The definition of NAIRU, according to Economics Online, is:
“the specific unemployment rate at which the rate of inflation stabilises ...”
The Holy Grail of inflation stability is the justification for a persistent rate of unemployment in the UK economy. This buffer stock of unemployed people, living subsistence lifestyles on social security benefits, are actually the nation’s brave inflation fighters.
Many citizens in the UK don’t appear to recognise the sacrifice. Newspaper headlines and general conversation will soon highlight the disgust and rejection of the unemployed by many in society, as ‘lazy scroungers’, who should ‘get off their backsides and do an honest day’s work’.
There seems to be no recognition of the fact that the unemployed buffer stock is protecting the value of the money in their wallets and banks accounts and the value of their future pension. What possible purpose could this shaming of the unemployed accomplish?
A number of the tropes highlighted in other articles in this series come into play again. It comes down to the scarcity narrative and competition. When the unemployed are shamed and derided in plain site on media and television, it reminds everyone that joblessness exists. It reinforces the precarity of one’s own life, burdened with debt, and that unemployment is the bogey man everyone is scared of. Anyone who wants to preserve a lifestyle that they are just affording, just getting by.
In the UK, the concept is more commonly referred to as ‘The Natural Rate of Unemployment’. This frames it as something that can’t be helped. ‘It’s a fact of life, so we just need to deal with it as best we can’. ‘It’s a shame for the people affected, but what can we do?’
The well-paid, persistently-employed economists have never really managed to work out what the natural rate actually is. It has fluctuated wildly over the years and seems to match what they think the Government can get away with to avoid riots, rather than anything to do with modelling or mathematical study. That is no wonder when, as you’ve probably already gathered, it is completely unnecessary to let anyone suffer the ignominy of involuntary unemployment.
As currency issuer, the Government is able to spend whatever it takes to employ all the idle resources available for purchase in its currency. Due to the fact that these are idle resources, the action can never be inflationary. It could be highly re-distributive though.
With jobs in demand and desperate people looking for work, business owners have little incentive to raise wages or improve conditions and benefits packages to attract staff. Staff retention is also higher, any staff member considering leaving, no matter how bad things are, has to consider the difficulty in gaining employment elsewhere.
Unemployment is entirely caused by Government. It created the concept of involuntary unemployment when it imposed the tax obligation on society at its inception. Every household needs to find work paying in the unit of account that the government will accept in payment of taxes. There was no such thing as unemployment before the tax burden was put in place.
An unintended consequence of the NAIRU process is that employers are reticent to take on the long-term unemployed. These people have no referee, as they haven’t worked for a lengthy period. The employers don’t know if that is because they get into fights or suffer addictions, so, rather than take the risk, they’ll head-hunt or take someone newly laid-off, if there is a choice.
Therefore, it should be the Government that should bear the burden of improving the life of these unemployed people. Instead of a buffer stock of unemployed controlling inflation, why not have a buffer stock of jobs. The MMT Job Guarantee proposal will be looked at later in the series. The Job Guarantee, as I will explain later, is a superior price anchor when compared to unemployment.
Capitalism works in cycles and there are booms of investment and productivity and slumps when this lessens. During the slump, workers are laid off from jobs as the productivity reduces. This, in turn, results in a further drop of spending into society which continues the decline.
A buffer stock of jobs would provide a government funded transition job to any worker who can’t find work in the private sector, and tide them over until the private sector is ready to hire again. It retains spending power in the economy and should shorten any slump and avoid recession.
In addition to this, the job guarantee puts a floor under the pay and conditions of workers. The private sector must bid at or above the job guarantee wages and benefits to attract staff. Current staff also need to be treated well or they will resign and take a job guarantee job while looking for their next employment opportunity.
NAIRU is in place to ensure that the balance of power is heavily weighted towards business owners. This balance has swung too far, and is harmful in terms of social outcomes for those left out, and for the damage being done to the planet’s ecosystems.
Society is largely unaware of NAIRU and the fact that unemployment is a political choice. The shaming of the unemployed is testament to this. People don’t understand that Government has the capacity to ensure that workers need not suffer, in an economic downturn, for the vagaries of the market. Disciplining the population to be productive can be done in other ways. Fear may be a motivating force, however, the unintended consequences catch up with a population in the long-term.
https://www.dailymail.co.uk/news/article-2276418/Lazy-Britain-uncovered-How-FOUR-MILLION-adults-worked-lives.html