Modern Monetary Theory and the Job Guarantee have gained significant traction on the left and within public policy circles, particularly since the health and economic crisis hit.
While recent attention has focused on the potential of MMT and the Guarantee to compromise progressive taxation and the welfare state, this article will instead focus on the risk it poses to the bargaining power of workers and their unions.
Despite its attractive slogan, the proposal has a concerning reactionary tradition, with many of its proponents invoking rhetoric highly critical of the welfare state. This should make us wary of adopting it as part of a progressive policy platform.
Although several economists from the left have taken issue with MMT, its proponents do not describe it as a policy proposal. In their words, it is simply a description of what already occurs. Conversely, the Guarantee is a specific policy proposal.
Models for a Guarantee have existed in several forms, however, there are a few constants throughout all. Namely, the Guarantee would make the federal government an employer of last resort for anyone who wants a job. In economic downturns, the program would expand and employ people who have lost their job in the private sector. As the economy begins to recover, these people would transfer back into the private sector.
There is some debate about whether such a scheme would be voluntary or not. Some US MMT economists, like Stephanie Kelton, suggest it would be voluntary. Others, like Randall Wray, state workers could utilise unemployment insurance until it runs out and then enter the Guarantee. Australia has a different welfare model to the US, and the most prominent MMT economist in Australia, Bill Mitchell, states that such a program should be compulsory. However, for the sake of argument, I will proceed under the basis that such a scheme would be voluntary.
Proponents of the scheme insist that the jobs would not be ‘make-work’. They would be ‘real jobs’ and people in the program would receive a living wage (which would become the new minimum wage), as well as superannuation, leave entitlements, and the normal conditions that go along with employment.
There are several suggestions for the sort of work people in the program would complete. An article in Challenge from Young Labor for Full Employment suggested that the program would provide:
“work building renewable energy infrastructure and restoring natural wilderness to stop climate change; work building and maintaining social housing to end the housing crisis; work in our hospitals, schools, childcare centres and every other sector of the Australian economy that brings value to our society”
There is one aspect of the Guarantee that makes it distinct from all other forms of employment. Wages are set. They are not bargained for, they are dictated by the government at a level that would become the new floor for wages. This is made clear in the previous work of Wray, but also in this more recent proposal.
There’s an obvious problem with this. If this is real work, then why shouldn’t the participants be afforded the same rights as every other worker? That is, the right to organise and collectively bargain. This right is acknowledged specifically in the International Labour Organisation’s 1998 Declaration of Fundamental Principles and Rights, which was adopted by Australia in the same year, and is referred to in the explanatory material of the Fair Work Act.
This has some worrisome implications. Building our renewable energy infrastructure is a critical objective. But why should the workers who build this infrastructure not be able to bargain for their wages? Similarly, our childcare centres, schools, and hospitals are understaffed. But why should the Job Guarantee participants who are being placed in these institutions be given fewer rights, or be paid less than the people who they will be working alongside?
This is also highly problematic for unions that have negotiated enterprise agreements. An employer would be discouraged to continue to pay wages negotiated in enterprise agreements, wages well above the minimum wage if identical work is being done by people in the Guarantee program. Similarly, why would employers give their workers a pay rise when they can simply hire workers from the program at minimum wage.
Wray argues that this is actually the intent of the program. He states that workers in the program will function as a ‘reserve army’ that employers can use to bid down the excessive wage claims of their employees. Further, this ‘reserve army’ would be more effective in keeping down wages as it becomes more accessible to potential employers. Any unionist would be rightly concerned at the impact this would have on workers’ bargaining power.
Of course, some Guarantee proponents might handwave this concern by asserting that program participants will be able to bargain for their wages. However, this completely contradicts what MMT economists such as Kelton and Wray state is a key advantage of the scheme - preventing inflation. The setting of a minimum wage exogenously is what stops runaway inflation while maintaining full employment.
MMT economists, including Wray, deal with this issue by stating that the program would be prohibited from replacing any existing workers. This severely restricts the type of work participants can do. We already have workers who can build renewable energy infrastructure, they just have to be directed to do so. Similarly, we already have workers who can build more social housing, the government just needs to engage someone to build it, or build this housing directly itself. We also already have people working in child care centres, hospitals, and schools, we simply need to increase the number of positions available.
This then leaves a very limited set of tasks for people in the program to complete. Unfortunately, much of this work is likely to be drab, boring, and by definition, unnecessary. Hence, why many opponents have likened such a program to Howard’s Work for the dole, or Nixon’s workfare, albeit with higher payments. This might also explain why the Guarantee has received support from the likes of John Carney, the economics editor of the far-right publication, Breitbart.
Make no mistake, we should support full employment, we should build the infrastructure necessary to stop climate change, we should build more social housing, and expand employment in schools, hospitals, and child care centres. But a Jobs Guarantee is not required to do any of these things. The government can simply fund and undertake these activities directly; employing people through a normal process, and without stripping away the rights of workers to organise and bargain collectively.
Michael Hiscox is a trade unionist and a member of the ACT Labor Left