Tuesday, February 23, 2010

Jobs - On the Topic of Employer of Last Resort

I promised last week that I would write a post where commenters who so desired could debate the merits of an ELR (employer of last resort) program.  Without writing everything I have been thinking about on this topic, I have decided to provide you with a few links for discussion, accompanied of course by some commentary.  If there is sufficient interest, there is certainly ample material floating around in my brain to write more on this subject.

first:  Marshall Aurback via Barry Ritholtz:

"To all of the “Chicken Littles” (including the president), who fret about “excessive” government spending, we would simply point out that it is far better to deploy government spending in a way that reduces unemployment instead of settling for having it rise as a consequence of this spending.

We therefore suggest a new approach: Government as Employer of Last Resort (ELR). The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. A sizable benefits package should be provided, including vacation and sick leave, contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom-up reform of the current patchwork health care system.

Government as ELR would not be introducing another element of intrusive bureaucracy into our economy, but simply better utilizing the existing stock of unemployed, who are now dependent on the public purse — especially the chronically long-term unemployed. The current system we have relies on unemployed labor and excess capacity to try to dampen wage and price increases; however, it pays unemployed labor for not working and allows that labor to depreciate and develop behaviors that act as barriers to future private-sector employment. Social spending on the unemployed prevents aggregate demand from collapsing into a depression-like state, but little is done to enhance future growth and demand, which can be done via the ELR by providing the currently unemployed with jobs, greater education and higher skill levels.

The ELR program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption."

One thing to note - I THOUGHT that I'd previously read ELR advocates saying that an ELR program would not replace unemployment benefits.  It seems to me that Auerback is saying that the ELR would replace unemployment insurance (note the final sentence in the quote above).    I actually wrote about this before - suggesting that in NYC we should pay people to clean the streets instead of paying them to sit home and do nothing - but of course there is a counterargument to that claim:  the point of UI is "insurance"  (money for basic expenses so you can spend time looking for a job instead of panicking to pay your basic bills) while people are looking for a new job - not "welfare."   In traditional times that may be true, but if there's any discussion of an ELR program, you can't (in my opinion) allow people to collect unemployment insurance for upwards of a year, like many can do right now.

Anytime you talk about government creating jobs, the issue of "efficiency" or "productivity" always comes up.  It's relevant because if the government spends $100k to create a job that isn't "efficient," perhaps the money could be used more productively.  In other words, instead of creating 10,000 jobs at a cost of $100k per job (note - that's COST, not salary, as infrastructure projects have huge costs aside from salaries, obviously.  Perhaps the net salaries to the workers in this over simplified example are $50k)  building a hypothetical bridge to nowhere, why not create 40,000 jobs paying $25k each for people to sit at home?  "But Kid Dynamite, they are building something!"  Yes - a bridge to nowhere - the ultimate in non-productive infrastructure.   I'm certainly not in favor of paying people to dig holes and fill them back in (why waste the materials - just give them the money if you want to do that!) - and I'm not in favor of paying people to build a bridge to nowhere.  Even in infrastructure projects there is a cost/benefit analysis that must be undertaken.   I'm not advocating either of those solutions - only using them as boundary scenarios to illustrate the issue of "efficiency" and "productivity" which MUST be considered.

Felix Salmon digs deeper into some government data on the cost of job creation:

"What’s at issue here is a ratio: I’m talking about dollars per job created. To get that number, you take the number of dollars spent, and divide it by the number of jobs created. DeFazio, by contrast, subtly tries to change the denominator when he says that “$92,000 in direct government spending creates one job-year”: he’s taking dollars, dividing by jobs created, and then dividing again by the number of years that each job is expected to last.

In the real world, of course, if you spend $300,000 to create a job which lasts three years, then that’s one job created with your $300,000, not three jobs. Only in DC would people attempt to claim that their $300,000 had created three “job-years”."

"A 5-mile stretch of highway, costing $50 million, creates a total of 79 jobs. That’s over $600,000 per job. Even if you divide that by two on the grounds that it’s a two-year project, that’s still $300,000 per job-year. In railways, a $15 million investment creates 12 jobs — that’s $1.25 million per job, and it’s a one-year project.

I’ve seen similar numbers surrounding hospitals, and higher numbers surrounding nuclear power stations — basically, infrastructure investment is an incredibly inefficient way of creating jobs."

The bottom line is that, although we need not get a 100% return on capital for this spending, it's essential that there is SOME efficiency/productivity/benefit in these projects - even infrastructure projects - otherwise, as I noted above, you could help a lot more people with the same amount of money.  A new bridge linking Jersey to NYC may be a good project - relieving congestion and improving worker productivity.  A bridge to nowhere is not a good project.

A final point to ponder (which will likely become relevant as this discussion evolves)  is "what is the purpose of a job?"  Some people claim it's to keep people busy - to occupy their time and keep them out of trouble.  I'll leave this to the reader to decide, but for me, that claim is hogwash.  People work to get paid.  If you have a job you absolutely love going to everyday and would do for free - kudos.  I'm happy for you - you're a very  lucky person.  In my opinion, people work to get paid, and I don't think I'm alone in this view.



Anonymous said...

people work to get paid. agreed.

but i would tweak f.s.'s approach a little bit. the cost of "creating" a job should not include the wages paid to the worker. the wages are (ideally, fair) compensation for the efforts of the worker. it's all the other things that go into that project that constitute the cost of "creating" that particular job.

so, assume a highway project costs $1.0mm with half going to workers' wages, takes exactly one year to complete (i don't want to argue the temporal issue, yet), and employs 100 people. the cost of creating a job is $5.0k.

my $0.02.

Anonymous said...

and the benefit side is a lot more hairy, i think.

first, there is the tangible return on the project itself. for the highway project, that tangible return could perhaps be attained by estimating the toll payments that would be received had the road been privately-owned.

if the government were not involved, i.e. if the infrastructure building was a private initiative, the tangible side would perhaps be the end-all on the benefit side. but when the government is involved, with the explicit purpose of doing something about employment at that, this is perhaps not the only benefit.

second, and more abstract, is the counterfactual: what if those jobs had not been created? a crude version of this would probably look at something like the money-multiplier and apply it to the wages portion of the project. of course, i am sure there are ways to get a lot more sophisticated answers for this second bit.

finally, things like social cohesion and the like, which perhaps just can't be measured but just conjectured upon without any hope of precision.

Anonymous said...

The joke in the Great Depression was we paid one guy to dig a hole, and then we paid paid some other guy to shovel the dirt back in the hole. Most modern people would die if they had to work outside digging holes, etc.

So I've been working on the modern equivalent of the above. For instance, we could pay one person to write a computer virus, and then pay another person to write the anti-virus. This job could outlast any recession.

Congress has taken to reading the Federal reserve's AIG emails multiple times. This is great work if one could get it. So we could have a computer generate random AIG email messages, and then congress cold pay people to read them. This, obviously, could go on forever, as it already has. It just needs some creative expansion.

These are make-work jobs that could be done in cubicles in air-conditioned offices, and that is what we need.

Kid Dynamite said...

interesting ideas, JCH - i love your creativity.

but why bother? what is the point of an ELR program? this was the nature of my final paragraph - is it to keep people busy? is it to give them financial resources? (i think that's the primary goal) is it to make them prove some sort of worth (i don't think that's what you think - but why else should we require one guy to demonstrate that he can write the virus and another guy to demonstrate that he can remove it?)

if the point isn't to force people to do something productive or beneficial, why require them to do anything at all? why not just send out checks?

i do have a feeling that your AIG Emails comment will prove to be the Comment of the Day, and will be worthy of mention in a post of its own.

Anonymous said...

So much for the US being the one place on earth where individual freedom and opportunity trump (sovereign) ambition.

Employer of last resort. What a joke. Are the want ads in local newspapers blank, even today with 17% un(der)employment?

When the US is at 5% unemployment, would you want that 5% working for you? Of course not!

How much "management" would be required to achieve 2% unemployment? How many additional "hostile work environments" would there be by forcing that 3% to go to work every day?

Perhaps if one cannot find a job, the problem isn't the economy, its that the one is looking for a job that doesn't exist, and the one should look for some other job, or perhaps move to a place where that job does exist. And heavens, perhaps have to take a lower quality, lower paid job, for a while.

The only certain result of ELR will be a dismal communistic existence for everyone. No thanks.

We've spent 250 years in this country, largely proving that more individual freedom is better then more government induced stability. We're now getting to the point where current generations have no memory of what it means to have government in control of everything -- and worse, we cannot learn from the examples we see around the globe

(e.g. Argentina showed the US how to confiscate retirement benefits, and provide the sheep with a "sip of milk" in return.

Now we're on our way there:

You want to see MMT in action? Seize those 401(k)s. ELR to keep folks from the horror of saving.

Policies which support the endless printing press in the Treasury. Meanwhile, the small business is squeezed ever harder with the taxes required to keep the wheel turning.)


Anonymous said...

IT's an interesting thought. It also makes me cringe, but I suppose it's worth consideration. Long term unemployment is a real destroyer.

Use WPA as a case study, and see how that worked out.

Игры рынка said...

" In my opinion, people work to get paid"

That is a very tough statement.
So writers write to get paid.
Painters paint to get paid.
Musicians create music to get paid.
Mathematicians (or scientists) do theories to get paid.
Red cross people help people to get paid.
But than you could get into any profession like teachers teach to get paid.

Does it really make a difference in your opinion what people do to get paid or all of them are completely replaceable? Some people might simply work to get paid but then I am really sorry for their poor life which they waste doing some abstract work to get paid. You have a super simplistic and capitalistic approach to motivation.

And finally why do you blog? Do you get paid for that?

Anonymous said...

You still need an incentive to make people work.

Anonymous said...

"but why bother? what is the point of an ELR program?"

* to make sure aggregate demand does not fall off a cliff, or go into a steady decline over the course of decades (a.k.a. head off deflation)

* to make sure the government appears to be doing something about the situation where people are not doing well

Kid Dynamite said...

vlccashmachine -
good points, although i think there is one flaw with your want-ad analogy - it's been pretty well documented that the number of job seekers for each available job opening is massive right now.

market games - i will not have this debate with you - i am quite confident i my claim that people work to get paid - but if you don't agree with that, i don't care. as i said - kudos to you if you have found a job that you would do for free. I don't think it's a very tough statement at all. and yes - it's one of the BEST (and at the same time worst!) features of capitalism - INCENTIVE. DRIVE. MOTIVATION.

i have no idea what the point of your second paragraph is - it absolutely makes a difference if the goal of an ELR is to provide people income or to occupy their time. if the goal is to give people income, there is never reason to pay people to dig holes and fill them back in - you could just send them checks instead so that they have time to pursue their noble artistic endeavors which you mentioned in your list.

you can bet that if i had to work a full time job right now I wouldn't put as much time into this blog as i do. should the government provide me a stipend for this blog because writing is a noble endeavor? hell no. absolutely not.

as for art - that's a big can of worms. who decides what is art? Are you the one who says that my step-sister's art (which is tremendous by the way) qualifies as "art" while the guy who gives himself tempura paint enemas and shits on a canvas isn't art? are you the one who decides that Picasso is art, but a blank canvas painted white is not art (or is art) ? the value of art is whatever someone is willing to pay for it. if society finds artists' contributions to be valuable, they reward that value. that's how it works. If someone wants to pay or trade for diarrhea tempura paint art, then it has value. If not, it does not.

Anonymous said...


"why bother? ..."


I think the country needs to rethink what unemployment number is actually the most efficient.

My suspicion is it's around 8 to 9%.

At that point, the costs of creating (government subsidy of some form) the job will outweigh its benefit, and society would be best off simply paying around 8% of the population a humane wage to stay at home and watch soap operas.

When GWB was being accused of having a jobless recovery, jobs suddenly sprouted up everywhere. And those jobs have cost us dearly. We would have been far better off had his jobless recovery go on and on.

Kid Dynamite said...

anon @ 11:30 who wrote:

""but why bother? what is the point of an ELR program?"

* to make sure aggregate demand does not fall off a cliff, or go into a steady decline over the course of decades (a.k.a. head off deflation)

* to make sure the government appears to be doing something about the situation where people are not doing well"

stop. read what i wrote in the rest of that comment. you are giving rote textbook answers without thinking. That was not the question. If the goals are to maintain aggregate demand, or to have the gov't help people - then you admit the gov't could just send them checks instead of giving them busy work - right?

now, the logical extension of that is that there clearly ARE some jobs which are productive and some which are not. if you don't have a productive job for someone, EVEN THOUGH i understand that you want to help them - why make them dig holes and fill them in? why not just send them a check?

having people do meaningless work (digging holes and filling them in) does NOT increase aggregate demand. it does NOT make it "Appear" that the government is doing something to help. now - of course, this is a boundary case - the hole digging - but it's important to recognize that there is a scale of "value creation" from jobs. digging holes and filling them in is at one extreme. The closer things are to that extreme, the less sense in having them as part of the ELR program.

Kid Dynamite said...

jch - YES. we could argue about the number, but you have a point. of course, the real problem is that when you pay people a living wage to stay home, it results in backlash from the rest of the population, and a vicious cycle that's probably harder to manage (the guys working at MCDonalds now say "fuck it - i'm going to stay home and get paid instead of busting my ass here flipping burgers" and then the government has to force one of the stay at home benefit ELR recipients to take that job.

Which is the real reason you can't really pay people to stay home, which gets back to why you have to pay them to do meaningless stuff like dig holes and fill them in. It's not about aggregate demand - it's about human psychology.

Anonymous said...

sorry, i thought this was apparent.

you are absolutely right re: "having people do meaningless work (digging holes and filling them in) does NOT increase aggregate demand."

* but we are talking about a matter of degrees. i agree digging holes et al are extreme cases. but there will be difference of opinion about the useful/useless-ness about almost any other job. not for nothing that so many people think "bureaucracy" is synonymous with "waste", while others see it as "necessity".

bottom line is don't worry about efficiency and waste. ELR is for production, not productivity. as long as the government is not actually involved in digging holes and filling them, there will be some addition to "aggregate production" (just a concept, don't know if this concept exists in textbooks).

finally, given the cost of capital for the government is what it is, it is kinda unnecessary for people to expect the government to be super efficient and productivity-maximizing. in a very real way, government is a big PR exercise: as long as the system survives politically, something is being done right.

"why make them dig holes and fill them in? why not just send them a check?"

*the government also needs to appear to be putting people through some un-ease as part of any ELR program. to placate those who are not getting jobs through the government. in that sense, it really does not matter what they do, as long as the government can make it seem that people are getting paid for doing work.

as for holes and fillers, see above.

work with me here. i am not trying to give you textbook answers. if anything, i am giving your seat-of-the-pants answers. maybe not well thought out, but just raw thoughts.

Anonymous said...

"work with me here." ==> bear with me here.

Kid Dynamite said...

anon @ 12:13pm: you wrote

"*the government also needs to appear to be putting people through some un-ease as part of any ELR program. to placate those who are not getting jobs through the government. in that sense, it really does not matter what they do, as long as the government can make it seem that people are getting paid for doing work."

bingo - i agree completely and i think that's a under-discussed PROBLEM with the program. it's an admission that society doesn't favor it.

anyway - as i wrote in the initial post, the reason efficiency and productivity matter is that there are many projects which, while not quite being dig-and-fill, cost a ton of money to run. instead of wasting money building a bridge to nowhere, where 20% of the proceeds go to the workers to actually increase aggregate demand, why not take that money and give 100% of it to five times as many workers (to read AIG's emails, for example, per JCH's suggestion)!

you already answered it (the first quote in this comment - from you) - the answer is because the government has to fool the rest of the populace into buying into the whole concept.

scharfy said...

Good posts to all.

"Creating a job" is perhaps the single worst economic metric in existence, perhaps worse than GDP, and captures almost nothing regarding the relative efficacy of any GOVT spending sprees. This is by design, I suspect.

What we want are high wage jobs. Which are highly productive jobs. Which are highly skilled jobs. Which do not come from the bowels of bureaucracy.

As many have noted, economic activity is not tantamount to economic gain. Our government is adept at the former, not so much on the latter.

As a free market "type", I have resigned myself to the fact that GOVT spending is a fact of life, and now I only pray that the bridges to nowhere - lead kinda close to somewhere. I am not optimistic.

Anonymous said...

i agree.

"... the answer is because the government has to fool the rest of the populace into buying into the whole concept..."

the other side of the story, as already mentioned, is that a jobs program - or, the talk of it - is necessary for the government to fool the populace into buying into the current system where a given proportion don't have enough work at present.


within the system, the government's role is to create conditions where some can participate in economic activities that result in economic gains for some people. economic gains that some people can keep (subject to varying degrees of atrophy/depreciation).

for the system to function, it is not necessary for the government itself to partake in the creation of economic gain/value in the traditional sense. that mere fact that government exists allows for the creation of all economic gain through personal effort.

"free markets" need governments, too. police/army/jails/laws etc.

everson said...

Good article here on the costs of long-term unemployment:

In the context of MMT, an ELR provides a method of helping to maintaining full output. Unemployment has large costs for social cohesion and providing jobs is a way to keep these costs low.

I agree that an ELR should replace unemployment insurance. Perhaps you get a maximum of say 3 months unemployment insurance and then after that you can sign up for the ELR? This way someone who wants to search can do so full time first.

Also if I recall from Bill Mitchell's blog correctly, this program would replace the minimum wage. (Set a floor on what the lowest wages are in the economy.) Why work for $5 per hour pumping gas if you can sign up for the ELR at say $9 per hour with benefits.

It also seems to me that this would be a great way to introduce health insurance for those that can not afford it. If the government provided health care as part of the wage package any who needed the coverage could sign up.

The efficiency of the ELR has to be weighed against the suffering of those who are unemployed. The costs of long-term unemployment are very high.

Personally, if we are going to do large stimulus spending I would rather see it done as an ELR program than go to the bankers, or as pork to connected politicians and their 'friends'.

If would be an added bonus if the emphasis of the ELR was on needed work such as home health care for the elderly or disabled, education, energy conservation, road maintenance, etc. There is a *lot* of work that would provide useful benefits that is not being done due to budget issues at the local or state level.

rjs said...

we already have a stealth ELR program going with the census, where they're hiring 1.2 million, more than three times the last census...the bottom line, though, is that you cant build a sustainable economy or pay for your oil imports with everyone being paid to search each others luggage, count each other, and empty each others bedpans...

Anonymous said...

... "manage" each others' money? ...

Kid Dynamite said...

RJS wrote: "the bottom line, though, is that you cant build a sustainable economy or pay for your oil imports with everyone being paid to search each others luggage, count each other, and empty each others bedpans..."

yes. very well said. anyone care to respond to that?

oc bear said...

You make and excellent point that lengthening the unemployment benefit blurs the line with welfare. The idea of unemployment was a short term insurance program for job seekers. Welfare used to be a lifestyle choice, but was reformed by requiring training, retraining, or working in a gvmt program.

So it seems to me that we already have a system in place, but of course we are not letting it work.

There is going to be a period or adjustment because of interference by the government. I don't see how this can be avoided. So stop interfering. Let's see -- housing bubble, FNM, FRE, what's next.

Kicking the can down the road doesn't get rid of the can or make the road any shorter.

Anonymous said...

>>what is the point of an ELR program?

We should acknowledge that many people work for the dignity and self respect that accrues from being able to take care of themselves and their family.

Therefore ELR work that was makework (dig hole / fill it up) should be avoided, while WPA style public works projects that provide a surviving public benefit should be encouraged.

everson said...

Kid and RJS,

The time to build a sustainable economy was 10 or so years ago before Greenspan and his wrecking crew did their thing.

The job guarantee or ELR is about minimizing the negative impact of the crisis on overall output. Why should the rank and file suffer for the misdeeds of the bankers/politicians/economists?

While I have reservations about MMT the ELR seems like a much more humane approach than random stimulus or infrastructure pork. If properly targetted it could assist us in the process of getting back to a sustainable, organically grown economy. I.e. not built on excessive debt and spending beyonds ones means.

Now if you subscribe to MMT they would say to create new money (credit bank accounts) to pay for the jobs.

That is the part of the ELR and MMT that concerns me :-)

Kid Dynamite said...

everson - unfortunately we don't have a time machine.

The stimulus program is a variation of ELR. it's government funded work. Semantics.

But you need to address RJS's point - his point is that this is no sort of solution.

I think your suggestion "If properly targeted it could assist us in the process of getting back to a sustainable, organically grown economy" is a pipe dream (which is not to say it's not a noble goal!). yes - we'd love it if the government could wave a wand and magically create all sorts of jobs that would sustain new economic growth (by the way - it would be impossible to argue against the fact that such jobs would be PRODUCTIVE) - but i think that's about as realistic as the tooth fairy.

i'm going to ignore your rhetorical question "Why should the rank and file suffer for the misdeeds of the bankers/politicians/economists?" because the rank and file is suffering from their own fiscal ignorance and spending beyond their means. I am willing to bet that not a single foreclosed homeowner was cursing Alan Greenspan and his low interest rate regime at the same time he was taking out a 5/1 ARM at 3.5% which he thought he'd be able to refi at a profit.

but seriously - if we talk about blame, it will be a major diversion to the topic at hand.

Jeff65 said...

Another facet to the requirement that an ELR program is in place is philosophical in nature. An ELR program is obligatory because the state offers no humane alternative to participation in its system. It is a human rights issue.

everson said...


Take a look at this interview with Richard Koo:

If you read his work, especially his book "The Holy Grail of Economics", he stresses the fact that our current crisis, the Japanese crisis, and the Great Depression are all about debt. There is no fix other than to reduce the excessive debt in the system. If nothing is down to offset this de-leveraging you end up with collapse like in the Great Depression. By the government deficit spending the collapse can be avoided. Stimulus spending is needed under these circumstances.

My primary point is that if you have to do it you might as well, 1) help the unemployed, 2) try and spend the money on something useful like new energy infrastructure. The bill we had was a porkfest and it is doubtful in my mind that it did much to help no matter what Krugman may say :-) We need to avoid a repeat of that going forward.

I do not believe in the dig a hole and fill it style of stimulus. An ELR could (and should) be designed to avoid this. I don't think that there is a lack of useful projects to do even if the work is not performed as efficiently as could be done by the private sector. At least people would have a job and some ability to provide for their families with dignity. That sure beats welfare.

According to Koo's theory of a balance sheet recession sustainable growth could be a long ways off. HIgh unemployment for the next 10-20 years seems like a recipe for social disaster.

An ELR program would be a great way to avoid that.

Why the assumption that targeting the ELR is a pipe dream or fairy tale? I can think of many jobs that need doing that both sides of the aisle should be able to get behind.

How about new pure research institutions like the old bell labs? New nuclear power plants, energy grid, or wind projects (depending on your energy views). More teachers. Daycare providers for others working in the ELR, etc, etc.

The ELR is not proposed as a solution to our growth issue but a way to mitigate the issue of long term unemployment. No sustainable growth is going to result from 10% of the workforce sitting idle unable to pay their bills and defaulting on their mortgages or credit cards. Just more pain for all.

Kid Dynamite said...

everson - i'm nor sure how long you've been reading my blog, but i've been agreeing with the ideas you reference in Koo's piece from the start: the only solution is to recognize bad debts and write them down.

THEN you can talk about potential healing - and then you actually get bang for your buck from stimulus (Even on the bank front)

Kid Dynamite said...

everson - ps - i think there's definitely work to be done on the municipal level. That's also one of the hardest things to deal with, as states are supposed to have their own budgets, and government plans in those areas always seem to cause problems (or be PORK predominated!)...

I lived in NYC for 10 years. the subways come to mind - it's obvious that money could be spent improving that system. the question is, whose money? NY doesn't have money in the budget for it, nor does the MTA. I guess the point of the MMT theorists is that it's not anyone's money when the government spends it - it doesn't have to be collected in tax revenue. it's just NEW money. and it's not inflationary (they hope!) because it increases economic output or aggregate demand etc... that will remain to be seen i guess.

Jeff65 said...

Kid D,

You don't understand MMT at all if you speak about the NYC govt being in any way similar to the Federal govt with respect to fiscal issues. NYC doesn't have a printing press and therefore can go broke if it doesn't fund expenditures through taxes or debt. MMT makes this very clear.

This may have been a careless oversight on your part, but it is a very important distinction.

Economics of Contempt said...

I'm curious how Auerback plans to have the federal governmenet employ (which is an ongoing activity, separate from just "hiring") literally millions of people without, as he claims, "introducing another element of intrusive bureaucracy into our economy." That would be a neat trick indeed.

Without commenting on whether it would be needlessly "intrusive," it's simply undeniable that the kind of ELR program that Auerback envisions would require a massive new bureaucracy. Unemployment Insurance at least has the benefit of requiring minimal ongoing supervision/monitoring of beneficiaries. An ELR program would require armies of career supervisors, back-office personnel, etc., just to have the capacity to employ all the unemployed workers. The government would basically have to set up an entire sector of the economy!

It's just silly to think the government could do that without creating a massive new bureaucracy.

But then again, making outlandish (and usually untrue) claims seems to be Auerback's shtick, so I can't say I'm too surprised.

Kid Dynamite said...

no jeff - i understand it perfectly well - but thanks for making the distinction clear for the readers.

my point was that the places where i think the most useful jobs could be "Created" are in municipal roles, but that it's thorny when the government spends its printing press dollars on places that don't have a printing press. that's exactly why our system is so totally fucked to begin with. (in other words, i was talking about Federal bailouts of state budgets - which is almost certainly inevitably coming (Cali, NH, Arizona, etc) since the states are bankrupt.

then it becomes a race to the bottom when suddenly the STATES realize that they don't really have to adhere to their budgets.

Kid Dynamite said...

EOC - good point - that claim of his seems pretty outlandish. HOWEVER - this new bureaucracy is probably exactly the desired effect. just think of how many jobs would be created just to monitor, track, maintain, and pay all the other jobs in the ELR program!

Jeff65 said...


Auerback qualified the word bureaucracy with an adjective in his sentence as you quoted it. It completely changes the meaning of the sentence, but you seem not to have noticed.

Anonymous said...

"RJS wrote: "the bottom line, though, is that you cant build a sustainable economy or pay for your oil imports with everyone being paid to search each others luggage, count each other, and empty each others bedpans..."

yes. very well said. anyone care to respond to that?"

-never really thought about it this way before, but these describe _sustainable_ economic activity pretty well. they may not promise growth, but they sure represent economic activity.

leaving aside net imports for a while, isn't all economic activity basically supplying things or services to one another? like cooking for one another, caring for one another's babies, managing one another's money, and so on.

and imports is predicated on our ability to "sell" our currency to foreigners. "selling" could mean convincing we have superior economic power or military power or a combination. does not really matter.

too far out?

rjs said...

anon@5:51: we certainly have morphed into a "service economy", but we still buy our toys overseas...& while we have managed to fool the rest of the world into taking our fiat currency in exchange for real goods for several decades now, how long can that be sustained?

military power? while we've been bogged down in iraq & afghanistan, china, with $2.4 trillion in foreign reserves to work with, has managed to buy half the world resouces, including the iraqi oil some thought we were securing for ourselves...

Greg said...

Hey Kid

Are you taking shots at me over here on your blog! ; )

I dont disagree with the statement that people work to get paid, I actually think that sort of warrants a DUUUHHHHHH response. But all snarkiness aside, working to get paid is exactly the point of ELR programs.

A side benefit of ELR programs (and an important one I think) is that people will be busy 8 hrs a day, have an income to pay some debts or provide a customer for a small business and NOT be idle and possibly starting trouble somewhere.

Its a cost benefit analysis. If you think there are no real costs to chronic unemployment (that is people who want to work but cant) I would beg to differ with you. If you think that idle young males wont be getting into trouble (especially in this country where POT SMOKING can get you incarcerated) I think you must be smoking something. Further if you think that building jails and training guards is "productive" use of our resources I would seriously question your definition of productive.

I like your blog and your visits to Bill Mitchells site have added to the comment section over there.

Greg said...

mlThe social aspects of the ELR are HUUUUGE.

The resentment by those not in the ELR would be real if their wasnt work being done, if their wasnt time away from leisure being required.

An important aspect is that ELR jobs are available to EVERYONE. You want to quit your job and take an ELR job? Go ahead, chances are good someone will take your private sector job. ESpecially in todays environment. The fears of this slipping to some communistic state are ridiculous I think. The entire program would be VOLUNTARY. No one would be MADE to take ANY of these jobs. Creating these false dichotomies where we are either TOTALLY private market or we are going to be TOTALLY communist is silly.

The truth is simply that there are too many things, that if not necessary are certainly desirable, that the private sector can not do for a profit and thus will not be done. This is because of many factors but primarily because people do not have enough disposable income to spend on some services they would like to have.

Good discussion here