The Social Enterprise Sector Model for a Job Guarantee in the U.S.

Pavlina Tcherneva | January 10, 2014

Jesse Myerson created a firestorm over mainstream media with his Rolling Stone piece “Five Economic Reforms Millennials Should Be Fighting For.” I’d like to address the very first of these reforms, the Job Guarantee (JG), as Myerson references my proposal for running the program through the non-profit sector and discussed it in several interviews on Tuesday.

Last month, I did a podcast with him about this program. Let me focus on some questions that keep popping up about the proposal, e.g., Josh Barro’s Business Insider piece.

What is the problem?

It is fundamental. It’s not just a problem of today’s deeply ailing economy. It’s permanent. There are always people willing to work, whom profit-driven firms do not wish to hire.  Even when economies are growing rapidly, there are never enough job openings for all who want to work. That number is 24.4 million people today: 10.9 million officially unemployed and 13.5 million in hidden unemployment (bls.gov).

The mark of unemployment is itself an obstacle to getting a job. The average employer equates 9 months of unemployment to 4 years of lost work experience. (Eriksson and Rooth AER, 2014). And so unemployment breeds unemployability, feeding the decades-long uptrend in long-term unemployment, while the economic, political and social costs are mounting.

Whenever I write about unemployment, I always stress the long run. The point is to solve the problem in recessions and expansions. Virtually no economist or pundit outside MMT makes this point. I predict that, while it is fashionable to entertain various solutions for the unemployed today, as soon as the economy recovers sufficiently, they will be forgotten.

It’s time to change the conversation from creating jobs for the jobless now, to creating jobs for the jobless always. The Job Guarantee provides the solution. I have explained elsewhere why neither the private sector nor the flawed bastard Keynesian pump-priming policies can get us there (here and here).

So let’s move right to the design and implementation of a JG through the non-profit sector.*

The social enterprise sector creates the jobs, not the federal government!

The JG is an employment safety net. It is not incompatible with or a replacement for private sector employment. Quite the contrary, one of its core features (the buffer stock), makes it symbiotic and interdependent with private sector activity (more below).

The federal government funds it, but non-profit social entrepreneurial ventures (SEVs) and traditional non-profit organizations propose, manage, and run the projects. We can use the already existing infrastructure to launch it. Convert the nation’s ‘unemployment offices’ to ‘employment offices’ and let them register all unemployed who wish to work in the social sector at a base wage (e.g., a living wage). Allow nonprofits and SEVs to hire from the registered to do the kind of important work they are already doing.

Why the non-profits and SEVs?

The non-profit and social enterprise sectors produce original, innovative and sustainable solutions to seemingly intractable socio-economic problems, which the private sector has failed to solve. Their mission and reason for existence is to create social value and address very specific problems like poverty, hunger, homelessness, environmental degradation, community blight, inadequate care and education for all, and other. The work of this sector is perhaps the one bright spot in our economy today. Yet delivering large-scale solutions to these problems remains a challenge for two reasons: 1) its work is always underfunded and 2) it is always understaffed. The Job Guarantee solves both problems—it provides funding and labor.

So, let’s add full employment to the list of social problems that need a solution by recognizing that a job for all who wish to work for the public interest creates social value and itself serves the public purpose. A JG is a sustainable solution to the problem of unemployment. By harnessing the entrepreneurial sector’s energies it becomes the institution that delivers true full employment over the long run. For this task, policy needs to do three things:

1)    Explicitly marry the various social objectives of the social sector with the goal of providing jobs for those who wish to work. Let the unemployed participate in the very process of social provisioning, by guaranteeing a job offer in that sector to anyone ready, willing and able to work.

2)    Scale up the social ventures that are already successfully operating on the ground. No need to reinvent the wheel. Just permit them to do more.

3)    Reproduce already successful work models in places where no such non-profits or SEVs exist.

Non-profit and much SEV work is countercyclical

This is a key point: the social sector is countercyclical.  As we have discussed many times, a core feature of the JG is its buffer stock mechanism.

When economies falter, community needs increase and social problems multiply. This is precisely the time when the social sector needs to perform much more work and requires extra helping hands.  That is also the time when the JG expands. Those who have lost their jobs would now move from private sector employment to social sector employment (rather than from employment to unemployment). Since it is a job guarantee, the program is also open to new entrants and all who wish to work in the social sector for a base wage.

When times are good, some social problems are alleviated, spending on programs shrinks, fewer workers are needed, and many of them transition to better-paying jobs in a recovering private sector. Because social needs continue to exist, the nonprofit sector is perfectly suited to providing jobs for those who have been left behind by a growing economy. Unlike conventional stimulus programs, the work of non-profits and SEVs does not disappear during expansions.

Fit the job to the worker

A common concern is that we cannot find productive work for everyone. The experience of the New Deal and Argentina’s Plan Jefes shows that such programs can be up and running in 4 to 6 months and useful tasks can be performed even by the least skilled and least educated citizens.

Without a doubt, the public sector can initiate massive public works projects today and rebuild the crumbling U.S. infrastructure. And that should be done regardless. But public works are a clumsy method for providing jobs for everyone over the long run. Building a bridge is not always the best solution to employing the unemployed. It is much better to find them a job in a sector that is already countercyclical, so a job placement in a non-profit or SEV is the way to go.

Since the JG guarantees a job at a base wage for everyone, irrespective of skill or level of education, the program would in reality fit the job to the worker (rather than the worker to the job). One way to do this is, after assessing the needs and resources in a community, to permit the non-profits, SEVs and (through them) the unemployed themselves to propose the types of work that they wish to do in those communities. This is a true bottom-up approach—powered by communities, localities, and the individuals themselves.

A HuffPoLive interviewer asked Myerson: “Well, I’d like to travel the world like Anthony Bourdain. Can I set up a non-profit to do that and would the government guarantee me that job?”

The answer is ‘no.’ Every proposal in the JG would be designed to serve some public purpose and address an important social problem. A basic grant review process can approve or deny these projects, subject to the same guidelines that already exist for non-profits.

What kind of jobs?

Non-profits and SEVs already work to produce sustainable and reproducible low-cost solutions for the most overlooked and blighted areas in our nation, such as low cost urban fisheries, community clinics, farms, aquaponics, youth mentoring projects, veteran services, and many other. Many support community sustainable agriculture initiatives, work to address the dual challenge of homelessness and AIDS, provide internship opportunities for at-risk-youth, or renovate and beautify decrepit urban spaces with murals and art projects.

Consider just one problem of many that countless U.S. communities face: the food desert problem. A food desert is an area with little or no access to healthy and affordable food. Many rural and urban such areas rely on gas stations or convenience stores for food. There are no gardens, farmers’ markets, or other sources of fresh produce. Areas suffering from food insecurity also have the highest health-related and other social problems. Addressing the food desert issue in the U.S. alone can generate millions of jobs. And this is just one example.

Program funding

The program is sustainable when the federal government provides the funding. But it need not fund 100 percent of the total cost of these projects. Many non-profits and SEVs already have some resources and, as it was done in Argentina, the government could commit to paying 60-80 percent of the total costs of the project. The social sector firms would provide the rest, either by raising funds from their private donors or by supplying part of their infrastructure for the execution of the projects. Additionally, the government could determine that it would appropriate 80 percent of its budget toward wages and only 20 percent toward materials (that was about the ratio that New Deal projects used). This is the kind of public-private partnership that seals the social contract.

A final word about the private for-profit sector

Imagine 25 million people with no income or precarious forms of income. Now imagine 25 million with a decent base wage. The effect on the private for-profit sector would surely be more stable demand, ringing cash registers, increasing profits, growth and, yes, a lot more better-paying private sector jobs.

The Job Guarantee is voluntary. No one is forced to take the job. And if someone wants to set up their own mom-and-pop shop or for-profit SEV instead, the very existence of the JG ensures that they will be starting their business in a much more stable economy with much more stable demand than we have ever experienced. They might even offer a better paying job to some of those JG workers. Experience with direct job creation around the world, shows that it promotes private sector employment much more aggressively than conventional stimulus policy.

Millennials are clearly not optimistic about their future, but they have great many ideas about the kind of communities they want to live in—from the Kansas City urban farming guys to the young entrepreneurs in Detroit—they are working on potentially transformative initiatives. A Job Guarantee policy can support them while providing a basic employment safety-net for all.

As Salon’s Brian Beutler correctly observed, the astute conservatives understand what’s at stake here: not that the Rolling Stone article is advocating for some form of communism, Stalinism, or some other than the preferred –ism, but that young people are beginning to demand a renewed role for government policies that serve the public interest. Worse, that a policy like the JG represents a foundational rethinking of the safety-net in a way that provides economic opportunities to all. It is a call for a bolder New New Deal for the modern world.

* See Randy Wray’s primer and new series for answers to other questions about the JG.

(cross-posted from New Economic Perspectives)

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