The purpose of politics can be said to be to resolve conflicts among different groups in society that arise from conflicting economic and generational interests. Developing compromise solutions that can promote harmony and good societal relations are the raison d’être for political parties.
The post-war welfare state delivering health and education services free at the point of use is such a compromise. So too is the social security safety net.
There were weaknesses in the Beveridge plan, particularly around the problem of marrying universal benefits with widely varying levels of rents across the country. Societal changes since Beveridge’s day have also seen unprecedented growth in single-parent families and the length of time spent in retirement.
Additionally, wide gaps have appeared in the rates of subsistence available to pensioners via the state pension and lower rates available to working-age claimants, especially those under 25.
The recent Fairer Share for All paper proposed to ‘pilot a secure income guarantee to test the impact of introducing an unconditional element to the benefits system’.
At present, there are two principal methods directed at providing income support to the lower paid and or unemployed.
The first is a personal tax allowance of £12,500 worth £2,500 to a basic rate taxpayer, and a national insurance threshold of £8,632 worth £1036 in employee national insurance savings.
The second is universal credit with a basic allowance worth £317.62 per month for single claimants over 25.
The first proposition here is to reinstate equality between the personal tax allowance and NI threshold such that each is equal to £12,500 and to make these allowances available as tax reducer. The difference between a personal allowance and a tax reducer is tax relief is restricted to basic rate tax, so higher rate taxpayers receive the exact same amount of tax relief as basic rate taxpayers. The combined rate of tax and NI relief would be £4,000 or £333.33 per month. The increase in the NI threshold is more than offset by limiting tax relief to the basic rate for higher rate taxpayers and higher employer contributions from withdrawal of the NI threshold (NI relief for smaller employers would continue to apply).
The second proposition is to increase the universal credit basic allowance to £333.33 per person and make it not subject to withdrawal. This can be effected by increasing the universal credit work allowance to £12,500 and maintaining the allowance in line with the tax and NI thresholds. Currently, the work allowance is £6,036 (£3,444 for those in receipt of housing benefit). Initial funding for benefit increases would come from unfreezing fuel duty and restricting relief on pension contributions to basic rate.
This then becomes the minimum income guarantee. The same level of benefit (£4000 per year) could be made available to eligible students in full-time education as a maintenance grant or in a training program with top-up maintenance loans for the neediest students. So would carers allowance be based on this sum.
The tax allowance/NI threshold/Work Allowance of £12,500 would be increased in successive budgets to bring it to the equivalent of a full-time minimum wage i.e. currently circa £16,250 or an equivalent guaranteed minimum benefit/tax reducer of £100 per week/£5200 per year excluding means-tested benefits.
To address persistent poverty arising from long-term unemployment, a minimum income guarantee should be supplemented with a job guarantee scheme run by local authorities focused on a staffing pool to aid in delivery of publically provided childcare services, adult social care, youth services, environmental clean-up programs; and training as teaching assistants and paramedics among others.
The minimum income guarantee does not remove the need for supplementary means-tested benefits and higher allowances for families and the disabled. But coupled with a job guarantee scheme at minimum wage it goes a long way to making work pay and providing a route out of poverty.
It is the kind of societal compromise that can help to build solidarity and that a healthy political system should be capable of delivering.
* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.
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Bit lost by this, does this mean every adult would get £4000 and then just pay NI/income tax on whatever they earn or is that too simple a system? So a couple with two kids would get £8000 plus child benefit and then whatever they can earn, plus housing benefit if they can’t earn enough.
There is a lot of unfairness in the state pension, as well, someone could pay a lot of tax/NI over 20 years yet not get the full state pension if they do not then work or make voluntary NI payments. Pushing the pension age to say 70 (to help pay for it) and then giving every adult twice the guaranteed income instead of the state pension might be worth a look. And replacing child benefit with a lower income payment could help simplify the whole system. It is sort of UBI in disguise, though.
Wouldn’t such a job guarantee make local certain services dependent on low labour demand, and thus vulnerable to periods of tight labour markets?
Also, what if people’s skillsets and aspirations don’t align that jobs in this scheme? That would require additional retraining
Full employment is something governments should strive towards but through AD management, more public sector hiring across the board, and retraining to prevent structural unemployment.
Frank West,
yes, that is broadly it. If you are earning minimum wage of £16, 250 you will get tax and NI relief of £4,000 and pay £1200 tax and NI on your earnings. When the relief is increased to £5200 in the future you will pay Nil tax and NI on a minimum wage. Any benefits you are entitled to such as child credit, disability benefit and housing benefit are paid on top subject to the withdrawal rate of 63p in the pounds for earnings over the work allowance.
If you are unemployed you will get £4,000 (rising to £5,200 plus any benefits you are entitled to. You will not get both tax relief on earnings and a basic allowance, but there will be no withdrawal of supplementary benefits until you have earnings above £12,500 (rsing to £16,250) in the future.
William Francis,
job guarantees are targeted at the long-term unemployed. The aim is to bring people back into the workforce and develop the habits and skills required for employment in the public or private sector. Funding of job guarantees provides the fiscal stimulus to promote full employment. It is what Keynes called effective demand management i.e. fiscal stimulus that directly targets employment rather than a scatter gun approach.
Joe, thank you for opening up the subject of tax and income for both those in employment and those who are not in such an interesting way. This invites and deserves much thought and much discussion, not least from myself. My first response is to like a good deal of it, to wonder about some aspects (such as raising resource from unfreezing fuel duty), and to ponder whether such solutions would too easily allow deep-rooted employment problems such as irregular and insecure working, and severe housing problems such as uncontrolled private rent pricing, to continue to be ignored. However, you do not ignore the perceived need of making the well-off contribute a greater share, so as to reduce inequality of income and wealth, and are not accepting a kind of poor underclass in our society. Moreover you wish all those able to and wanting to have a job to be able to find one. This seems like liberal thinking, and appropriate to the need for a renewed Beveridge-type social contract in our society.
Katharine,
This letter was signed by 50 LibDem PPCs last November
“We, Liberal Democrat prospective parliamentary candidates for the 2019 election, wish to highlight the party’s policy of trialling an unconditional minimum income element in the social security system, as endorsed by conference this year within our A Fairer Share for All policy paper. It is crucial that a liberal perspective on this debate is heard as widely as possible… as a prospective party of government it is crucial that the electorate hear about the full range of effective, progressive policies with which we want to tackle the deep evils of poverty and insecurity in Britain.”
“…we are proud to stand …on a policy of abolishing benefit sanctions – but as a party we have rightly committed to going further and piloting a minimum income element, accessible to all. One of the most damaging features of poverty is the chronic insecurity faced by the worst off in our society; as liberals, our policy will give a route to tackle this and pilot a new, twenty-first century system that will give people the freedom to make use of opportunities and improve their lives. We are proud to be standing as candidates with a party policy to secure pilots of such a system, given its potential for putting our Liberal Democrat values into practice, and as such we wish to highlight our personal support for this policy and our willingness to work to secure such trials in the next parliament.”
On the issues of employment problems such as irregular and insecure working, you will be aware of the party’s policy to alter employment rights to make them a better fit with the gig economy. the creation of a “dependent contractor employment status” in between employment and self employment. This would entitle workers to minimum earnings levels, sick pay and holiday entitlement. People on zero-hour contracts would benefit from a 20% higher minimum wage to compensate them for the uncertainty of fluctuating hours of work. Zero hours and agency workers would also be given a right to request a fixed-hours contract after 12 months “not to be unreasonably refused”.
As regards uncontrolled private rent pricing, you will know my views that this can only be effectively brought under control by adopting the kind of reforms advocated by Shelter to the operation of the land market.
I like the idea of a universal income but £4000 a year is too low it needs to be £157.62 a week which is the poverty level for a single person in April 2019, based on Joseph Rowntree Foundation April 2016 figures. I like the idea that for those on benefit it would work as if the £12,500 was like the work allowance of Universal Credit. I like the idea that this £12,500 would rise to the full-time national minimum wage which I don’t think is £16,250, but is currently £16,009.50 based on a 37.5 hour week, rising to £17,004 from April. I have no idea what a £100 guaranteed minimum benefit/tax reducers is or how it works. Joseph doesn’t give any details of this in the OP.
I think this minimum income guarantee would remove all full time workers (without children) out of relative poverty before housing costs. And a person earning £8196.24 a year now would be living on the poverty line before housing costs (about 19.2 hours a week).
It would cost £25.6 billion to pay £4000 a year to the 6.4 million who are not economically active and currently receive no benefit. It would cost £11.16 billion to increase the National Insurance threshold to £12,500. To increase the work allowance by £1000 for claimants with children or who have limited capability for work cost about £1.1 billion in 2018. At the moment claimants not in these groups have no work allowance. It would cost about £7.15 billion to increase the existing work allowances by £6,500 but it would still leave those receiving housing benefit about £3,000 short of £12,500. I think it might cost a further £3 billion to increase the work allowance by the last £3,000 for those on housing benefit and about £5 billion to provide it for those without children who currently have it set at zero. Say £15 billion to increase everyone’s work allowance to £12,500. The total cost of all three is about £51.76 billion.
I think Joseph implies that the rates where the different tax rates kick in are changed. Instead of not paying tax until earning above £12,500, they will nominally pay income tax and national insurance on anything which is earned. Instead of starting paying the higher rate at £50,000 it would be lowered to £37,500. Joseph has stated that 4.28 million people pay the 40% tax rate and the changes mean these people will be paying an extra £2,500 a year, totally £10.7 billion. This leaves £41.06 billion to find to fund this.
The generous amounts you suggest should be introduced, Joe, particularly I suppose in nearly doubling the universal credit work allowance, will naturally require careful costing. Is work being undertaken to equate the amounts with suggested sources of finance for them?
I didn’t know about the enlisting of 50 PPCs to sign the letter endorsing the proposed piloting of this scheme. To whom was the letter addressed? And where is it thought that the pilot should take place? Is the plan to try to persuade the government to try the scheme? Is there any thought of seeking support from the Labour Party or SNP welfare spokespeople? – both of whom spoke in support of the Alston denunciation of the government policies which allowed the rise in poverty.
Yes, thank you, I knew of the various party policies which would help people in insecure employment, which must be sought for as minimum. The job guarantee scheme is not I think yet party policy? I take it that the current compulsion of people to work or lose all benefits would no longer apply in your new scheme, which it will be difficult to obtain popular assent to. In that case the job guarantee might be sought to become compulsory – a dilemma much discussed lately on this site.
Two Coronavirus-related articles have been published on this forum, but by now only 5-6 people have comments there. Please, guys, have a look at them. You must see in the pandemic a golden opportunity to distinguish ourselves to public, starting by loudly criticizing the government’s current lack of strong actions and call for aggressive testing, which is currently being done with significant success in South Korea.
Note: you guys ought to do research on how Korea is handling the pandemic and getting it under control.
@Katharine Pindar: I hope you can read those articles.
Michael BG,
Larger employers would pay employers NI on all earnings without a NI threshold deduction. These changes mean that the increase in the employee NI threshold is funded in full by restriction of reliefs for higher rate taxpayers and large employers.
There are no payments to the economically inactive, You have to be paying tax and/or national insurance to use any part of the tax reducer relief, If you are not paying tax or NI or not eligible for Universal credit you will receive no payment – so you can discard your £25.6 billion estimate for this.
As per page 72 of the attached report https://www.ukonward.com/wp-content/uploads/2019/05/ONWJ7142-Firing-on-all-cylinders-report-190530-WEB-1.pdf
“as a cautious estimate, a further £3,000 increase in work allowances would
cost £5 billion a year after five years. For the biggest winners, such a reform would
increase their income by just under £1,900 a year” Increases in the order of £6,500 could be expected to cost around £11 billion. However, this would very likely reduce as people found it in their interests to take up guaranteed job offers. This s the approximate sum expected to be raised from unfreezing fuel duty and limiting relief for pension contributions to basic rate . Additionally, the annual amounts provided for in our last manifesto in respect of welfare and early years provision increases by 24/25 include the following of which 9.43 billion is allocated directly for improvements in benefits.
Tackling in-work poverty 3,330
Early years and childcare 13,990
Extend free school meals 1,160
Restore maintenance grants 940
Tackling child poverty 2,820
Support for disabled people 1,280
Making the welfare system fairer 2,000
The changes proposed to tax and NI reliefs and fuel duty together with the sums already provided for in the manifesto costings provide ample room for funding the reliefs for lower and middle income earners, improvements in benefit provision and implementation of a job guarantee program for the long-term unemployed to address persistent poverty,
Even using your estimates, Michael, once you deduct the £25.6 billion from your £41.06 billion you say is needed, you are left with £15.4 billion to find. Employers Ni, fuel duty and restrictions on pensions relief will more than cover this figure alone without reference to the manifesto costings.
Katharine,
the letter is linked in this article by James Baillie
https://www.libdemvoice.org/this-week-fight-for-our-values-on-social-security-62847.html.I am unaware as to what work has been undertaken since the Fairer Share for All Paper was adopted. Most likely it was interrupted by last years election.
We have already been clear that we would eliminate benefit sanctions. There can be no compulsion. The job guarantee scheme fulfils the state’s role as employer of last resort and ensures that the right to work has substantive meaning as well as providing an adequate income for participants in the scheme.
Joseph Bourke,
It is possible that I have underestimated the cost of your Minimum Income Guarantee. In my article on the Greens UBI of £89 a week I estimated they were saying it would cost £73.9 billion to bring it in (https://www.libdemvoice.org/can-the-greens-universal-basic-income-tackle-poverty-62840.html).
I hadn’t realised you wanted employers to pay the cost of increasing the National Insurance threshold to £12,500 of £11.16 billion. I am surprised, but accept it could be done. Of course some companies may have to fold if they have to pay an extra £1,190.66 for each worker. Employers already moan about what they have to pay in NI calling it a tax on jobs.
The Onward paper is using the same basis as me for their costs of increasing Universal Credit work allowances (page 70). In fact they seem to have greater costs than me of £1.67 billion per £1,000 for those with children or who have limited capability for work compared to my 1.1 billion. So your £11 billion is greater than my £7.15 billion. You still have to estimate the extra for the £3,000 difference for those receiving housing benefit and all those people who don’t have children or who have limited capability for work. It is very possible I have overestimated these and using my £1.1 billion figure for £1,000 the extra for those receiving housing benefit should be £1.67 billion and for those without children £4.4 billion totally £13.2 billion. Using the same methodology for £1.67 per £1000 we end up with a total of £20.26 billion. £20.26 is a long way from £9.43 billion. I think a 4.7 % rise in fuel duty would only raise £1.33 billion. I think both the RSA and the IFS state that restricting tax relief on pension contributions to the basic rate will generate £10 billion. I hadn’t realised you were scrapping all of the desperately needed welfare reforms we promised in our manifesto costings document which I strongly support and thought you did too.
Joseph Bourke,
I hadn’t realised your Minimum Income Guarantee didn’t guarantee a minimum income of £4000 for all working age adults in the UK. I thought it was to be provided to everyone without any conditions or means testing. There are about 6.5 million unpaid carers in the UK. 19% are aged 65 or over and 25% provide more than 50 hours per week. Therefore the number of carers who you want to provide your Minimum Income Guarantee to is about 1.3 million. You have already identified 2.3 million students who you are giving your Minimum Income Guarantee to. So even if you could ensure that all of the 6.4 million who are not economically active and currently receive no benefit will not get your non-universal ‘Minimum Income Guarantee’ you still wish to pay it to 3.4 million which will cost £13.6 billion.
I can’t imagine the party supporting a non-universal ‘Minimum Income Guarantee’ or dropping our £9.43 billion of welfare reforms to reverse the Conservative 2015 cuts.
Michael BG,
the employers NI increase is for larger employers only. As noted in the article- The increase in the NI threshold is more than offset by limiting tax relief to the basic rate for higher rate taxpayers and higher employer contributions from withdrawal of the NI threshold (NI relief for smaller employers would continue to apply). Smaller employer relief is given by way of an employment allowance.
Unfreezing fuel duty is estimated to generate an estimated £4 billion now. The Institute for Fiscal Studies has calculated that the failure to raise fuel duty in line with plans originally set out by Chancellor Alistair Darling in 2009 now costs the Treasury around £9 billion a year http://www.lse.ac.uk/GranthamInstitute/news/why-the-uk-government-has-frozen-fuel-duty-again/
I do not propose scrapping any of the welfare reforms in our manifesto document although clearly some will overlap such as Tackling in-work poverty 3,33 billion and Making the welfare system fairer 2 billion.
The minimum income guarantee a outlined above is a basic allowance to those eligible for Universal credit or a tax and NI reducer to those in employment. Carer’s Allowance is currently paid at £66.15 a week. From 6 April (2020-21), this will increase to £67.25 per week.This proposal uprates the figure to £333.33 per month. Carer’s Allowance is not based on your income and capital (or any partner’s). However, there is a cap on how much you can earn from work and still be entitled to Carer’s Allowance.
Students do not receive Universal credit. Many will take part-time work. Eligible students receive a grant. There is £940 million allocated for this in the manifesto costings for University students. 16 and 17 year olds and overseas students are not eligible.
The party has already adopted the principle of piloting a secure income guarantee to test the impact of introducing an unconditional element to the benefits system. I think this is worth pursuing and this article seeks to set out a basis for how that may be achieved.
With respect to the job guarantee, a single claimant with a disability allowance will have income at or above the JRF poverty line without employment income. An able-bodied single claimant will have the option of a job guarantee that would pay well above the poverty line.
” Developing compromise solutions that can promote harmony and good societal relations are the raison d’être for political parties.”
I don’t know about that!
The alternative view is they are the instruments of class struggle. It’s not so much a Marxist viewpoint as the viewpoint of the Thatcherite wing of the Tory party too. Whenever was she interested in “promoting harmony and good societal relations”? I know that’s what she said the day after she was elected in 1979, but does anyone think she really meant it?
Joseph Bourke,
I don’t see the £2,500 income tax which is not paid because of the structure of the income tax system as tax relief as it is automatic and built into the system. In my first comment in this thread I estimated the increase in tax from reducing the threshold by £12,500 for the higher income tax rate, using your figures, as £10.7 billion. The Employment Allowance applies if the eligible wages for paying employers contributions is less than about £724,650 a year, so about 30 full time employees.
I am glad to read that you are not advocating scrapping any of our welfare reforms set out in our 2019 manifesto.
I had assumed wrongly that all full time unpaid carers would receive your ‘Minimum Income Guarantee’. The conditions for receiving Carer’s Allowance are that the person who is cared for receives certain disability or attendance payments. The cap on earnings is £123 net!
You didn’t say that your ‘Minimum Income Guarantee’ was means tested for students. The 2.3 million students figure was provided by you. I had assumed the 2.3 million figure was close to the number of UK students in university education. How many do you think will be eligible for your ‘Minimum Income Guarantee’?
Please can you explain how someone receiving Employment and Support Allowance after we have restored the extra for being in the Work-Related Activity Group receives at least £157.62 a week?
The party has not accepted the principle of providing a guaranteed minimum income. In “A Fairer Share for All’ we said we wanted to pilot a scheme. I expect that the party would decide after running a pilot scheme if it should become policy. The pilot scheme didn’t make it into our manifesto.
Joseph Bourke,
As you know I support the idea of a Job Guarantee but I think running one will be very problematic. If I was Chancellor of the Exchequer I would allocate £1 billion to pilot a Job Guarantee scheme in North East England which is the region with the highest unemployment rate.
I think restricting a Job Guarantee job to the roles you set out in the OP would encourage the public employers of such people to rely on people on a Job Guarantee scheme, especially if they were paid at the minimum wage rate for their age. Why pay a teaching assistant more than the minimum wage when you can get someone for free being paid the minimum wage by central government?
I see a Job Guarantee scheme as being the backup for when it isn’t possible for the government to manage the economy to provide full employment and as a way of providing training and work experience to the unemployed either for a new role or to keep their skills up to date. Not as a way of providing people to do what might be considered worthwhile work activities such as you set out. In the Job Guarantee scheme that I envision someone who normally works in accounts would get a Job Guarantee job in accounts. The maximum time anyone could spend with one employer would be one year. I am considering if the hours should be limited to only 30 a week.
Combining incentives to work with an adequate safety net for those who don’t in an uncertain employment environment is the challenge. We should value present non paid work such as caring or charity work in a financial way so that most income is “earned”. This would also help to value those who do such work and assist them to progress.
Michael BG,
I have written on job guarantees in the linked piece in the article. One of the commentators there, Pavlina R. Tcherneva, is an acknowledged expert in this field who has undertaken detailed studies of such programs in various countries. She writes “the job guarantee improves the income distribution faster than any other type of fiscal policy, because it stabilizes employment at the bottom and allows incomes at the low end of the income distribution to improve faster than incomes at the top. Currently fiscal policy works precisely the opposite way–it improves the employment conditions and incomes of the so-called ’employable’ individuals–high-skill/high wage workers with little interruption in employment experience. For a genuine bottom up approach, policy must target those who experience the most precarious labor market conditions–the poor and the unemployed.”
Another commentator, Ralph Musgrave, is more critical when he writes; “One problem here is that the public sector is not as good as the private sector at employing the relatively unskilled.
Second, the evidence from around Europe with these schemes is that the subsequent employment histories of those involved is better in the case of temporary subsidised jobs in the private sector than in the public sector.”
Personally, I find Tcherneva body of reserach work more persuasive, but recognise there is room for debate on the most effective approaches. I do think it is a policy the party should be considering adopting sooner rather than later.
Peter Hirst’s brief point at 7.18pm, just above, is brief, but very important. There is a general danger that too many readers will take “incentives to work” to mean “incentives to find employment by and under a ‘proper’ employer”. Mothers or fathers bringing up children, and other kinds of unpaid work such as he mentions must be included in any scheme to provide a basic income.
Joseph Bourke,
You quote Ralph Musgrave who states that research shows that where private provides were used in they provided better outcomes for the person who had the Guaranteed Job. This is interesting and should mean that in any Job Guarantee scheme there should be roles within private organisations as I suggest.
I am not sure that what Pavlina R. Tcherneva advocates is what we would consider as bottom-up. However, I think there is talk of communities providing the organisations which provide the jobs for those on Job Guarantees, which is bottom-up in the way we would use the term.
It is very important that Job Guarantees provide the work of a type a person was doing before they lost their job so the person can use their existing skills and keep them up to date. I think providing this type of work could be problematic.
I have the impression that most Job Guarantee schemes are temporary and not a permanent feature across the whole country anywhere. I would be interesting in an article which sets out where Job Guarantee schemes have been used, why they stopped and which parts were the most successful. As I said I think a voluntary Job Guarantee scheme would be a good thing and we as a party should have the policy of supporting a pilot scheme in the region with the highest unemployment rate. Maybe we could work together to draft a conference motion for supporting a pilot if we could agree on how it would work and how we could include all types of jobs.
Michael BG,
This is a one pager from Pavlina R. Tcherneva http://www.levyinstitute.org/pubs/op_55.pdf She writes “Critics think the program will face large skill and geographical mismatches, but ignore the fact that communities with the highest levels of unemployment also have the greatest social needs. The JG puts the two together. It “takes the contract to the worker” and “takes workers as they are.” We have provided many examples of such projects that fulfill community needs, are labor intensive, and can employ even the least skilled among us. ”
This Washington Post article sets outs the proposals for work subsidies for low wage workers from Nobel laureate economist Edmund Phelps https://www.washingtonpost.com/news/wonk/wp/2013/12/11/nobel-winner-edmund-phelps-on-his-plan-to-help-low-wage-workers-without-raising-the-minimum-wage/?arc404=true.
I am heavily engaged at present with Alter (council tax reform) and the APPG on Land Value Capture (Reform of the 1961 Land Compensation Act), so would not be able to devote much time to drafting a conference motion at this time. This may be a suitable proposal for the Social Liberal Forum to develop and take forward and I would be happy to help with an approach to the group as an initial step.
@ Michael BG,
“I am not sure that what Pavlina R. Tcherneva advocates is what we would consider as bottom-up.”
The concept of the JG naturally incorporates the notion of “bottom-up”. Anyone running a business will naturally want to hire “off the top”. In other words, they’ll want to have a choice of several candidates for any particular job and select the best one. One problem of conventional Keynesian thinking is that increasing aggregate demand also increases the demand for the most able and employable workers which can create an inflation problem long before those less able and less employable workers get a look-in.
This is particularly problematic for those with mental and physical disabilities. The JG simply ignores all disabilities. As JoeB puts it: The JG ” “takes workers as they are.”
@ JoeB,
You seem quite taken by Pavlina R. Tcherneva. She’s an expert on the JG as you say but her expertise isn’t limited to that.
Her economic POV is very close to my own! I’d be interested to know if you can find any significant differences between us at all.
https://neweconomicperspectives.org/category/pavlina-r-tcherneva
Joseph Bourke,
Your quotation from Pavlina R Tcherneva is about employing low skilled people and my concern is about people with skills doing jobs where they don’t use them and so their skills while doing a Job Guarantee job are not kept up to date and what they did during their Job Guarantee job will not help them get a job in their previous occupation. I have already pointed out that I have concerns that Job Guarantee jobs would only be low skilled ones only to meet perceived social needs.
I too have things which need working on before I would be able to work with you to draft a comprehensive motion on a voluntary Job Guarantee scheme. Perhaps we should revisit working together on this motion at the start of next year.
Peter Martin,
Your discussion of “bottom-up” shows that what you are talking about is not what we (Liberal Democrat Party members) mean by “bottom-up”, which was my point, not that the provision of jobs for those at the bottom of the job market is a bad thing. If we identify that increasing aggregate demand would encourage employers to increase wages so they can attract workers already in employment rather than taking those unemployed or on a Job Guarantee scheme then we might need to provide incentives to employers to employ from these later groups. I think we might need to provide incentives to employers to employ people who receive employment and support allowance as well.
Peter Martin,
Tcherneva. has published detailed research on job guarantee programs that have been developed in other countries and her articles offer real world experience alongside practical policy recommendations that can be put in place regardless of whether it is initially deficit financed or tax funded.
I think her focus on effective demand, automatic stabilisers and a bottom-up approach is the right policy framework, although I find the arguments around job guarantees as an inflation anchor a little less convincing. I would also disagree that job guarantees should seek to replace social security or unemployment benefits. I see it in terms of targeting long-term and youth unemployment rather than cyclical unemployment. I also think it should run alongside a minimum income guarantee as it won’t be suitable for everyone, particularly single parents with pre-school children.
I would also suggest that deficit spending needs to be managed over the business cycle not only with regard to potential inflationary consequences, but also to ensure efficiency and value for money in both current and investment spending (including debt service costs); to maintain the confidence of financial markets; to provide for fiscal headroom in dealing with shocks and downturns; and to allow for increasing demands on the working population to provide healthcare services and pensions for a rapidly growing number of retirees.
@ JoeB,
“…regardless of whether it is initially deficit financed or tax funded”
I doubt if Prof Tcherneva would let that comment go unchallenged. She’d say taxes imposed by a currency issuer are for preventing inflation not for funding government spending. Such governments neither have nor do not have any money etc etc.
I would agree with you that this should be the way the JG is introduced. Whether it then becomes something which does work as an anchor against inflation is something that can be decided later. The idea is that the hourly rate for a worker becomes a sort of standard. This does raise the problem of what happens if workers aren’t happy with the rate and if they can challenge it via union activity.
This is the theory of how it works:
https://www.huffpost.com/entry/the-umkc-buckaroo-a-curre_b_970447
Incidentally, any political body with the authority to levy taxes could do the same thing and create their own currency. A possible solution for cash strapped local councils?