Jason van Tol tells a story of the true price of policy.
Tragedy struck recently in my friend’s kindergarten class. Savanah, the single, working grandmother of Davey, one of the most disadvantaged students in the class, died suddenly. She was Davey’s primary carer and had recently stopped working to help him, as he was having a hard time in school and had already been removed from his mother, who is not capable of looking after him and his sister. Had Savanah had some help, perhaps from a government-funded care worker, she may not have succumbed to stress and exhaustion.
A few months before she died, Savanah expressed a simple wish for Davey: “I just hope he can live a normal life,” she brooded, “and have a job.” A simple wish indeed, but one that is becoming increasingly elusive for many young people, particularly disadvantaged ones like Davey, because of labour underutilisation policies – a hallmark of neoliberalism.
According to Australia’s Labour Force Survey, if someone works at least one hour a week, they are considered employed. But most of us cannot survive on one hour’s wages a week, so a more meaningful reflection of how well the labour force is being utilised would be to include people who are underemployed, as well as the jobless.
The underemployed are those that have work but want more and cannot find it. In Australia labour underutilisation is defined as the unemployment rate plus the underemployment rate. The International Labour Organization (ILO) defines the relevant terms slightly differently, but it too accounts for those who are both un- and underemployed and uses a one-hour a week threshold to define employment. According to the ILO the global youth unemployment rate is about 15.6%, more than three times the adult rate (see graph).
Like many others, Davey’s kindergarten class provides play-based education. The children draw, garden, make crafts, and bake cookies, all with an emphasis on having fun and caring for each other and their environment. The school-to-work transition and the focus on developing employability skills seems ages away. Yet, given the high, and rising rates of youth un- and underemployment worldwide, our systems of secondary education, and increasingly tertiary ones too, have become increasingly aimed at job-readiness and conferring employability skills.
While youth unemployment is often framed as an educational shortcoming – with schools not teaching the correct skills that employers are looking for – less attention is paid to how government spending and taxation policies impact on unemployment.
This appears sensible, especially given Davey’s disadvantage and Savanah’s wishes for him, and UNESCO, amongst other high-level international organisations including the World Bank and the World Economic Forum, support this trend. But there is a problem. While youth unemployment is often framed as an educational shortcoming – with schools not teaching the correct skills that employers are looking for – less attention is paid to how government spending and taxation policies impact on unemployment
The first is referred to as a sovereign currency. A sovereign currency-issuing government is one that has a monopoly on the issuance of its currency and has a floating exchange rate. If I attempt to issue British pounds, that would be considered counterfeiting, which is a serious crime. Also, if a government pegs its currency to another country’s currency, or to gold, or something else, it relinquishes part of its domestic sovereignty since it then needs to amass and retain the foreign currency, gold, or other reserves to maintain the peg.
Most countries in the world today have a sovereign currency. Such countries face no nominal constraints on spending, only real constraints based on the availability of resources, and they can always afford to buy anything for sale in their own currency. Importantly, this includes labour. In other words, the government can always choose to maintain full employment and guarantee jobs.
The second, and related, key insight of MMT has to do with the sequence of government spending and taxation. While most people believe that governments collect taxes to fund their spending, MMT demonstrates that the causality is backwards: governments must spend first so that we can pay our taxes. But what has this got to do with unemployment?
The MMT money story, best told by Warren Mosler, goes as follows: First, a government wants to provision itself; it wants an army, police force, doctors, teachers, and so on. So to get people working for these jobs, it imposes a tax liability. An example might be a property tax whereby if you do not pay the property tax, the government will dispossess you of your land, put you in jail, and so on. Because people do not want to be imprisoned or have their property taken away, they are now looking for ways to pay the tax by earning the government’s currency.
In other words they are looking for paid work which, by definition, makes them unemployed.
Second, the government can now spend its money in offering paid work, and finally, the government collects the taxes. The moral of the story is that unemployment is a result of either taxes being too high, spending being too low, or a combination of both.
As Davey and his classmates progress through school, they will approach what academics call the school-to-work transition. Beginning in high school, as this transition approaches, the purpose of education will, for most students, become increasingly aimed at conferring employability skills. Job-readiness will become a growing concern, and why shouldn’t it when youth un- and underemployment is high and rising, fomenting a competitive labour market. But since unemployment is a political choice, not an economic necessity, what can be done?
The answer could lie in the post-war period when every Western government pursued, successfully, a full employment policy and where, with few exceptions, anyone who wanted a job could find work. This continued until the 1970s and the onset of neoliberalism, since which time governments have chosen to use unemployment as a tool to curb inflation.
The rationale for this policy is that when jobs are plentiful and the economy is operating at full employment, workers will ask for higher wages confident that they will not be laid off, or they can easily find work elsewhere. In turn, businesses raise their prices leading to a wage-price spiral. So, by keeping a sufficiently high number of people unemployed, workers feel insecure and do not ask for higher wages. Indeed former Federal Reserve chairman, Alan Greenspan, cited “worker insecurity” for the US’s low inflation in the mid-1990s.
Why should a disadvantaged student such as Davey join the large and growing class of people, whose livelihoods and wellbeing are sacrificed in the name of keeping down inflation?
Is there not a more conciliatory way to reconcile this tension between employers, employees, and the unemployed? Why should a disadvantaged student such as Davey join the large and growing class of people, whose livelihoods and wellbeing are sacrificed in the name of keeping down inflation? Fortunately, they don’t have to: enter the Job Guarantee (JG)
The JG hires “off the bottom” of the labour market, and so does not compete with private sector workers and their wages so it is less likely to stoke inflation. At various times and places a number of JG programmes that come close to the description above have existed, most notably India’s National Rural Employment Guarantee Act, but also the US’ New Deal, Argentina’s Plan Jefes, and South Africa’s Expanded Public Works Programme.
Because most countries in the world today meet the sovereign currency criteria, increased commonality of such programmes is due, not to lack of funding, but to popular understanding and political leadership.
Imagine what education would look like if every graduate was guaranteed a job. Not only would it shift education’s focus from job-readiness and conferring employability skills, it would also facilitate other non-market purposes of education such as personal, cultural, and citizenship development. In Australia, this could help fulfil its national educational policy goal that all young Australians become active and informed citizens, who “work for the common good, in particular sustaining and improving natural and social environments.”
The JG would ensure Savanah’s wish for Davey would come true.
Equally, if not more importantly, however, is that the JG would expand our collective imagination of what counts as valuable work. For example, the US Bureau of Economic Analysis has estimated all the care work at home, which still tends to be done by women, as being worth $3.8 tr in the US alone. Yet it is invisible from the perspective of national income and productivity accounts.
This has led feminist scholars, like Silvia Federici, to campaign to have women’s and men’s care work at home paid for at a living wage. To be sure, the JG is not a panacea; in a well-functioning society, it seems likely that private sector jobs would, and should, provide significant employment opportunities. The point is that achieving and maintaining full employment is not the business of the private sector; this is a job for government in relation to its citizens in a decent society.
Davey left my friend’s kindergarten class to go live with his aunt in another town. Before she died Savanah was planning for him to repeat kindergarten so that he could have the time to match the development of his classmates. Perhaps having a JG worker around would have lightened Savanah’s load – maybe someone to help do her shopping while she was out working herself?
Mitchell, W. & Fazi, T. (2017). Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World. London: Pluto Press.
Tcherneva, P. R. (2020). A Case for the Job Guarantee. Medford, MA: Polity.