Re: Full Employment is what?

[Paul Davidson <pdavidson@xxxxxxx>]

At 06:24 AM 5/30/01 +1000, you wrote:
> Bill wrote:
> my statement about significance has no distributional connotation. it was
> in reaction to your own
> words that I was replying to "but the problem is that the government
> wage rate MUST be significantly
> lower than the private sector wage rate." Your use of the word
> significantly lower carries the tone
> that the JG wage will be VERY LOW. 


Thst's right. Certainly if the minimum wage $5.25 it is significantly
lower than the Arithmetic mean of private sector wage rates (what we
euphomistically call the market wage rate).  I assume that the ELR
wage rate would not exceed the legal minimum wage rate -- in countries
like the US that have such minimums.

> well not at all. it just has to
> generate a dynamic to ensure that
> the JG sector does not inflate above the inflation rate in the private
> sector. 


But you have confused levels with rates of change.  The ELR rate
level must be significantly lower than the market wage rate (as is the
minimum wage rate in the US) -- but that does not per se prevent the ELR
wage or the minimum wage from rising more rapidly than the rate of
inflation.
 First I thought Warren Mosler claimed that ELR would create full
employment WITH price stability, i.e., a zero inflation rate.  Do
you agree with Warren or not?

It would appear that you think inflation can occur even with a ELR 
policy. So you appear to be adding another constraint on the ELR wage
rate -- namely that it does not increase more rapidly than the inflation
rate.  

But in an inflation  spiral where some of the inflation is due
(perhaps sparked off buy costs other wages rising faster than
productivity e.g., energy costs, import raw material costs, etc) and then
workers in the private sector try to catch-up and even protect themselves
from future inflation by demanding money wage (or cost of living
increases) to maintain the spiral [at least unil the central bank
tightens the money supply to, as Greenspan would say, strike at the
inflation by pursuing some higher rate of unemployment that keeps workers
in their place (i.e., a natural rate of unemployment). This would swell
the rnks of the ELR labor force -- whose wages cannot rise faster than
inflation.
Thus ELR becomes the natural rate of unemployment with a human
face!

 
> The JG is also accompanied
> by a raft of social wage measures available to all lower income workers
> with a means test cut off to ensure
> that public education, health, etc are to be enjoyed. The point is that
> distributional issues are dealt with
> outside of the JG wage and therefore outside of the allocation
> system.

Interesting but do you  really think the politicians (and the
remaining employed) are going to finance such welfare benefits if
Greenspan is making a strike at the inflation rate?

> That partly replies to Sven also.
> There is no hint in the JG that you would tighten welfare if by
> that
> we mean genuine welfare - a safety net for those without jobs, aged, sick
> etc. those provisions would be
> very generous. But then we hit the rub!!! In my own view, as author of
> the JG, the government is bound
> by the UN human rights agreements which include full employment. The
> agreement says in part that the
> government should do everything it can to ensure there are enough
> jobs.

That would be a great platform for you to make a run for office
Bill.  I suspect if you did -- you would take some marginal votes
away from the more liberal of the major parties and you would get a
smaller proportion of votes than Ralph Nader did in the last Presidential
election -- and just make it easier for "compassionate
conservatism" to take the reins of government


> But I think that individuals also
> have a responsibility to their communities if they was this security.
> Otherwise
> they are free to solve their economic (and social) problems
> independently. If they don't wish to contribute
> in some way to the community that is fine. So the key provision of
> welfare as currently known (in Australia)
> - the unemployment benefit - would disappear because there would be
> enough jobs for everyone currently
> receiving it. the jobs would be locally available (so in general, no
> coercion to move), they would be varied
> (to suit indoor, outdoor, manual, non-manual types) and they would broach
> a range of talents. In that sense,
> I think it is reasonable to expect people to take a job if they are fit
> and well if they want the income security.
> I don't see that as a tightening of welfare.


But given asll these caveats would these jobs produce what consumers
really want -- or would they, like their counterparts in the old Soviet
Union merely create the illusion of working with long queues at the
shops. (When I was a guest of the "party" at an economic
conference in Budapest in the early 1980s, the joke Hungarians told was,
"They pretend to pay us and we pretend to work".

Paul

Paul Davidson

Editor, JOURNAL OF POST KEYNESIAN ECONOMICS

Holly Chair of Excellence in Political Economy

Economics Department - University of Tennessee

523 SMC

Knoxville, Tennessee 37996-0550

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