[thread] What If We Nationalized Payroll?
It was great to speak with @petersgoodman about a Nordic style rescue of the US economy. We ran a few thought experiments. Here are some thoughts that didn’t make it in the article
nytimes.com/2020/03/28/bus…
It was great to speak with @petersgoodman about a Nordic style rescue of the US economy. We ran a few thought experiments. Here are some thoughts that didn’t make it in the article
nytimes.com/2020/03/28/bus…
1st the US can budget/pay for ANY amount that's appropriated for whatever reason.
Peter asked “what if the govt paid all US payroll for a time?” My answer: "it would amount to nationalizing the payroll & would make the govt the Employer of First Resort"
Peter asked “what if the govt paid all US payroll for a time?” My answer: "it would amount to nationalizing the payroll & would make the govt the Employer of First Resort"
What would it cost? One back-of-envelope calculation: 157mil employed ppl in the US x median income of $63,700 (2019) = approx $10Trillion for a year of payroll subsidy. I'd add $500b for #JobGuarantee (our @LevyEcon estimate) to support the unemployed w/ stable, living income.
That would be = to govt spending of approx 49% of GDP--almost exactly what we spent per year during WWII.
The deficit would be smaller b/c of tax revenue. In WWII deficit peaked at 27% of GDP vs 10% during GFC. It quickly shrunk in both cases as the economy recovered.
The deficit would be smaller b/c of tax revenue. In WWII deficit peaked at 27% of GDP vs 10% during GFC. It quickly shrunk in both cases as the economy recovered.
If govt paid the wage subsidy for 3 months, that would be $2.5T Heck, we already appropriated $2T and, in my view, it ain’t gonna cut it. We’ll prob have to appropriate more.
And I’ll leave the Job Guarantee as a permanent govt program. amazon.com/dp/1509542094/…
So “paying for it” isn’t the problem. I chose the median income figure because it’s a pickle to figure out how to pay everyone’s exact wage.
But the question is: Should we?
But the question is: Should we?
To answer it we should remember that the private sector sets wages extremely inequitably. It vastly underpays some, grossly overpays others, reproduces the gender wage gap, robs workers of overtime pay and other earned income, and on and on it goes.
If govt nationalized payroll, it would be reproducing these inequities or (at a minimum) it would be validating them. Should bankers get their exorbitant paychecks when the median income for almost half of workers is $18,000!
Of course not.
brookings.edu/blog/the-avenu…
Of course not.
brookings.edu/blog/the-avenu…
So it's tricky to structure it, but if govt were to proceed with some wholesale payroll subsidy program (no chance in the US, but still an interesting thought experiment), then it will bear the absolute burden of responsibility to do wholesale reform in the labor market.
In my view, govt has that burden now. It is keeping the private sector on life support anyway. The strings attached to any stimulus should include requiring employers to pay living wages with guaranteed benefits (Medicare, paid leave, right to bargain, labor contracts, etc).
In sum, the budget for such a wholesale wage-replacement for 3mos is comparable to what we already appropriated. And we can surely fund it. The challenge is to structure and tie it to comprehensive labor market reforms to ensure more just & equitable employment & pay conditions.
Just a thought. /End
