Thursday, 3 August 2017
My Job Guarantee theory proves correct, unfortunately.
Job Guarantee (JG) is a name for what are sometimes called “make work” schemes. “The Job Creation Programme” which operated in the UK about 40 years ago was one of many examples. And the WPA in the US in the 1930s was another example.
I’ve been arguing for twenty years that if Job Guarantee schemes take the form that they did under the WPA, namely having large numbers of unemployed people work on specially set up schemes, there is a danger that the ratio of unskilled to skilled employees is too high, with disastrously low levels of productivity being the result. For example I argued that point quite recently here.
The fact that productivity was not too bad on many WPA schemes in the 1930s proves nothing. Reason is that given VERY HIGH levels of unemployment (as existed in the 1930s), there is a decent availability of skilled labour from the ranks of the unemployed. But JG is not a good solution for VERY HIGH unemployment levels: the best solution there is simply to run a bigger deficit, as Keynes explained. Ergo where JG performs the role for which it is ideally suited (reducing unemployment even further where unemployment is relatively low) the latter “skilled / unskilled” danger exists. (Unfortunately that point is too subtle for many of the windbags inside and outside academia who witter on about JG).
Anyway, some local government people turned up in my neighbourhood recently and said they were going to employ some youths on probation to fill potholes in a road near where I live (see picture below which was taken after the holes had been filled).
For the benefit of non-Brits, probation is a system in the UK for dealing with miscreant youths: they are given supervised work, and so on. So it’s SIMILAR to JG but clearly not EXACTLY the same.
Now this road has a slight slope on it (left to right in the picture) which means that excess rainwater runs down the right hand side, out of the way of vehicles. That’s desirable because if water stands in the middle of a hardcore or dirt-track road, car tyres force water out of the pot-holes at high velocity, which forces hardcore out of the holes and makes them worse.
So I told one of the men in charge that that slope needs to be retained. And what d’yer know? They ended up giving parts of the road a slope the wrong way or giving it no slope at all, with the result that water will accumulate in the middle of the road. Least that’s what my spirit level says – see second picture.
The ratio of “unskilled miscreant youths” to “normal intelligent adults” looked to me to be about two to one.
The moral is that, as explained in the economic text books, if the amount of skilled labour in any economic activity, including JG, declines to much below normal levels, productivity falls dramatically, even where a simple job like filling pot-holes is involved.
Ergo JG people should be subsidised into work with EXISTING EMPLOYERS, not concentrated on specially set up schemes which involve high levels of unskilled, low IQ labour.
Unfortunately, and to repeat, that’s all a mile above the heads of most of those who witter on about the potential wonders of JG.