Web Only / Features » November 9, 2009
How to Create Good Jobs Now (cont’d)
No such thing as a free job
As explained above, the program would create 3.5 million jobs per year. Assuming a wage of $18 per hour, each job would cost $37,440 annually. At this level, the annual wage and salary cost for each annual cohort of workers entering the program would be about $129 billion.
To that number two additional costs must be added. First are administrative costs, which we estimate at 5 percent of the total program outlays, bringing the incremental cost to $135 billion annually. The second cost arises because supervisory and managerial jobs would receive a higher wage than others (although extreme pay differences executives and other workers would be avoided). This would add another 30 percent cost to the program.
With these two adjustments, the annual cohort cost rises to $175.5 billion. Thus, five years into the jobs program, and continuing permanently thereafter, the jobs program would cost the federal government about $878 billion annually (in 2009 dollars.)
Actually, this cost estimate may be too high. Since many of the participants in the jobs creation program would be youth and the chronically unemployed, an integral part of the proposed jobs program would consist of a major training program. Trainees would be paid somewhere between $12 and $18 per hour. Once they satisfactorily completed the training, they would be guaranteed jobs in the regular program. On the other hand, because training programs would increase administrative costs, we have chosen to err on the high side rather than attempt to estimate net savings that might be realized from the participation of trainees.
Finally, all private employment under the jobs program would be subject to the provisions of the proposed Employee Free Choice Act. These provisions would facilitate the creation of union jobs, where the workers would form trade unions and workers’ associations of their choosing. Work conditions and wage increases would be determined through collective bargaining. All public employees would have the right to bargain collectively, as well.
• The ongoing misadventure in Iraq has cost taxpayers approximately $100 billion per year since the 2003 invasion, while the total war budget costs approximately $1 trillion per year. Completing the withdrawal from Iraq and limiting the cost of the war in Afghanistan should free up about half of the $100 billion per year, while another $50 billion could be recouped by trimming the pentagon budget by 5%, for a total savings of $100 billion.
• An excess profits tax on the major energy companies could conservatively raise an additional $50 billion. This tax might be part of a broader “carbon tax” offset by subsidies to low-income households that need to, at least in the short-term, rely on carbon energy sources.
• A half-percent tax on financial transactions would raise significant revenue and have the additional benefit of reducing the volume of highly leveraged financial speculation. When transactions in various derivative markets and the off-exchange bond market are included, the revenues generated, even discounting for the likely reduction in trading, would be sufficient to finance most if not all of our jobs program: A revenue estimate of $600 billion annually for the U.S. seems reasonable.
• If necessary increases in the money supply to accommodate an expanding economy were used to fund jobs rather than pay down federal government debt, additional “tax free” funding of approximately $42 billion would be available.
• Lastly, a wealth tax of 0.5% on the top 1% of households (those with more than $5 million in assets) would generate another $75 billion/year.
The approximately $917 billion generated by these five sources would more than cover the costs of the program, though revenue from some of these sources would not be available until legislation is passed and implemented. Therefore, some financing might have to be borrowed in the short-term–-as has virtually all of the $700 billion allocated toward the current financial bailout.
A properly crafted jobs program must aim at a fundamental restructuring of the labor market. It will, by design, drive up wages for existing low-paying jobs, thus uniting the interests of the chronically unemployed and the working poor. It will mean a significant transfer of income share from the wealthy to the poor. This transfer will necessarily generate opposition, but the conflict will have an upper-versus lower-class dynamic rather than be a racial conflict between different sectors of the lower class.
How do we find the political will?
A near majority of Americans live in households that take in less than $50,000 annually. Among this sector, the financial crisis and the ensuing collapse of the “real” economy have rekindled class feelings and resentment of gross economic inequalities. Many others also are offended by the enormous gulf that the last 30 years have opened between rich and poor.
The New York Times has reported that a full 80 percent of adults in the U.S. support government efforts to help the poor “get ahead.” Thus there would seem to be an unusually large constituency for a program that promised more jobs and better pay for poor Americans.
The labor movement, too, has much to gain from a large jobs program. Unions representing relatively low-wage workers, such as SEIU, might be expected to sign on early.
Unfortunately, it is becoming increasingly likely that Obama’s proposed reforms of the financial sector and his economic stimulus will do little more than restore health to an economic system that generates inequality. The president is not systematically addressing the widespread desire for greater fairness.
This political and programmatic void can best be filled by something like our jobs program. Older liberal and left-liberal organizations like the National Jobs for All Coalition and Americans for Democratic Action would probably be quick to rally around such a proposal, as would many grassroots and Washington groups committed to solving the problem of joblessness.
We recognize that government creation and support for 17.5 million jobs is a mammoth – perhaps utopian – undertaking. But with the support of a large self-interested minority, the labor movement, public interest and grassroots organizations, and the popular anger at inequality and the greed of the rich, a large jobs program stands a better chance of adoption than it has for many years.
As the financial crisis has incontrovertibly demonstrated, neoliberal policies are not sustainable. Now that even neoliberalism’s former beneficiaries have sought a helping hand from the government, it has become increasingly absurd to rely on the invisible hand of the market to provide for the common good. We must instead seek a solution in the government, which we have created for precisely that task.
Ron Baiman is Director of Budget and Policy Analysis at the Center for Tax and Budget Accountability, an Illinois based public policy think tank.
Bill Barclay worked for 22 years in financial services before retiring in 2004; since then he has been active in the Oak Park Coalition for Truth and Justice and Democratic Socialists of America.
Sidney Hollander, a former Chicago Department of Human Services employee who worked on legislative issues, lives in Chicago.
Joe Persky is a professor of economics at University of Illinois, Chicago.
Elce Redmond is a community organizer and political trainer who has worked with non-governmental organizations and labor unions in the United States and around the world.
Mel Rothenberg, professor emeritus of mathematics at University of Chicago, is a longtime social activist and writer on a variety of issues, many related to the construction of socialism.
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