Odd Lots - How The Government Can Guarantee Everyone A Job And Fix The Unemployment Crisis Immediately

Episode Date: July 9, 2020

Officially, the US unemployment rate stands at 11%. This is higher than the worst levels of the financial crisis. And there are reasons to think that the actual state of unemployment is even worse. There’s a wide variety of views on how to address this, but what about the government simply guaranteeing everyone a right to a job? On this episode of the Odd Lots podcast, we speak to Pavlina R. Tcherneva, an economist at Bard College, and the author of The Case for a Job Guarantee about what the government can do right now to end the crisis.See omnystudio.com/listener for privacy information.

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And I'm Tracy Allaway. So Tracy, we kind of have an extremely timely episode today, given the news. This is going to be one of those episodes where we have to definitely make sure that we say what day we are recording and what time. But it's Jobs Day. It's Jobs Day. That's right. It's July 2nd, 2020.

So depending on when you're listening to this. take that into account. And just about 30 minutes ago, we got the June jobs report. And at least on the headline measures, it was definitely better than expected. Yeah, I'm looking at those now. So we had 4.8 million jobs added versus expectations of, what was it, three point something? Do you remember, Joe? Yeah, 3.2 million. 3.2 million. Yeah, so a huge beat on the expectations. And I'm looking at the chart. I know we've been debating about how best to chart all these various economic indicators, but, you know, it looks like a V. If you just sort of look at the pure headline, I mean, it is, jobs are coming back sooner than expected, I would say, and faster than expected. But of course, there's all kinds of caveats in there, including the fact that jobs, Most of these, this snapshot of the economy was taken prior to this reacceleration of the virus.

So, of course, in the U.S. anyway, so there's a sense in which this is dated. Also, you know, you have to look at permanent job losses, which continue to rise even as the total job losses continue to come down. So I think, like, you know, on the headline, it's good. it's good that the unemployment rate is already back down to 11%, though, that's still worse than it ever was during the great financial crisis. But, you know, hopefully the headline trend continued. So for now, I guess that's hopeful news. I mean, I do think there's a sense that unemployment is becoming obviously more of an issue. Like, we are expecting the virus to reemerge at various points in time until we get a vaccine. We're expecting

multiple waves of infections. And that means, you know, whenever the government orders people to stay confined or stay in lockdown, that we are probably going to see a hit to employment. And it's not through anyone's faults per se. It's basically policy ordained unemployment. And so we as an economy or society need to start talking about that and how we kind of figure it out. Absolutely.

And this really sort of like gets to the key thing. So it's like we have this massive, even if it's getting better, and it is, we have this massively high unemployment rate. We had a massively high unemployment rate just a decade ago. And we went between the last crisis and this one, we had elevated unemployment on a historical basis up until extremely recently. Like maybe like in 2019 or 2018, we might have been close to what economists might call full employment. though that's a very nebulous term. But there is this permanent feature, it seems, of the U.S. economy and arguably even going back to the post.com era as well when the term jobless recovery first started talking, that like

underemployment or elevated unemployment seems to be a more or less permanent feature of the economy and periods of when we could say anyone can get a job who wants one seem to be depressingly rare crisis or no crisis. You mentioned full employment there. And I mean, as you point out, that in itself is kind of a weird idea. You know, the notion that because we have an unemployment rate at something like 3 or 4 percent, that we're at full employment, even though millions of people still don't have jobs. It's kind of funny that that's the accepted norm.

And again, I think one of the things about the coronavirus crisis is one of the unique things about the crisis is that it is opening up these bigger conversations about what employment should mean. Yeah, totally. And also, like, even prior to the crisis, economists needed to do some soul searching because, you know, we got down to some 4% unemployment as recently as earlier this year. But there was a point, you know, in 2017 or 2016, we're like, oh, unemployment can't go below 5%. Then it went below that. It's like, oh, unemployment can't below 4%. And we never got to associate with surge in inflation. So there are just all kinds of reasons to just sort of rethink employment in this country or in any economy and what we're capable of and how many people are left behind,

unemployed, underemployed, in jobs that don't pay them well even during the so-called boom time. All right. Well, let's do some rethinking around jobs now. Then who do we have on? So I'm very excited. We have a guest today who I wanted to do. talk to for a long time. She is an associate professor and director of the economics program at Barg College. She's also a fellow at the Levy Institute. She's also the author of a new book called The Case for a Job Guarantee. And our guest is Pavlina Cherneva. She is out with this new book, and we are going to talk about the job guarantee. So Pevelina, thank you very much for joining us. Good to be with you. Hi, Tracy. Hi, Joe. Pavilion, you know, obviously modern monetary theory,

MMT, a lot of attention paid to it, especially in recent years, especially now, people rethinking, the potential for fiscal sustainability. But one big component of it, which probably has gotten a lot less attention, or there are at least certain people within the sort of MMT sphere who think that an important aspect of it is essentially targeting the unemployment rate directly, that the unemployment rate itself, currently at 11.1% is a policy choice in that the government can essentially guarantee everyone a job if they'd like. So talk to us about what the job guarantee is, first of all, and how it fits into the MMT world. Yeah, thanks. I really like how Tracy. put it in the introduction, policy ordained unemployment. So in COVID, it's pretty straightforward because

we have to close down businesses. We have to shutter many sectors and we're told to go home. So that was a very explicit, if you will, policy guidance. And we saw a spike in unemployment. But most people probably don't think about it this way in normal times. That actually we have unemployment as a perennial feature in the economy. And the fact that it's positive unemployment is, again, policy ordained. So, you know, there are various ways in which you can look at this. I mean, the one is, of course, the Nairu, the nebulous term that Joe was referring to, that is this idea, this notion that there is some optimal level of unemployment that would be consistent with price stability. And, you know, we've watched this conversation evolve even over the last few months before COVID.

where the Fed was questioning the nature of the Nairu, questioning whether there is such a relationship or if it has broken down or whether it's even a causal relationship. So basically we don't know. We don't really know what that low level of unemployment is that won't trigger inflation. And it turns out we can go even lower than what we thought before. But what's important about this is that the Nairu for a long time

has been used as a policy guide. What is Nairoost, what does Nairo stand for again? I always forget. The Nair is the non-accelerating inflation rate of unemployment. It's the level of unemployment that might be consistent with stable prices. And as we know, the Fed has a dual mandate to keep price stability and maximum employment or achieve price stability and maximum employment. And so the theoretical and this so-called empirical term is concept is the NIRU. But what's interesting about that is that it is used as a policy guide.

You know, like models have some NIRU number where if the unemployment rate, the actual unemployment rate breaches that number, then the models might indicate some price increase, wage inflation, etc. The thing is that it is this concept exists only for unemployment. We don't have a concept like this for any other economic phenomena out there. We don't talk about a natural rate of hunger, a natural rate of homelessness and natural rate of illiteracy, right? We only for unemployment, we do that.

And so it's actually sanctioned. Positive level of unemployment is sanctioned by policy. And then on the fiscal side, we do a whole bunch of fiscal policies in the name of job creation. But as you were saying at the beginning, we never have enough employment opportunities for all people who are looking for work. So it's really a policy ordained unemployment rate. So what MMT says and what the job guarantee says is that, well, the unemployed are already the charge and the responsibility of the public sector.

The unemployed are already, they already require various forms of assistance, but also unemployment in and of itself inflicts high costs on the economy. So unemployment is paid for, so to speak. So the job guarantee is a better way of dealing with unemployment by simply employing the unemployed. and expending public money for direct hiring to both stem all of these various costs of unemployment, reduce existing financial and real costs, and create something of social value. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed.

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News Now on Apple, Spotify, or anywhere you listen. So just to ask a really basic question, but when we talk about jobs guarantee, what do we mean exactly? And I mean, I'm aware there are different iterations of how this might work, but how do you specifically think about it. I just think of it as a public employment option. So if, if for example, somebody walks into an unemployment office, you know, they can get a whole lot of assistance, unemployment insurance, help with their resume, coaching, interview skills, but they cannot get a job, you know, and they apply and they apply and apply. So if we had devised a system where they will be, on standby, a program that will create employment opportunities in the locality, in public service,

where somebody can go into the unemployment office. If they have not been able to find a job elsewhere in the economy, there will be always an option. They are guaranteed at a base living wage. So it's a basic job option. And, you know, the philosophy behind it is, there are many ways to rationalize it. But think of it this way. You know, when somebody doesn't have education, we guarantee it.

They guarantee the seat in a public school. If somebody doesn't have access to retirement security, right, we guarantee it through social security. If you are food insecure, you know, we guarantee food stamps. I mean, you know, these programs can be made better or, you know, it depends how you think about them. But we tend to have this kind of straight solution to these various forms of economic security, but for unemployment, when the problem is the absence of a job, we don't actually provide the job. So that's what the job guaranteed people do. So this gets to sort of an interesting, I don't know if it's a philosophical question or probably is philosophical, but it's also,

of course, economic, is that what you make a distinction implicitly between job loss and income lost or losing it from losing a job. Because if it's just a matter of the lost income, then in theory you could say, okay, we could have an unemployment insurance program that doesn't run out as long as you're looking for a job and it covers your entire salary or some sort of like essentially a basic income. So the question is, why in your view does it make more sense for the government to guarantee people a job as opposed to just lost income? Well, I should make it clear that it's not a displacement for income support, the job guarantee. And it's a new program, an additional program.

But it's true. Unemployment brings higher costs beyond just the loss of income. And we macroeconomists don't really think about this very much, but even the cognitive sciences, psychologists think about this a fair amount. And there's really good work that is documenting the impact of unemployment on not just the unemployed, but their families and communities. So economists talk about scouring effects. You know, we talk about the loss of income. And so unemployment insurance essentially attempts to patch that up.

But we know even with unemployment insurers, your lifetime income is permanently lower as a result of unemployment. But also you start losing these other non-tangibles. Like, for example, the social networks that you rely. on to get the job. There are also physical mental health costs that are experienced not just by a person who's lost their job, but their spouses, their children, there's impact on growth stunting. We talk about unemployment being literally deadly. And so just interventions that just focus on income alone just are not going to be enough.

I'm not, you know, they are the right thing to do. We need to provide income support for people who've lost their employment opportunity. but that is really just a very minimum we could be doing. And what we know also from even experiments that run basic income programs, we know that people still look for jobs. So if we live in an economy that guarantees unemployment, right? As you said, it's a perennial feature of the economy. If we live in that kind of macroeconomic framework,

then you're assured that people will not be able to find employment, even if we provide income and if they seek employment. So it's just fixing this one gap in the macroeconomic package. How did jobs guarantee change the behavior of private sector firms? Do you think, for instance, that they'd be competing for the same pool of labor and therefore might have to raise their own wages, or do you think they're sort of two different pools of job seekers? Well, I think that the net effect will be positive.

And I can talk a little bit about a macro model that we had developed at the Levy Economics Institute. What's important, I think, to notice is that the private sector doesn't really like to hire the unemployed, right? We have this odd paradox that firms, you know, prefer people that have work experience, that have shorter gaps in their resumes. they like to poach from their competitors. And what ends up happening is those who are trapped in unemployment, especially long-term unemployment, are the last ones to get hired. And there's recent research that was very good that came out

on what firms did after the Great Recession. They changed the rules of the game. The lower the unemployment rate fell, the higher their criteria for hiring. So it's a bit of a stacked game for those, who are really last hired. And what the job guarantee essentially would do is provide those unemployment opportunities

for folks who have the hardest time, you know, catching on this job strain. And those tend to be people with disabilities, people of color, you know, former inmates. And we are going to provide not just an employment opportunity, but on the job training, experience, help with transitioning to the private sector jobs. So in net, it will be a benefit for firms who basically report this odd paradox.

We can't find qualified workers. And yet, we're seeing a lot of unemployed people. So the job guarantee will help with that matching problem as well. And so, but then the other question that you raise is, what about wages? And here, COVID is an interesting case. It has shown us how poorly paid so many people are in the. the labor market. And now we're debating whether we should be extending this extra $600 unemployment bonus and insurance bonus to protect the unemployed. And, you know, that's really a,

just a reflection of how many jobs just don't provide living income for people. So the aim and the goal of the job guarantee is to provide a basic guaranteed minimum wage floor. That would be a decent living wage floor, below which no one will fall. And what will be the impact then on the private sector? Well, there will be some competition for sure. There will be some pressure on the private sector to match that package, the wage and the benefit package. Now, should this be, is this going to be a very big problem for firms? It's not really clear.

Our model shows that the job guarantee actually permanently increases employment. in the private sector by four million jobs. It shows a permanent increase in GDP. And so, you know, overall, you know, firms are living in a better environment, more sales, higher profits. So some will be able to, you know, most will be able to match the $15 an hour. And, you know, we see this with living wage ordinances, you know, when states or cities pass higher wages than the official minimum wage.

There will be some firms who actually rely on very low wages for the existence and poverty paying wages. And this, the job guarantee basically says, you know, this should not be a macroeconomic condition. We want to assure a firm living wage for. So it's a feature of the program to weed out these pay practices. Pavilion, you know, something I've thought about before and I've been thinking about it during this crisis is I look at the government. I look at the effectiveness of our state capacity in this country to do things like, say, establish testing protocols for COVID or hospitalization or anything else. And I have to say, like I'm sort of like a state pessimist these days.

It does not look like we're particularly good at provisioning anything in the public. And so, you know, it feels like we're good at cutting checks. Like we could do that if we choose to. How confident are you, or why should we have confident, that a government-administered jobs program can work, can be effective? Even if we decide politically we want a sort of essentially public option for employment, that it would be just well-administered. Yeah, I mean, look, I share your frustration, but it's not that we are bad at doing contact tracing. I think we're just not doing it. We're simply not even attempting to do the kind of mobilization and all the policies that we need for this moment.

So I think the political obstacles for sure are there. But I don't think that the administrative obstacles are unsurmountable. So, you know, if we had attempted and we actually had the political interest and commitment, I think that it's workable. And let's just think of other things that we prioritize. Our administrative challenges, a litmus test for guaranteed education. You know, they really are not. We believe that everyone should have a guaranteed seat in a school, and so we do that.

And then we haggle over which schools are better and better funded and, you know, how should they should be run. But there is a policy commitment to provide infrastructure and ensure those opportunities. So with the job guarantee, we will have the same sort of idea. I mean, the infrastructure is all there. And in my book, I basically argue that we shouldn't reinvent the wheel. We should use the institutional capacity that already exists, like the unemployment offices, which are present in every single county across the United States.

And they just need to become genuine employment offices. Public service is one thing that has been underfunded. You know, it's this one aspect of the public sector that has been underfunded for a long time, in part under the guise that the government is running out of money, and all of those are the myths that MMT is attempting to bust. And we have a lot of neglect. So there are problems to be solved. We have environmental problems.

In short, I think that there's lots and lots that we can do, and there are groups, communities on the ground in every community, rather, that address these. So the proposal here is not to necessarily, reinvent the wheel, but just to do things better and at a bigger scale, to empower those who are already on the ground filling in these gaps and just match the unemployed with the kind of work that they can do. So, yes, I have no illusion that like any other program, this too will have its own administrative and political challenges, but it hasn't stopped us to do other things

we think are important. So I think the first step is to form a consensus that if somebody needs a job, they should be able to walk into unemployment office and just get a basic job. I mean, sorry, just to press on the political point a little bit, you know, the U.S. has a long history of pushing back on, well, the American public and some parties in particular have a long history of pushing back on any social welfare program that they think might undermine capitalism. And I imagine that a full jobs guarantee is one of the ones that will automatically trigger, you know, accusations that we're becoming communists and all of that. How do you deal with that side of the political debate? And also, I mean, this kind of touches on my biggest

criticism of MMT, which is if we all agree that whether or not we can afford something isn't really the constraint, the constraint is political, then, you know, that's a question. That's That's sort of how things have been for a long time. So how do you overcome those political barriers? The first thing to point out is that actually the job guarantee is very popular. There have been a number of different surveys. And I will admit, even I was surprised to see some of the results. It was the Harris Hill survey.

There was Data for Progress survey. There are older surveys. And they always consistently show more than 50% support. the latest one, even you go of in the UK, they were in the 70s. So jobs are not a partisan issue. Now, I agree with you that there's always the red herring of, you know, all of this is, you know, big government takeover. The thing to stress here is that government,

there is already big government takeover. There is already an enormous, enormous infrastructure that deals with poverty and much of it, which is connected to the problem of unemployment. And so the infrastructure is there. the spending is already there. We can do things better by directly going to the source of the problem. So maybe there's political wrangling, but some of these social programs are really popular,

like social security, you know, that once they understand the value and the benefit of these policies, you know, they defend them. So, you know, for us, the hurdle is getting there. Now, I do hear, you know, this question of, you know, Soviet Union tried this. And the answer is no, the Soviet Union. didn't try the job guarantee.

Soviet Union tried an employer first resort. The job guarantee is an employer of last resort. And it is a program that actually stabilizes the economy better than unemployment. So it kind of dances with the private sector employment. When private sector employment declines, job guarantee increases. So if those aspects are understood at the macroeconomic level, that doesn't mean that they won't be political hurdles, but we can begin at least to rethink how to put in place macroeconomic stabilization policies to do the job better. I mean, I think economists understand we are,

we, something is not working. We have jobless recoveries. And that is not really kind of a tolerable situation. And we could attempt to do a counter-cyclical employment policy. It has been tried, even in the United States. We just never really did it on a permanent basis. You know, we have experience with direct job creation. We know we can put in place projects on short order. But I think that our thinking has really gone into the more indirect approaches, the nudges, you know, attempts to incentivize private sector, and it hasn't really worked terribly well. On April 4, 2023, around 2 in the morning, a man was found stabbed

multiple times on the sidewalk in downtown San Francisco. Hey, we did this to you. What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. You say, you know, that this is, people should not think, oh, this is communism or, oh, this is socialism, per se, because it's not trying to be the employer, first resort is trying to be the employer of last resort. So I want to ask you a question specifically about that. You know, we think about the Fed. It plays a role of lender of last resort. But part of

the last resort is that it's implicitly worse than, say, the market option. So if you have to go borrow money at the Fed in the worst case scenario, then you pay some like penalty rate, et cetera. Is the assumption that the public employment option would be on some level less desirable than private sector work. And then just beyond that, like, what are the jobs? Like, what are my options? If I'm unemployed and I go to an unemployment office looking for a job directly, how do you conceive of what the government can at any time and any business cycle put people to work doing in a way that would be productive and not just sort of like make work, something that we call a job for the sake of calling it a job? Yeah, yeah. So, I mean, the first

question is really interesting. Is this going to be the inferior option? I think we really don't think about this. Guarantees are everywhere. The government puts in place all sorts of guarantees. So, you know, think of deposit insurance. That's a government guarantee, right? Think of interest on short-term securities. That's a government guarantee. In fact, it's an employment program for bonds, right? You buy and sell bonds on demand to hit that price, right? So we do that for bonds. Think of the gold standard. That's a guarantee. You know, that's a guarantee for the price of gold. Well, it's in, you know, a price of the currency in the form of gold. But if you look at it the other way around, we buy and sell to hit the right price. It's a full employment program of gold. I mean, we have

buffer stocks. We've got all sorts of guarantees for commodities. We have loan guarantees. You know, in COVID, you know, the loan guarantees are the lifeline for all of these businesses that they can get the loan. They can be assured that the government will, you know, wipe it off. if they preserve payroll. So guarantees are everywhere. It's just we don't have guarantees for employment. And employment basically functions in the same way to provide a basic floor, basic price in the labor market.

Now, what are the jobs? I mean, this is a question of administration and management. In my conception is that these are public service jobs because it is really a public program. you don't want the public sector to compete with the private sector. We're not going to be building electric cars and doing things for commercial return. If it is a public objective to provide an employment safety net, it should create something of social value. And as I was saying earlier, we have lots of neglected areas.

So I think that the obvious place to go is really green work, community rehabilitation, environmental projects, dealing with things like, blood control, fire, prevention, of the damage from hurricanes and other natural disasters. In other words, we can borrow from FDR's playbook, and we can use some of that experience, but really adjusted for the modern day. A lot of environmentalists talk about trees as the lungs of urban spaces. It seems like a pretty easy and straightforward thing to do, but it has huge, huge effects on our living environment. So that would be where I would go to create employment opportunities. But broadly, I talk about care work.

We have also shortages in care for the elderly, for at-risk youth. So anything and everything from after-school activities to classes and training, to recycling initiatives, urban campuses, to community gardens, to deal with the food desert problem across the country to dealing with the fires in California. Can you talk a little bit more about the impact of inflation if we were to have a jobs guarantee program and presumably get maybe not all the way to 100% employment, but much, much closer to it? How would you see that actually impacting wages and broader economy? So one of the objectives of the job guarantee is to raise the minimum.

wage and firm it up. So now we have 725 as the minimum, the federal minimum wage, states and cities have higher wages. But even if you want a minimum wage job, if you're faced with mass unemployment, your wage is zero essentially. Maybe you can get some unemployment insurance. You know, that's temporary. But if we have a public option that provides $15 an hour, then that becomes the floor for the rest of the economy. So we should expect a one-time bump in wages and prices. Now, will that be inflationary? So we have to look to like historical examples where we've had something similar like that.

So if 1949 was the one time in U.S. history when we doubled the minimum wage. So 15 will be like, you know, doubling of the current minimum wage. and we were as close to full employment as we had ever been right in the post-war era. And so there wasn't any material inflation of note that we see from just this bump up in purchasing power. Now, the program itself is designed to function countercyclically, which means that it represents a stimulus. It represents fiscal contribution to the economy. So if you have COVID and great financial crisis and people are trickling into the program, they're getting wages and income and they are then spending, that is the stimulus itself is what kickstarts the private sector economy, which is facing deflation. Now, when the private sector picks up its hiring, then the contribution is removed.

People transition into private sector, better pay private sector jobs. and so the stimulus naturally and automatically shrinks. And so that is a kind of a damper on any inflationary effects that we might see in the economy. But what's interesting about all discussions about inflation is that inflation is assumed to be a function of strong demand and too high, as a demand side effect, you know, high incomes and strong aggregate demand. But we actually don't really experience that. We haven't really experienced that except after World War II because we've never had a tight full employment economy. We've never really had robust, strong growth that has generated this kind of demand-led inflation. What we see is, you know, things that become expensive like health care, like housing, like education.

You know, this is cost-push inflation. It's a different sort of inflation. So you don't need to keep people in an unemployment. employed and incomes down to tackle this sort of inflation. There are other ways of dealing with it. So just, you know, just to sum up, the program is anticyclical. I think we have a case of mistaken identity for inflation. We tend to think of it that it's demand-led, but it's really, you know, cost push inflation.

And we already have anticyclical fiscal policy that stabilizes inflation over the cycle. So the job guarantee will do the same. Sorry, one more question on inflation. I mean, I tend to think of like our current sort of conventional approach is to the macro economy is, well, let's target inflation, let's make sure price is stable. And then if we're good at that, then employment will soon follow. And to me, it feels like MMT, job guarantee aside, subverts that and says, let's do the employment side first or let's focus on that.

would you expect there to be more price volatility generally, even if it's not okay, like, you know, even if it's not like massive inflation, would you expect there to be more price volatility in a system that didn't start by essentially targeting inflation? I mean, no, not necessarily. We first, we can't even hit our inflation target, right? You know, we've tried for 20 years and we can't generate even. So a little bit of inflation is probably going to be a good. good thing. If we get this one-time bump in wages and incomes at the bottom, I think that that

will bring a little bit of desirable inflation, increasing incomes and profits and assets. Now, volatility. Why would we expect volatility from an economy that has full employment? What do we know from countries that have direct labor targeting is that their labor market is actually more stable. Like in the U.S., the unemployment rate is this huge yo-yo. It shoots up and downturns and then slowly kind of come downs in these jobless recoverers and then shoots up again. So with the job guarantee, which is direct labor targeting, we dampen these amplitudes. So we actually, the downside is stabilized, right? Well, we don't fall into these big deflationary death spirals.

Now, on the upside, it's not the job guarantee that will create any price volatility. you might see volatility coming from other parts of the economy. We might see shortages, we might be at max capacity in certain industries. They may be commodity price, volatility, you name it. But these sorts of things are outside of the contribution of the program itself. Pevillian, you know, obviously, you know, we've said it, you know, you'd sort of like come at this from an MMT framework, which is something that pretty frequently comes up on our episodes these days. You know, when I first became aware of sort of modern monetary

theory 10 years ago, like it was a lot of focus on fiscal capacity, the fact that people's conceptions of what our limiting factor with spending is, misconceptions about printing money, inflation, and so forth. How crucial in your view is the job guarantee? to the MMT project, is it something that you think must be central, or is it something that, you know, given the sort of descriptive aspects of MMT is a choice, or do you think it's sort of like a, you know, core to the whole thing? I feel like there's some dispute about this question. Yes, yes, I hear that a lot, but it is, it is a core element. And the reason is because the job guarantee is not just another jobs program.

You know, we can come up with all sorts of job creation programs, but for MNT, the job guarantee is the substitute for the unemployment stabilizer. It's the substitute for the NIR. So in the universe of macroeconomic policies, you know, however well intended they may be, we have two options, really. We either have policies that nudge and incentivize, but they never quite create enough jobs for all, in which case, unemployment is always. going to be the collateral damage when we have macroeconomic fluctuations.

Or you have a policy that guarantees employment. So there are two choices. So what MMT says is that the public sector expends resources anyway to deal with unemployment, and we can do it by putting in place a more robust automatic stabilizer. But there's another point I want to highlight that actually doesn't really get any play. M&T says that the government is the issue of the currency and it has the exclusive monopoly. Now, in any Econ 100 course, we teach our students that a monopolist has the exclusive prerogative to set prices. But what does that mean for an issue of the currency?

You can actually set the price of that currency. You could figure out the manner in which you supply that currency to the economy. So what the job guarantee does is something very interesting. It actually sets a conversion rate through this program of currency spent in exchange to some basic labor, right, the wage for labor. And, you know, you can envision a scenario in which the price of labor is fixed, but the budget floats, right? If unemployment accelerates, then you relax the budget, you spend as needed on. buying all excess labor at this price. And then, of course, when unemployment shrinks, then you reduce that expenditure. But there's always that fixed price that you're paying and you

have a floating budget. What do we do today? Today macroeconomic policy is exactly the opposite. We fix a budget. If Congress gets together, we pass a budget for the year. And then we pay market prices for whatever output labor will be, we will buy for the various programs. So it's very interesting because we pay market determined prices. We don't quite always get all the output that we need to satisfy various public needs. The programs don't really provide the necessary stimulus to secure type full employment. And so it's not quite adequate. So the job, guarantee, at least with respect to full employment, has this,

other unique feature that only a monopolist has the prerogative, right, to put in place, to spend as needed at a given price to employ all excess labor as needed. Pevelina, that was awesome. I'm glad we finally got you on the show is very timely, and I hope everyone reads your book. Thank you so much. It was great talking to you both. Yeah, that was great. Thanks, Bethlehna. It was really interesting. Thanks. You know, I really like the way of Lena frames the question of what we decide to fix. I think that to me is sort of the most sort of interesting and counterintuitive idea of this. Like, okay, we guarantee that your money in the bank will be safe.

We guarantee what interest you'll be able to get paid on X. Like the government sets all kinds of guarantees. So the idea that we would extend that to labor, it's not. automatically intuitive, but it's also not, you know, it's really not out of the realm of lots of other things we do in the economy. I totally agree, but again, this is sort of my main criticism of MMT. Like the constriction on the jobs guarantee has always been political and not financial, because we do spend loads of money on other guarantee programs and, you know, some other social programs. So, like, how do you actually overcome that barrier?

And even if, as Puffino was saying, there does seem to be, you know, a groundswell of support building for a guarantee of some kind. Like, it still hasn't happened and it still seems quite far off in the U.S. political system. Yeah, well, you got to write books and you got to come on the Odd Lots podcast. And then influential people have to listen to the Odd Lots podcast. And then they're like, all right, we're going to vote that in the law. I mean, to me, like, that actually is, though. The answer, it's like, you just got to, it's political and you just keep fighting for it like any other fight. whether it's whatever else people fight for.

The other major thing that we probably could be talking about in this context is having some sort of socialized medical system. But again, for the past few years, we've seen how polarizing that whole debate became. But if you think essentials for being a complete, you know, human being, probably a good job or at least a job and medical care. Yeah. And, you know, as Pavilion mentioned, like, some of these things are, like, really popular.

Even, like, health care, like, it's so polarized at the sort of, like, congressional level. But I don't know if probably a lot of people missed it. Just the other day, a couple of days ago, Oklahoma voters overwhelmingly decided to expand Medicaid in the state. So a couple hundred thousand people are now going to get Medicaid who were previously ineligible. A lot of these things are, like, popular when you actually put them at the popular. level as opposed to, say, the congressional level. All that aside, like, no, it does seem like, you know, whether it's sort of the general MMT concept of, okay, there's a lot more fiscal flexibility than we were let to believe, or the sort of narrow objective here of let's use that

to give everyone a job, it just sort of starts by reframing people's popular conceptions. And look, you know, what we see right now is a reminder, like, we have so much flexibility as a country to spend and do things. You know, that they're like we've managed to keep people's household incomes actually going up despite incredible unemployment. So we're sort of getting this real time experiment in what we can do. And I think part of the premise of all this is why do we only limit it to the worst possible crisis? is why don't we take what we learn and actually create something more stable? Because again, like crises aside, we've been underemployed for at least two decades. Well, I do think we've been talking about this a lot already, but I do think one of the unique things about the coronavirus is that it is going to give us a chance to have these sort of conversations about the structure of our economy.

So, you know, if there's ever a moment to start talking about a jobs guarantee, it's definitely this one. So it's going to be fascinating to see what happens. Great. Okay. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthall.

You can follow me on Twitter at the stalwart. Be sure to follow our guest, Pvelina Chernava. She's at P. Cherneva and check out her book on the job guarantee. Follow our producer on Twitter, Laura Carlson at Laura M. Carlson. the Bloomberg head of podcast, Francesca Levy, at Francesca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening. I'm June Grasso, inviting you to join me for the Bloomberg Law podcast.

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