Sunday, 16 August 2020

John Quiggin’s flawed ideas on the Job Guarantee.

He claims here in his opening paragraph that more public services (via JG or via other means) results in more employment. Well an obvious problem with that idea is that there’s been a massive increase in public spending relative to GDP over the last century, yet there’s been no fall in unemployment as a result. (Title of his article: “Why a Job Guarantee will require higher taxation.”)

The reason is simple: unemployment is minimised where labour market efficiency is maximised: by labour market efficiency, I mean the efficiency with which the unemployed can be matched with vacancies, which in turn depends on factors like how well training is matched to skills required and how quickly the price of different types of labour changes in line with supply and demand for different skills.

I.e. if JG works, it’s nothing to do with the fact that the work is public sector type:  it’s because it makes labour for which there is temporarily no demand available to employers for free. But that being the case, there is no reason for JG to be confined to the public sector: private sector would do the trick. Indeed it would do it particularly well, given that the private sector is better at employing unskilled labour than the public sector. Moreover, there’s evidence from Switzerland that private sector JG results in a better post JG employment record for those concerned than public sector JG.

I expanded on that point in this paper several years ago. But then few people bother reading the literature before opining on whatever subject you care to mention.


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