Re: Full Employment is what?

[Bill Mitchell <ecwfm@xxxxxxxxxxxxxxxxxxxxxxx>]

Paul said:


> 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.

The JG wage can be lower than the private sector wage because you free the
distributional
system from the wage system. That makes things entirely different.


Bill said:

> > 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?

I haven't confused anything. You are playing divide and conquer between
myself and warren. tut tut.
Price stability is a term warren uses. My statements are:
(1) The JG wage should be as high as is needed to drive the private sector
high cost firms out.
Thus it allows some industry policy influence.
(2) Once established, the dynamics of the market will then set the
differential between the private sector wage structure
and the JG wage.
(3) The JG wage should grow with the level of labour productivity and some
constant indexing rate (maybe zero).
(4) The Govt sets an inflation target beyond which it will not allow the
economy to go.
(5) This eliminates the variance and play of inflationary expectations
because agents know rule (4).
(6) Fiscal and monetary policy then ensures that private sector activity is
adjusted to meet (5).
(7) the compositional shifts in employment between JG and other ensure that
employment adjust to (6).
(8) Some inflation is possible but will be stable.

So the second derivative of the price level will be stable. The level could
be made stable but why bother.

> 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!

It becomes the level of employment that the private sector riddled with
inflationary biases
cannot carry.



Bill said":

> > 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.

Paul replied:

> 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?


They do not have to finance anything. Only households and other spending
agencies that do not have
fiat currency issuing powers have to finance spending.

Until PKT can come to terms with this and jettison the orthodox GBC stuff
we won't make progress
towards full employment.


Paul again (losing the plot)

> 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

Who ever said I would want to stand for US Government? I am a citizen of
Australia Paul!!!


Paul (sounding more and more orthodox)

> 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".

Maybe the hungarians lacked imagination.
I don't really want to let the market determine all allocations because
then public goods lapse
in favour of more private goods driven by dollar votes. I don't support
that sort of system.
Environmental concerns alone require us to change the composition of output
towards more
green things. We have to VOTE for governments who will take these decisions
on our behalf
rather than leave it to a private dollar-driven market. Profits are
a  private concept. They don't
send signals which are needed to increase employment in public good
creating areas.

JG workers would work. They would be paid. They would spend. They would
have superannuation.
They would have holidays and sick leave. They would have dignity in being
productive and part
of the future.

all this stuff you raise Paul is part of the past that failed to generate
full employment. We are pushing
for a paradigm shift. It usually takes a long time to accomplish.

best wishes
bill


William F. Mitchell
Professor of Economics and Head of Department
Director, Centre of Full Employment and Equity
University of Newcastle
New South Wales, Australia
E-mail: ecwfm@xxxxxxxxxxxxxxxxxxxxxxx
Phone: +61-2-4921 5065
Fax:   +61-2-4921 6919
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WWW Home Page: http://e1.newcastle.edu.au/economics/bill/billeco.html