The idea of a basic income guarantee is very popular with readers, more so that the notion of a job guarantee. Yet as we have mentioned in passing, this very sort of program was put in place on a large-scale basis in the past. Initially, it was very popular. However, in the long run it proved to be destructive to the recipients while tremendously beneficial to employers, who used the income support to further lower wages, thus increasing costs to the state and further reducing incentives to work. And when the system was dismantled, it was arguably the working poor, as opposed to the ones who had quit working altogether, who were hurt the most.
It is also intriguing that this historical precedent is likely to resemble a a contemporary version of a basic income guarantee. Even though some readers call for a stipend to everyone, that simply is not going to happen, at least in terms of net results. It is massively inflationary, since most of it would fuel consumption. More consumption means more environmental damage: more strip mining of the planet, more chemicals, more greenhouse gas emissions, more plastic containers and other waste. Increased consumption also means more profit for the CEO class without necessarily improving the wage share of national income, hence no better and likely worse income inequality.
Taxes would therefore need to be increased to offset those effects. The best tax outcome you could expect would be a progressive tax on income. Thus the end result in a best-case scenario would be tantamount to a means-tested BIG, graduated so as to avoid any sudden cutoff for someone who wanted to work. Thus the result (whether achieved directly or indirectly) is likely to resemble Milton Friedman’s negative income tax, with the zero tax rate set at a living wage level.
The experiment was the Speenhamland system, which was implemented in England 1795 and dismantled in 1834, was intended to make sure that country laborers had enough income to live. It was intended as an emergency measure to help the poor when grain prices had risen sharply due to meager harvests. The justices of Berkshire decided to offer income support to supplement wages, with the amount set in relation to the price of bread and the number of children in the household, so that the destitute would have a minimum income no matter what they earned.
Even though it was never codified as law, the Speenhamland approach was adopted in country towns all across England and in a weaker form in some factory towns. It was widely seen as a “right to live.” It was neither universal nor consistently implemented, but it nevertheless appears to have been fairly widespread. It reached its peak during the Napoleonic Wars, and was wound down in many small towns before it was effectively abolished by the new Poor Law of 1834. Not surprisingly, the Speenhamland system existed in its strongest and most durable embodiment in areas where the threat of violence by the impoverished was real. But another reason it lasted as long as it did despite the costs it imposed on local landlords was it kept the poor in place with their wages fixed at a bare subsistence level. Rural property owners wanted to keep workers from decamping to towns and cities in search of better paid employment. A smaller pool of local laborers would lead to higher wage levels.
Karl Polanyi explains how a well-indended program over time proved damaging to the very group it was intended to help. And it is critical to keep in mind that Polanyi is acutely aware of how treating labor and land as commodities is at odds with the needs of society. First, an overview from his book The Great Transformation:
During the most active period of the Industrial Revolution, from 1795 to 1834, the creating of a labor market in England was prevented through the Speenhamland Law.
The market for labor was, in effect, the last of the markets to be organized under the new industrial system, and this final step was taken only when the market economy was set to start, and when the absence of a market for labor was proving to be a greater evil even to the common people themselves that the calamities that were to accompany its introduction. In the end the free labor market, in spite of the inhuman methods employed in creating it, proved financially beneficial to all concerned.
Yet it was only now that the crucial problem appeared. The economic advantages of a free labor market could not make up for the social destruction wrought by it. Regulation of a new type had to be introduced under which labor was protected, only this time from the workings of the market mechanism itself. Though the new protective institutions, such as trade unions and factory laws, were adapted, as far as possible, to the requirement of the economic mechanism, they nevertheless interfered with its self-regulation and ultimately destroyed the system.
Polanyi depicts a dialectical process: the supposedly self-regulating market grinds forward, undermining the foundations of society. Individuals and groups push back and secure amelioration and reforms. But their victories interfere with the operation of the market, leading to more and more stresses on the market system.
But notice Polanyi’s verdict: that the effect of the Speenhamland system, which was to blunt the impact of industrialization on rural England, proved in the end to be too costly to the rural poor and laborers. How can he reach that conclusion? Polanyi again:
Under the Speenhamland Law, a man was relieved even if he was in employment, as long as his wages amounted to less than the family income granted to him by the scale. Hence no laborer had any financial interest in satisfying his employer….Within a few years, the productivity of labor declined to pauper level, thus providing an added reason for employers not to raise wages above the scale. For once the intensity of labor, the care and efficiency with which it was performed, dropped below a definite level, it became indistinguishable from “boondogling”…
No measure was more universally popular. Parents were free of the care of their children, and children were no more dependent on parents; employers could reduce wages at will and laborers were safe from hunger whether they were busy or slack; humanitarians applauded the measure as an act of mercy even though not of justice; and the selfish gladly consoled themselves with the thought that even though it was merciful it was not liberal; and even ratepayers were slow to realize what would happen to the rates under a system which claimed the “right to live” whether a man earned a living wage or not.
In the long run, the result was ghastly. Although it took some time till the respect of the common man sank to the point where he preferred poor relief to wages, his wages which were subsidized from the public funds were bound eventually to be bottomless, and to force him upon the rates….
On the face of it the “right to live” should have stopped wage labor altogether. Standard wages should have gradually dropped to zero, thus putting the entire wage bill wholly on the parish, a procedure that would have made the absurdity of the arrangement manifest. But….[t]he majority of the countryfolk…preferred any kind of existence to the status of a pauper.
The backlash against the Speenhamland system, which came via the Poor Law Reform of 1834, was the establishment of workhouses designed to force the poor to work. As Wikipedia explains: “The workhouses were to be made little more than prisons and families were normally separated upon entry.” “Outdoor relief,” which then meant aid to the poor without requiring that they enter an institution, was discouraged in the Poor Law Reform and then abolished in the 1840s. Polanyi again:
Never perhaps in all modern history has a more ruthless act of social reform been perpetrated; it crushed multitudes of lives while merely pretending to provide a criterion of genuine destitution in the workhouse test. Psychological torture was cooly advocated and smoothly put into place by mild philanthropist as a means of oiling the labor mill.
I’m at a loss to understand reader objection to the idea of a job guarantee. It would either price many McJobs out of existence or convert them back to their old form, of being part-time positions for young people still in school. It would similarly increase compensation for important jobs like home health care workers that now pay rock-bottom wages. It would make it harder for retailers to continue their abusive practice of requiring workers to be on call. And there is no dearth of meaningful work that needs to done: providing universal day care, better elder and hospice care; replanting forests; building wildlife tunnels; maintaining and improving parks; repairing and upgrading infrastructure with an eye to energy efficiency. These are all ways of increasing national output in a manner which can also improve the environment. If we had more enlightened leadership, a Marshall Plan to retool the economy to reduce energy consumption and convert more sources to cleaner ones would be a high-priority target for Job Guarantee workers.
People need a sense of purpose and social engagement. Employment provides that. History is rife with examples of the rich who fail to find a productive outlet and and whose lives were consumed by addictions or other self-destructive behavior. Ironically, we have the veneer of having less of that due to the prevalence of the new rich (CEOs, elite finaciers, tech titans) tend to be a workaholic lot* (that serves as the rationalization as to why they deserve their lucre).
Too many of the fantasies about a basic income guarantee seem to revolve around a tiny minority, like the individual who will write a great novel on his stipend. Let’s be real: the overwhelming majority of people who think they might like to write a book don’t have the self-displine to do so in the absence of external pressure. And that’s before you get to the question of whether it will turn out to be good enough for anyone but the author to want to read it.
When unions provided an wage anchor for factory labor, the US had less income disparity and more class mobility. Under Speenhamland, income disparity widened and real wages fell. Low end service jobs are the modern analogy to former blue collar work. Even with greater automation, many of those jobs will remain. The alternative of job choice with a job guarantee will force wages higher and improve working conditions. It would provide pressure on employers as labor unions once did. And it will add a bit more to individual freedom by giving them more employment options.
A jobs guarantee and a basic income guarantee are not either/or propositions, contrary to the claims of many readers. Job guarantee proponents see it as an addition to, not a substitute for, other social safety nets, such as unemployment insurance and Social Security. For instance, Joe Firestone has argued for a basic income guarantee in addition to a job guarantee, with the income level for the basic income guarantee set at 2/3 the rate of a full time job under the job guarantee.
As Randy Wray said via e-mail:
A job at a decent wage, set by public policy, will eliminate at least 2/3 of poverty. we can then work on eliminating the rest thru compassion. This is the high road that can increase productive capacity, making it easy to spread the extra production among those who cannot, should not, or do not want to work.
A jobs guarantee is the beginning of the de-commodification of labor and break the dynamic decried by Polanyi. Once productive, dignified work becomes fixed as a right in the minds of the people they will not tolerate being bought and sold like a stamp-machine. A job guarantee breaks the paradigm that workers, as in human beings, must accept whatever terms “the market” has on offer and starts us on a path toward a better society.
* I am mindful of the fact that being in a Master of the Universe role is vastly more gratifying than trying to patch together part-time work to make a living. However, CEOS,top financiers and top professionals typically work well over 55 hours a week.