One of my major frustrations with some elements of the Modern Monetary Theory group isn’t in their broad economic theories (which make a lot of sense and do a lot to show up the current climate of Austerity and forced inequality as the deliberate political choice that it is) but in the policies that are sometimes drawn from that theory. One major one that is more strawman than fact is the line extending from the MMT point that currency-sovereign governments don’t tax then spend but spend then tax. The straw man takes that point and claims that MMT says we don’t need to have taxes. Plainly not true, but some in the field could do better to explain how tax should then be used to absorb excess accumulation in the private sector and to redistribute wealth and inequality.
My more direct confrontation comes from the subset of MMT advocates who have an almost irrational dislike for direct social security payments and especially the Universal Basic Income (UBI) – preferring instead an alternative policy of a Job Guarantee Scheme (JGS). It’s a topic I’ve written about before. First in my 2017 paper on social security where I laid out the idea that these are two separate policies designed to do separate things. UBI is social security – it is a cash payment given unconditionally to everyone, no matter their other income, and is designed to ensure that everyone can maintain a decent standard of living no matter their circumstances or life choices. JGS is economic policy – it is an alternative to jobseeker’s benefits which offers anyone who wants one a job guaranteed by the government and is designed to maximise employment, minimise unemployment, to act as a floor against wages and standards (on the basis that if your current job is lower paid or otherwise worse than the “government job” then you’ll quit and take that instead) and to fill gaps in the economy not met by the “jobs market”. As I wrote in a newsletter article last year there’s a very good case to say that we need both.
Nevertheless, the debate around the merits of one versus the other still continue and several MMT-aligned Common Weal supporters have been sending us this series on Bylines Scotland by prominent MMT economist Ellis Winningham in which he has laid out a series of ten articles (nine written at the time of writing this response) in which he directly attacks the concept of a Universal Basic Income and advocates the sole use of a Job Guarantee Scheme as a driver of social security.
Obviously I can’t take on such a series by addressing every single point within it – it could take a series of articles to respond thus to each one of Winningham’s ten – so by necessity I will try to distil each part down to its essence and respond to that. Just know that if there’s a point in there that I miss, it’s not for lack of trying on my part but do let me know if I miss something that you think is absolutely fundamental and deserves a response and I’ll do so in the comments.
Part I – Terms Matter
Winningham bases his argument against UBI on the pilot schemes being trialled in various places – particularly a recent one started in England this year. His argument is that because these are limited trials, that they are not truly “universal”, then the results of them cannot be translated into the real world impact of a true UBI and thus shouldn’t be used to justify one. He is correct here but this is only an argument against the concept of yet more limited trials designed to test something that has already been tested elsewhere. Some MMT advocates to consider the idea of a conditional basic income (i.e. means-tested benefits) or a minium income guarantee (effectively a top up of income up to a certain “liveable” threshold) and this seems to be what he is nudging his audience towards. However, terms also matter the other way. To my knowledge there have been even fewer limit pilots of a Job Guarantee Scheme and none of them have been universal on a national scale either. The closest examples are India’s MGNREGA scheme which, as its name suggests, is focused on rural employment and the ongoing pilot study in Marienthal municipality, Austria (which while it applied to all long term unemployed people within the municipality, this only actually translated to 62 people, albeit within a geographically concentrated area). It’s fair to say that Winningham’s advocacy of JGS is based on evidence that is substantially weaker than that which he dismisses for UBI.
His final comment is another attempt to poison the well of discussion. By saying that if I support a basic income but oppose giving it to the likes of Elon Musk, then I, by definition do not support a Universal Basic Income. Except UBI advocates, including myself, do support Musk getting the UBI. We’ll be taxing him a fair bit more than he receives but it’s still worth him getting it because him being invested in the system incentivises him to help campaign for it to be as high, not as low, as possible and anyway he never knows what tomorrow will bring. Say he tanks a social network he overpaid for, drills a hole in the finances of his car company by making a bad parody of a truck and blows up one too many rocket ships. He might need that basic income fallback sooner than he thinks and he doesn’t strike me as the kind of person who would find it easy to navigate the complex bureaucracy of a job centre without having his Universal Credit sanctioned.
Part II – Automatic Stabilisers
This is a core idea of economic management. Say you (and many others) lose your job. Your income drops. You can’t spend in shops. They lose a customer and so have to reduce their output and fire workers. This causes their spending to decrease…and the economy enters a downwards spiral. But if, when you lose your job, your income is at least partially maintained via unemployment benefits then that shock is dampened. The logic behind a JGS is that if you lose your job, you just get another one and it functions as a similar kind of automatic stabiliser (though we’ll see later why it isn’t that simple) but the argument against UBI here is that it is not an automatic stabiliser because it doesn’t “kick in” when you lose your job so it can only act as additional spending in the economy which would have an inflationary effect.
There are two missing factors in this analysis. The first is that for people with an income, tax will reduce the “additionality” of their UBI (and for people on high incomes, they’ll probably pay more in tax than they receive in UBI). Thus losing their income via unemployment means not paying the tax on that income, meaning their UBI will in fact act as an automatic stabiliser (indeed, my 2017 model was designed specifically at a level equivalent to then Jobseeker’s Allowance though I consider that number to be far too low in today’s climate and would instead advocate for something closer to the Real Living Wage or the UK Minimum Income Standard). The second and perhaps more crucial point is that in today’s low wage economy plenty of low income people do not earn enough to overspend in the economy. Never mind spending on comparative luxuries, if you are one of many who have cut back on home heating or food in recent times then that cut back is already negatively affecting the economy in a manner similar to if you lost your income entirely. A UBI sufficient to allow everyone to meet their basic needs should and must be a human right of society. An economy that cannot handle that basic level of spending because it would be “too inflationary” is one in which human poverty and suffering is not a flaw in its system, but a malicious design feature.
Part III – Production and Prices
This is a perennial argument against UBI. That because it is an unconditional payment decoupled from your productive capacity as a worker, then you might not do useful work in the economy. In other words, folk who are against a UBI are terrified that you’ll take the money and sit on the sofa doing nothing. Of course, when asked if THEY would take the money and sit on the sofa doing nothing, the answer is almost never “no”. Just as an economy designed to create poverty as a design feature should be abhorred, so should one that reduces you to your “productive output” and implicitly threatens you with destitution if you don’t meet your quota. Elsewhere in this series, Winningham, rightly, decries conventional capitalist economic theory’s reduction of the human condition to a mere consumer of goods, “Homo Economicus”. I would warn “JGS only” advocates that they risk making a similar argument, reducing humans not to their consumption capacity but to their productive capacity, “Homo Fabricans” perhaps.
Part IV – The Fallacy of Composition
Two issues stand out in this section. The first is a repeat of the prior argument that the results of a limited pilot cannot be extended to a universal policy – which I’d once again point back at the lack of an equivalent JGS beyond limited pilots or schemes, and the other is a complete strawman stating that because one of the benefits of UBI is that it would simplify the welfare system then it will be used as an excuse to eliminate the welfare system. This is patent nonsense because, as stated at the start, the UBI would BE the welfare system. At least in great part. Certain elements, particularly needs-based care packages including disability benefits will and must remain. This trope plays off the idea that not everyone who advocates UBI is a left-leaning socialist or social democrat but there is a strand of right-wing conservatives and libertarians who also advocate UBI as a means of eliminating the State. Why have public schools when you can use your UBI to pay for tuition from the private sector? Arguing against those people isn’t arguing for or against UBI, it’s just democracy at work. But it is worth mentioning that a similar strand exists in JGS circles too. For every socialist looking to guarantee the right to work, there’s a libertarian who doesn’t believe in you having the right to exist unless you work – usually for them.
Part V – Automation Arguments are Nonsense
This is a topic that we’ve covered in a policy paper here but in brief it goes that automation has always eliminated jobs – horse farrier jobs were greatly reduced by the invention of the car, for instance, and ice cutters eliminated by refrigeration – and that UBI advocates are concerned that workers will see their job replaced by a robot (I’ll write an article soon about my experiment in trying to replace my own job with a robot). I agree with Winningham that I have faith in human ingenuity to come up with new jobs as technology marches on but there’s an absolutely critical flaw in his suggestion that a JGS is the solution here and that is that I do not have faith in a centralised government bureaucracy having the innovative mindset to create those jobs perfectly and assign them as required. There’s also the problem that his JGS – like most of the schemes out there – are designed as “wage floor stabilisers” (i.e. Minimum Wage) first and foremost, not as vehicles for the “Just Transition”. What’s the difference? Well, I used to be a laser engineer – quite a highly paid one – and while it wasn’t automation that took my job I don’t think the impact of losing that job would have been much easier on me than it was if the best a JGS government job would have offered to me would be a minium wage job that almost certainly would not match my skillset (As I say here, JGS is much better at dealing with the frictional unemployment of people moving between similar jobs than it is someone moving between different jobs and skills – especially if their job is fairly niche). The threat of losing my laser job for a minimum wage Government Job wouldn’t have been significantly different from the threat of losing my job for minimal unemployment benefits. To quote Winningham back at himself, if you’re afraid, they can end welfare and benefits by giving you a JGS that is doomed to fail, but will result in a massive upward transfer of income and wealth to themselves. Automation might well “free up labour from drudgery and outdated jobs” but a JGS of the kind that Winningham advocates may well see those jobs not just protected, but become government policy.
Part VI – The social considerations of UBI
The argument of this section is that a UBI is somehow antithetical to social cohesion as part of the “social purpose” of a job is to bond with one’s work colleagues – effectively to form a tribe of shared experiences through one’s work. Now, I’m not saying that I have never done this – several of my closest friends I met through my laser jobs and I met my now wife through Common Weal.
But the flaw in this plan with regards to Winningham’s JGS is that by its very nature, these are temporary jobs. The Government Jobs are not designed to be career-forging paths. They are explicitly designed to be minimum wage, “non-essential” (i.e. not organisationally load-bearing) jobs that exist as an alternative to you being unemployed until the moment that you find something better. With you and your colleagues all in jobs that are designed to be jobs that you don’t want to be in, what hope is there for social cohesion around that shared experience? You can’t even unionise and demand better pay and conditions, because minimum pay and conditions is a design feature of the Job Guarantee. The private sector is supposed to be the one bidding for your labour at above that minimum level.
A UBI, on the other hand, offers choice. Once paid at a sufficiently high level that you can afford to quit your job without losing your means of basic existence you find that more and more around you are in the job they want to do, not the one they have to do to survive. It’s THAT positive experience that will build the tribe, not the drudgery of trying to find a reason to quit. This isn’t a system dependent on individualism and competition either. Some people, given the option, will actively seek out and choose community and collaboration – collaboration that might not be possible if everyone is scrabbling to meet basic needs or is too tired to think after yet another shift of minimum wage clerical work for a government project that you know will happen whether you do this job or not.
Part VII – Redefining Work
Here is where Winningham unwittingly makes the case for UBI over JGS more strongly than he does the opposite (I still say we need both). “the main problem with our view of work is that it is tainted with market-based nonsense which leaves us with a very narrow, ignorant vision of work, and deliberately so” leads to “Work is what we do. In fact, all living things work. Breathing is work. Sleeping is work. Eating is work. Giving birth is work. Thinking is work.”
I completely agree and this is why I advocate for UBI. It frees you from someone else’s definition of “work” and allows you to find your own should you choose to. JGS by necessity creates those narrow definitions of “work” as it will only ever offer you a Government Job from the list of approved Government Jobs. If what you want to do isn’t on the list, tough luck. Winningham brings up the example of an artist being offered a JGS job to “teach community members how to paint and sculpt” and I think this is the very example of the perfect job that needs a UBI rather than a JGS. Being an artist isn’t a 9-to-5 job. It’s not one where you sit on a production line making art. It’s a job that often isn’t even waged (gone are the days of the King’s Patronage for artists) but is piece-work. If you paint something that sells for £10,000 (yes, I hear the sound of every artist who’s tried to sell their work to someone who doesn’t want to store it in a Freeport but bear with me) then it doesn’t matter if it took you ten hours or ten years to paint, the payment is the same. And does that time include the time spend walking in the forest till the light hit that tree just so and sparked the inspiration for the painting? Would it if you were waged?
But that JGS job teaching art. Sure, we need art teachers but the job of art teacher is very different from the job of artists. Not every one can or wants to be the other (I know plenty of very skilled musicians who can barely read music, never mind teach music theory). And what happens to the students of the JGS art teacher if they can’t support themselves until they can produce sellable art? Do they take a Government Job as art teacher too? Is that really the intention for a JGS, to just self-perpetuate the teaching of the same skills without applying them?
A UBI allows artists to create art. It allows them to create art without worrying about selling them. It also allows people to be able to afford that art. My wife once created a pro-UBI artwork specifically to illustrate this. In material costs, the embroidery of a UBI logo surrounded by flowers and plants was “worth” a token amount but the time spent to make it, paid at Artist Union rates, would put the “fair” value accounting for the labour of the artwork into the region of almost £1,000. Very few people could afford to pay that much for that work, which is why almost no-one on the Etsy craft stores of the world charge what they should for their art and crafts. And anyway, the point of the art was to show that art shouldn’t be about the money involved anyway, it should be about adding joy and wonder to the world without having to consider its impact on GDP. A minimum wage JGS as an art teacher won’t help artists make art. It won’t help people buy art. It won’t allow artists more time for more art to be made (indeed, quite the opposite). Breathing is, indeed, work – but while a UBI will pay you to do it, a JGS will not. Once again, UBI is social security. JGS is economic policy. Both are needed, but confusing the latter for the former is to court injustice and poverty by design.
Part VIII – The NAIRU Economy
In short NAIRU is a technical economics terms that essentially means that the current economy not just implies but demands a certain level of unemployment. What keeps you from demanding better pay and conditions but the threat of being replaced by someone who won’t? If there are more jobs than there are people who want jobs then people will “bid up” their wages by threatening to quit. You can see this misguided philosophy in everything from the Bank of England’s insane sinking of the economy via interest rates rise through to some CEO’s just outright saying the loud bit out loud. I have little to argue about with Winningham in this section other than his persistent implication that a UBI would only act to concentrate wealth in the top end of the inequality scale as if the current non-UBI economy doesn’t already do that and that it can’t be prevented or redressed by other policies such as wealth taxes. I agree that the concept of NAIRU has to be gotten rid of for the wellbeing of society but I’m not sure either a UBI or a JGS or even both alone would solve it. It will require a complete restructuring of our economy along true wellbeing grounds (perhaps something like the society we envisage in our book Sorted: a Handbook for a Better Scotland) and this is one that will very likely require both a UBI and a JGS alongside other economic policies designed to make life better for all of us, not just those who manage to grab enough capital to keep it from the rest of us.
Part IX – The Job Guarantee
The final part of the series as of the time of writing (I may add an annex covering Part X once it’s published if it says something that requires a response). Winningham lays out his vision for a JGS and it is indeed the classic type of a minimum wage, relatively unskilled job. It’ll offer the “freedom” to choose your own hours but we’ve all seen exactly how that works out in the Gig Economy. The role of this job scheme is, in his words to “[guarantee] the jobs of the low-skilled working-class, and as a result, it will create a vibrant job demand for skilled, highly skilled, and highly educated people.”
This is the very opposite of breaking down class inequality. It is designed explicitly to entrench classism as government policy as the role of the working class in this scheme is specifically to be minimum wage consumers and producers for the educated middle classes (so much for replacing Homo Economicus with Homo Fabricans, at best workers have to become both). It is designed against being a mechanism for the Just Transition from jobs made obsolete by automation or by changing circumstances like the climate emergency. Just as a highly paid laser engineer replaced by a robot isn’t going to be happy in a minimum wage job, nor is an oil worker replaced by a renewable sector that didn’t allow them to move over for lack of training. A Job Guarantee may be a valuable mechanism for frictional unemployment but this scheme would do nothing for the structural unemployment that would result if, despite the series’ claim, a disruptive element like technology or climate wiped out an entire job sector.
I think of communities in Scotland torn apart by the loss of a keystone employer and wonder what would happen to them if all that could be offered was minimum wage gig jobs. A UBI alone might not be sufficient in those circumstances either but this is the value of both. If your basic needs are met then your needs and desires above that are entirely within your power. The government could then come in with a bespoke job guarantee scheme designed to meet the structural unemployment needs of your community, or to co-invest with entrepreneurs in the community who have an idea of what they can do with their skills given that the risk of setting up a business is covered by their UBI.
The two policies of UBI and JGS need not contradict each other nor be in conflict with each other. MMT advocates for JGS and the exclusion of UBI must justify why it must be either and not both – I believe Winningham has failed to do so in this series – and that this justifiction must do more to show how this would improve society rather than merely entrench the status quo of class inequality and poor work for poor folk. The studies around JGS are encouraging – the Austrian study found positive impacts of poor people becoming less poor even though they explicitly said they couldn’t compare the results to, for example, a UBI paid at the same rate as the JGS – but if anything the studies around UBI are even more compelling. Can criticts maintain their stance in the face of that data rather than merely defend an economic model against uncomfortable moral implications?
Members of the SNP recognise this as they have happily voted to support both policies and support for UBI now has functional majority support across the Scottish Parliament with all parties except the Conservatives saying they’re in favour of it. The idea might not be in place yet but if the issue is that pilots can’t tell us more than they already have then perhaps that’s a sign that we’re ready now to try the full roll-out of a Universal Basic Income. Common Weal stands together with many other organisations in Scotland and beyond who are ready to support this and a Job Guarantee and all of the other policies we need to break down the injustice we face in the world. In short, we want a Scotland that works for all of us, not just one where all of us work.
Image Credit: Ellen Joëlle Dalzell