Tuesday, March 6, 2012

UK Lib Dem — Opinion: Job Guarantees – an economic stimulus worth considering?


India introduced a job guarantee programme, for the rural poor in 2005. It was dismissed by many as fiscal folly. Yet this developing country has weathered the financial storms of the economic downturn far better than most European countries. Argentina ran a successful programme in the wake of their debt default and Canada has had a good experience with such programmes.
Job guarantee as an economic policy builds on the concept of employer of last resort. The policy requires that the public sector offers a fixed wage job to anyone willing and able to work. The job pool expands when private sector activity declines, and declines when private sector activity expands. 
To avoid disturbing the private sector wage structure and to ensure the job guarantee is consistent with inflation targets, the wage rate should be set at the current legal minimum wage for each age range.
Under the programme, people of working age who are not in full-time education or full-time employment would be entitled to a full-time or part-time job, undertaking work of public benefit at the minimum wage. The aim is to replace involuntary unemployment with paid employment, so that those who are at any point in time surplus to the requirements of the private sector (and mainstream public sector) can earn a reasonable living rather than be forced to become reliant on benefits.
Read it at Liberal Democrat Voice (UK)
Opinion: Job Guarantees – an economic stimulus worth considering?
By Joe Bourke
(h/t Neil Wilson via email)

10 comments:

Clonal said...

Evaluation of India's job guarantee program - The Impact of Indian Job Guarantee Scheme on Labor Market Outcomes: Evidence from a Natural Experiment

Quote:
Abstract

Public works programs, aimed at building a strong social safety net through redistribution of wealth and generation of meaningful employment, are becoming increasingly popular in developing countries. The National Rural Employment Guarantee Act (NREGA), enacted in August 2005, is one such program in India. This paper assesses casual impacts (Intent-to-Treat) of NREGA on public works participation, labor force participation, and real wages for casual workers by exploiting its phased implementation across Indian districts. Using nationally representative data from Indian National Sample Surveys (NSS) and Di erence-in-Di erence framework, we nd that there is a strong gender dimension to the impacts of NREGA: it has a positive e ect on the labor force participation and this impact is mainly driven by a much sharper impact on female labor force participation. Similarly, we nd that real wages of female casual laborers have increased sharply in NREGA districts, while there was only marginal increase in real wages of male casual workers.


1 Introduction

The notion that public works programs can build a strong social safety net through redistribution of wealth and generation of meaningful employment has gained ground in recent years. Many countries are increasingly adopting this strategy to tackle growing unemployment and poverty.1 The National Rural Employment Guarantee Act (NREGA) is a similar endeavor in India.2 NREGA was enacted during a time when more than a decade of sustained high growth in GDP experienced in the 1980s and the 1990s was perceived not to have made a su cient dent in poverty in the rural India, leading to euphemism of co-existence of two India(s): one, a thriving urban India and the other, a stagnant rural India.

NREGA is a result of the Government of India's stated principles of `inclusive growth' and the desire to ensure that economic growth trickles down to the rural areas. When NREGA was enacted in August 2005, there was optimism that the initiative would transform rural India.3 NREGA entitles every rural household in India to a minimum of 100 days of paid work per year. This is an unrestricted entitlement with no eligibility requirements. However, it was assumed that the nature of work under NREGA and the wage rate would ensure that the program is self-targeted that attracts only the poor. The primary objective of NREGA is augmenting wage employment. Its secondary objective is strengthening natural resource management through works that address causes of chronic poverty like drought, deforestation and soil erosion and so encourage sustainable development (Ministry of Rural Development, 2010).

NREGA was implemented in phases across rural India. In February 2006, it was launched in 200 backward districts in

Clonal said...

Also Mexico to imitate Indian MGNREGA scheme

Leverage said...

Third world counrties which have obvious problems are implementing them to solve these problems.

I don't see why developed nations can't do the same, after all you would rather pay people to do SOMETHING than to do NOTHING (like now).

But the devil is in the details, in this case, in the details of how it's implemented so it does not end being abused by private sector to rent cheap labour from the government (so public-private partnerships using JG workforce as manpower should be very controlled).

marris said...

Leverage,

Many people who are opposed to the JG don't want some government public works program grabbing resources that the private markets should be allocating. It is inefficient micro allocation (yes, it will decrease some measure of macro idleness, but I don't care about that). I want production controlled by dollar bids, not some government scheme. Of course, I'm open to small amounts of government production, but it should be small.

If what we care about is making sure people don't starve or live impoverished lives, I think welfare is basically enough. I don't think the goal should be to increase the self-esteem of unemployed workers. There are plenty of public school teachers who can do basic math, but nonetheless, have high self-esteem. That seems like a public policy bug rather than a feature.

marris said...

Oops, it should read CAN'T do basic math. I'm sure there are plenty who can do it, too.

Unforgiven said...

Let's not forget that JG is designed to get smaller as private industry demand increases.

Seems like a lot of arguments against JG assume that it will:

1. Pay more than min. wage.
2. Be a career.
3. Employ more and more workers.
4. Be a permanent position.

Anonymous said...

"..to replace involuntary unemployment with paid employment"

By individual choice? Can an unemployed quit this government job?

Unforgiven said...

See my post above.

JG is voluntary and will only be attractive to SOME workers. JG is employment for those that are WILLING and ABLE in times when there is insufficient private industry demand. Some will prefer to stick with unemployment insurance as the work or pay offered in JG isn't attractive to them. For the rest, it provides a minimum cashflow and benefits in exchange for SOME productivity.

Leverage said...

marris, the amount is ridiculous in the grand scheme, is not like there would be trillions of employees wanting a job for the minimal wage. It's better to give people the only choice of delinquency and fraud? Probably the social benefits are much wider than all the 'misallocation' this could produce, you would save a lot of police, judicial system, etc. And misallocating what anyway? If there is spare capacity and this increases demand there is no misallocation, it just increased demand. All the talking about how this is a waste of capital or that is a waste of capital is simplistic and subjective, there is a lot of demand for a lot of stuff that is not being serviced/produced because artificial monetary scarcity (not because inflationary pressures).

Maybe you are scared of the precedent it would set up, but then you should be scared about democracy and the whole system, because if its abused is because there is social and political demand for it. So then maybe we should just get rid of the State and the political system... It's a question of the political and institutional arrangement, so either you agree with that arrangement or you don't. There is no need to be more worried about a possible JG than to be worried about the mere existence of a congress or a defence department.

reslez said...

Many people who are opposed to the JG don't want some government public works program grabbing resources that the private markets should be allocating.

What resources would the government be grabbing? These are people the private sector Does Not Want.

JG work would involve stuff the private sector isn't currently doing or can't afford to do. What exactly should the private sector be allocating? Are you arguing the private sector is always perfect and always accounts for externalities? We both know that's a strawman argument.