Tag Archives: Job guarantee

Basic Income vs Job Guarantee: A Few Thoughts

Since I began following the discussion about basic income a couple of years ago, I’ve seen a number of people arguing that a job guarantee is a better solution to alleviate poverty. Briefly, a job guarantee is where the government acts as “employer of last resort”, providing jobs when the private sector is unable to. I’ve read several articles about the concept, but have always had a few reservations about it and felt that some of the criticisms of basic income made by its supporters have been somewhat unfair.

For example, in August Pavlina Tcherneva, a prominent supporter of the job guarantee, made an appearance on RT’s Boom Bust programme (see video below). One of her main criticisms of basic income is that it doesn’t do enough to stabilise the business cycle. “The basic income doesn’t have this counter-cyclical stabilisation function” she says. “It is supposed to be provided at all times irrespective of the macro-economic conditions. Every fiscal policy has a counter-cyclical feature except the basic income guarantee”.

So far, this doesn’t seem to have been an issue with the Alaskan dividend – the nearest example to a basic income that we have – which has been providing every Alaskan with an annual, unconditional cash payment since 1982. Funding a basic income like this by means of a sovereign wealth fund is the method preferred by Guy Standing, co-founder of the Basic Income Earth Network. He has refuted the “business cycle” argument, saying that basic income payments made in this way can be increased and decreased depending on the state of the economy with an independent body making judgements on the amount being paid out.

However, if –unlike the Alaskan dividend – a basic income is used to replace existing elements of the welfare state, in particular unemployment benefits and tax credits, then Tcherneva’s criticism may be a legitimate concern.

Many basic income models already have a counter-cyclical feature built into them though. This usually involves an integration of the benefits and tax systems. For instance, several proposals for a basic income in the UK include the abolishment of the personal tax allowance. This means that, unlike now, all income would be liable for taxation. As soon as someone’s income rises they would begin to pay back more of their basic income through income tax. Additional marginal tax rates can be implemented to ensure that more of the basic income is clawed back from higher earners.

In this way, a counter cyclical feature is ensured: when the economy is doing well more people will be paying back their basic income, and when it’s not doing so well people will rely more on the basic income, just as they do with welfare now. Alternatively, a land value tax could be introduced to recoup some of the money from wealthy individuals. It is often argued that a land value tax would stabilise the economic cycle of boom and bust.

Clawing back the basic income in one of these ways also tackles another common criticism of basic income, namely that it isn’t targeted enough to people on low incomes. If the basic income is recouped from the rich, more money would be available to raise the level of the basic income and ensure that people on low incomes are better off.

I’m not against the idea of a job guarantee in combination with a basic income though. “Providing a financial incentive to seek work may not be enough, if job-hunting is difficult and expensive” writes basic income advocate Frances Coppola in Forbes. “People may need help looking for jobs, and in some areas may need the government to guarantee a job… The combination of job guarantee scheme with basic income should ensure that anyone who wants to work can do so.”

If there is work to be done that won’t be taken care of by the market then why not have the government employ people in certain areas of the economy? If we look at the United States for example, there is clearly a need to deal with the country’s crumbling infrastructure. A jobs programme to fix this, like the one proposed by Bernie Sanders in his presidential campaign, would be a good idea.

L. Randall Wray, a professor of Economics at the University of Missouri–Kansas City and colleague of Pavlina Tcherneva, provides a list of other possible jobs that could be guaranteed by the government, such as companion for senior citizens, the bed-ridden, mentally or physically disabled, public school classroom assistant, neighbourhood clean-up worker, library assistant, environmental safety monitor, etc. These would be useful jobs that wouldn’t necessarily be filled by the private sector so I see no problem with a job guarantee providing this work.

A worthy goal that advocates of both the job guarantee and basic income have in common is the aim of redefining what is meant by “work”, allowing people to choose to do useful work that is not usually considered “productive”. However, if a government were to implement a job guarantee with the objective of simply achieving full employment, no matter what sort of jobs are being done, then I probably wouldn’t be in favour of it. This would continue the fetishizing of jobs and lead to more people being employed in what David Graeber describes as “bullshit jobs”. The main issue is see really is whether there is enough useful work to do for the government to guarantee everyone a job.

There is also plenty of work, such as care work, already being done that isn’t always remunerated and wouldn’t necessarily make sense being part of a job guarantee programme. According to Emily Holzhausen, Director of Policy at Carers UK, 1.4 million people in the UK each provide over 50 hours of unpaid care per week. A basic income seems like the simpler way to recognise this unpaid contribution and make it easier for people to take on and possibly share the responsibility of care work without involving state bureaucracy. If there are important jobs that need to be done within a community, does the government really need to get involved to provide formal jobs? We could instead just provide a basic income and let people decide what work needs to be done on their own.

An issue that I have with implementing a job guarantee without a basic income is that it would do nothing for people who are already employed but whose incomes fluctuate; the self-employed, freelancers working in the gig economy or workers on part-time/zero-hour contracts, for example.

In particular with the potential for giant leaps forward in terms of automation and artificial intelligence, it seems clear that we’re moving further towards an economy that creates fewer and fewer steady full-time jobs, and increasingly promotes flexible labour markets. Without a basic income we will forever be resisting this. It would surely be better to embrace new, more flexible ways of working, while also ensuring improved financial stability for workers in the form of a basic income.

Furthermore, a job guarantee doesn’t eliminate the disincentives to work caused by high marginal tax rates at the lower end of the income scale. As Scott Santens explains in a recent article, welfare effectively punishes people for working because it is withdrawn, whereas a basic income would help to remove the “benefits trap” and make sure that work always pays.

Related to this is the final criticism of basic income that I want address: the idea that basic income simply pays people to stay at home. Mariana Mazzucato (who I thought was a supporter of basic income) recently tweeted an article by L. Randall Wray to present this argument.

In the article, Wray talks about a job guarantee programme called Plan Jefes y Jefas, – or Jefes – that was introduced in Argentina following an economic crisis there in 2001-02. The scheme created around 2 million new jobs for poor heads of households.  

According to Wray, at one point three quarters of the participants were female. However, when the economy recovered and the men in the families began to find work again in the private sector, the government decided to draw down the Jefes programme and place the women back on regular welfare. When the women were asked “would you prefer to receive the benefit of the Jefes program but stay at home,” they all said that they would prefer to go out to work.

It seems odd to me that Mazzucato would see this as an argument against basic income. Surely it is rather an argument against welfare in its current form? I think this idea of basic income paying people – in particular women – to stay at home is a really unfair representation of basic income. Pilots have shown that a basic income can help people to work. For example, following a basic income trial in India, Guy Standing notes that people actually worked more, not less. One example he gives is of a disabled woman who was able to buy a sewing machine and become a seamstress. If – as job guarantee advocates seem to agree – people instinctively want to work, why would a basic income stop women from going out and participating in the community or finding a job? Unlike conventional welfare, a basic income would give them every incentive to do so.

I think this discussion about these ideas is really interesting and I intend to keep an open mind about a job guarantee. Like France Coppola, I think a job guarantee could be done alongside a basic income and I see no reason why we can’t try both.

See also Scott Santens discussing basic income and job guarantee with Iain Dooley of the Australian Employment Party: