Economic disruption and a federal ‘jobs guarantee’

Axios.com regularly publishes reports on how artificial intelligence, robotics, automation and computerization in the information age is eliminating jobs in the way that the industrial age caused economic disruption of the world’s economic order from its agrarian past.

Steve LeVine recently reported this fascinating piece, The coming jobs apocalypse:

Congress and the Trump administration have yet to create a coherent policy response to a widely forecast social and economic tsunami resulting from automation, including the potential for decades of flat wages and joblessness. But cities and regions are starting to act on their own.

What’s happening: In Indianapolis, about 338,000 people are at high risk of automation taking their jobs, according to a new report. In Phoenix, the number is 650,000. In both cases, that’s 35% of the workforce. In northeastern Ohio, about 40,000 workers are at high risk.

In all three places, local officials are attempting to take charge by identifying jobs most at risk, skills most likely to be in great future demand, and how to organize education and industry around a new economy.

• Their gingerly first steps are a snapshot of how economies throughout the advanced countries will have to respond to an already-underway economic disruption that will be of unknown duration and magnitude.
• “This is a national trend that is going to play out locally. This is something the country and really the world is facing right now,” said Rachel Korberg of the Rockefeller Foundation, which funded the reports covering Phoenix and Indianapolis.

The background: The Phoenix and Indianapolis studies were carried out by ShiftLabs, a collaboration of Rockefeller and New America, a think tank. They are responding to forecasts of an utter shakeup of current jobs, forcing vast numbers of workers across fields to learn new skills, often unrelated to their occupation as currently configured.

By the numbers in Indianapolis and Phoenix:

• As a group, restaurant workers — food service workers, waiters and cooks will lose the most jobs, followed by retail sales people and cashiers. Their average salary is about $32,000 a year (compared with about $67,000 for 300 low-risk occupations).
• Among those at highest risk: Cashiers have a 97% risk of losing their job to automation; and office workers like secretaries and administrative assistants at 96%. Food servers in Indianapolis are at 94%.
• Among the lowest risk: Registered nurses have less than a 50% chance of being automated out of their job.

Women are disproportionately affected in both cities:

• They are 58% of the workers in high-risk fields in Phoenix and 55% in Indianapolis.
• They dominate the food and retail industries, office work and cashiers.

In both cities, in line with prior studies, those with a high school degree or less are at greatest risk. They represent about 45% of those at high risk of automation and just 18% of those at low risk.

• On the positive side: Phoenix workers are likelier to be in computing or mathematical jobs, meaning jobs at low risk of automation, and much less likely to be in manufacturing than the national average.

As for solutions, cities and regions are only starting to figure out what they can do.

• In Phoenix, Arizona State University is starting a program in which — before incoming students decide a major — they are briefed as to what type of work is likely to be available when they graduate.
• Indianapolis is preparing to link low-income workers to training programs that would lead to long-term jobs.

Jacob Duritsky, of TeamNEO, a Cleveland-based economic development group, tells Axios that a report issued this month begins the process of training northeastern Ohio’s work force in projected high-demand future jobs. A starting point is building up local expertise in additive manufacturing, he said.

• “Talent will be a defining factor of competitive regions moving forward,” Duritsky said. “This report is our effort to address an increasingly urgent challenge impacting our region and the nation.  We can’t solve it unless we can measure it, and this is our first step to solve that challenge.

One response to the economic disruption of the information age that is causing both social and political upheavals as well, which has received a lot of attention of late, is a federal “jobs guarantee.”

Erik Loomis recently wrote at the New York Times, The Case for a Federal Jobs Guarantee:

Employment numbers may look solid now, but economists, physicists and industrial engineers all say that automation will, in the not-so-distant future, drive higher unemployment. The Columbus Dispatch recently calculated that in Ohio, out of total state employment of about 5.5 million workers, 2.5 million jobs are at risk of automation.

How do we prepare for such disruption and the future of work? We might revisit an idea from the 1970s: a federal guarantee of employment. In recent weeks, three Democratic senators (and likely presidential contenders) — Kirsten Gillibrand of New York, Cory Booker of New Jersey and Bernie Sanders of Vermont — have either expressed their approval of the idea or unveiled initial ideas about how an updated version could work.

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Resurrecting the Humphrey-Hawkins Act can help pre-empt a technology crisis and even future labor dislocation from globalization. In the original Humphrey-Hawkins bill — not the watered-down version that ultimately passed in 1978 — the president would submit an annual plan to Congress to achieve full employment, and local committees would coordinate job needs in their communities. The bill would have spurred private-sector job creation and a New Deal-style federal job creation program. Private employment would limit government investment, while federally mandated wage and price controls would fight inflation.

The arguments against Humphrey-Hawkins in 1978 are largely irrelevant today. After decades of low inflation, wage and price controls are unlikely to be problems. Mr. Booker’s pilot plan to test these ideas in 15 areas of the country builds on the Great Society belief in community control over federal resources.

The potential is great for helping revive depressed communities. West Virginia could clean up its streams and roadsides while building better housing. Flint, Mich., could construct new water systems and provide stability for private business to support a newly robust community. New York could construct low-cost housing to solve its homelessness crisis.

What must exist in any job-guarantee program is an enforcement mechanism. The initial version of Humphrey-Hawkins allowing workers to sue for a job reminds us of the need for a strong enforcement mechanism. Without a legal requirement to provide work, lawmakers will find political excuses to not implement the program, and it will not serve as a useful solution to automation, poverty and social instability.

True full employment would require an expansive view of worthy labor that moves us beyond nostalgic images of white men employed in steel mills and coal mines. This can range from the building of badly needed infrastructure to giving children music lessons. It can also underwrite our elder care and child care crises. Moreover, while an expanded public sector would be necessary to achieve full employment, the government can provide a variety of incentives to the private sector to increase employment.

Ideally, a permanent Works Progress Administration, with the government directly employing tens of millions of unemployed workers, would not be required. For the last several decades, a corporate culture of quarterly earnings reports has emphasized short-term profit and executive bonuses based on cost cutting. That approach came at the cost of labor. With real competition for labor from the government, corporations would need to invest in long-term planning and job creation and training programs to keep workers.

And if the most drastic claims of automation’s impact on employment come true, our society will have developed a plan to ensure economic and social stability through robust public employment, one that can be funded through taxes on the wealthy benefiting from automation and from those directly employed by the state. For those who cannot work, a limited version of universal basic income-style direct cash transfers can substitute.

Job creation fits American cultural norms around work more effectively than the idea of universal basic income. It avoids politically unpopular forms of welfare while significantly bolstering the welfare state for those who need it. Encouraging private sector job creation would limit the impact on the deficit while adding tax money to the nation’s coffers.

A federally guaranteed job is not the full answer to economic inequality or an automated world. It needs to be paired with a higher minimum wage and labor law reforms that allow workers to unionize and win collective bargaining agreements. Work under the federal job guarantee starting at $15 an hour would help produce those outcomes.

The implementation of a federal employment guarantee would consist of difficult compromises, power struggles and policy corrections. But it also provides the most politically realistic answer to our future employment crisis. It deserves serious consideration.

Matthew Yglesias noted that “The policy wonk community is rather suddenly being torn apart by a phrase that lurked in incredible obscurity just a few months ago: “jobs guarantee.”” Why politicians should promise every American a job (excerpt):

The idea, which exists in different forms, is that the government ought to accept responsibility for ensuring that everyone who wants to work can get a job — directly hired by the public sector if necessary.

The idea dates back at least to French socialist Louis Blanc’s mid-19th-century plan to establish “national workshops” to guarantee employment to the poor. Franklin Roosevelt in his 1944 State of the Union address spoke of establishing “the right to a useful and remunerative job in the industries or shops or farms or mines of the Nation,” and the concept is enshrined in the United Nations’ universal declaration of human rights. And now Democrats are increasingly talking about bringing the idea back.

Sen. Kirsten Gillibrand (NY) broadly endorsed the concept of government-sponsored jobs for all who need them in March, Sen. Cory Booker (NJ) unveiled a specific plan for a jobs guarantee pilot program last week, and Sen. Bernie Sanders (I-VT), who managed to get through an entire 2016 primary campaign full of ambitious policy proposals without a jobs guarantee, now says he’s preparing to unveil a plan for one soon.

The response from many wonks has been scornful. Moody’s Analytics economist Adam Ozimek says it’s “absurd”; former Treasury Department economist Ernie Tedeschi observes any such program would be “extremely expensive” and not necessarily a well-targeted use of money. From the left, Matt Bruenig of the People’s Policy Project has repeatedly scorned jobs guarantee plans as “muddled,” especially on the critical question of “coming up with suitable jobs.” Mother Jones’s Kevin Drum denounced Sanders’s vague outline of a plan as “pretty close to insane.”

Yglesias goes into great detail. You should read the entire piece.

Economists Jared Bernstein and Dean Baker recently wrote at the Washington Post, Guaranteed jobs in America: Motivations and limitations (excerpt):

Democratic policymakers are thinking seriously about government programs to create decent jobs for people who live in places where too few exist. As noted, even in year nine of the current expansion that boasts a 17-year low on the unemployment rate, there are far too many people and communities left behind. This, along with the black/white unemployment differential and its impact on minorities’ living standards and future opportunities, is a classic market failure, providing a clear rationale for government intervention.

As economists who have long bemoaned the absence of full-employment labor markets, we are uplifted and gratified to see this policy thrust. Its logic follows directly from the fact that the game has long been rigged against those who lose the most from the dynamics engendered by the five facts (above). These include minorities, immigrants, the working-age poor, and all low- and middle-wage workers. In other words, not exactly a fringe group.

We would single out minority and poor families as uniquely vulnerable to these market failures. Majorities in Congress insist that they work in the paid labor market, but the lawmakers not only fail to guarantee them a decent job; they keep the minimum wage ridiculously low ($7.25 in states that still adhere to the federal level), threaten to slash job-training dollarsand work supports, and do nothing to repair a criminal justice system that creates high barriers to labor market entry and advancement for many minority workers.

Meanwhile, when the job market finally heats up to the point where it’s tight enough that those left out might get pulled into action, the Federal Reserve invariably tries to cool this heat. The Fed’s interpretation of its mandate to maintain the lowest jobless rate consistent with stable prices leads it to push back on the very conditions needed to meet the requirements for work increasingly insisted upon by conservatives.

It is this vise grip on the economically vulnerable to which the job guarantee responds. As you’ll see, we have serious concerns about its feasibility, but it is a rational response to an irrational and discriminatory economic system.

It is also a proposal with a large, technical problem: Because of the rigged system we just described, if a policy is introduced that guarantees good, permanent jobs to anyone who wants one, it will draw in tens of millions of workers from the private, low-wage labor market.

The package on offer from the one popular version of a job guarantee could be an improvement for at least 50 million currently employed workers. Even if the employers of half of these workers raise their pay to match the package offered through the job guarantee (a great outcome), that would still leave 25 million currently employed workers for whom the guaranteed job would be an upgrade.

Add in the unemployed and underemployed, and this gives us more than 35 million workers in this program and, quite possibly, many more. The federal government’s current workforce, outside of the Postal Service, is 2.2 million, meaning the job guarantee would increase the size of the federal workforce by a factor of 10.

Sen. Cory Booker (D-N.J.) recently introduced a three-year pilot program offering a guaranteed job in 15 urban and rural places. That’s a smart way to proceed, one that should allow us to see whether our concerns are justified. If so, local governments in the pilot areas will find themselves having to essentially re-create the private low-wage labor market by undertaking a huge expansion of public-sector jobs.

Therefore, it makes sense to also try a less interventionist approach to job creation. Members of Congress including Sen. Chris Van Hollen (D-Md.) and Rep. Ro Khanna (D-Calif.) are rolling out ideas for subsidized jobs programs that target long-term jobless workers and/or those with persistent poverty-level earnings. [See, A Rescue Plan for a Jobs Crisis in the Heartland by Edward L. Glaeser, Lawrence H. Summers and Ben Austin.] The job would have to pay at least the minimum wage, and employers, who could be in the public, private or nonprofit sector, would receive a subsidy to cover wages, overhead and training costs. Unlike many earlier versions of such plans, these subsidies would last for a significant period: at least 18 months, and possibly as long as 30 months (with the opportunity for subsidized workers to “re-up” with a different employer if necessary).

We should test both ideas. If we try only the job guarantee and our suspicion that it calls for an unrealistic expansion of the public sector is correct, the cause of a national jobs program could suffer a setback. Less ambitious plans might prove to be more manageable and could still reach most of those now left behind.

But before we get too bogged down in pragmatic details, let’s recognize how responsive these job ideas are to the contradictions that have long plagued the job market as faced by millions of people striving to get ahead in a system whose architecture is fundamentally stacked against them.

Economists at least are exploring ways to address the economic disruption of the information  age. Our politicians need to begin to address these issues in a thoughtful and serious manner. Tariffs to protect romanticized old industries, or punishing the poor with work requirements in order to receive federal assistance when they have few prospects of gainful employment in some areas of the country are not thoughtful and serious answers. They are merely punitive.