Brad Voracek, Author at

Reimagining “Right-to-Work”

“Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.” This is Article 23 of the Universal Declaration of Human Rights declared by the UN in 1948. It sounds like a pretty good right to me. I recently learned that in America, we have some states with “right-to-work” laws. That dumbfounded me. Why did unemployment exist in those states if they had a right to work?

It only took a few minutes of research to find out that the “right-to-work” laws some states have are nothing like the fundamental human right. What these laws actually do is defend a worker’s right not to be required to join a labor union to work at a company. This “right-to-work” doesn’t allow more choice, it allows less. Where’s the option to have a union that doesn’t allow freeriders? If you don’t want union benefits, you can work for a company without a union. You still have your choice, but this law has destroyed mine. These laws really promote the right to work for less money, the right to work at a business with a racist union, the right to destroy what unions could and should stand for.

Research from the Economic Policy Institute shows that states with “right-to-work” laws have hurt unionization rates, and hurt the power of unions that do exist. In such states 7% of workers are represented by a union contract, versus 17% in non “right-to-work” states. Wages are lower in states with these laws in place, which makes sense as unions allow collective bargaining for better wages. Nationally, unionized workers are making 27% more than non-unionized workers. “Right-to-work” has been a disaster for the labor movement, those who historically have won us better pay for shorter hours and better working conditions. Those who won us the weekend. Those who won women the right to vote. Those who won us the 8 hour work day.

To reinvent the labor movement we have a lot of ground to cover. One way to start would be with reimagining the “right-to-work” to be much more like the fundamental human right envisioned by the UN in 1948. This actual Right to Work, a Job Guarantee, would transform the labor market. It’d be up to communities to decide what jobs to guarantee as they see fit, but surely our communities could come up with something better than a new fast food joint. If you’re guaranteed a job serving your community, wages will go up across the board, as entry-level workers get real choice. Capitalists would be forced to make burger flipping more attractive than planting trees.

The real human right to work would mean you could quit working for your abusive boss and cross the street and get hired. We could make job guarantee jobs come with awesome benefit plans, that capitalists are forced to match. We could have contracts with our employers that require “just cause” to be fired, rather than the uneven “at-will” employment contracts we all toil under today. We could have unions that represent all of the workers in our businesses rather than just a small subset. It’s going to take a lot of work to get there, but coalescing around a shared demand, a good job for everyone, is a great start.

We can see the work that needs to be done. We need care workers to serve our aging population. We need police officers that actually serve our communities. We need solar panels harnessing the free energy of the sun. We need to capture the carbon capitalists have polluted the environment with. We need affordable housing so we don’t have people living on the streets. We need the right to build these things together, including everyone willing and able. We need to take care of those who aren’t able, for whatever reason. If we reimagine a true right to work, the unimaginable becomes possible.

USA 2017 Q1 Sectoral Balances Update

Sectoral analysis provides a key framework for understanding the macroeconomy. GDP is a flow representing the value of all goods and services produced in a specific time period. This flow can be tracked in two different ways, on the spending side and on the income side. On the spending side the GDP components are: consumption (C), investment (I), government spending (G), and the difference between exports (X) and imports (M)–or just net exports (X-M). On the other hand, the income that makes up GDP, is consumption (C), savings (S), and taxation (T). These two ways of measuring GDP are two sides of the same coin, a product of double-entry accounting, and must always be equal.

Thus sectoral analysis comes from equating and simplifying the spending and income views on GDP. You can follow the math on the wikipedia page here, but after equating these two different views and simplifying we end up with the equation (S – I) = (G – T) + (X – M). These are our three sectors of analysis. The private sector surplus/deficit is defined by the difference between savings and investment (S – I). The government surplus/deficit is its spending minus the amount it takes back in taxes (G – T). And finally, the foreign sector surplus/deficit is the amount of exports by the country less the amount it imports (X-M). We can see this identity visually in the following graph. You can hover your mouse over specific bars to see specific values and dates.

The graph setup this way shows how government fiscal deficits (orange bars) make their way towards the rest of the world or into the private sector. Why have we had a persistent current account deficit (green bars) since at least 2000? Well, the rest of the world wants US dollars. We want to import their goods and services. Since the US is a net importer of goods and services, we are a net exporter of US dollars. Thus some of the deficit each quarter makes its way out of the country. The rest of the deficit makes its way into the domestic private sector (blue bars). The private sector is composed of households and businesses. The great recession was caused due to poor household balance sheets, among other things. If you were following the sectoral balances graph closely in 2000-2008, you could see how the private sector was continuously indebted, both households and businesses. This was unsustainable.

The government deficit expanded post recession due to automatic stabilizers, repairing poor household balance sheets. This muddling on continues today. The past few years have seen domestic business go into debt, although the last two quarters have shown a slight surplus. Households and institutions have maintained a surplus since 2008. From a purely sectoral balances perspective, as long as we maintain our government deficit and the rest of the world continues to want US goods and services, the US private sector seems poised to continue muddling along. Splitting households into top 10% and bottom 90% would be an interesting exercise to see how these modest surpluses have been distributed. I will keep an updated quarterly graph here on The Minsky’s as FRED releases data. I hope you found these graphs useful and insightful.

Doughnut Economics – Grab a pencil, draw a doughnut!

Many of us know we need to rethink economics, but Kate Raworth actually did it. Envisioning the economy as a doughnut, two boundaries become clear. If we fall into the doughnut’s middle hole, human needs fail to be met. If we drop off of the outer edge, life is unsustainable.

You should be weary of people who seek to get the “first lick” on a young impressionable brain. Paul Samuelson knew that by writing a successful economics textbook, he could influence how students frame the economy, and thus the world. From the 50’s to the 70’s, his textbook was the most widely used in introductory economics courses. Today, that role has been given to Gregory Mankiw’s “Macroeconomics” (see the Open Syllabus Project). Both view the economy in the same narrow way, with the same simple pictures that don’t seem useful today. Raworth’s Doughnut Economics breaches the pattern and envisions a new economics, for a new generation with clearly defined challenges and scant tools to solve them.

For so many years, the principle goal of economics, and thus the economy, has been GDP growth. Growth for whom or through what means wasn’t nearly as important as just ensuring there was in fact growth. Raworth emphasizes the importance of framing, and if you ask an economist what picture they foresee for GDP, they often describe an upward exponential function.

Thankfully, many young students that I’ve met recognize that infinite growth is unsustainable. Hopefully, their generation can popularize a GDP graph in the shape of a sideways S, respecting the upper bound to growth we have to live within. Enter Raworth’s doughnut. In Raworth’s framework, the outside of the doughnut reflects an upper bound we can not pass based on environmental limits of our planet. The inside of the doughnut reflects a social foundation we can not let crack, the necessities for humanity to thrive.

The goal should no longer be growth, but ensuring we take care of our social foundation and respecting our environmental ceiling. Raworth calls this balanced space in the middle the safe and just space for humanity, and that’s the goal we should direct ourselves toward. We can not ignore who growth is leaving behind, or what damage this growth is doing to our planet. These bounds are the crucial factor for Kate’s “doughnut.” They can move us beyond a narrow single measure called GDP, to looking at all the interconnected measures that are so important for our livelihood.

Once we’ve moved beyond the single measure, we have to also abandon the single neoclassical narrative that espouses the godlike nature of “the market”. The market, the household, the state, and the commons all have a place in the big picture, and different challenges have to be faced by different actors. The neoclassical story tells us there is a “tragedy of the commons,” what if that story was actually the tragic one? Kate takes a stab at the characters of the old narrative, and offers us a new script for them.

EARTH, which is life-giving—so respect its boundaries

SOCIETY, which is foundational—so nurture its connections

THE ECONOMY, which is diverse—so support all of its systems

THE HOUSEHOLD, which is core—so value its contribution

THE MARKET, which is powerful—so embed it wisely

THE COMMONS, which are creative—so unleash their potential

THE STATE, which is essential—so make it accountable

FINANCE, which is in service—so make it serve society

BUSINESS, which is innovative—so give it purpose

TRADE, which is double-edged—so make it fair

POWER, which is pervasive—so check its abuse

The big picture story requires the next generation of economists to be savvy with systems thinking. The old economics used mechanical equilibrium thinking, where economies trend towards a static state. A new economics recognizes the flaws of this equilibrium thinking, recognizing like Minsky said that “stability is destabilizing.” A new framework for economics will recognize the different feedback loops that influence the economies stability.

The language of complexity, evolution and systems needs to infiltrate economics. We need to be thinking about how we can design a resilient economy, one that can resist shocks. We need to look at the big picture, understanding the sources and sinks of different resources. We have to know where our food comes from, ensuring it is distributed properly, and we have to know where our plastic is being disposed, ensuring it’s not destroying the planet. We have to get familiar with the language of stocks and flows, the stores of resources and also their movements. These will be our new tools.

Raworth’s story gives hope to the young economists that are bent on saving the dying planet we’ve inherited. Her vision for a new economics, and the new economy, align with the work we’ve been doing here at The Minskys. Even better though, she has produced a frame for which we can better espouse our ideas. We started out thinking about systems – the sources and sinks of money creation. We’ve recognized the physics envy of mainstream economics. We understand the need to nurture human nature, so maybe we should be studying the grants in the economy and not just monetary exchanges. Without this, we’ll fall inside the doughnut’s hole, where there is no paid maternity leave, and austerity all around. We’ve also thought about ways not to breach the doughnut’s bounds, with a Green Job Guarantee, Basic Income, or Community Currencies for example.

Raworth’s doughnut frames the important aspects of the economy, and is simple to use. Observe your local community! Do you see human needs not being nurtured? That means we’ve breached the inside of the doughnut. Do you see irresponsible damage being done to our home, the earth? Then we’ve breached the outside of the doughnut. We have to design solutions to keep us in the doughnut. We’re all economists now, because we have to be. The future is pretty bleak for humanity without a planet to stand on.

If you too wish to start thinking like a 21st century economist, be sure to check out the book in it’s entirety here. There are also a series of animated shorts here. After that, it’s as simple as grabbing a pencil and drawing a doughnut.

Ending the Econocracy: The Need for Pluralism in Economics

To understand why economics students around the globe are calling for Rethinking Economics, the book The Econocracy is a thoughtful and accessible place to start. An econocracy, as defined by authors Joe Earle, Cahal Moran, and Zach Ward-Perkins is “a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it.” Their work carefully explains why our current system is an econocracy and discusses possible ways to change that. Based on my own experiences so far, I can’t help but agree with them.

The Econocracy argues that the current definition of economics is limited to a narrow, neoclassical viewpoint. Institutions of higher education have accepted and helped reinforce this tendency, at the expense of the discipline. The neoclassical approach to economics requires an understanding of complex mathematical models, which leaves many citizens feeling unable to engage with it at all. However, they should not be intimidated by those who do possess the necessary quantitative skills. While today’s economic experts hold prestigious positions, their understanding of math is often greater than their understanding of the economy. As the 2008 recession demonstrated, the majority of current experts didn’t get things right. This shows “the perils of leaving economics to the experts.”

The authors’ critique of economics curricula at colleges and universities necessarily extends to a critique of the higher learning system where these curricula are taught. Interestingly enough, they argue neoclassical arguments have helped shape this system to become what it is today. “Human capital” theory has its roots in neoclassical utility maximization. One of the first exercises in standard econometrics classes is to calculate the “returns to education,” which shows that incomes are higher for those who have completed college degrees.

These type of theories are problematic because they frame education as a “financial investment” which encourages students to give “the minimum effort and engagement necessary to get a satisfactory grade.” Such a mentality “undermines many of the core principles of a liberal education.” The authors look through history at the UK’s higher education system, and show how rising tuition costs financed by personal loans also has its roots in neoclassical thinking. This type of change is symbolic of the econocracy’s influence throughout all spheres of civil life.

While studying at UC Berkeley and Bard College, I met many students who thought and acted this way. As long as you put in a minimal effort, there was little chance of failing or being expelled. Second and third chances were given out often. Teachers did not give a lot of room to think critically about what you were learning, and worksheets and one-size-fits-all curricula were the norm. Nearly every class I had was in a lecture/tutorial format, and nowhere was the socratic method used for teaching. Still, there were some great professors and fellow students who shined the light in the right direction for me. I finished school feeling like I missed out on something, but I’m glad I have my entire life to continue learning.

The Econocracy does more than offer a critique—it also puts forth a new direction, albeit one that might be tough to achieve. For the authors, reform should start with the education system. They pose it’s necessary to shift away from “a passive student body—whose only input into their education is a tick-box feedback form—to an “active student co-production of education.” Debate and dialogue should be encouraged.

A shift needs to happen within economics curricula too. The authors recommend economics departments teach with a pluralist approach, which would place post-Keynesian, classical, Marxist, feminist, Austrian, historical, ecological, and other perspectives front and center next to neoclassical economics. This way, students would be able to see neoclassical views as one of many ways to look at things. They would recognize that scholars have debated alternative points of view for decades, often on the fringes of the institutions they call home.

As Joan Robinson quipped in Marx, Marshall and Keynes: “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” It doesn’t have to be this way. The Econocracy offers a different vision for economics. One where it is not only for the experts but for everyone. They want to “democratise economics because [they] believe at its core economics should be a public discussion about how to organise society.” That’s something we should all get behind.

At The Minskys, we too hope to help advance a jargon free view of the economy that everyone feels empowered to engage with. Economics can’t just be left to the experts, because “the economy” affects us all.

Be sure to grab your own copy of The Econocracy, read it, and comment down below with your thoughts.

In the Spotlight: William “Sandy” Darity

William “Sandy” Darity’s work is the proof you need that the American dream is just that, a dream. The promise that anyone who takes initiative and works hard has an equal chance at success is not true. A close look at data on income and wealth reveals an inherently unequal society. Our recent post on racial inequality points out how for example, race affects the payoffs of a college education. For a much more comprehensive view of this issue, we can dive into Darity’s work.

Darity currently serves as the director of the Samuel DuBois Cook Center on Social Equity at Duke University, where he teaches Public Policy, African and African American Studies, and Economics. The focus of his work is inequality, examined through the lenses of race, class, and ethnicity. He also has analyzed policies that would help fix the legacy of racial injustice in America.

Darity rejects the neoclassical view that “markets” will arbitrage away discrimination over time, and champions a different approach called stratification economics. This strategy uncovers the stories of inequalities by looking at economic variables by different strata. Your chance at success in this society differs based on your race and gender. Examining economic variables by different groups offers a much clearer picture than the abstract “representative agent” models would depict.

As a young economist at Brown and MIT, Darity thought that studying economics would teach him why these inequalities are created and persist. Yet he found, like so many of us now, that studying economics is often more focused on math than society. Thankfully, once degrees are conferred PhD economists can pursue different lines of thought. His work today is a bright light for not only understanding how these inequalities are created and persist, but for understanding how we can fix them.

For example, the piece Umbrellas Don’t Make It Rain: Why Studying and Working Hard Isn’t Enough For Black Americans shows the broken logic behind the idea that more years of education results in higher earnings. Think about a rainy day, he argues. A lot of people might be holding umbrellas, but that doesn’t mean that the umbrellas caused the rain. Similarly, people with higher educational attainments have higher levels of wealth. Yet, it does not mean they accumulated the wealth because of the education.

Often times, working hard at an education or job is just not enough. Darity shows that white families with an unemployed family head have double the wealth of black families with a family head working full time. That’s a difference of $21,892 to $11,649. It’s not because of their educations, either. Black household heads with a college degree have two-thirds of the net worth of white household heads who never finished high school. Data like this suggests that education is not enough to correct these inequalities. This is just a taste of an enormous list of Darity’s publications that help us understand discrimination, prejudice, and inequality.

Darity hasn’t just looked at the problem, he has proposed bold solutions. Two policies which he advocates for are Baby Bonds and the Job Guarantee. The Baby Bonds idea would endow every newborn American with a trust that grows and they can access when they turn 18 years old. Everyone would receive this trust but to reduce wealth inequality those with lower levels of wealth would be given larger endowments, While this idea strengthens future generations, the Job Guarantee proposal fights inequality immediately. Guaranteeing every American access to employment at a living wage with benefits, the Job Guarantee could create a more equitable system.

Economic justice will be a necessary component for achieving racial justice in this country, and Darity’s work helps not only understand the problem but also the solutions that we, as citizens, can help promote. If you’re itching for more, check out this piece on INET, his articles at HuffPo & NYT and be sure to follow him on Twitter @SandyDarity. I’m sure we’ll hear from him there when his forthcoming book on reparations comes out. I can’t wait to read it!

The Basic Income and Job Guarantees are Complementary, not Opposing Policies.

It’s disappointing to see debates between proponents of the Basic Income Guarantee (BIG) and the Job Guarantee (JG). These discussions detract from the fact that both of these ideal policies are distant from the policies we currently have in place. Supporters of either of these policies should be working together to get either one implemented, and we can debate adding the other later. Today, we need to move beyond our current disjointed welfare system to one that will help Americans, and either policy (or both!) seems like a step in the right direction.

If we look at the current system, the three largest welfare programs we have are Medicaid, the Earned Income Tax Credit (EITC), and the Supplemental Nutrition Assistance Program (SNAP). Before the Affordable Care Act (ACA), Medicaid was limited to certain low-income individuals, but the ACA expanded this program so that all adults with incomes below 138% of the federal poverty line are eligible. For FY 2015 Medicaid cost $532 billion to cover 73 million individuals. EITC provides additional income to low wage workers, and in 2014 paid out $67 billion to 27.5 million tax filers. Finally, SNAP guarantees an income to buy certain necessary items, and paid out $69 billion to 22 million households in 2015.

Then beyond those three largest programs, we have a smattering of additional programs that help the poor in this country. There’s a housing assistance program, Supplemental Security Income (SSI) for the elderly, Pell Grants for college tuition, the Temporary Assistance for Needy Families(TANF) program, the Child Nutrition Program, the Head Start preschool program, various Job Training programs (like AmeriCorps and Job Corps) under the Workforce Investment Act, Unemployment Insurance, the Child Tax Credit, Supplemental Nutrition for Women, Infants, and Children(WIC), and then theres others I’m sure I missed (oh yeah, the Obama phone!) along with various state and local programs. The amount of overlap, overhead, and bureaucracy involved with running all of these programs surely diminishes their effectiveness.

All of these programs provide support by doling out income or necessities, with or without a requirement that the recipient be working. BIG and JG would both be ways to consolidate all of these programs, and then the debate becomes how much does someone have to work in order to receive assistance. A lot of people who advocate for BIG think that our current system has a lot of pointless jobs, and BIG would be away to allow those people to pursue something more creative. Considering that most entrepreneurs have one thing in common — access to capital — that may not be too far off. Then there are JG proponents who probably agree with that point, but think we can use the policy to help organize jobs that need to be done (liking cleaning up our environment, or building our infrastructure). Most people who support BIG worry that a JG would create “make-work”, quoting Keynes famous “bury bank notes and dig them back up” line. To them, just giving people the bank notes makes more sense. On the other hand, JG proponents worry about losing the social utility of work. People want to contribute to society, and they see work that needs to be done. Both policies seem hard to pass in todays political climate.

I think proponents of both the BIG and JG are disappointed with a U6 unemployment rate of 9.5%, current companies lack of interest in maintaining our environment, and over 45 million Americans living in poverty. Call it whatever you want, let’s guarantee every American access to the necessities: healthy food, shelter, and healthcare. Clearly this is going to require some people to do some work, so let’s make sure that work gets done with our social structure as well. Calling it a BIG or a Basic Necessities Guarantee (BNG) or a JG doesn’t matter so much to me.

In fact, I’d probably start with calling it the EITC. Get rid of the minimum income phase in, and we instantly have a “BIG”, with all the infrastructure already in place. It would only go to unemployed or low income citizens, since the EITC phases out, which helps it be a progressive policy. So that it can cover the housing benefits and others, we could expand the credit a bit too. How do we pay for this? It’s simple. Scrap the other welfare programs (keep Medicaid, that one’s complicated). The overhead of having all of these programs is gross. How feasible is this plan? Honestly, no clue. I’ve never made a policy. I’ve barely met anyone who even makes policy. It seems like the closest option there is, however. I can see the complaints already though. These ungrateful welfare abusers will buy alcohol and drugs with their new found income! Somehow it’s not OK to drink and do drugs if you’re poor, but if you’re rich, go for it, right? If you get rid of SNAP, people won’t buy food for themselves! Well surprise, there’s already a way to trade SNAP benefits for cash — it’s called craigslist.

Then there’s the other major complaint this would cause — now there is no incentive to work. We have to keep abject poverty as a social option so that people keep working at McDonalds making the McObese, and keep stocking the Wal-Mart shelves so that Wal-Mart can pay starvation wages which allow people to be eligible for the EITC in the first place. I’m not really sure those are the jobs that need to be done. If our low wage workers were working on local farms producing fruits and vegetables, I’d probably agree… someone has to do those things (or make robots to do them!). Yet I haven’t seen any proof an income stops people from working. It’s all speculation. I bet people still do things. Here I am, incomeless, and I’m doing something. I’m writing. I’m volunteering. I’m applying to jobs that I want to do and think will have a positive benefit. Getting rejected, but still, I’m trying.

Let’s see what happens when everyone has some cash on hand. If we start starving and need the government to force us to produce food, we’ll do it then. Yet from the friends I’ve talked to, boredom is a very potent driver of change. I know my fellow millennials and I have dreams of growing our own food in our parents backyards, or the empty lot across the street, or the empty K-Mart, or the empty mall. If only they’d let us. If only we had a little income, a little land, and some water to give it a try. If only the police weren’t killing and hurting us. If only Nestle wasn’t pumping out water from government land for free and forcing us to spend money on it. A lot of us worked our asses off at school, and what did we get? The choice between huge corporations who we see as destroying the environment, or low incomes working retail living with our family and friends. Meh. My friends and I want something different. I choose believing there’s something better than choosing between two evils.

Remember when the public hated huge corporations for destroying small business, not each others’ identities? Do we remember The High Cost of Low Price? BIG and JG proponents, let’s not quibble. We’re on the same side. There’s work to be done. Get organized. Make it happen.

Originally published on Medium

Women should be running things. They actually care.

The jobs in our society that focus on caring for others are often held by women. Women hold 70% of teaching jobs, 90% of nurses are female, social workers, childcare, customer service, you name it. If the duties performed in a particular industry involve caring for another person, most of the workers employed in that industry will be female. Yet within these industries men who do the same jobs are still paid more. Overall, women earn 80 cents for every dollar earned by men who perform the same job. This gender pay gap exists even in these jobs dominated by women. A male elementary school teacher earns 9% more than a female teacher. A male nurse’s median weekly income is $556 versus a female’s $446. When we cut budgets for our schools and our hospitals, we’re doing more than hurting the women typically in these jobs. We’re hurting everyone. If we want to better care about our citizens and reverse these trends, women would know how to do it best.

Yet women only hold 24% of C suite positions in the United States. Only 19% of our “representatives” in Congress are female. How does that stack up with the fact that half (that’s 50%, y’all) of our nation has the power to birth a human being? Rachel Croson and Uri Gneezy performed a comprehensive review of literature with regards to preferences and gender. They find that women are more risk averse than men, are more sensitive to social cues, and are more cooperative. If women were in charge, would the bets placed on the housing industry that helped cause the last financial meltdown have happened? Would we be cutting funding for educating our children, profiting off our students in colleges, or letting 48 million Americans live in poverty? Given the findings, it seems unlikely. Women just seem to care more about these things.

Take a look at Hillary Clinton’s choice for chief economist for her transition team, Heather Boushey. Her book, Finding Time, highlights how care for our health, our children, and the elderly, have all been subsidized by “the American Wife.” As women have entered the official workforce, “the market” needs to recognize these valuable contributions with equitable pay. Or look at our recently spotlighted economist Pavlina Tcherneva. She advocates for feminist fiscal policy, claiming our current gender and race blind policy approach is anything but. Policy that is race and gender blind really just means favorable for white males. These problems are intersectional, income disparities get even worse if you’re female and a person of color. If we want to reverse these trends, we need to target policy towards helping these communities who have been harshly marginalized. Sadly, I doubt it’s going to be males who get it done. Males are the more competitive gender, and real competition drives capitalism. If society was driven by the cooperative gender, and we had real cooperation and caring instead, where would we be?

Employ Young Americans Now: Beyond Education

Over forty years ago, President Lyndon B. Johnson declared a “War on Poverty” in his state of the union address. This war emphasized education as the remedy to America’s economic hardships. Critics, like Hyman Minsky, worried from the beginning that this would not be enough. As explained in some of his writings collected in Ending Poverty: Jobs Not Welfare, Minsky believed that without a focus on providing jobs the war would end in failure. In 2016 it is hard to say the poverty situation in America has improved drastically. Inequality has gotten worse, the minimum wage has stagnated, and food and health care prices have risen faster than inflation. I argue in my master’s thesis that while education has been shown to improve individual employment chances at higher wages, it is a fallacy of composition to assume those results can apply for everyone.

Trying to push all of our youth through high school will not guarantee them jobs, especially in today’s economy where we are far from tight labor markets. Minsky argued that programs should be designed which hold the promise of a useful and productive life for our high school dropouts. In my view, this would help students learn different skills that can’t be acquired sitting at a desk. Perhaps even more importantly, having an income would enable many students to either stay in or return to school, as requiring a student to forgo an income for four to eight years is just not realistic for many families living in poverty. College graduates are competing for jobs that do not require college educations. Our youth needs a more comprehensive “War on Poverty” than a focus on receiving a formal education.

14212114_10210003402663742_2076273988545782318_n — Illustration: Heske van Doornen

Senator Bernie Sanders and Representative John Conyers have introduced the bill Employ Young Americans Now, which would provide $5.5 billion in funding to create jobs for disadvantaged youth. This seems like a better solution for our youth living in poverty. Employment is connected with a slew of benefits that education and welfare have not provided. Employment is shown to reduce incidence of mental illness, reduce criminal activity, and it allows production of useful goods and services. In my thesis I modeled EYAN and demonstrated that it will provide 500,000 jobs to young disadvantaged youth. This gives a young person a job in 11% of families with unemployed disadvantaged youth. My results suggest that if the bill were expanded 10x, we could provide a job for every young person living in poverty at a cost of $50 billion.

One issue with EYAN is finding jobs suitable for young Americans that do not yet have high school degrees. One possibility is to pay EYAN participants for raising young children in their families, since this is a responsibility that already exists for many youth living in families in poverty. Early childhood education has been shown to have great returns. Another prospect would be something along environmental lines. In the National Youth Administration as a part of Roosevelt’s New Deal he had youth plant trees, forming his “Tree Army.” This is another job that any able bodied youth can do. Jobs offered by EYAN do not necessarily have to be profitable jobs. The bill specifies that they could help the nonprofit sector with jobs volunteers are already doing for free. The nice part about this bill is that it allows local communities to determine who to hire and what type of jobs to do, as Minsky foresaw for a Job Guarantee program. That is, it is federally funded but locally administered. It would thus be up to individual communities to determine how they can best be benefited.

In a previous article I have discussed the role that college should be playing in today’s workforce and how education, as it is currently administered, has actually increased racial and class inequalities. In tight labor markets racial inequality has been shown to decrease, while with loose labor markets we have seen racial discrimination get worse. Economist Sandy Darity has shown that job prospects for black high school graduates are worse than for white high school dropouts. As I have discussed earlier, expanding the education system fails to provide income for all of our youth, and it does not payoff the same for those from low income families. Automation is on the rise, and business does not have enough demand to justify hiring more workers. We can thus not rely on the private sector to get us to full employment, and should push our legislators to create more local public jobs. While we can probably expect a huge infrastructure bill with our next president, if it’s anything like the American Recovery and Reinvestment Act it is unlikely this will help out low skill workers. With proper targeting, EYAN could hire 22% of our high school dropouts nationwide. This is why I believe in this type of policy, and would love to make it happen.

Reducing poverty and inequality will be hard, but I think a new focus on employment beyond education is the right way to do it. Argentina has had a direct government job creation program, Jefes y Jefas, which was modeled after Minsky’s ELR proposal and showed a lot of promise. It is therefore reasonable to see how such a program would work within the States, and EYAN offers us this chance. I wish I knew how to get it through Congress.

This post is an adaptation of my master’s thesis, and you can find the whole argument here. Comments and feedback are appreciated.