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UK remains hopelessly out of paradigm

Posted by WARREN MOSLER on January 4th, 2013

U.K. Labour to Strip Benefits From Unemployed If Job Refused

By Kitty Donaldson

January 4 (Bloomberg) — The U.K.’s opposition Labour Party called for a compulsory jobs guarantee for the long-term unemployed, making state welfare payments dependent on paid employment.

The party’s treasury spokesman, Ed Balls, said the guarantee would initially be for adults who are out of work for 24 months or more, though Labour would seek to reduce this to 18 or 12 months over time. The party said there are currently 129,400 adults over the age of 25 who have been out of work for two years or more, a rise of 88 percent in a year.

To pay for the jobs guarantee, which Balls estimates would cost 1 billion pounds ($1.6 billion), he would restrict tax relief on pension contributions for people earning more than 150,000 pounds a year.

“A One Nation approach to welfare reform means government has a responsibility to help people into work and support those who cannot, but those who can work must be required to take up jobs or lose benefits as a result — no ifs or buts,” Balls wrote in an article for the Politics Home website today. “Britain needs real welfare reform that is tough, fair and that works, not divisive, nasty and misleading smears from an out-of- touch and failing government.”

‘Squeezed Middle’

Labour and Prime Minister David Cameron’s Conservatives are battling to attract what the premier calls the “strivers” and opposition leader Ed Miliband the “squeezed middle” of voters whose wages aren’t rising in line with inflation and who are suffering from cuts in public services.

An overhaul of the welfare system is at the heart of the debate, with the Tories seeking to portray themselves as defenders of hard-working families by cutting the welfare bill, and Labour saying it is protecting the most vulnerable in society. Today’s announcement by Balls seeks to show Labour will also be tough on the long-term unemployed.

The Conservative Party said Balls had already pledged in March last year to spend the 1 billion pounds from pension tax relief to increase tax credits for low-paid workers and families with children.

“We are taking firm action to help the long-term unemployed Labour left behind get back into work,” Conservative Party Chairman Grant Shapps said in an e-mailed statement. “Ed Balls is trying to spend the same money twice. That means more borrowing and more debt — exactly how Labour got us into this mess in the first place.”

32 Responses to “UK remains hopelessly out of paradigm”

  1. Ed Says:

    I guess it takes “Balls” with a first name, Ed, to push for a JG program in UK!….:-)

    If u crunch the number, it’s like 6 pounds/hr for a 40/hr week, right at about their min wage. it’s a start, could have been at least 8pds

    This is interesting for sure. Is anyone proposing anything similar?

    Reply

    Neil Wilson Reply:

    @Ed,

    It’s a 25 hour part time position for six months maximum.

    It doesn’t even deserve the name ‘Job Guarantee’.

    Essentially it’s a resurrection of the Future Jobs Fund. Unfortunately they might cripple it by allowing the private sector to be involved.

    Reply

    Ed Reply:

    @Neil Wilson, Thanks, I’ll take your word for it since I’m not too familiar with uk scene, guess i totally mis-read this one then….:-)

    whats the pro/con to it?

    Reply

    Neil Wilson Reply:

    @Ed,

    The Pro is that is helps show that it can be done.

    The Con is that it is being sold as some sort of punishment and that long term unemployed will be ‘forced’ to take these positions.

    The problem Labour has is that they no longer believe in anything. It’s all about selling to the focus group to grab power rather than putting a vision forward to get the focus group to come to your way of thinking.

    Arguably that’s modern politics.

  2. Andy Says:

    Balls is a neoliberal idiot.
    The only guarantee this non-proposal has is that it doesn’t guarantee you a job at the end of it.
    As you were.

    Reply

    Ed Reply:

    @Andy, ok, neil straightened me out. thks….:-)

    Reply

    Ralph Musgrave Reply:

    @Andy,

    “It doesn’t guarantee you a job at the end of it”. So do you have some magic system, Andy, that DOES GUARANTEE everyone a job at the end of a period of subsidised employment? If so, you’ll get a Nobel Prize.

    The evidence from several studies around Europe is that a period of subsidised employment DOES IMPROVE the chances of subsequently getting a job.

    Reply

    Andy Reply:

    @Ralph Musgrave, Well yes Ralph. A JG job as promoted by MMT. What am I missing ? Perhaps we can’t afford it ?

    Reply

    Neil Wilson Reply:

    @Andy,

    Ralph is quoting his ‘evidence’ again. The one that was rightly debunked by Pavlina as mere analysis of neo-liberal inspired ‘work programmes’.

    In all economic thought there is little real evidence, because you can’t do the double blind test to prove anything beyond doubt. Therefore it always boils down to belief and propaganda.

    So it’s hardly surprising that Old Religion priests find ‘evidence’ that the best approach is to pay tithes to the Old Religion Gods in the private sector.

    The JG provides an alternative work offer to everybody in the economy. So they always have somewhere else to go, some alternative thing to do and importantly some alternative source of wages. It is a permanent job offer.

    That is key to its function as an anchor – a labour competitor to the rest of the economy (private *and* public) at a fixed price. And the other key to that anchor is that it take the labour *away* from the standard sectors and deploys it on different projects.

    You don’t teach a child manners by buying them more toys. You teach a child manners by taking their toys away until they decide to behave.

    So it is with the standard sectors of the economy and labour. If they won’t pay people properly, then they shouldn’t get to use them.

    And that is a key *moral* position.

    Ralph Musgrave Reply:

    @Andy,

    As usual, Neil is sounding off about aspects of economics he has not bothered reading up. If he’d actually looked at the evidence I’m referring to he’d discover that some of it actually DOES INVOLVE “double blind” (or as near as you can get to it) That is, some of the research took random samples of people from the ranks of the unemployed, and compared them with similar samples who were put onto subsidised work. The evidence was that those doing subsidised work had better subsequent employment records than those left unemployed. That was especially true of those given subsidised PRIVATE SECTOR subsidised jobs.

    The evidence is here:

    http://ralphanomics.blogspot.co.uk/2012/01/effect-of-temporary-subsidised.html

    And even if the double blind was not 100% perfect, what of it? I attach huge importance to empirical evidence, even if the evidence is not perfect. All you can do is go on the BEST AVAILABLE evidence. What else do you do?

    As to Neil’s silly remarks about “religion”, religion is almost by definition a set of beliefs which ignores empirical evidence (as the phrase is normally understood in science). Looks like I’m vastly more interested in empirical evidence than Neil. So who’s “religious”?

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    Ralph Musgrave Reply:

    @Andy,

    Andy,

    JG does not guarantee anyone a regular job “at the end” of their time on JG work. It aims to guarantee giving people permanent employment: but that might mean several years on JG, or in extremis, an entire lifetime.

    In contrast, Ed Balls’s scheme limits subsidised jobs to 6 months. But it could perfectly well incorporate the above JG “employment guarantee” by vastly expanding the scheme: i.e. throwing money at the problem.

    So there isn’t a vast difference in principle between the two schemes. The main difference is that JG is limited to the public sector, while Balls’s scheme includes subsidised work in the private sector.

    Neil Wilson Reply:

    @Andy,

    As you can see Ralph has no idea what a double blind test is and why it is considered the gold standard in science

    It removes bias completely. Without that the evidence is always circumstantial and is interpreted according to beliefs.

    You get the same analysis of evidence in WatchTower. I always find reading their articles interesting as well if only to work out where in the narrative to insert the words ‘and behold’ somewhere next to the sideways logic leaps that ensures the narrative fits with the belief structure.

    It’s pretty much the same in economic analysis (and funnily enough nutritition).

  3. Jbh Says:

    Exactly what the UK govt should do. Stop printing money and encouraging people to go on welfare, and encourage work.

    Reply

  4. Andy Says:

    Ralph

    It seems to me that you are talking about something totally different than MMT JG in terms of the problem to be tackled.

    The old ‘I wouldn’t start from here’ joke comes to mind and that is in your favour. You are trying to tackle things as they are. Fair play to you for that. I can see however how some would see that as placing you bang in the Employability framework as opposed to the Full employment framework (Using Bill’s analogy in ‘Full Employment Abandoned’)

    The MMT JG is a whole new way of thinking about employment, it seems to me. It’s not meant to be a solution (although it will certainly help) to problems we have now in terms of the motivation and skills of the currently long-term unemployed.I see it more as part of a whole new paradigm of macroeconomic policy. In other words the problems you are trying to tackle simply would not exist in future if the JG was in place.

    So I’m not really sure what we are arguing about. Oh yes it was Ed Ball’s initiative. I am really surprised that you see it as anything more than a gimmick from an opposition party. He is more interested in stressing how, if people don’t comply, they will lose their benefits, than in getting people into work.

    Reply

    Ralph Musgrave Reply:

    @Andy,

    I’m not sure about your claim that “JG is a whole new way of thinking about employment..”. The basic JG idea, namely that there are an infinite number of useful public sector type jobs that the unemployed could do actually goes back thousands of years. But that’s not to knock the idea. I just think that that idea as it stands is over-simple.

    For example everything suffers from diminishing returns. That means that the more unemployed are put onto JG type work, the less productive is each succeeding job. Or in economics jargon, the marginal product of JG labour declines with increased numbers.

    The Future Jobs Fund worked quite well, I’d guess, because of the very small numbers involved (about 0.03% of the UK workforce according to my calculations). If you are going to get say half or more of the unemployed into JG type jobs, then it’s a different ball game. If they were all concentrated in the public sector, some of the jobs would be fatuous: employers might actually pay some JG people to go away.

    That’s why I’m in favour of Balls’s scheme. That scheme extends JG to the private sector. And the private sector is definitely better at employing the relatively unskilled than the public sector. I.e. if it’s productive jobs and increased GDP you want, then include the private sector.

    As to whether Balls is motivated by “political gimmickry”, I’ve no idea. I can’t read his mind. I’m not clairvoyant. But if he really is motivated by political gimmickry to do something which by coincidence actually makes sense (far as I can see), the he gets my backing.

    Reply

    Neil Wilson Reply:

    @Ralph Musgrave,

    “if it’s productive jobs and increased GDP you want, then include the private sector.”

    They are included – all they have to do is pay the rate to hire the staff.

    Profit on labour should not be subsidised.

    Subsidising labour reduces its value and makes it less likely that the labour service will be permanently replaced by a machine. Labour should be expensive to use, because as a society we don’t want people doing jobs that a machine can do.

    A Job Guarantee scheme enhances the commons and concentrates on remaining an effective employer – paying wages, making sure people turn up on time and doing what it can in between with the buffer stock. That makes spaces for efficiency drives by entrepreneurs in the private sector to take labour that has demonstrated its usefulness and deploy it for its own ends.

    Dont’ pay the rate, don’t get the profit. Very simple. Very fair.

    Reply

    PZ Reply:

    @Neil Wilson,

    Can JG workers increase private profit, and under what circumstances?

    If you give JG workers to one employer but not to the others that one employer sure can increase it’s profits. But if you give JG workers equally to all employers they have to threat them as drop in production costs – competitive price of the output is bid lower.

    What if JG workers were distributed using formula where employers would get right to one JG worker for every Nth employee they employ? Then it would not disturb competition, and therefore not boost profits.

    Neil Wilson Reply:

    @Neil Wilson,

    “But if you give JG workers equally to all employers they have to threat them as drop in production costs – competitive price of the output is bid lower.”

    That’s based on marginal theory again. Employers are not equal. People do not receive their marginal product. Labour output is not even. You can’t treat labour like batteries however much you like The Matrix.

    What happens with these schemes is that those employers with a full administration layer and that can deal with the bureaucracy engage the staff. Smaller employers and those without a full admin layer do not. And so it always favours the larger employers – which is why those employers lobby for this sort of arrangement.

    Of course they’d like free staff paid for by somebody else. Just like the five year old wants sweets at every meal.

    “Can JG workers increase private profit, and under what circumstances?”

    They restore aggregate demand. JG is based on the reality that there will be a 2% or 3% of the workforce pretty much permanently on JG. That’s because they will be the end of the workforce that range from profoundly disabled for work to lightly able for work.

    So what happens when you introduce JG is that those who are profoundly disabled get an income, which they spend, which stimulates the private sector who then hire from the most able end of the unemployment queue. That continues from both ends of the spectrum. And eventually the JG and the private sector meet somewhere along the ability continuum.

    And that is further towards the profoundly disabled end with a JG than with unemployment, because the people are working and turning up on time which reduces the hiring risk meaning that the private sector will engage more of the pool.

    Hence the idea that the majority of the direct economic benefit is due to aggregate demand maintenance and reduction in hiring risk from maintaining the buffer ‘employment ready’.

    The massive social benefits of the JG are then on top of that basic structure.

    “Then it would not disturb competition, and therefore not boost profits.”

    Yes it would because the labour market is not marginal in the way it operates for the reasons I outline briefly above and PK economists have been writing about for years.

    The line in the sand should simply be that the private sector gets the staff when it pays the going rate – relative to the permanent alternative job offer in the JG. That is a perfectly fair system that disturbs nothing, stops the chase to the bottom in its tracks and is very easy to understand.

    I would argue that is the best way to use the private sector – via competitive tension. If it has to pay for staff, it will replace them and augment them with machines as fast as it can. That drives productivity forward. We don’t want the situation where state subsidised individuals are washing cars by hand and the car wash machine is stood idle – or not built at all.

    In addition if you then use the JG manpower to help enhance the commons, the common goods created will give the private sector more opportunity to profit. And that should help bring it out of its depressive state earlier.

    PZ Reply:

    @Neil Wilson,

    Consistancy of the wage share was one of the Kaldor’s “stylized facts”

    Those who have economic power and make decisions on income distribution – mostly company managers – seem to allocate some fixed share to owners, say 15-20% of turnover. They are happy to compensate workers with the rest of the money because they are not profit maximising robots but human beings who have to concede that their own workers deserve share of the “loot”. There where labor unions are strong union bosses also have their thing to say about divition of the income.

    So schemes like JG don’t really boost profits because profit share is kept quite stable anyways.

    And I don’t believe 2-3% of workforce is disabled. BTW, JG is for those who are “ready, willing and able” to work. If disabled are not able to work, JG is not for them.

    WARREN MOSLER Reply:

    the jg has to be a transition job to function as a buffer stock

    Reply

    Dr Zen Reply:

    @WARREN MOSLER, Do you make provision for people who are functionally unemployable?

    WARREN MOSLER Reply:

    of course!

    see ‘full employment and price stability’ on this website (under ‘mandatory readings’ thanks)

    Neil Wilson Reply:

    “Or in economics jargon, the marginal product of JG labour declines with increased numbers.”

    Which is an irrelevance. Efficiency of transformation of labour power into labour services is not the main concern.

    The point of a JG is to get people to spend money and turn up on time. Anything you get beyond that is a bonus in economic terms – and should be focussed on developing The Commons.

    The other effect is that everybody knows they have an alternative job to go to – which stops the chase to the bottom. Labour can remove itself from the main economy if they refuse to play fair.

    JG is designed to be effective at maintaining aggregate demand, basic employability and keeping the living wage at a sensible level by anchoring the value of the currency to an hour of labour power.

    The efficiency comes from the private sector hiring people away from JG. People who now have a lower risk of employment because they are seen to be working.

    Reply

    WARREN MOSLER Reply:

    the purpose of the jb is to transition people from unemployment to private sector employment

    Reply

    Neil Wilson Reply:

    @WARREN MOSLER,

    The buffer stock is bi-directional:

    As Randy points out in his book ‘Modern Money Theory’:

    “The program would improve working conditions in the private sector as employees would have the option of moving into the program”

    So it disciplines in both directions. Good quality private employers get the benefit of reduced hiring risk and the elimination of competitors who try to undercut on job quality.

    WARREN MOSLER Reply:

    yes, and to do so it must be ‘liquid’, i.e. the transition job aspect is critical or it doesn’t function as a buffer stock.

    Neil Wilson Reply:

    @WARREN MOSLER,

    All jobs are transitional Warren. It’s just a matter of when you get a better offer.

    In fact JG would help the liquidity – even in the public sector – since those who felt they were in a dead end could still move on making space for somebody more suitable to move in.

    One of the problems of the recession is that the job market has lost a lot of liquidity.

    However I think it important to note that the ‘buffer’ will not be uniformly liquid. It is bound to be more fluid at the ‘more able for work’ end than the ‘less able for work’ end. And some people will be on JG pretty much permanently – except during the wildest of booms.

    During a recession the liquidity will go up and it will go down during a boom.

    But yes you could almost imagine them having ‘hire us – call abc-123′ adverts next to the public work item they were currently undertaking.

    WARREN MOSLER Reply:

    all true but I distinguish between ‘normal’ public service jobs and ‘transitional’ jobs.
    the transitional jobs are the ones where desired public services aren’t reduced as the jg pool shrinks to desired size as a price anchor.

    Neil Wilson Reply:

    @WARREN MOSLER,

    Yes. Both the ‘normal’ public sector and the ‘normal’ private sector draw from the JG pool. It should be seen as separate from the normal sectors for that reason.

  5. Andy Says:

    “You can’t treat labour like batteries however much you like The Matrix.”

    Can I nick that one please?

    Reply

    Neil Wilson Reply:

    @Andy,

    Of course. I’m a big believer in ‘copyleft’.

    Reply

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