry in the 2012 ENCYCLOPEDIA OF RACE AND RACISM, 2ND EDITION, UNEMPLOYMENT AND UNDEREMPLOYMENT Matthew C. Klein’s 2017 article, Debunking the NAIRU Myth

The rest of this post is a work-in-progress.

Our current system stabilizes prices only for some.

In our current in neoliberal era, the United States government stabilizes prices for the advantaged only. It does this by forcing involuntary unemployment and underemployment onto the disadvantaged, which results in mass suffering and death. For further details (with sources), see this post: Our current system: Guaranteed involuntary unemployment (which MMT eliminates).

The MMT-designed job guarantee replaces the reserve army (bufferstock) of the unemployed with a reserve army of the employed. Along with ZIRP and a flexible exchange rate, the job guarantee is one of the three recommended policies of MMT. It is not an optional add-on of the MMT project but a core element.

The MMT-designed job guarantee stabilizes prices for all.

It boils down to this: There are only two choices (Mitchell 2011): you can stabilize prices and wages for all, or only for some. You can provide a job for all (who want and are able), or only for some. MMT chooses – a civilized society requires – the latter (Davidson 2016). The MMT-designed job guarantee stabilizes prices in the only humane way possible: by eliminating involuntary unemployment and underemployment – for all.

The question cannot be, “How can we employ (or provide healthcare to) all?” It must be “How can we not try?” Because otherwise, we must choose who will live and who will die – and we all know who gets to choose and who gets chosen. This – not academics, not maths and models – is the justification for a job guarantee. The matter is not “who should suffer and who should not suffer?”, but rather “how can we employ all as best as we can?”

As it turns out, quite well.

Sources: Bill Mitchell, 2011 post, Whatever – its either employment or unemployment buffer stocks Greg Davidson, Paul Davidson, 2016 book, Economics for a Civilized Society

The MMT-designed job guarantee

The MMT-designed job guarantee (MMT-JG or just “JG”) is a guaranteed opportunity for a job in your local community at a living wage-benefit.

The word guarantee is used in the sense of the public library or school systems: all are allowed to enter and take advantage of its services, as long as rules are followed and performance is acceptable. If these conditions are not met, that person may face discipline. If the negative behavior persists, they may be temporarily ejected and, in extreme cases, permanently ejected. Just as with a troubled child in your own family, you do the best you can to make it work. You provide help and guidance, training, therapy, and other accommodations. You don’t just kick them to the street. In the context of the job guarantee, in extreme cases, opportunities may be provided to, for example, work in isolation or remotely (Wray 1997, pg. 15, item 4).

A primary goal of job guarantee jobs is caring (Tcherneva JG-FAQ, questions 8 and 8a): caring for people in your community, caring for the community as a whole, and caring for the environment. These jobs are valuable but not profitable. Among other reasons, this is why JG jobs do not conflict with any existing job in the private (for-profit) or public (government) sectors.

The MMT-JG proposal “favors a fixed living wage with basic benefits, as opposed to tiered wages” (Tcherneva 2020, p. 89), currently proposed to be $15 an hour (plus benefits including healthcare, on-the-job training, and childcare). This means the MMT-JG wage is an unchanging “minimum wage floor” (ibid). Regardless how long they have been in the program, every JG worker in the nation is paid the same rate – there are no raises. Private sector businesses can, and are encouraged to, offer a marginally-higher wage in order to attract workers out of the JG program. This is another way in which the JG does not compete with existing jobs in the private or public sectors.

(The wage floor is also why it is not possible for the MMT-JG to cause a wage-price spiral, which is a form of cost-push inflation. In addition, because the federal government funds job-guarantee wages only for those who are currently employed in the JG program*, and only until that worker [chooses!] to leave the program, the MMT-JG program is perfectly funded by definition. Because of this, it is also not possible for the MMT-JG to cause demand-pull inflation. Further, since the funding is non-discretionary, it is not vulnerable to elimination or reduction from periodic political bickering, such as related to the budget or debt ceiling. Although there can still be inflation in the economy, it is not possible for it to be caused by the MMT-JG.)

(*Plus a small markup for administration purposes.)

A critical difference between the job guarantee and our current system (one with no JG) is that when workers lose their job, they often have no choice but to go home and do nothing. Among its other horrific effects (Tcherneva 2017), extended unemployment causes skills and experience to wane and wither, social connections to decay, and options overall to become more and more limited. Since your bills (and the for-profit companies they’re owed to!) don’t care if you have a job or not, it also means that your savings will decrease and credit card balances increase. In addition, for-profit businesses prefer to hire workers with skills and experience over those without. So, those who end up unemployed often become a permanent member of the reserve army of the unemployed. Those who still have a job fear themselves falling into that terrible position, and are therefore less likely to demand better wages or working conditions.

The MMT-JG program prevents this situation by serving as a “transition job.” It gives the unemployed somewhere to go. Once settled into a JG job, workers can maintain their skills and experience (and pay their bills!) until they are ready to return to the private sector, or the private sector is ready to offer them a more attractive position.

…more to come…

Sources: L. Randall Wray’s 1997 paper Government As Employer of Last Resort: Full Employment without Inflation Pavlina Tcherneva’s Job Guarantee FAQ Pavlina Tcherneva’s 2020 book, The Case for a Job Guarantee Pavlina Tcherneva’s 2017 paper, Unemployment: The Silent Epidemic.