Thursday, November 7, 2013

Bill Mitchell and the Job Guarantee.

It’s good to see Bill considering the fact that the amount spent on capital equipment, materials and skilled labour (relative the costs of actual JG labour) is a variable. He appears to be considering three different scenarios where the ratio of the above JG labour costs to other costs is 75/25, 60/40 and 50/50. (Word search for e.g. “50/50” and you’ll find the relevant paragraph).
I’m not sure what the logic is behind the above seemingly random figures. A more relevant point which I made here is as follows.
If the amount spend on “other costs” relative to amount spending on JG labour is very small, that necessarily means a JG scheme which employs JG labour and practically nothing else. Such a scheme will be highly unproductive. On the other hand, if the ratio of other costs to JG labour costs are similar to the sort of ratios of other costs to “relatively unskilled labour costs” that one finds with a normal or regular employer, then the JG scheme in effect becomes a normal or regular employer.
Thus JG is caught between a rock and hard place. Or rather, the inevitable conclusion one is driven to is that SPECIALLY SET UP JG schemes do not make sense: that is, JG labour might as well be subsidised into work with regular employers.
And indeed that is exactly what the UK’s Work Programme and similar “temporary subsidised employment” schemes that have appeared and disappeared over the decades have consisted of.

Private and public sectors.
And note that while the Work Programme involved subsidised work with PRIVATE employers, the arguments for and against letting private employers “join in the fun” have little to do with the above “rock and hard place” point. I.e. if private employers are barred from taking on JG labour, then the above rock and hard place point still drives us to the conclusion that JG labour should be allocated to EXISTING public sector employers rather than to specially set up JG schemes.
To which astute readers will respond: “Oh but it’s plain impossible for e.g. the UK’s National Health Service, state schools, etc to absorb a million not too skilled temporary employees”.
To which my response is: “Dead right. And that’s one argument for letting private sector employers join in the fun.”
And as to those who think that supplying private sector employers boosts profits, they need to study an introductory economics text book. There they will find an explanation as to why subsidies expand the SIZE OF an industry or firm, but do not boost profits as a proportion of turnover in the LONG TERM. (Likewise, and incidentally, taxes are a mirror image of subsidies and have a mirror image effect: that is while taxing a firm or industry INITIALLY depresses profits, the LONG TERM effect is simply to reduce the size of the firm or industry.)

No comments:

Post a Comment