To guarantee a living wage, make government the employer of last resort

I recently wrote about an interview I had with economist and professor Stephanie Kelton at Netroots Nation this year.

The context was “Five Questions” and the talk ranged from climate and “burnable carbon” to what led her to become a leading light of the Modern Monetary Theory (MMT) school of economics.

(For a quick look at what MMT economists think, click the link above, or see my own lay-friendly explanation.)

But the question whose answer interested me most was this one (paraphrasing):

If you were president — with an FDR-style mandate and FDR’s Congress, both houses — what would you do the fix the economy?

She answered first about the financial situation, meaning bank and financial sector regulation, and then about the economic situation, about the health of the economy. The financial recommendations were strong and well put. But the economic recommendations contained this striking proposal — let’s make the government the employer of last resort. From that proposal, all sorts of good things flow.

Listen to the clip; it’s not very long. Then a comment after.

The discussion of her financial-side fix is at the start, and as I said, very strong (unlike the “fix” in that other sense offered by the people at the Fed, for example). Then at 3:49 she gives her economic solutions. Along the way, Kelton says the following:

Economist Stephanie Kelton

Economist Stephanie Kelton

The economy performs well when you have lots of consumers with income to spend, and they go out and buy the stuff that the firms are producing. And the firms have customers and nice revenue streams and the economy works well. … The economy doesn’t work well when you’ve got the kind of inequality you have today. …

80% of all the income gains since the recovery went to the top 20% … we’re just shoveling cash into wheelbarrows for these folks. And what do they do with it? They don’t need another refrigerator … they plow it into the stock market … they buy art …

The prescription is to get incomes rising for the people at the bottom. … We need unions to come back. We need a jobs program.

And what does a Kelton “jobs program” look like? It looks like this.

If you don’t like your junk job, you can work for the government and get a living wage

How’s this for a jobs program on steroids, and a minimum wage program, and a working conditions program, all rolled into one? She starts with a look back at FDR-era programs like the WPA and CCC, then adds:

If [FDR-style jobs programs] were created the right way, and you said, “Anybody who’s ready, willing and able to work, or unable to find a job in the private sector — or if you just don’t like that job — you can come and take this [government] job. We’re going to create one for you at a living wage with these benefits …”

You create a package for the worker that then becomes the minimum, [which] everyone else has to provide … or they’re not going to get workers. That becomes the de facto minimum. … We’re not going to let you starve in America.

Fascinating proposal, one that would work beautifully. My translation back to her (6:55):

I don’t want this to go by without people getting what was said. … You’re saying that you don’t really need to define a minimum wage, because the government sets a floor. … [Then] anybody who wants a better job than the junk job they’ve got, can work for the government. That forces the private employers to compete with the government for workers, and that’s a good thing for workers.

Instant fix to junk jobs, public infrastructure needs, and all kinds of employment minimums like health care and working conditions. The economy sails because as Kelton said, the economy works well when most people — the non–very wealthy — have money to spend. Instant gains for the economy; instant gains for workers and working conditions as well.

Feel free to talk this up. And if you encounter one of those “but deficit” hawks who magically appear when the rich want more than they have, read this. It’s the perfect answer to the bipartisan question, “When would you like your austerity, now or later?”

Again, to listen to the entire interview, click here. It’s worth your time.


Twitter: @Gaius_Publius
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Gaius Publius is a professional writer living on the West Coast of the United States.

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10 Responses to “To guarantee a living wage, make government the employer of last resort”

  1. Mike F says:

    I disagree with not a single word here. What we have today, especially if you’re working at the lower end of the wages and benefits spectrum, is nothing more than indentured servitude. In our society, money means freedom. The less money you make, the less actual freedom you have to do with yourself and your life as you wish, or to do that which is best for oneself and one’s family.

  2. Mike F says:

    “You create a package for the worker that then becomes the minimum,
    [which] everyone else has to provide … or they’re not going to get
    workers. That becomes the de facto minimum. …”

    That’s what used to be called the prevailing wage, kids. The prevailing wage was essentially the non-union wage in towns and cities where manufacturing was the bulk of the local economy (until the late 70’s, that was pretty much everywhere from St. Louis and eastward). You may not have been paid the union wages and benefits, but you damn sure weren’t going home to starving children, and a ramshackle house. And that, boys and girls, is why the post-WWII period was the most prosperous and equitable period for workers–trades, industrial and office–in our country’s history.

  3. Sean says:

    You might be right – but what’s the point of a comment like this? That we are stupid to propose solutions to the problems that we face today?

  4. GarySFBCN says:

    Force private employers to focus upon their products AND their employees. Reward employers who do not lay-off, abuse or cheat employees. Severely tax employers who are not employee centric.

    Stop calling these entities businesses. Start calling them employers.

    Implement policies that result in a cultural shift – the health of the economy is based upon employment and debt, and not upon wealth and financial success.

  5. Norwood Orrick says:

    Also, I would be remiss if I failed to credit the WPA and Victor Mikhail Arnautoff for my avatar.

  6. Norwood Orrick says:

    This proposal isn’t crazy – it’s very similar to UBI – a universal basic income. See also Bruenig v Sawicki

  7. Colin says:

    Great ideas one and all. Never happen. I fear it will come to violence first.

  8. Indigo says:

    Stronger unions strikes me as a more likely solution.

  9. BeccaM says:

    It’s an intriguing idea, but in part I’m with Bill on this: Unless these government jobs also come with union protections, we risk a situation where workers are exploited, mistreated, and underpaid even more than they are already.

    Collective bargaining and workplace protections are how, for a time, we didn’t just have people working jobs — we had them working fewer hours for better pay and benefits, doing jobs that were safer than before. And for example, we don’t need the government to be the employer of last resort to raise the minimum wage to a living wage. What we need is a government that is responsive to the needs and well-being of the ordinary people and not to the corporate plutocrats and their insatiable hunger for ever-increasing profit at the expense of everything else.

    We can easily see what happens, how government workers can be terribly exploited without someone to advocate for them just by looking at history. Remember the air traffic controllers strike during the Reagan presidency? In addition to striking for better pay and benefits, the controllers had a solid case that air travel was being endangered because they were being massively overworked and the equipment they were using had been breaking down from lack of investment and improvements for years. Reagan fired them all and replaced them with scabs — lower paid, even more overworked, and accidents (near and actual) went up.

    Then there’s public teachers, another pool of government workers. As they’ve lost unions, they’ve lost pay, they’ve lost job security, and they’re constantly being scapegoated for the short-sighted budgetary decisions of local and state governments.

    Back in the day, going to work for the government meant you knew you’d draw a lower salary than the private sector, but it was offset with job security and superior benefits, such as a guaranteed retirment pension. Now? It’s just lower salary. All the tradeoffs and deferred compensation have been clawed back. The promises were broken.

    Basically, I don’t trust the government to avoid playing politics with the defined ‘floor’ of a decent living, especially not with the GOP’s overt “we hate workers” attitudes and the Dem’s complimentary ones of “corporations are wonderful and workers will do fine if we just have MOAR UNFETTERING!.”

    The only way to restore equity and fairness throughout the entire economy is to allow workers to organize and bargain collectively. And this starts with the repeal of ‘Right to Work’ (sic…actually it’s “Right to be Exploited and Discarded at Whim”) and other union-busting laws. And yes — boosting the minimum wage to be a living wage. If we’re looking for one area where the gov’t should step in and provide a baseline benefit, just for being an American? Let’s start with healthcare and higher education.

    If we have unlimited money for whatever wars the Powers That Be care to start, anywhere in the world, and the destruction of millions and billions of dollars in used up military assets is possible, there is PLENTY of money to take care of this country’s citizens.

  10. Bill_Perdue says:

    I don’t think a successful solution to massive poverty, low wages, union busting and no benefits can come from government programs.

    The government, not government workers, but their political directors and managers are invariably right wing. They report to Democrats and Republicans and both of those parties are right centrist and rapidly moving right. They will not implement pro-worker programs to raise wages to high trade union levels, which are minimal levels to insure the needs or working people.

    Government leaders and managers are on the side of business, not labor.

    There is a path to ending poverty, lack of health care, massive unemployment and endemic underemployment and that is through the self organization of workers in unions. That entails the fight, well underway, for union democracy.

    And it has to include the fights, in most cases led by socialists and the union, left for a much higher minimum wage, for socialized medicine, for full high trade union level wages benefits for everyone, no matter how many hours they work. Those benefits and wage levels should also apply for retired workers, workers in training, and those who can’t work because they’re not able or because they’re single heads of families.

    The central component of any effort to correct the anti-worker abuses by Democrats and Republicans is the fight for 40 hours pay for 30 hours of work combined with a Manhattan Project effort to green the economy, run by elected environmentalist agencies and administered by unions, with the goal of ending underemployment, unemployment and poverty and ameliorating the effects of global warming and climate change.

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