Government Sponsored Jobs Program

I agree with that, but I would also like to say that taxes destroy as many jobs as they create through government spending and are thus not a viable option (can you confirm that, Reiver?)

 

Depends on the tax. A negative income tax (amended to allow for progressivity), for example, can be used to integrate tax and benefit systems such that work incentives are encouraged (including those on higher wages that are on the backward bending portion of their labour supply schedule). With such incentives there could be a net gain in employment.

The issue with government 'jobs' continues to be their nature. Certain jobs (public universities, R&D etc) can actually produce positive spillover effects and alleviate problems of market failure. Others (particularly ones artificially created), however, will be unproductive and their will be lost production possibility and severe crowding-out consequences

 

I was very specific in my comment, something you can't seem to grasp.

You don't believe human capital is specific in nature, therefore anyone can replace anyone.

I made the skill sets in my description purposely different. Lets make them the "same" - a consulting company employs 4 economists, all the same age, educated at the same school and classes, with the same years of experience - are they all worth the same amount?

 

You made a silly error. You can call it a very specific silly error if you want. Human capital is both specific and general. The idea that it is all specific is ludicrous. Someone stating such a thing needs to get some economics education. Claim some human capital for themselves!

 

Then answer my question:

A consulting company employs 4 economists, all the same age, educated at the same school and classes, with the same years of experience - are they all worth the same amount?

 

We pay our economists according to the consultancy work that they undertake. That will reflect the difficulty in what we demand (i.e. its more akin to piece work in orientation, with workloads dependent on the complexity of the econometric problems involved). But what about a company that employs 4 economists full time? We'd expect little variation in compensation packages. Offering similar compensation packages can, for example, can reduce costly job turnover. Human resource management techniques, however, can be employed. A female worker, for example, might find discriminatory practices at play (given such gender divides can further accentuate economic rent collection)

 

Those economists have defined their own specific capital - not fungible.

That doesn't only apply to professionals, pay field workers by the boxes of strawberrys they pick, instead of by the hour, and you will see their specific capital.

 

You're arguing with someone that employs economists. There is very little specific human capital involved. The techniques that they have been taught are given equally. We only see a difference between 'some' universities (i.e. I will find that some universities have a superior history in teaching case study approaches; but that's only a minor issue in very specific consultancy work)

There is no debate here. It is cretinous to assume that all human capital is specific.

 

Your attitude toward your employees is cretinous. That managment attitude toward professionals fell out of favor in the US in the 1950's.

 

The best economists tend to be academics. They expect consultancy payments in the way I provide. You have just tried to use an example that merely advertised how foolish the "all human capital is specific" comment really is

 

You gave me a far better example of the specificity of human capital than I did, and that you could get better performance, and morale from your employees by recognizing that. Wow.

 

First, how do you know the affect was causal? Second, having looked into it farther, removing them and replacing them with the NMW seems like a step backward and the claim for removing them (unemployment) didn't appear to have any evidence to support it.

No it wasn't. Specific innovations have lead to many industries being less labor intensive, those jobs aren't coming back and those skills are no longer useful. Since you're scoffing at retraining, what do you with people who find themselves either unemployed or underemployed as a result of these circumstances.

What you've done is repeat the same thing and never made an attempt at real world application.

 

The analysis is the same as standard minimum wage analysis, using differences in minimum rates to ascertain whether there are standard disemployment effects.

The scope of the wages councils was limited. Gaps in minimum wage provision were significant.

I've had to deal with economic errors all day. Stop boring me with obvious twaddle. You clearly haven't got a clue what creative destruction refers to.

I did as I stated: referring to both economic outcome and the theoretical analysis behind it. Don't like it? Tough!

 

(I kinda replied to this earlier but maybe it wasn't enough of a reply)

Well anyway putting the new dollars into the economy will increase tax income, but that is not enough to pay for it however. While you would have to raise taxes, there is the benefit of having that money be put into the economy. For instance local business around the previously unemployed workers will get a benefit of increased income, and since that means more demand for their products, and demand sets people's wages, peoples wages will increase or there will be more jobs available in that area. Lets also realize that the currently 9% unemployed (who are looking for a job) are spread out pretty well in the US, like they are in other countries. These effects balance well with the increased taxes.

As for understanding the internal labor markets... I still don't get why it's a problem. Couldn't we just accept the risk of of something going wrong for the reward of achieving 99% employment?

 

You can't use this to justify your programme. First, if its demand that you're interested in, you merely need an automatic stabiliser. Unemployment benefit is a simple example. Second, you are still creating a system which will be regressive in nature (i.e. there will be unfortunate spillover effects as you protect the rich and tax the poor)

You're asking the government to be active in jobs characterised by internal labour markets. You're also therefore asking them to intervene despite being ignorant of the nature of those markets (and therefore a crucial aspect of firm organisation). That is a recipe for disaster. In essence, it creates a private-public sector asymmetric information problem. At best the policy will be ineffective (and therefore, through tax distortions, destroy economic activity). At worst it will interfere with firm behaviour, encouraging them to choose systems suited to maximising the government hand-out. That would be particularly harmful for economic well-being

 

Good, you are correct. I went through all this to find a common ground we share to base my argument upon. You and I both agree that a new job funded through taxation will just shift demand, for it will destroy a job somewhere else. What you must understand is that creating more money to finance new jobs will have the same ultimate effect as raising taxes to finance new jobs.

When you create money, you are reducing the purchasing power of each individual dollar. This is because as the supply of money increases, the price of money decrease. The price of money is its purchasing power. Thus, the purchasing power of actors in the economy will decrease as well. Taxation has the same effect--it reduces the purchasing power of actors. That purchasing power is the key to demand. Printing dollars will not create more demand because each dollar will no longer be able to demand the same amount of goods as before. It has less value (simple supply and demand at work). Thus, demand is merely shifted from current holders of dollars to the worker paid with new dollars. Somewhere else in the economy, wages will have to fall or a job will be lost because there is a loss of purchasing power to finance such things (it has been shifted to the new job).

Do you see the point? Creating money is no better, and potentially worse, than taxation. The existence of more pieces of paper or electronic codes will not magically create free wealth. It will only transfer wealth.

 

If tax income increases and local businesses benefit from this program why can't use that to justify my program? Would it also be a good idea to make area taxes around where the recruited workers work, like the city? Why are you assuming the tax raise will go strait to the poor?

So would one of the risks you are talking about be that you give one business an advantage over its competitor? That could be negated by giving both of them a government sponsored job.

 

This doesn't happen when you use that money to make more goods and services, the increased supply gives value to the increased amount of currency.

 

What increased supply? The increased supply of a certain good resulting from creating new money will result in a lower supply of another good, the same as taxation.

Say you increase the supply of money to create another job creating GM cars. For this job to be worthwhile, more money must be spent on the capital goods that produce GM cars (such as the metals and plastics used). This will raise the price of these capital goods. As a result, it will be more expensive for Ford to make automobiles (the costs of production have gone up) and they will have to cut back on their own production, resulting in job loss.

The effect is the same, just harder to see. The means of production are scarce. Increasing the supply of money does not magically decrease the scarcity of means. It simply shifts those means to where the new money is pumping. In the above example, GM gained at the expense of Ford.

 

Already said. You might as well go with an automatic stabiliser. This eliminates the threat of government uselessness in terms of economic planning (such as a tendency to produce lags in demand management such that policies actually encourage overheating)

No, its not about competition. Its about feeding at the trough at the expense of economic efficiency and equity

 

But if you give Ford, GM, and the producers of capital government sponsored jobs, where's the hurt? Also, in this case, GM and the capital goods producers benefit vs the loss to Ford.

 

If you give both GM and Ford the money, then any other company that uses those same resources will face higher prices and thus be forced to cut back production. For example, say HP uses the same materials in some of its computer components. It will be negatively effected instead.

To give another job to the capital producers, you have to assume government knows exactly what all of the car companies will be demanding with the new money to create the products, that government knows which producers it will buy from, and that government can somehow create the exact amount of labor with that money. Even if you granted such an absurd predictive knowledge, it still would not result in higher growth.

Say the government creates another metal mining job at the same time it creates the auto jobs. This increased production will cancel out the price increase caused by the higher demand from auto companies. But the worker who gets the new money will spend that money on consumer goods and services, all of which will have price rises as a result. Consumer goods become more expensive, and those who do not get the new money will suffer losses in purchasing power, and thus a loss in real wages. People will be making, in real terms, less money than before. This is the loss that finances all of those new jobs in mining and at Ford and GM.

 

I'm surprised, I'd expect given their potentially superior knowledge of the sector and the flexibility of not having a single rate that you'd have better results.

I do but I don't particularly care if you agree or not.

The notion that planners are going to be able to gaze into the crystal ball and know what skills will be valuable tomorrow was and still is ludicrous.

Besides, all this huff and puff is really just a tactic to avoid my comment. If you didn't want to answer you could have at least been polite about it.

The hurt comes from the competition to get those jobs, their entirely artificial. They'll spend real money and resources to compete for the free labor, whatever gains may have occurred will be lost in the chase.

Haven't we wasted enough money on GM? ... I digress...

Any gains you may have had would be competed away. It's like I said from the beginning, it would do nothing other than create a giant rent seeking contest. The double whammy is, not only will you likely not come out even, you'll likely come out in the red because of the need to monitor.

 

All the company can do is file a paper with a number of statistics on it in the hopes of getting that worker. That piece of paper is not a large waste of resources.

 

So their unlimited now? Otherwise you comment makes no sense.