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Alan Aja, Daniel Bustillo, William Darity Jr., Darrick Hamilton
Social Research: An International Quarterly, Volume 80, Number 3,
Fall 2013, pp. 781-794 (Article)
Published by The Johns Hopkins University Press
DOI: 10.1353/sor.2013.0075
For additional information about this article
Access provided by Duke University Libraries (9 Oct 2014 14:02 GMT)
http://muse.jhu.edu/journals/sor/summary/v080/80.3.aja.html
Alan Aja, Daniel Bustillo,
William Darity, Jr., and
Darrick Hamilton
Jobs Instead of Austerity:
A Bold Policy Proposal for
Economic Justice
IN THE LATE 1 97 0S, AMID HIGH INFLATION AND SOARING POVERTY
rates, the decade-old Congressional Black Caucus actively sought to
confront the spiraling econom y’s disproportionate impact on African
Americans.1 One o f their founding members, Congressman Augustus
F. Hawkins of California, teamed up with Senator Hubert Humphrey
of Minnesota to write the Full Employment and Balanced Growth Act, better
known as the Humphrey-Hawkins Act of 1978. With support from reli
gious leaders, minority advocacy groups and other congressional allies,
including the newly formed Congressional Hispanic Caucus,2 the act
was passed by Congress and signed into law by President Jim my Carter
on October 27,1978.
The Humphrey-Haw kins Act im mediately em powered the
fed eral governm ent to spend proactively to increase con sum er
demand. Drawing from the tradition of Keynesian economics, the act
sought to stimulate the private sector to achieve its primary goal o f
full em ploym ent for every able American. However, a lesser-known
provision of the act stated that if the private sector failed to respond
adequately, the public sector would take responsibility for providing
the missing work. Critical components of the new law were specific
social research Vol. 80 : No. 3 : Fall 2013 781
goals for unem ploym ent and inflation, with all federal programs and
policies required to work toward achieving a 3 percent adu lt an d 4
percent overall jobless rate within five years and inflation rates o f 3
percent by 1983 and 0 percent by 1988 (Schantz 1979). Though the
specific goal for unem ploym ent was clearly stated as an interim and
not final goal, this im plicit rejection of the idea that 4 percent unem
ploym ent is full em ployment has, unfortunately, becom e a widely
ignored aspect of the act’s histoiy. Eventually, the overriding concern
with inflation became the m ain focus of both political parties, with
the struggle against unemploym ent dissipating as a priority (Ginsburg
2011).
Over 30 years later, the United States sits at the supposed edge
of the “Great Recession,” triggered by the housing crisis o f 2007.
Despite claims o f economic recovery, m ass long-term unemploym ent
rem ains high for skilled and unskilled alike, with African Americans
and Latinos bearing a disp roportio nate burden. The latest figures
provided by the Bureau o f Labor Statistics (February 2013) noted that
the overall black and Latino unem ployment rate was estimated at
13.8 percent and 9.6 percent respectively, com pared to 6.8 percent
for w hites and the overall national rate of 7.7 percent. The figures
from the Bureau of Labor Statistics in 2012, broken down by educa
tional attainment, more fully underscore the reality. For example, in
2012 the unemployment rate for whites with less than a high school
diplom a was 11.4 percent, but for African Americans with less than
a high school diploma the rate was estimated at 20.4 percent. The
unemployment rate in 2012 for w hites with a bachelor’s degree or
higher was 3.7 percent, but for African Americans and Latinos it stood
at 6.3 percent and 5.1 percent, respectively. We must cautiously note,
however, that this disparity is not sim ply an effect of the aforem en
tioned Great Recession. Indeed, the overall unemployment rate for
African Americans has historically been roughly double that of whites
and roughly 1.5 times greater for Latinos (Bureau of Labor Statistics
2010).
78 2 social research
All of this com es am id a barrage of reports underscoring the
overall economic fallout o f the last decade: h omelessness is at an all-
time high in certain US urban centers, real wages on average are the
lowest they have been on record, and income and wealth disparities
continue to widen (Markee 2013; Knight 2013; Isodore 2012). A recent
analysis o f the UN Economic Commission for Latin America and the Caribbean
underscored this reality, illustrating that US inequality now ranks
in the middle am ong Latin Am erican countries, with the wealthi
est 20 percent earning 16 times more than the poorest 20 percen t
(ECLAC 2012; Isaacson 2013). More group-specific: before the Great
Recession, the typical black and Latino family had less than 10 cents
for every dollar in w ealth o f the typical white family. After the reces
sion, that gap nearly doubled, with the typical black and Latino family
possessing about a nickel for every dollar in wealth possessed by the
typical white family (Taylor et al. 2011), with a recent report from
the Institute on Assets and Social Policy at Brandeis University find
ing that the total wealth gap between black and white families has
tripled since 1984, increasing from a $85,000 difference to a $236,500
difference.3
To add insult to injury, corporate profits are at their highest level
on record. The w ealthiest top 1 percent of earners, those earning above
$1 million, receive an average of $96,000 a year in the form o f tax subsi
dies and savings, and 53 percent o f all subsidies go to the top 5 percent
of taxpayers. In contrast, the bottom 60 percent o f taxpayers receive
only 4 percent of the benefits, with the bottom fifth of taxpayers receiv
ing 0.04 percent o f benefits—an average of $5 per taxpayer (Woo et al.
2009). Current estim ates of this regressive, asset-promoting budget—
which includes such items as mortgage interest deductions, exclusion
of investment income on life insurance and annuity contracts, reduced
rates of tax on dividends and long-term capital gains, and exclusion of
capital gains at death—exceed $400 billion.
Despite these blatant inequities and the irony th at the black
and Latino unemployment rate today is near the sam e level it was
Jobs Instead of Austerity 783
when the Humphrey-Hawkins Act w as passed, there is little discus
sion in Washington, D.C. over a basic right to employment. In 2011, US
Representative John Conyers from Michigan introduced a bill entitled
the Humphrey-Hawkins 21st Century Full Employment and Training
Act to establish the National Employment Trust Fund with the goal of
reaching full employment. The Humphrey-Hawkins 21st Centuiy Full
Employment and Training Act has gained little traction in Congress.
Meanwhile, the president has neglected the possibility of implem enting
a sim ilar national policy. Instead, the president, along with Democrats
and Republicans, seems to have em braced the Tea Party narrative that
spending cuts are a necessary ingredient to revitalize the economy and
lessen the national debt.
Loosely known as “austerity econom ics,” the Tea Party narra
tive involves spending cuts on essential social safety nets and public
services while raising taxes to pay back creditors. But if we have learned
anything from recent events in Europe, “austerity economics” yields
disastrous consequences, plunging countries into worsening unem
ploym ent, record poverty rates, and growing civil unrest. According
to Eurostat, as o f January 2013, the unem ployment rate in Spain was
26.2 percent, and for individuals under 25 the rate was 55.5 percent.
As astonishing as those figures are, the data on Greece are even more
sobering, with an overall unemployment rate of 27 percent, and 59.4
percent for individuals under the age o f 25. As the realities of “auster
ity econom ics” continue to wreak havoc, even institutions such as the
International Monetary Fund have been forced to admit that they did
not fully understand how austerity efforts would undermine economic
growth (Schneider 2014). A recent IMF working paper states:
Underestim ating fiscal m ultipliers m ay cause unpleasant
surprises . . . using the debt ratio as an operational fiscal
target presents risks. If country authorities focus on the
short-term behavior o f the debt ratio, they may engage in
repeated rounds o f tightening in an effort to get the debt
784 social research
ratio to converge to the official target, underm ining confi
dence, and setting off a vicious circle of slow growth, defla
tion, and further tightening (Eyraud and Weber 2013).
In essence, this “tigh tening” has led to more job loss, and the
potential for more job loss means less tax revenue for the essential
public services families and businesses depend on to thrive.
In a hearing before Congress regarding the potential effects of
sequestration, Douglas Elmendorf, the director o f the Congressional
Budget Office, estimated that 750,000 jobs could be lost as a result of
cuts in 2013 (Hufflngton Post 2013). With the likelihood that more than
half of the nation’s 2.1 million government workers may be scheduled
for furlough (Jelinek 2013) in a public sector that has already shed more
than 600,000 jobs since the election of President Barack Obama in
2008, the potential differential impacts on a federal workforce, which
is less white and male than the overall workforce, are evident (Yoder
2012). Austerity-driven cuts to community health centers, Section 8
vouchers, Head Start, WIC programs, along with reductions in unem
ployment insurance paym ents, would have differential, detrimental
im pacts on working, poor comm unities o f color. In lieu of austerity
economics, a permanent, full-em ployment policy w ould sim ultane
ously address long-standing patterns of racial inequality and prevent
another economic recession.
And yet, despite overw helm ing em pirical evidence to the
contrary, there is an increasin gly p opular “p ostrac ial” narrative
accepted by w hites, blacks, conservatives, and liberals alike assertin g
that labor m arket discrim ination and other racial structural barriers
are largely things of the past and that race is no longer a defining
feature of one’s life chances (Hamilton and Darity 2010). Consistent
with the postracial narrative, the rem ain ing racial differences are
supposedly driven by self-sabotaging attitudes and behaviors of the
underperforming groups themselves. Rather than acknow ledging
an “increasing” significance o f race, particularly as measured by the
Jobs Instead of Austerity 785
widening racial wealth gap cited earlier, the dominant narrative is a
“declining” significance of race.
In policy practice, the postracial narrative translates to a shift
from public responsibility for the econom ic conditions of blacks and
other racialized groups demonstrated by race-based interventions to a
position that aforementioned groups need to take “personal respon
sibility,” change their behavioral values, and stop playing the “victim
card,” em phasizing “perceived” discriminatory barriers as the culprit
of socioeconom ic circum stances (Hamilton and Darity 2009; Aja 2012).
The National Investm ent Employment Corps (NIEC) is a race-
neutral alternative to austerity economics that would not only provide
econom ic security, mobility, and sustainability for all Americans but
also address the long-standing pattern of racial inequality, particularly
in the realm of unemploym ent. Consistent with the ideals of the 1978
Humphrey-Hawkins Act, a perm anent federal government job guar
antee program would move the countiy to full employment, while at
the sam e time rem oving the threat of unemploym ent and ensuring the
opportunity to work for a livable wage and decent pay is a citizenship
right for all Americans. A federal jo b guarantee program would miti
gate the immense damage that persistent unem ployment does to the
hum an spirit and alleviate its extensive costs to individuals, families,
and society as a whole (Diette et al. 2012).
If the N ational Investm ent Employm ent Corps w ere im ple
mented, pay would range from a m inimum of $20,000 to a maximum
of $80,000, each job also providing benefits (including medical cover
age and retirement support), opportunities for advancement, on-the-
job training, and professional development. A national program of
job assurance would provide meaningful employment in a variety of
“public w orks” projects while potentially serving as the stimulus for
the types of innovative, green technologies the president has often
touted. States and municipalities could develop inventories o f needed
jobs for all who are able to work, m atching skilled and unskilled labor
ers alike w ith full-employment opportunities. The program could give
786 social research
priority to the most urgent projects to aid the m ost distressed commu
nities. Jobs would address physical and hum an infrastructure needs
including building, repair, and maintenance o f bridges, damns, roads,
parks, m useum s, mass transit systems, school facilities, health clinics,
and child care centers. In a recent March 2013 report, the American
Society o f Civil Engineers (ASCE) gave the country a grade o f D+ on its
physical infrastructure, indicating that a total investment of $3.6 tril
lion is required by 2020 in order to deal with the backlog of overdue
maintenance across our infrastructure systems.
The cost o f an NIEC would be less than the first stimulus package
enacted by Congress and vastly less than the $10 to $30 trillion awarded
by the Federal Reserve to the very same investment banking comm u
nity that caused the economic crisis in the first place. We calculate that
if 15 million people were employed at $50,000 per year, per person,
the total expense o f the program would be $750 billion. Consider that
in 2011 alone, federal antipoverty programs (Medicaid, unemployment
insurance, for example) cost approximately $746 billion (Wasson 2012).
A federal job guarantee would dramatically reduce current anti
poverty expenditures and is, by comparison, far more productive in use
for both physical and human capital development. The net expenses of
a job guarantee program could also be minim al given the potential cost
savings from other social program s. With the federal government serv
ing as employer o f last resort, unemploym ent compensation funding
could be slashed and antipoverty program funding for free and reduced
lunch subsidies and food stamps could be greatly reduced since a job
guarantee works to eliminate both working and jobless poverty sim ul
taneously.
The National Investment Employment Corps would be a better
job creator than the indirect incentive effects of stimulus measures
and tax incentive strategies aimed at encouraging the private sector to
provide jobs, given that it serves as a direct mechanism for job creation
while also triggering a m ultiplier stimulus effect across a panoply of
activities that takes place in the economy. The private sector would
Jobs Instead of Austerity 787
benefit in m yriad ways, not ju st by stabilizing consum ption demand
but also through vertical linkages of sales o f supplies and materials to
the NIEC for public projects. New leverage for unions would also be
created, since the jobs offered by the NIEC would set an effective mini
mum floor on the quality o f employment.
Furthermore, the incom e paid to the em ployees of the NIEC
would restore tax bases at the state and municipal levels, alleviating
their current budget crises. The federal job guarantee w ould serve as
an implicit “public option” leading to health coverage of millions of
uninsured Americans.
Other benefits include the elim ination of a number of market
interventions, including minimum wage laws, financial regulation, and
associated enforcement expenses. Minimum wage laws could be elimi
nated since the minimum salary offered by the National Investment
Employment Corps would set the floor on the wage standard. This
would reduce concerns about strengthening and constan tly u pdat
ing financial regulation in order to keep up with constantly evolving,
econom ically harmful private-sector products and practices aimed at
eluding regulation: the presence of job guarantee would mitigate the
adverse effects o f fluctuations in speculative investm ent markets on
personal employment and income for the public at large.
To be clear, this policy recomm endation is not m eant to act as
a temporary program contingent on emergency conditions. Instead, it
is to function as an autom atic, permanent stabilizer in good and bad
times insofar as the number o f people put to work in the NIEC rises
during downturns and falls during upsw ings. Thus, like the cost o f
the program, it will expan d and contract countercyclically. It would
structurally change the US econom y away from low-wage job s—a
sector in which an increasing global economy is mak ing the United
States increasingly less competitive—toward more moderate and high-
wage jobs.
More im portant, the program would serve as assuran ce o f
em ployment for members of stigmatized populations historically and
78 8 social research
presently su bject to discriminatory employm ent exclusion. Devah
Pager’s audit study in Milwaukee, for exam ple, revealed that among
males of comparable age and em ployment qualification, white appli
cants received more em ployment callbacks than their black coun
terparts. Even more alarm ing, the study also found that whites with
criminal records were m ore likely to get callbacks than black m ales
with no criminal record, although this latter effect was not statistically
significant (Pager 2003). Indeed, even am ong only white males, having
a criminal record reduced the odds of receiving an employment call
back by half. It is noteworthy that these audits took place in Wisconsin,
a state that outlaws employer use o f a criminal record as criterion for
em ployment in m ost jobs.
In anoth er exam ple, Guiliano, Levine, and Leonard (2008),
using personnel data from a large US retail firm, undertook an exam
ination of whether the race of the hiring m anager affects the racial
composition of new hires, finding sign ifican t differences between
the hiring patterns o f non-black m anagers and black managers, with
non-black managers hiring more whites an d fewer blacks than do
black managers. Also, Bureau o f Labor Statistics indicate that am ong
18- to 25-year-olds, white high-school dropouts yielded an unem ploy
ment rate 10 to 12 points lower than blacks who have com pleted
some college. The evidence suggest that even when blacks are able
to avoid incarceration and acquire education, they are employed
at lower rates than white formerly incarcerated and lower educated
counterparts. Thus the full-employment national jobs program envi
sioned here would provide employment for all—black, white, Latino,
Asian, Native American, male or female, w ith or w ithout a criminal
record.
Globally, programs sim ilar to a federal jobs guarantee have proven
to be effective. In 2002, Argentina im plemented the Plan Jefas yje fes de
Hogar Desocupados (Program for Unemployed Female and Male Heads
of Households), providing a payment of 150 pesos per month to a head
of household for a m inimum o f 4 hours o f daily w ork in community
Jobs Instead of Austerity 789
services, small construction, or m aintenance services. The program
provided job s to 2 million workers, with indigence rates among partici
pating households falling by nearly 25 percent and the unemployment
rate dropping from 21.5 percent in May 2002 to 15.6 percent in May
2003 (Tcherneva and Wray 2005); the program’s multiplier effect was
conservatively estimated at 2.57 (Harvey 2007). India’s National Rural
Employm ent Guarantee Scheme, which was im plemented in 2006,
guaranteed households the legal right to be employed up to 100 days a
year. For individuals, the program entitled them to receive wages if no
work is made available to them within two weeks of an application. Liu
and Deiniger (2010) estim ate that the short-term effects o f the Indian
program on participating households were positive and greater than
program costs.4
Non-white racial groups that are currently and chronically
affected by higher unem ployment rates will suffer the m ost from
federal job- and budget-cutting austerity economics. Yet, the presi
dent and Democratic m embers o f Congress hold the m andate, given
the overwhelming support that they receive from African Americans
and Latinos, to com bat persistent unemployment in those communi
ties. Instead of supporting and im plem enting the dangerous contours
of austerity economics, we need a plan that moves us tow ard full,
perm anent employm ent as m andated by Humphrey-Haw kins. A
federal job guaran tee would not only address long-standing unjust
and discriminatory barriers that keep large segm ents of stigm atized
populations out of the labor force, but also reverse the risin g tide of
inequality for workers in general by strengthening their labor market
bargaining power and eliminating the threat o f unemploym ent for all
Americans.
NOTES
1. For instance, while the unemployment rate hovered between 12 and
14 percent during the mid-1970s, by 1978 rates widened between
blacks and whites dramatically, with a black and “other race” unem
790 social research
ployment rate 2.4 times higher than the rate for whites (Bureau of
the Census 1979).
2. The Congressional Hispanic Caucus was organized in 1976 by five
Hispanic congressmen: Herman Badillo (NY), Baltasar Corrada del
Río (PR), Kika de la Garza (TX), Henry B. Gonzalez (TX), and Edward
Roybal (CA).
3. Note that the Taylor et al. (2011) study is based on data from the
Survey of Income and Program Participation while the data from the
Institute of Assets and Social Policy is based on data from the Panel
Study of Income Dynamics.
4. India’s N ational Rural Employment Guarantee Scheme has not
existed long enough to evaluate the long-term effects.
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