A Green Job Guarantee For Ireland

Jun 11, 2011 Comments Off on A Green Job Guarantee For Ireland by

Green Job Guarantee : Smart Taxes &Environmental Pillar Economic Working Group: Emer O’Siochru

The Job Guarantee was formulated as the counterpart of Modern Money Theory (MMT) fiscal policy under a fully sovereign sate i.e. one still in control of its own currency. It is more difficult to explain and deliver where the currency is issued by a 3rd party, i.e. the ECB in the case of Ireland. Nevertheless, MMT and the Job Guarantee is relevant to Ireland in its discussion with the ECB and EU Parliament to fix the debt and economic crises.

MMT tells us that the ECB can issue currency or liquidity to the banks at no cost to itself nor to the constituent central banks nor national economies of the EMU. The ECB must know that at some level because it has refused requests to turn its liquidity support to the Irish banks currently at €70b into a term loan, which is actually unnecessary and not in our interests as it would require Ireland to pay higher interest rates. The ECB does not have to raise the money it provides as liquidity by selling bonds or levying taxes. In fact, it can’t do either under current rules. It provides the liquidity by simply crediting it in the accounts of the bank of the member state. The pretence that the liquidity was provided in exchange for valuable assets has been shown up to be a non-essential requirement or notional fiction because it allows the Irish central bank (a subsidiary of the EEB) to credit the banks without matching transfer of valuable assets.

The ECB and its national central banks should not be concerned or constrained by the mounting sum on the account spreadsheet of the central bank as it does not represent a debt analogous to a household, business or bank debt. It should instead be constrained in its issuance by inflationary signs – of which there is little in our struggling economies. Once it is realized that inflationary pressures, not inability to repay is the only truly limiting critereon, new policy options become available in the fight against unemployment. One of the primary policies of most MMT economists is a Job Guarantee or Employer of last resort (ELR), Labor Buffer Stock, etc. A job Guarantee is a permanent job offer from the government to all citizens of a certain age for a basic wage to anyone who is ready, willing, and able to work.

The Environmental Pillar suggests that instead of the ECB providing liquidity at 1% to the banks it could directly fund a Job Guarantee Programme in Ireland – and in any other EMU state that requested it. Or the JG programme could be funded indirectly by the ECB were it to distribute ‘liquidity’ to EMU state government on a per-capita basis. The Irish government could then use its allocation to fund the JG amongst other programmes. The Irish banks will benefit as newly employed citizens lodge their salaries and pay off their mortgages. The increase in money circulating and spending power in people’s pockets will kick start the economy, providing the confidence that the banks are so sorely lacking and that no amount of direct liquidity injection appeared to create.

The Environmental Pillar goes further to suggest that the jobs provided in the JB programme should ideally be Green Jobs addressing the most important challenges of our time – resource peak especially fossil fuels, climate change and biodiversity loss. Apart from the obvious need to tackle these issues, a GJG will impact least on the private sector as these issues are not priced i.e. they are seen as externalities of the market system. The EU is already planning a reformed Common Agricultural Policy that will fund desirable environmental and ecosystem protection – the GJB is little different except it will not be a requirement to be a farmer to be a beneficiary.

Because the program would never demand more labor than is available, it would be impossible for it to cause “demand-pull” inflation. In a recession, employment and aggregate demand decrease which has a deflationary effect. However, with this program in place those workers have the ability to get a job from a job guarantee which would counteract the falling demand. As the economy recovers, people would leave the job guarantee program and enter the private workforce for more money. People leaving the program would cause government spending to go down which would cause deflationary pressure that would be offset by the potential inflationary pressures of a rapidly expanding economy with rising wages i.e. full employment with non-accelerating inflation. There could still be cost-push inflation (like oil prices) or demand-pull inflation if some commodity other than unskilled labor is in short supply. The point is however, the government can give everyone a job, without causing accelerating inflation.

A “job guarantee” program could actually be less inflationary than what we currently do with our unemployed workers.

  1. First, There’s the automatic stabilizing effect above .
  2. Second, the unemployed will be working instead of doing nothing. Right now unemployment pays people to not work. The job guarantee puts them to work and the part time “underemployed” discouraged workers, and those who have never worked before.
  3. Third, much of the cost of the program will be offset by a reduction in spending on other social programs. When people work, they need less government assistance.
  4. Fourth, there will likely be faster movement of workers from the job guarantee to the private sector than under our currently unemployment regime where people lose their “good work habits”. In a job guarantee regime that won’t happen because people will be working.

The program is not meant to replace any existing government assistance such as job seeker allowance. While the program might reduce the size of other social programs, it will not completely eliminate their function. People will spend some time looking for a new job before entering the job guarantee program. There could be a move to reduce the number of weeks that unemployment is offered.

Green JG Criteria:

  • Jobs are not being done already i.e. they won’t displace any existing permanent jobs in the private or public sector.
  • The jobs should incorporate up-skilling or maintaining skills so as to keep participants in readiness for future employment.
  • The jobs should add value to our commons

Indicative examples of potential work areas:

  • Afforestation on public and private lands and woodland management
  • Flood relief works such as conversion of conventional drainage to SUDS and flood plain creation and management
  • Eradication of invasive species on land such as rhododendron and in water, the zebra mussel etc.
  • Restoration of damaged peatlands to functioning carbon stores and sequestering systems
  • Restoration of damaged dunes, wetlands and important upland systems etc.
  • Creation of community gardens, city farms and allotments for food security and the preservation of locally adapted food plant and domesticated animals.
  • Preparation of Resilience Plans for rural villages and urban neighbourhoods
  • · Energy refits of all social housing and homes of pensioners

Further Information:

Video presentation on Job Guarantee.
Bill Mitchell’s description of the program.
L. Randall Wray writing in the huffington post.
A more complete description of how and why it would work.
Comparison to an income guarantee.
Another description of it by L. Randall Wray (he calls it an Employer of last resort or ELR for short)

See also Dr L Randall Wray’s video in the afternoon session of www.smarttaxes.org and www.tasc.org ‘Learning from the Crisis’ conference 9th May

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Discussion Paper, Smart Taxes Network Documents

About the author

mer O’Siochru is a qualified architect and valuation surveyor. She was a founder of Feasta and served on its executive committee for many years. She is director of EOS Future Design which designs and develops sustainable systems and settlements. She also manages the Feasta-led Smart Tax Network which is funded by the Department of the Environment, Heritage and Local Government to develop tax policies in areas related to the environment. She lives in Dublin.

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