Wednesday, 19 June 2019

Simon Wren-Lewis has thoughts on the Job Guarantee.

That’s in an article entitled “Some thoughts about the Job Guarantee”. It was published in 2017, but I only just stumbled across it, so thought I’d say a few words about it.

It’s good to see he gets the point that too generous pay and conditions for JG work will result in what he calls the “lock in” effect: i.e. JG people will be induced to stay in their JG jobs rather than seek regular work. The same cannot be said for a significant proportion of JG advocates, who refuse to recognise the lock-in effect.

At worst, the lock-in effect could result in JG actually reducing GDP: i.e. if the main effect of JG is to induce people to move away from regular jobs to relatively unproductive JG jobs, then the net effect could be a cut in GDP. (The reason for thinking JG jobs are relatively unproductive, is that they are by definition jobs which would not take place but for the JG employment subsidy.)

My only quibble with Wren-Lewis’s article is that in his opening paragraphs, he doesn’t get the history of the basic JG idea quite right. He starts: “The idea of the state stepping in during a recession to offer some group of the unemployed a job was selectively adopted by the UK Labour government in 2009: see here by Paul Gregg. Richard Layard has proposed it for the long term unemployed.”

Actually there was a very large JG type scheme in the US in the 1930s (the so called “WPA”) and Pericles had JG scheme up and running in Ancient Athens 2,600 years ago.

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