Everybody Gets a Job!

policy give more Americans a better quality of life? Can America even afford it? Or is this just the latest political fad? Welcome to Benchmark. I'm Scott Landman, Economics editor with Bloomberg News in Washington, and I'm Daniel Moss, Economics row and her editor at Bloomberg of Community Newial. This week on Benchmark, we're talking about this job guarantee proposal.

The economists behind it say it would create jobs for fifteen million workers paying fifteen dollars per hour that's well above the minimum wage in most parts of the country and what many employees in the private sector are making. And it would also create an additional four point two million jobs in the private sector along with generous health benefits, but some people have been criticizing the plan and say it's not so feasible. Let's talk about it with one

of the principal authors of this proposal. L Randall. Ray is a professor of economics at Bard College in New York State and a senior scholar at the Leavy Economics Institute there. Randy, thanks so much for joining us on Benchmark. Hi, thanks for letting me come on. So Randy, why now for this job guarantee proposal. Well, we've been working on this for twenty five years or so, but there now is an opening, an opportunity to get this out to the public and out of academics. So that's that's why.

What's the opportunity, Well, it seems that a number of people within politics but also at think tanks are starting to realize that even after a decade of recovery, and even after it appears we have reached something that many economists, including people at the FED want a call full employment. We know that there are millions upon millions of people left behind, and so there's a I think a very

widespread recognition that we need to do something. Is there any parallel for this, I mean, has this been tried anywhere before? Oh? Sure, yeah, yeah, many times. Um. Now, what we're promoting, and there are several other proposals there's somewhat similar to ours, is a universal job guarantee across

the whole country. Usually what has been tried would be smaller programs, maybe targeted programs, let's say the heads of households with poor families, or they have been time limited saying the depths of a deep recession or depression, including the United States, we had the New Deal jobs programs so on, either more limited or smaller scale. Yes, they've been tried many times all over the world. In fact,

I would go further than that. I would say that any country that has experience sustained truthful employment has had at least one of these programs in operation, and in many cases they've had many different variations of a job guarantee in place. Randy, you're right on the Levy website that the generous wage and benefit package would become standard across the country, as all private and government sector employers

would need to match it to retain workers. And we're talking about pretty generous health benefits here and so on. Is this also another way to produce a kind of universal healthcare system for the American public. Yeah, it's that's a minimum wage and benefit package. My professor was Himan Minsky, who's very well known for the financial instability hypothesis and the so called Minsky moment that we went through in

two thousand and seven. But I remember him in the classroom always asking the students, Hey, what's the minimum wage now in the United States? And so of course some bright student who was awake would say, oh, it's say no, it's not. It's zero. If you can't get a job, your wages zero. You can't have an effective minimum wage unless there is a job available for everybody who wants to work. So this would set the universal minimum wage that anyone who wanted to work would be able to receive.

In the same way, whatever benefits this program provides will become the national minimum package of benefits. I can imagine the siren call on site Fox News give away for everyone, welfare state, we can't afford it. How do you combat that idea? Well, we have gotten used to the idea of minimum wages. We've had minimum wages in place for a very long time. And what the minimum wage does is it's that's the minimum that you can legally employ some buddy at I think that that is widely accepted.

I won't try to argue that of all economists support the notion, but by far the vast majority do. The idea is that that is a proper role for the government to set a minimum standard with regard to wages. But we also set many other minimum standards in the way that you can treat your workers, and uh we even set standards on the number of hours per day and per week and so on. So I think that is very legitimate. So we are moving toward provision of

time off when you have a new baby. Vacation time now in the United States is way way behind in comparison with any other rich, developed capitalist country in the world. We uh, we don't if we don't mandate paid vacation time, we don't mandate paid time off for new parents. Virtually every other country in the world with a at least a moderate living standard already provides those things. So these are widely accepted among all of our comparison countries. So

there's there's nothing unusual about it. This is not extreme at all. Now we just need to address how the country would pay for this. Uh, you talk about proposing that Congress would appropriate funds for it without new taxes. But let's just take a step back for a second. You're also the author of a number of books, including Understanding Modern Money, The Key to Full Employment, and Price Stability. So what is modern money theory and how does it

relate to this proposal? Well, there are several aspects to modern money theory. One of the things that we've done, also for about twenty five years, is study the way that the government really spends. And um, I think that virtually no academics really understood the processes that we go through any time the government makes a payment. We completely understand that, and we have tried to get these ideas out in a variety of forms, including academic papers, but

also with more simple explanations for the average public. So, if I wanted to say that very simply, the way that the government spends today is through key strokes, that is, credits to bank accounts, Alan Greenspan said exactly the same thing. He said, we can't run out of money. All we

do is we created as we spend. Bernanke said the same thing, both on sixty Minutes and before Congress when he's asked where on earth did the FED get those trillions of dollars that it used to bail out the financial system, and he said, well, we have this new device that's called a computer, and all we do is key stroke entries into balance sheets. You know that that is the way that the government spends. So how are

we going to pay for it? We're gonna pay for it in exactly the same way that we pay for all other federal government spending, which is key strokes. These are sort of directed by the Treasury after the allocation has been budgeted by Congress. The Treasury directs the Federal Reserve Bank to make the payments for the Treasury. And the way that the Fed does that is by crediting bank reserves at private banks, and then those private banks

credit the accounts of the recipients of government spending. That is how the government spends. So how are we going to pay for it the same way we pay for all other government spending. But doesn't this mean that the bond market will provide an ultimate check? The government does have to borrow this money. It would have to borrow it. We're already seeing interest rates go up in the first few months because of the Republicans tax cut plan and

some new government spending. Isn't this just going to push it up so high that will become more difficult to pay back the money in the long run. Well, the real reason the rates are going up is because the FED is decided that it's time to raise rates, and they've been increasing the overnight rate target and using that to try to push up longer term rates. So I

think that this is a matter of policy. Will the FED continue to raise rates might at some point it will decide to lower rates and then the rates will go down. If the FED reacted to this program worrying that maybe it would cause inflation, then the FED might push rates up. But this is a policy decision, and you haven't mentioned it yet. But we have run all of the the programs features through a model that's used by ecmoms all over the country and they've been using

it since the early seventies. It has a very good track record, and the boost to inflation is very very tiny, and we do run simulations with the FED reacting against the inflation and it has a very insignificant effect on the outcome of them simulations. So Randy, Ultimately, how realistic do you think this is going to be? Don't you think you'll need a strong Democratic Congress or control of the White House to make this happen. Of course, I'm

not a political scientist. I'm an economist, and I do the best that I can do to put the economics out there and then see how far the politicians can take it. I think it's very apparent that this idea has captured the imagination not only of a number of Democrats who are likely candidates in the next election, but among the public at large. There have been polls that find that this is the most popular program that has ever been pulled, with support all over the country across

the political spectrum. So I don't think it's going to die out. Do I think that a bill will go through before the next presidential election? Probably not, But it's still worthwhile to get the ideas out there. All right. Well, it's certainly sparking debate in several corners of the economics profession, and we're glad that you're able to come on and explain it to us. So, Randy Ray, thank you very

much for your time. Thank you. So we just heard from Randy ray that this plan isn't going to become law of the land right away, probably has a long way to go and is going to engender some more debate. But for some more analysis, let's go to Ernie Twodsky. Ernie is a policy economist and head of fiscal analysis in Washington at ever core I s I and investment research firm. Before that, he was a senior advisor and economist at the Treasury Department during the Obama administration. Ernie,

thanks so much for coming on Benchmark. Thanks for having me on. Guys. So, Ernie, is this the best way to get to full employment? So? I think the short answer is, we don't know. Um. There is limited experience with job guarantees around the world. India has a sort

of a similar scheme to a Job's guarantee. Argentina had one in the two thousands, and there have been limited trial runs in specific geographies and urban areas, the most prominent one being in New York City where they had a a work fair program where they required you to work for your local welfare check. That's why I actually like Santor Corey Booker's idea to do a trial run of Job's guarantee, I think that that would tell us

a lot. It would wade through the uncertainty and because so many of the critiques of a job's guarantee are really just about implementation challenges UH and the uncertainty about how people would react. You know. That said I, I think that a job's guarantee is just probably in my view, to blunt an instrument to do what it wants to do. UM. If we want to smooth macroeconomic cycles, you know, the ups and downs of the economy over time, which is

a noble goal and an ambitious goal. You know, other countries have been able, Other advanced countries have been able to do that UM without using a jobs guarantee UM. For example, if you look at Germany, the United Kingdom, Japan, their labor force participation rates have been rising ever since the Great Recession, even though you know, in in Germany they had sort of a double dip slowdown over the last couple of years as a result of the year Zone crisis, and in the UK they had um Brexit.

Is they've been able to do it with UH sort more of a pot pourri of different policies, things like national health insurance. You know, um, Stronger wage controls and wage subsidies, you know, protections particularly for women, I think, for paid leave, stronger unemployment insurance and disability programs. Those things I think would get us a lot of the sort of you know, business cycle benefits of a Job's guarantee,

and they would be more universally enjoyed. The other thing I'd say is, you know, if our goal with the Job's Guarantee is to eliminate poverty and raise wages, then there are probably cheaper, more cost effective ways of doing that. There are There are certainly upsides and downsides of having a fifteen dollar minimum wage, which is essentially which is what a lot of jobs guarantee advocates are pushing for

through a Job's Guarantee. But if we think that that's the right way to go, why not just raise the minimum wage to fifteen dollars without having this very very large fiscal costs associated with the program. Well, let's let's talk about that for for a second. What what do you think would be the fiscal cost of this program? Is it feasible? Would it contribute to bond yields going way up, which would make the program even more expensive

to pay back for taxpayers in the long run. I think there's actually, you know, in in finance, we would call it fat tails. That's just a that's a fancy way of saying that there's there are two risks here, right.

There's there's a risk that the program is extremely small and that actually far fewer people participated in it than anticipated, in which case it wouldn't be that expensive, but it wouldn't help the economy very much, and a lot of the benefits that advocates tout probably wouldn't come to pass. The other risk is on the upside, right, that lots and lots of people participate in it um and it

ends up being much more expensive. One estimate from Mark Paul, William Derrity, Derrick Hamilton's so their co authors who did a version of this plan for the Center for Budget and Policy Priorities. So they basically start from, you know, there are eleven million people who are unemployed or underemployed in America. Underemployed meaning that you're not getting all the hours that you want even though you have a job.

And they assume that, I believe that they base their the pay and their plan around the idea that workers on a job guarantee should be above poverty for a family of force. That translates to eleven dollars and eighty three cents an hour um. So they calculate that that's going to cost six billion dollars a year, which is

roughly on par with the Defense Department. But they also say that if for some reason the job's guarantee program ends up attracting people anybody who makes under eleven dollars and eighty three cents an hour, now, that the cost could swell to possibly over two trillion dollars a year. That would be two trillion dollars right now during an

economic recovery. That is, you know, roughly, that would be like a fifty increase in the size of how much the federal government spends every year in the middle of a recovery. You know, that's not that's not a countercyclical move to address a shortcoming in aggregate demand. Right now. That would be you know, two trillion extra dollars when the economy is relatively good. Now, that's you know, that's on the high end, and that's that that's sort of

an upper end range. But you know, this would be a large program. So politically, does it have to wait for the next recession to be viable. I think it probably does have to wait until the next recession. I think a job's guarantee was born out of sort of how deep the two thousand and eight downturn was, and and just the sheer depth of the two thousand and eight downturn was something that not very many people had even contemplated before two thousand and eight. It seemed like

a very low risk event. And now I think everybody's worldview is different. And that, by the way, is you know, even though I'm cautiously pessimistic on the economics of a job's guarantee, I think it's asking the right question right, which is that recessions are very damaging to people. We we are only now within striking distance of recovering from the two thousand and eight recession when you look at

things like employment in America. We we still haven't even recovered from the two thousand and one recession when you look at employment. So business cycles can be extremely damaging to the well being of people, and and thinking about ideas uh that could help mitigate those business cycles make recessions less damaging. Are good ideas they're asking the right question, and and just the fact that they're expensive. I don't think we should be dismissive of those ideas just because

they're expensive. They are trying to be ambitious and what they do. I think the problem here is that we can do a lot of what a Job's Guarantee promises to do with more targeted you know, like a potpourri of more targeted, smaller programs, or you know, programs that are ambitious things like national health insurance, but that would be more broadly enjoyed. Let me ask this, is it even possible to create a program that would have a large bureaucracy to support say fifteen million jobs that the

proponents are talking about. I mean, you said this would be a cost on par with the Pentagon, which is obviously a massive, massive global apparatus. Is it even feasible to create something new like this? I think it would be extremely difficult logistically, and it would be even more difficult to do well when you think about the right

to have a job and what that entails. I mean that means that a Job's guarantee would have to come up with jobs that were number one countercyclical, meaning that there were jobs available and needed in the depths of a recession, um that they would have to be scaled that, you know, in that projects would have to be scaled up or down depending on just how many unemployed people were in any given community and whether or not people

showed up. I mean, remember, the whole point of a job's guarantee is to set a sort of safety net below you for when you're unemployed. If you find a job the next day, um, you won't show up to your jobs guarantee job and the projects that that local communities choose to do that are funded under the job's guarantee would have to be able to accommodate that. It

would have to be appropriate across geography. So you know, you're talking about the kinds of jobs that would work in you know, anywhere from you know, New York City to Boise, Idaho, to a Native American reservation, and they have to be tailored to low skill workers. So you're gonna get unemployed people of all different skill levels, and so you have to choose jobs that they're able to do, and they have to be low capital intensity, because if a recession suddenly strikes, you may not be able to

get heavy equipment to your community. Things like you know, if you wanted to do a construction project, you may not be able to get construction equipment to your community very fast. And finally, they just I mean they have to have a shared mission that's able to withstand all, you know, the very high inflows and outflows from the program that would inevitably arise from you know, from from from people coming in and leaving. That's really hard to do.

You know, our experience with, for example, what New York City did with their work fair program. Um. And you would think of all places, you know, New York City has a lot of resources, even during a recession, they would have enough people I think of different skill levels where you would expect that they would be able to

come up with lots of different jobs. What ended up happening though with New York cities workfare program is that people on workfare ended up doing mostly menial tasks, low skill tasks, things like cleaning up Central Park, janitorial work, and then in some cases some low level clerical work as well. UM. Now, are these things valuable? Yes? Absolutely? Do they build human capital? Do they you know, are they going to make people more employable in the private

sector after you know, the economy recovers. I'm very skeptical of that. Alright, well, Ernie, that is a lot to contemplate, and when this becomes a topic in the Democratic presidential primary debates, will be glad to have you back. Ernie Tdsky of ever Core I s I thank you so much for being with us on Benchmark. Thanks for having

me on Benchmark. Will be back next week. Until then, you can find us on the Bloomberg terminal, Bloomberg dot com, our Bloomberg app, and podcast destinations such as Apple Podcasts, Spotify, or wherever you listen. We'd love it if you took the time to rate and review the show so more listeners can find us. You can also check us out

on Twitter. Follow me at at Scott Landman Dan You're at moss Underscore ECOD The Levy Institute, where Randy Ray is a scholar is at at L E B Y E c O N and Ernie Tedesky is at E R N I E T E D E s c h I. Benchmark is produced by Topher Foreheads. The head of Bloomberg Podcasts is Francesca Levy. Thanks for listening. To see you next time