Robert Shiller on direct government employment

Big new programs to create jobs need not be expensive. Suppose the cost of hiring a single employee were as high as $30,000 a year, several times typical AmeriCorps living allowances. Hiring a million people would cost $30 billion a year. That’s only 4 percent of the entire federal stimulus program, and 0.2 percent of the national debt.

There is more here.  Do any of you know of a policy paper on whether any labor market deregulation (e.g., Davis-Bacon?) would be required for this to happen?  Davis-Bacon did precede some of the major Roosevelt jobs programs, so I've never understood how this fits together.  How was it ruled that the relatively low-paying jobs of the WPA satisfied the Davis-Bacon requirement?

Comments

It would be a lot more difficult politically, however, since it's a market distortion much more blatant than the rest of the government programs - even non-econonerds can figure this one out.

Stimulus: $30B
Political smokescreen: Priceless?

That's a GS-4 or GS-5 in most areas. Since Davis-Bacon is supposed to base pay on local prevailing rates, wouldn't this be by definition the prevailing rate in the areas most afflicted and therefore most benefited by such a program? Or can we go ahead and admit D-B prevailing rates are a sham?

We could have a do-over on the census

Instead of the national guard in Arizona, we could employ people rather than take them away from the normal job

Then $750 billion at $30k a year could reduce unemployment by 25 million people. All this does is show that the stimulus program didn't give much bang for the buck.

Sure, let's have the government tax or borrow money so that we can employ people to do jobs that people would not voluntarily pay to have done. The beauty of this is that it's scalable so that the government can guarantee jobs for all the people and the problem of unemployment is permanently solved.

@Bill

You can modify it a bit more and do it Soviet style. Set quotas for retraining (The State knows best what you should do, your consent is not required), then create a system of mandatory assignment to jobs. So if The State decides that you should spend next five years building cellulose pulp industry in some Kazakhstan shithole it will be an offer you can't refuse.

@Bill

"Be open to changing your frame of reference and you might find some market oriented ideas that could be supported by government."

You'll then have to define at wich level of government "support" words "market oriented ideas" will lose that "market" part.

Bill,

We just send everyone to law school. Those juicy salaries of the legal profession could use some competitive adjustment.

But to be serious for a moment. Train them to be what exactly?

@Yancey--That is a very good question.

I do not have the answer, but my friend, Mr. Market, does.

So, the question to ask is: Would employers be able to identify the skills of persons they believe are not available for their present and current needs, that is, are not available in the market or are difficult to get, and also identify the cost of inhouse or outhouse training, to either bring on new staff or upgrade the talents of current employees to fill that position, making room for possibly a new employee to be hired replacing the inhouse person who was upgraded, or bringing in a new person for a skill that the employer did not have or could not fill.

I run across employers who need machinist who can run numeric machinery that makes parts for medical devices; some of their floor people could be trained--or, they could outsource that work to Taiwan.

Or, there is that secretary who could move up to another position if she had some training on database management, where she could work two jobs where there is only one half job available in the department that does payroll.

Or, there is the guy in charge of domestic sales for a die manufacturer who gets orders from overseas and declines them because he doesn't know much about shipping to Argentina, he feels uncomfortable about letters of credit (if he knows what they are), and, although he has some Spanish language background, is risk averse in doing international, which, for the firm, is not big--they sell to Canada, afterall, and isn't that international. He needs training on export management and international sales.

And so on.

America used to be an ingenious country. It still is. But, this type of change does not develop spontaneously, or without assistance. Or, if it does, it does so v e r y slowly, and v e r y, v e r y slowly during a recession, or whatever you want to call it.

Bill,

Then why are there needs in those fields unfilled at the moment? Are there really a shortage of machinists or database managers, for example? Would you be willing to pay for apprenticeships, instead?

Jon wrote:

Would paying these same people a very modest salary instead to do some sort of minimally useful work distort the market?

How "minimally useful"? We could, of course, pay them to make blocks of concrete that we dump into the ocean, and that would be worse than paying them to be idle. I still think, if one is actually serious in this regard, just pay them to work in the private sector. Certainly there are employers out there who would take on a new employee if the government paid his/her salary and benefits, but, as Michael pointed out above, this will cost you more than $30K/year*job, but, of course, this might also have "unforeseen" consequences.

@Yancy, Definitely in favor of apprenticeship programs and the like where an employee is trained in new or different skills. I do think there are jobs created in workplaces--duties which currently aren't done because there isn't enough for a full time person--which could be done by an existing employee who is trained--this additional work that comes from training speeds up the hiring later because the person who was trained becomes overbusy doing the regular job and the newly trained job.

We have accelerated depreciation allowances aimed at reducing capital costs for equipment that displaces humans; we should recognize the value of human capital, and have tax policies that permit deductions for investments in human capital as well.

Long term unemployment contains at its core the structurally unemployed who faced a shift in demand; when demand shifts, you modify the product to clear the market.

The section on jobs is in this editorial piece by David Stockman:

The second unhappy change in the American economy has been the extraordinary growth of our public debt. ... This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts. ... [T]he new tax-cutters ... hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts. ...
The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. ...Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. ...
The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs ... has shrunk by 12 percent... The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.
It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.
The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing...

Bill,

The last few months our government has been wringing it's hands over for-profit education companies because a lot of the people don't immediately get jobs.

I guess the only bad debt according to our government is for education.

According to Shiller, it was a defect of the stimulus program that there was too much equipment employed and not enough humans. That reminded me of a story told about Milton Friedman and Indian unemployment - "Said he saw hundreds of men digging a ditch with shovels. Asked the man in charge why they weren’t using backhoes. Guy told Friedman he didn’t understand. There was an extreme labor surplus in India and the men needed the work. Friedman said then why not take away their shovels and give them tea spoons. Then they could put a whole lot MORE to work."

Which makes me think this problem could be licked by outlawing the use of any capital in selected industries. With fine-tuning that should create many jobs.

@Andrew, I think you can make a reasonable distinction between education programs that are shams and those that are not, and if you do, then supporting even private education isn't an issue. The distinction is the quality of the program.

Re: How "minimally useful"?

Unless you live in an isolated bubble where everything is shiny, new and fully functional, you'll notice a lot of the country is sadly dilapidated, and this is true in cities and rural areas alike. There's a lot of wirthwile projects we could handle. One approach would be to hire the unemployed out to local govermments (cities and counties) as day labor.

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