The Job Guarantee

Toward True Full Employment

M. Murray, M. Forstater, M. Murray, M. Forstater

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137286109, 9781137286093
• eBook ISBN: 9781137297990
• Topic: Business
• Subtopic: Business General
• Index: Business

This timely collection will be the first of its kind to focus on the practical application of the government job guarantee (JG) for both developed and developing economies. Global case studies include: United States, China, Ghana, Argentina, Ireland, Iceland, and India.

C H A P T E R 1

RISING JOB COMPLEXITY AND THE NEED FOR GOVERNMENT GUARANTEED WORK AND TRAINING

JON D. WISMAN AND NICHOLAS REKSTEN¹

There is no extravagance more prejudicial to the growth of national wealth than that wasteful negligence which allows genius that happens to be born of lowly parentage to expend itself in lowly work.

Marshall 1920, 176

Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.

Chinese Proverb, credited to Lao Tzu,
founder of Taoism, fourth to sixth century BC

(The) real problem, fundamental yet essentially simple (is) to provide employment for everyone.

Keynes 1980, 267

INTRODUCTION

Government, as Adam Smith pointed out over two centuries ago, must provide for certain public goods that would not be provided in adequate quantity by the private sector. He identified education as among these public goods (1981[1776], 651). Until fairly recent times, however, government was controlled by a small elite whose members mistakenly did not generally recognize greatly expanding educational opportunity as in their own interest. Myopically, their more immediate short-term interest blinded them to how, in a longer term, a better educated workforce would make everyone, including members of their own class, richer.

In today’s wealthy countries, a surge in the democratization of education evolved toward the end of the nineteenth century, along with an extension of the franchise and labor reform in response to threats from below of violence and revolution (Acemoglu and Robinson 2000). As the twentieth century unfolded, democratic pressures led to the progressive extension of years of publicly provided education. Even higher education became increasingly democratized, especially between the end of World War II and the mid-1970s.

However, over the past 35 years, inequality has dramatically increased in almost all wealthy societies, and substantially in a good number of them, challenging the expectations set forth by Kuznets (1955) that mature economic development would witness declining inequality. This reversal suggests a new “reversal” inflection point on the Kuznets curve. In the United States, the erosion of working class power and fraying of social safety nets since the mid-1970s has led to persistent educational achievement gaps, causing the poor to increasingly be locked out of educational opportunities. The educational achievement gap between children from rich and poor families is roughly 30–40 percent greater for those born in 2001 than those born in the mid-1970s and is now more than twice as large as the black-white achievement gap (Reardon 2011). This means that the formal education that society provides to some of its future workers is not adequate for the job market demands created by an ever-increasing pace of change.²

Further, in an evermore complex economy, the training most receive when young is not adequate for their full work lives. More and more need, and will need, continual retraining. While much of this training has been and will continue to be on the job, some workers will lose their jobs and for lack of necessary skills, not find comparable new ones. Although publicly provided formal schooling might provide some of the necessary reskilling, some workers who perform poorly in school settings learn well when training is part of their jobs.

The traditional model—that future workers receive their formation when young and any future reskilling occurs on the job—no longer suffices. To maintain skills and full employment in increasingly sophisticated workplaces, a new model is needed, one that provides those who do poorly in school with needed skills while continually retraining those who become and remain unemployed because of obsolete skills. This chapter argues that it is in the best interest not only of workers but also of society generally that a critical component of a new model be a government employer of the last resort program that ensures not only continuous employment but also the necessary skills for workers to successfully enter and reenter the private labor market.

This chapter is organized as follows. After briefly surveying worker formation in premodern societies in which formal schooling was nonexistent or was provided for political and religious reasons to a small elite, it turns to the rising need for public education that accompanies industrialization. An examination is then provided of the intensified pace of churn and technological change in modern economies that leave an increasing number of workers with inadequate levels of human capital.³ The result is greater job insecurity, higher long-term unemployment and its attendant loss of human capital, a polarized labor market, and the consequent high personal and social costs. The study concludes with an overview of how provision of guaranteed employment with a robust training component would provide workers with adequate human capital throughout their lifetimes, resulting in a healthier economy and more just society.

THE EARLY EVOLUTION OF EDUCATION

Due to low levels of technology and specialization, premodern agricultural societies had little need for formal education. Occupations were usually inherited, and children began participating in agricultural work at a young age, progressively learning the needed skills. Urban children often became apprentices within craft industries, picking up the needed skills to eventually become masters themselves. Beyond education given to the Church’s priests or to Mandarins in China, some portion of the elite often received some formal education, but much of this served as a status signifier and method of socialization.

This small amount of formal education prior to modern times was, as Galor puts it, “motivated by a variety of reasons, such as religion, enlightenment, social control, moral conformity, sociopolitical stability, social and national cohesion, and military efficiency” (2005, 194). For instance, by the eleventh century, the Medieval Church in most of Europe had established schools to provide a small cohort with the necessary skills to manage its activities (Boyd 1966, 100). With the expansion of commerce, reading or song schools evolved in most small European towns and villages, while grammar schools developed in larger towns (Boyd 1966, 155). However, attendance was voluntary, and most parents could not afford having their children, among their most important economic assets, attend for very long. Incentives for investment in education were small.

With the rise of Protestantism, the demand for education expanded. Martin Luther and other early Protestant leaders were advocates of universal education, regardless of sex or class (Boyd 1966, 188–189). For them it was vital that all members of the community be able to read the Bible, and thereby have equal access to God’s word. They also sought a transfer of authority over education from the Church to the state throughout a large portion of Western Europe (Boyd 1966, 183).

With the rise of industrialization, formal education became more economically important. Although it played but a minor role in the driving industry of textiles, Becker, Hornung, and Woessman argue that its role in other industries was more important, and that this importance only increased as the industrial revolution progressed.⁴ Among economically and militarily competing nations, education was important for “technological catch-up” (2009, 2).

Yet except for a few intellectuals such as Adam Smith,⁵ providing education to the working class was not generally viewed as an important end. Even the somewhat progressive Bernard de Mandeville argued that workers would work harder if they were kept not only poor, but also uneducated, or as he put it, it is “requisite that great Numbers of them should be Ignorant as well as Poor” (1924, 288).⁶ Even the enlightened Voltaire feared that education would erode the deference of the poor for their superiors (Viner 1968, 33). It should also be noted that creating human capital would absorb part of the surplus that only the elite possessed.

The general failure to recognize the importance of human capital is not surprising in light of the fact that the first industrial revolution did not generally need highly trained workers.⁷ Factories paired large amounts of physical capital with raw material, which enabled the replacement of the highly skilled artisans of the handicraft era with relatively unskilled workers.⁸ Rather than complement human capital, physical capital became its substitute (Goldin and Katz 1998, 694–697). Indeed, in factories, workers under a regime of divided labor were generally de-skilled, a downward turn in worker welfare that did not go unnoticed by Adam Smith, who claimed that this form of work rendered them “as stupid and ignorant as it is possible for a human creature to become . . . unless government take some pains to prevent it” (1776: II, 782).⁹ Although the second industrial revolution evolved upon a greater marriage of science and technology, many workers continued to be de-skilled well into the twentieth century (Braverman 1974).

WORKING PEOPLE FIGHT FOR UNIVERSAL EDUCATION

The evolution of capitalism created an industrial working class that became increasingly organized and aware of its political power as the nineteenth century unfolded. Through strikes and revolts it increasingly threatened the existing power structure. By the latter part of that century it achieved considerable advances in work reform, in franchise rights, and in publicly providing education for its children.

Providing for education—creating human capital—is expensive.¹⁰ Because the incomes of workers generally barely exceeded subsistence, they were not financially capable of bearing the full costs. Funds would have to come from the wealthier classes. Understandably, the wealthy would resist giving up some of their incomes through higher taxes, even when some might recognize the long-term benefits because of stronger economic growth. Their short-term interests generally trumped their long-term interests. It took rising working class power to force a state, predominantly controlled by the wealthy until the state become more democratized, to extend educational opportunity.

The extent of these gains in education can be seen in England, where, as elsewhere, the state had been...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Tables
• List of Figures
• Introduction
• 1.  Rising Job Complexity and the Need for Government Guaranteed Work and Training
• 2.  Wage Policies and Funding Strategies for Job Guarantee Programs
• 3.  The Low Cost of Full Employment in the United States
• 4.  The Costs and Benefits of a Job Guarantee: Estimates from a Multicountry Econometric Model
• 5.  Effective Demand, Technological Change, and the Job Guarantee Program
• 6.  Transformational Growth, Endogenous Demand, and a Developmental ELR Program
• 7.  The Euro Crisis and the Job Guarantee: A Proposal for Ireland
• Notes on Contributors
• Index