Sunday, June 28, 2020

JG advocates want a UBI, they just won't say it

Let’s retire this debate and the endless word-games.

A Job Guarantee (JG) is a way to guarantee a certain income level to anyone willing to do tasks that some administrator decides are good.

A Universal Basic Income (UBI) is a way to guarantee a certain income level to anyone willing to do any task they decide is good.

We know that many JG advocates simply want to give people money for doing what they would do anyway if their income was guaranteed. They just have dogmatic beliefs about the dignity of work and the word "job."

Here’s Bill Mitchell saying that you would eventually do whatever you liked in the JG (my emphasis).
The Job Guarantee in fact provides a vehicle to establish a new employment paradigm where community development jobs become valued. Over time and within this new Job Guarantee employment paradigm, public debate and education can help broaden the concept of valuable work until activities which we might construe today as being “leisure” would become considered to be “gainful” employment.

So I would allow struggling musicians, artists, surfers, Thespians, etc to be working within the Job Guarantee. In return for the income security, the surfer might be required to conduct water safety awareness for school children; and musicians might be required to rehearse some days a week in school and thus impart knowledge about band dynamics and increase the appreciation of music etc.

Further, relating to my earlier remarks – community activism could become a Job Guarantee job. For example, organising and managing a community garden to provide food for the poor could be a paid job. We would see more of that activity if it was rewarded in this way. Start to get the picture – we can re-define the concept of productive work well beyond the realms of “gainful work” which specifically related to activities that generated private profits for firms. My conception of productivity is social, shared, public … and only limited by one’s imagination.

In this way, the Job Guarantee becomes an evolutionary force – providing income security to those who want it but also the platform for wider definitions of what we mean by work!
If we are going to be this lenient and generous with the definitions of a job, why bother at all? How about being a parent, carer, child, or just a citizen? Why aren’t these “jobs”? And if they are, aren't you just advocating for a guaranteed basic income of sorts?

The inflation concerns that JG advocates claim to have with a UBI are nonsense. They are just backfilling excuses. Obviously, most JG jobs wouldn’t in be sectors where output is priced, so wouldn’t enter inflation calculations anyway. Just like my housework isn’t priced, but could be if supplied by the market, a JG that includes my own housework would have no effect on reducing inflationary pressures.

Further, isn’t the insight of MMT that you might have to tax to reduce demand sometimes? In which case, a UBI can be easily designed to include taxes so that it redistributes in a way that doesn’t create demand-pull inflation.

Oh, and then there are people wouldn't participate in the JG anyway, like children, the elderly and the disabled. They would have to just get money anyway.

So let’s retire the debate. Yes, the government can be a money-creator if it wants. There are only real constraints. So let’s now talk about funding things that we think are important for society over things that are not. Let's talk about practical ways to redistribute income and wealth. Let’s get our priorities right and forget the word-games.

UPDATE: Despite all these nice words that have attracted many supporters to MMT, it turns out Bill Mitchell would like to scrap unemployment insurance from the welfare state and force people to take a JG job. He definitely does not want to give people money without workfare. 


  1. Hallelujah, bro! Agree entirely! Just finished @StephanieKelton's brilliant and lucidly-written 'The Deficit Myth' but can see why a well-meaning JG falls short of the ills that a living wage UBI addresses.

  2. You've made some massive logic leaps here....

    The amount of tax required to limit inflationary pressure caused by a liveable wage UBI is politically and socially implausible.

    Well worth reading Steven Hails article here.,11486

  3. "Some administrator" would hopefully apply a standard that the general public would be in agreement with. Much as government decision makers are intended to do now with the existing public service.

    One difference between a JG and a UBI is that the former requires the receiver of the money to do something of value for other people. The latter does not. The people who would be paying for the payments would probably feel a lot more comfortable about doing so if they felt there was some guarantee that some community value was being created. It also helps reduce the probability of people spending all their energies on self-destructive behaviour.

    Additionally, as another anonymous person has alluded to, a UBI is paid to everyone, while a JG is only paid to people who aren't otherwise earning the same money by other means. This makes the former a lot more expensive.

  4. I agree almost 100% with this post and have been making much the same argument. Both JG & UBI proponents tend to use JG and UBI as identity politics instead of looking at the mutually assured goals.

    I could also say UBI advocates want JG they just wont admit it and it would be the same point. The key difference is if you start with the UBI - any idea that is good - is just seed capital for a business - not productive in the caring community sense.

    And with taxation - give rich* kid a lollipop and poor* kid a lollipop - take the rich* kid's away (tax) and rich kid has a tantrum. (

    So the psychology and politics of the UBI doesn't work well.

    So we must introduce the JG for willing workers first and then a version of the UBI to mop up the excess - so Why not both (

  5. Cam I think you've been a bit disingenuous here or perhaps overlooked the more important points of contention. It would be the magnitudes order of difference of demand injections a UBI generates relative to a JG, and how much more potent it is as a counter-cyclical stabiliser and inflation anchor. I suppose we shoud also ignore the entirely valid social/psychological literature of attitudes towards and benefits of paid work with clear reciprocal and measured socials benefits vs income support with no strings attached for now and stick to the economics. For example, contrast social outcome differences of indigenous communities being offer employment vs income support.

    On the economics front, the most glaringly obvious issue you have ignored is how a UBI by definition raises all incomes, whereas a JG only raises incomes of people who currently do not have access to labour market income. A person who has a conventional market or public sector job is by definition unable to also claim additional JG income - unless they are underemployed, which regardless still constrains the amount of income any such already employed worker can claim.

    Whereas a UBI also raises incomes of already employed workers, which in turn (needlessly) also raises their consumption demand. This in turn adds an additional real resource cost to the UBI. Now sure you could use higher marginal rates on incomes to try and claw back this money, but then you are stepping into the already high and onerous EMTRs people in the existing welfare system are subjected to - which is supposed to be one of the areas UBI is supposed to fix. Either way it necessitates higher taxes for UBI to reclaim the same real resource space lost to higher incomes and consumption of already employed workers - whom I do not see any reasonable argument for needing social assistance (except from - in my anecdotal experience - entitled/privileged middle class people who just want more welfare but clearly don't need it).

  6. The second issue you have misconstrued is the more important aspect of the JG as a wage price anchor and counter-cyclical stabiliser. Under a JG, the *fixed-wage* low wage sector expands and contracts with the economic cycle. The problem with typical Keynesian expansions or supply-side shocks, is that wage demands in both the low wage sector and high wage sectors rise simultaneously and contribute to the inflation pressures. Whereas the JG prevents this with the fixed wage price anchor, and allows the market wage structure to adjust in such a fashion that low wage workers can maintain minimum real living standards while cutting them of higher wage workers. This is somewhat elaborated on in this post regarding Sectors A & B:
    "The dynamics of this economy change significantly.

    The elimination of all but wait unemployment in Sector A and frictional unemployment does not distort the relative wage structure so that the wage-wage pressures that were prominent previously are now reduced."

    A UBI has no such merits, as it maintains the existing wage adjustment structure of the economy and tries to rely on fluctuates, and mass unemployment in income to smooth out wages/inflation, which raises issues of labour market hysteresis.

    This then ties into the second factor. The changes in JG expenditures are far more counter-cyclical than UBI expenditures. JG expenditure evaporates immediately the moment a participant takes a market job. Because changes in employment and working hours have a far greater cyclical correlation (or at least I would intuitively guess) than changes in incomes. So whereas during a boom JG expenditure massively shrinks (reducing demand and inflationary pressures, while also discipline wage demands due to being *fixed* wage), it massively increases during a bust as employment and working hours reduce, which feeds back into counter-cyclical demand.

    Even if UBI attempted to try and replicate this counter-cyclical macro-stabilisation effect with high marginal rates on income (not withstanding the micro issues this causes), it would always be inferior. Market incomes do not reduce at the same rates as working hours and employment in a bust, because as any economist worth their salt knows, nominal wages are sticky and rarely decrease. Firms maintain wage levels but adjust quantities of labour hours. So labour hours is the direct correlating factor with demand. The flip side of this is in an inflation episode, under UBI incomes and wages keep rising without the JG's fixed-wage inflation anchor. Bracket creep in income tax with higher marginal rates could somewhat counter-act this, although as we observed in the lead up to the 2007 election politically this is unlikely to heavily utilised when compared to tax cuts.

    1. *rely on fluctuations in income and mass unemployment*.
      Apologies but I jumbled that sentence up in the editing

  7. I explain the JG mechanisms here

    I suspect the mistake here is the usual one - mistaking a contract for services for a contract of service. Only the latter is "employment" and it is just selling your labour hours to a third party for money. Nothing at all about what is done. That's the responsibility of the third party, not you.

    It’s “giving up your time for others” that is the key issue. Don’t give up hours in a way others want, and you don’t get anything.

    JG resolves that political issue by providing a mechanism for its resolution. Why? Because those others are using up their finite lives to produce a surplus for you to consume, and you need to provide a reason for them to do that.

    UBI tries to sweep that under the carpet and hide it with a money illusion. It doesn’t work: people quickly figure out that if they work, the UBI tokens are essentially worthless in real terms.

    JG is a fully automatic stabiliser that replaces the failed inflation targeting mechanism currently in place. It is an anchor to the currency by pegging it to the “labour hour” - which is a non-stockable physical item.

    If they are equivalent then you’ll be able to explain how UBI brings about the following effects of the JG.

    - permanent base rates at 0%, ensuring mortgage rates remain low forever
    - Allowing people to retire from, say, 50
    - ensuring firms using unskilled labour expand quantity not price
    - Preventing wage rises with a supply of work ready labour
    - automatically boosting depressed areas at the same time as suppressing boom areas
    - ensuring the output gap is transferred to the most deserving, not middle class trust fund wannabes after a state funded top up. Aka sorting the workers from the shirkers.