An Employment Policy for Europe

Everyone is talking about the extent to which the newly elected European Parliament is racist, or xenophobic, and what it all says about ‘our’ society. This discussion is mostly boring and not at all productive, and so, right now, is Europe in general. It would, I think, be slightly more interesting to think about what sorts of policies a successful European Parliament might pursue. The current members won’t like any of them, of course – not even the members who weren’t elected merely to oppose the whole project. Still, imagine if some candidates really had campaigned on some new and bold policy proposals. Perhaps then the election would have gone very differently.

Anyway, here is a policy that I think could be discussed. The European constitution could stipulate that governments should act as ‘Employers of Last Resort’ (ELR), in line with the policy L. Randall Wray has been pushing in the US for over a decade. The idea is simple. Rather than allowing huge sections of the workforce to go unemployed, or only part-time employed, and then spending money on unemployment benefits, the government should offer to hire any unemployed worker who is willing to work at a set wage and maintain him/her in employment until he/she is able to find work elsewhere. The work itself would depend on the skills of the workers hired and the shape of government investment. In some cases the government could hire workers for crucial infrastructure and welfare-provision programmes; in others it could contract out workers to the private sector. In Britain, for example, workers could be hired to build vitally-needed affordable housing.

The policy wouldn’t have to be inflationary. The government would be aiming to purchase unused labour capacity rather than to compete in existing labour markets and thus drive up wages. Also, since the government would itself set the wage this would give it some capacity to control prices and thus inflation.

The policy wouldn’t have to lead to higher taxes or deficits. The government could, if it wanted to, fund the whole programme using fiat money. In the European case, the constitution would have to change to allow sovereign nations to borrow money directly from the European Central Bank. That should obviously happen anyway, not that anybody in the parliament seems to be pushing very hard for it. If inflation started to look like a risk, then the government could fund more of the programme from tax revenue. But, again, it is unlikely that hiring up a buffer stock of unemployed workers would have an immediately inflationary effect.

The policy wouldn’t be a step towards socialism and central planning. If anything it would be a step away from it. Right now, governments try to deal with unemployment by using the public education system to train workers for the jobs they think might be there in the future. In other words, governments decide precisely what kinds of workers will enter the workforce – with what skills and training and even values – and then they just hope there will be decently-paid work for them at the other end. This strategy is based on a myth that unemployment is generally structural – that it results from workers not having the skills they need to take up the jobs that exist. In fact, of course, the jobs simply aren’t there. If the government hired unemployed workers, it wouldn’t need to bother with all this training and building the economy of the future and competing with the Chinese, etc. etc. etc. The education system could be used, once again, for education, rather than to provide for whatever economic future exists in the imagination of politicians. It’s true that workers hired into the ELR wouldn’t have much choice over their work at first (do low-end workers have much choice now?) but as they spent their wages the economy would grow and new employment opportunities would become increasingly available.

Also, if the socialism issue bothers you, you can think of it in this way. Since there aren’t enough jobs to go around right now, it is inevitable that a large proportion of the workforce will be dependent on government benefits. Benefit recipients usually have less autonomy than they would if they were government employees. The conditions attached to the receipt of unemployment benefits around Europe are becoming increasingly draconian. An ELR employee could work full-time hours and then be free to spend her money and time as she pleased. A benefit recipient is constantly reporting to welfare officers and often, in countries like the UK, given over to the private sector as unpaid labour. Which kind of central planning looks more malevolent to you?

Also, people in general who complain about central planning by governments are often perfectly comfortable with the current level of central planning carried out by the unelected elites of the financial sector. But that’s a topic for another day.

The policy would not be workfare. The ELR jobs would be offered, not forced upon the unemployed. The latter could always refuse to take them and remain unemployed and thus still entitled to unemployment benefits.

Obviously there is a huge number of other details to work out with the ELR policy (unions would have to be consulted to make sure ELR workers don’t replace unionized workers in the public sector, etc.). But one result of the policy would be that the currently criminal levels of unemployment in EU countries would go to zero overnight. Then nobody would have to care about floods of immigrants coming over here to take our jobs. Also, countries aiming to recover from massive financial shocks wouldn’t have to push down wages indefinitely, in a desperate attempt to compete for a place in a nonexistent export market, sending economic migrants out into other countries in search of a bearable standard of living. People who wanted to work could work, and so could the European Union. Immigration would just cease to matter in the same way, and alcohol and tobacco would have to hold up Nigel Farage’s blood pressure on their own.

In human catastrophes there are usually lots of people running about flapping and panicking and a few others calmly working out solutions. Today in Europe there is an awful lot of squawking; sometimes it looks as though half the population are panicking about waves of immigration and the other half are panicking about a replay of the 1930s. The problem-solvers are hard to hear amidst all this hyperventilation, but I suspect they are there.

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