Pavlina R. Tcherneva
Policy Note 2017/1 | April 2017Since the 1980s, economic recoveries in the United States have been delivering the vast majority of income growth to the wealthiest households. This policy note updates the analysis in One-Pager No. 47 and Policy Note 2015/4 with the latest data through 2015, looking at the distribution of average income growth (with and without capital gains) between the bottom 90 percent and top 10 percent of households, and between the bottom 99 percent and top 1 percent of households.
Little has changed when considering the distribution of average income growth in the current recovery (up to 2015) between the bottom 90 percent and top 10 percent of families, with or without capital gains. Although average real income for the bottom 90 percent of households is no longer shrinking, these families still capture a historically small proportion of that growth—only between 18 percent and 22 percent. The growing economy continues to deliver the most benefits to the wealthiest families.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 887 | March 2017
Job Creation in the Midst of Welfare State Sabotage
President Trump’s faux populism may deliver some immediate short-term benefits to the economy, masking the devastating long-term effects from his overall policy strategy. The latter can be termed “welfare state sabotage” and is a wholesale assault on essential public sector institutions and macroeconomic stabilization features that were built during the New Deal era and ushered in the “golden age” of the American economy. Starting in the late ’70s, many of these institutions were significantly eroded by Republicans and Democrats alike, paving the way for the rise of Trump but paling in comparison with what is to come.Download:Associated Program:Author(s):Related Topic(s):
In the Media | August 2016RT America, August 20, 2016. All Rights Reserved.
In this interview on "Boom Bust" Research Associate Pavlina R. Tcherneva advocates in favor of a public job guarantee program over universal basic income as a means of alleviating poverty and stabilizing the business cycle. (Interview begins at 15:00.)
Watch here: https://www.rt.com/shows/boom-bust/356572-louisiana-crisis-turkey-economy/
In the Media | July 2016
Pavlina R. TchernevaThe New York Times, July 11, 2016. All Rights Reserved.
Though job growth surged in June, by and large, this recovery has been the slowest in postwar history and 7.8 million people continue to look, unsuccessfully, for work.
There is nothing inevitable or natural about jobless recoveries....
Read more: http://www.nytimes.com/roomfordebate/2016/07/11/are-we-ready-for-the-next-recession/keep-unemployment-from-mushrooming-with-preventative-policies
In the Media | June 2016Bloomberg, June 7, 2016. All Rights Reserved.
Research Associate Pavlina R. Tcherneva argues against a universal basic income policy and in favor of a job guarantee in this interview with Bloomberg’s Joe Weisenthal. Click here for the video.
Working Paper No. 861 | March 2016
Money, in this paper, is defined as a power relationship of a specific kind, a stratified social debt relationship, measured in a unit of account determined by some authority. A brief historical examination reveals its evolving nature in the process of social provisioning. Money not only predates markets and real exchange as understood in mainstream economics but also emerges as a social mechanism of distribution, usually by some authority of power (be it an ancient religious authority, a king, a colonial power, a modern nation state, or a monetary union). Money, it can be said, is a “creature of the state” that has played a key role in the transfer of real resources between parties and the distribution of economic surplus.
In modern capitalist economies, the currency is also a simple public monopoly. As long as money has existed, someone has tried to tamper with its value. A history of counterfeiting, as well as that of independence from colonial and economic rule, is another way of telling the history of “money as a creature of the state.” This historical understanding of the origins and nature of money illuminates the economic possibilities under different institutional monetary arrangements in the modern world. We consider the so-called modern “sovereign” and “nonsovereign” monetary regimes (including freely floating currencies, currency pegs, currency boards, dollarized nations, and monetary unions) to examine the available policy space in each case for pursuing domestic policy objectives.Download:Associated Program(s):Author(s):Related Topic(s):
In the Media | July 2015The American Prospect, July 14, 2015. All Rights Reserved.
Good evening, podcast listeners! We’ve got a great episode for you this week as Richard Aldous speaks with his Bard colleague Pavlina Tcherneva about the recently announced deal with Greece before discussing the promise of disruptive new healthcare technologies with Philip Auerswald....
Full audio of the interview is available here.
Policy Note 2015/4 | March 2015
Trends in US Income InequalityIn the postwar period, with every subsequent expansion, a smaller and smaller share of the gains in income growth have gone to the bottom 90 percent of families. Worse, in the latest expansion, while the economy has grown and average real income has recovered from its 2008 lows, all of the growth has gone to the wealthiest 10 percent of families, and the income of the bottom 90 percent has fallen. Most Americans have not felt that they have been part of the expansion. We have reached a situation where a rising tide sinks most boats.Download:Associated Program:Author(s):Related Topic(s):
One-Pager No. 47 | October 2014In the postwar period, income growth has become more inequitably distributed with virtually every subsequent economic expansion. From 2009 to 2012, while the economy was recovering from one of the biggest economic downturns in recent memory, the top 1 percent took home 95 percent of the income gains. To reverse this pattern, Research Associate Pavlina R. Tcherneva recommends policy strategies to promote growth from the bottom up—to change the income distribution directly by funding employment opportunities in the public, nonprofit, or social entrepreneurial sector.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 789 | March 2014
The Road Not Taken
It is common knowledge that John Maynard Keynes advocated bold government action to deal with recessions and unemployment. What is not commonly known is that modern “Keynesian policies” bear little, if any, resemblance to the policy measures Keynes himself believed would guarantee true full employment over the long run. This paper corrects this misconception and outlines “the road not taken”; that is, the long-term program for full employment found in Keynes’s writings and elaborated on by others in works that are missing from mainstream textbooks and policy initiatives. The analysis herein focuses on why the private sector ordinarily fails to produce full employment, even during strong expansions and in the presence of strong government action. It articulates the reasons why the job of the policymaker is, not to “nudge” private firms to create jobs for all, but to do so itself directly as a matter of last resort. This paper discusses various designs of direct job creation policies that answer Keynes’s call for long-run full employment policies.Download:Associated Program:Author(s):Related Topic(s):
Policy Note 2014/1 | January 2014The job guarantee is a proposal that provides greater macroeconomic stability and secures a fundamental human right. Despite the economic and moral merits of this policy, often the program is rejected because of concerns about its administration. How would the program be implemented? Who will create the jobs? Can work be found for every unemployed individual who wishes to work? This policy note addresses these concerns by elaborating on a proposal for the United States that would run the job guarantee through the social enterprise sector, which includes traditional nonprofit organizations and emerging nonprofit social entrepreneurial ventures.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 772 | August 2013
A Critical Assessment of Fiscal Fine-Tuning
The present paper offers a fundamental critique of fiscal policy as it is understood in theory and exercised in practice. Two specific demand-side stabilization methods are examined here: conventional pump priming and the new designation of fiscal policy effectiveness found in the New Consensus literature. A theoretical critique of their respective transmission mechanisms reveals that they operate in a trickle-down fashion that not only fails to secure and maintain full employment but also contributes to the increasing postwar labor market precariousness and the erosion of income equality. The two conventional demand-side measures are then contrasted with the proposed alternative—a bottom-up approach to fiscal policy based on a reinterpretation of Keynes’s original policy prescriptions for full employment. The paper offers a theoretical, methodological, and policy rationale for government intervention that includes specific direct-employment and investment initiatives, which are inherently different from contemporary hydraulic fine-tuning measures. It outlines the contours of the modern bottom-up approach and concludes with some of its advantages over conventional stabilization methods.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 732 | September 2012
The Employer of Last Resort as an Institution for Change
Over the past decade and a half the ability of the employer-of-last-resort (ELR) proposal to deliver full employment and price stability has been discussed at length in the literature. A different issue has received relatively little attention—namely, the concern that even when the ELR produces these macroeconomic benefits, it does so by offering “low-paying” “dead-end” jobs, further denigrating the unemployed. In this context, the important buffer stock feature of the ELR is misconstrued as a hydraulic mechanism that prioritizes macroeconomic stability over the program’s benefits to the unemployed.
This paper argues that the two objectives are not mutually exclusive by revisiting Argentina’s experience with Plan Jefes and its subsequent reform. Plan Jefes is the only direct job creation program in the world specifically modeled after the modern ELR proposal developed in the United States. With respect to macroeconomic stability, the paper reviews how it exhibits some of the key stabilizing features of ELR that have been postulated in the literature, even though it was not designed as an unconditional job guarantee. Plan Jefes also illustrated that public employment programs can have a transformative impact on persistent socioeconomic problems such as poverty and gender disparity. Women—by far the largest group of program beneficiaries—report key benefits to their communities, families, children, and (importantly) themselves from participation in Jefes.
Argentina’s experience shows that direct job creation programs that offer employment at a base wage can have the unique capacity to empower and undermine prevailing structures that produce and reproduce poverty and gender disparities. Because the latter two problems are multidimensional, the ELR cannot be treated as a panacea, but rather as an important policy tool that remedies some of the most entrenched and resilient causes of poverty and gender inequality. The paper examines survey evidence based on narratives by female participants in Jefes to assess these potentially transformative aspects of the ELR proposal.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 719 | May 2012
The paper evaluates the fiscal policy initiatives during the Great Recession in the United States. It argues that, although the nonconventional fiscal policies targeted at the financial sector dwarfed the conventional countercyclical stabilization efforts directed toward the real sector, the relatively disappointing impact on employment was a result of misdirected funding priorities combined with an exclusive and ill-advised focus on the output gap rather than on the employment gap. The paper argues further that conventional pump-priming policies are incapable of closing this employment gap. In order to tackle the formidable labor market challenges observed in the United States over the last few decades, policy could benefit from a fundamental reorientation away from trickle-down Keynesianism and toward what is termed here a “bottom-up approach” to fiscal policy. This approach also reconsiders the nature of countercyclical government stabilizers.Download:Associated Program:Author(s):Related Topic(s):
Policy Note 2012/2 | March 2012
The Nonprofit Model for Implementing a Job Guarantee
The conventional approach of fiscal policy is to create jobs by boosting private investment and growth. This approach is backward, says Research Associate Pavlina R. Tcherneva. Policy must begin by fixing the unemployment situation because growth is a byproduct of strong employment—not the other way around. Tcherneva proposes a bottom-up approach based on community programs that can be implemented at all phases of the business cycle; that is, a grass-roots job-guarantee program run by the nonprofit sector (with participation by the social entrepreneurial sector) but financed by the government. A job-guarantee program would lead to full employment over the long run and address an outstanding fault of modern market economies.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 706 | February 2012
An Augmented Minskyan-Kaleckian Model
This paper augments the basic Post-Keynesian markup model to examine the effects of different fiscal policies on prices and income distribution. This is an approach à la Hyman P. Minsky, who argued that in the modern era, government is both “a blessing and a curse,” since it stabilizes profits and output by imparting an inflationary bias to the economy, but without stabilizing the economy at or near full employment. To build on these insights, the paper considers several distinct functions of government: 1) government as an income provider, 2) as an employer, and 3) as a buyer of goods and services. The inflationary and distributional effects of each of these fiscal policies differ considerably. First, the paper examines the effects of income transfers to individuals and firms (in the form of unemployment insurance and investment subsidies, respectively). Next, it considers government as an employer of workers (direct job creation) and as a buyer of goods and services (indirect job creation). Finally, it modifies the basic theoretical model to incorporate fiscal policy à laMinsky and John Maynard Keynes, where the government ensures full employment through direct job creation of all of the unemployed unable to find private sector work, irrespective of the phase of the business cycle. The paper specifically models Minsky’s proposal for government as the employer of last resort (ELR), but the findings would apply to any universal direct job creation plan of similar design. The paper derives a fundamental price equation for a full-employment economy with government. The model presents a “price rule” for government spending that ensures that the ELR is not a source of inflation. Indeed, the fundamental equation illustrates that in the presence of such a price rule, at full employment inflationary effects are observed from sources other thanthe public sector employment program.
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Working Paper No. 705 | February 2012
Lessons from Argentina
The literature on public employment policies such as the job guarantee (JG) and the employer of last resort (ELR) often emphasizes their macroeconomic stabilization effects. But carefully designed and implemented policies like these can also have profound social transformative effects. In particular, they can help address enduring economic problems such as poverty and gender disparity. To examine how, this paper will look at the reform of Argentina’s Plan Jefes into Plan Familias. Plan Jefes was the hallmark stabilization policy of the Argentine government after the 2001 crisis. It guaranteed a public sector job in a community project to unemployed male and female heads of households. The vast majority of beneficiaries, however, turned out to be poor women. For a number of reasons that are explored below, the program was later reformed into a cash transfer policy, known as Plan Familias, that still exists today. The paper examines this reform in order to evaluate the relative impact of such policies on some of the most vulnerable members of society; namely, poor women. An examination of the Argentine experience based on survey evidence and fieldwork reveals that poor women overwhelmingly want paid work opportunities, and that a policy such as the JG or the ELR cannot only guarantees full employment and macroeconomic stabilization, but it can also serve as an institutional vehicle that begins to transform some of the structures and norms that produce and reproduce gender disparities. These transformative features of public employment policies are elucidated by turning to the capabilities approach developed by Amartya Sen and elaborated by Martha Nussbaum—an approach commonly invoked in the feminist literature. This paper examines how the access to paid employment can enhance what Sen defines as an individual’s “substantive freedom.” Any policy that fosters genuine freedom begins with an understanding of what the targeted population (in this case, poor women) wants. It then devises a strategy that guarantees that such opportunities exist and removes the obstacles to accessing these opportunities.Download:Associated Program:Author(s):Related Topic(s):Argentina Basic income Capabilities approach Cash transfers Debt cancellation Economic and Monetary Union (EMU) Employer of Last Resort (ELR) policy Employment guarantee Eurozone debt crisis Functional finance Gender disparities Global financial crisis Global imbalances Job guarantee Modern Money Theory (MMT) Plan Familias Plan Jefes Poverty Public employment State theory of money
One-Pager No. 16 | October 2011
The American Jobs Act now before Congress relies largely on a policy of aggregate demand management, or “pump priming”: injecting demand into a frail economy in hopes of boosting growth and lowering unemployment. But this strategy, while beneficial in setting a floor beneath economic collapse, fails to produce and maintain full employment, while doing little to address income inequality. The alternative? Fiscal policy that directly targets unemployment by providing paid work to all those willing to do their part.Download:Associated Program(s):Author(s):Related Topic(s):
Working Paper No. 650 | January 2011
This paper argues for a fundamental reorientation of fiscal policy, from the current aggregate demand management model to a model that explicitly and directly targets the unemployed. Even though aggregate demand management has several important benefits in stabilizing an unstable economy, it also has a number of serious drawbacks that merit its reconsideration. The paper identifies the shortcomings that can be observed during both recessions and economic recoveries, and builds the case for a targeted demand-management approach that can deliver economic stabilization through full employment and better income distribution. This approach is consistent with Keynes’s original policy recommendations, largely neglected or forgotten by economists across the theoretical spectrum, and offers a reinterpretation of his proposal for the modern context that draws on the work of Hyman Minsky.Download:Associated Program(s):Author(s):Related Topic(s):
Working Paper No. 649 | January 2011
This paper reconsiders fiscal policy effectiveness in light of the recent economic crisis. It examines the fiscal policy approach advocated by the economics profession today and the specific policy actions undertaken by the Bush and Obama administrations. An examination of the labor market renders the contemporary aggregate demand–management approach wholly inadequate for achieving certain macroeconomic objectives, such as the stabilization of investment and investor expectations, the generation and maintenance of full employment, and the equitable distribution of incomes. The paper reconsiders the policy effectiveness of alternative fiscal policy approaches, and argues that a policy that directly targets the labor demand gap (as opposed to the output gap) is far more effective in stabilizing employment, incomes, investment, and balance sheets.Download:Associated Program(s):Author(s):Related Topic(s):
Working Paper No. 636 | November 2010
Bernanke’s Paradox: Can He Reconcile His Position on the Federal Budget with His Recent Charge to Prevent Deflation?View More View Less
This paper examines Federal Reserve Chairman Ben Bernanke’s recipe for deflation fighting and the specific policy actions he took in the aftermath of the 2008 financial crisis. Both in his academic and in his policy work, Bernanke has made the case that monetary policy is able to stem deflationary forces largely because of its “fiscal components,” and that governments like those in the United States or Japan face no constraints in financing these fiscal components. On the other hand, he has recently expressed strong concerns about the size of the federal budget deficit, calling for its reversal in the name of financial sustainability. The paper argues that these positions are fundamentally at odds with each other, and resolves the paradox by arguing on theoretical and technical grounds that there are no fundamental differences in financing conventional government spending programs and what Bernanke considers to be the fiscal components of monetary policy.Download:Associated Program:Author(s):Related Topic(s):
Policy Note 2009/1 | January 2009
A Modest Proposal to Guarantee That He Meets and Exceeds ExpectationsJob creation is once again at the forefront of policy action, and for advocates of pro-employment policies, President Obama’s Keynesian bent is a most welcome change. However, there are concerns that Obama’s plan simply does not go far enough, and that a large-scale public investment program may face shortages of skilled labor, put upward pressure on wages, and leave women and minorities behind. Both concerns can be addressed by a simple amendment to the Obama plan that will bring important additional benefits. The amendment proposed here is for the government to offer a job guarantee to all unemployed individuals who are ready, willing, and able to participate in the economic recovery—that is, to target the unemployed directly.Download:Associated Program:Author(s):Related Topic(s):
Working Paper No. 542 | August 2008
Aggregate or Targeted Demand?
This paper argues that John Maynard Keynes had a targeted (as contrasted with aggregate) demand approach to full employment. Modern policies, which aim to “close the demand gap,” are inconsistent with the Keynesian approach on both theoretical and methodological grounds. Aggregate demand tends to increase inflation and erode income distribution near full employment, which is why true full employment is not possible via traditional pro-growth, pro-investment aggregate demand stimuli. This was well understood by Keynes, who preferred targeted job creation during expansions. But even in recessions, he did not campaign for wide-ranging aggregate demand stimuli; this is because different policies have different employment creation effects, which for Keynes was the primary measure of their effectiveness. There is considerable evidence to argue that Keynes had an “on the spot” approach to full employment, where the problem of unemployment is solved via direct job creation, irrespective of the phase of the business cycle.Download:Associated Program:Author(s):
Working Paper No. 539 | July 2008
Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?
The monetarist counterrevolution and the stagflation period of the 1970s were among the theoretical and practical developments that led to the rejection of fiscal policy as a useful tool for macroeconomic stabilization and full employment determination. Recent mainstream contributions, however, have begun to reassess fiscal policy and have called for its restitution in certain cases. The goal of this paper is to delimit the role of and place for fiscal policy in the New Economic Consensus (NEC) and to compare it to that of Post-Keynesian theory, the latter arguably the most faithful approach to the original Keynesian message. The paper proposes that, while a consensus may exist on many macroeconomic issues within the mainstream, fiscal policy is not one of them. The designation of fiscal policy within the NEC is explored and contrasted with the Post-Keynesian calls for fiscal policy via Abba Lerner’s “functional finance” approach. The paper distinguishes between two approaches to functional finance—one that aims to boost aggregate demand and close the GDP gap, and one that secures full employment via direct job creation. It is argued that the mainstream has severed the Keynesian link between fiscal policy and full employment—a link that the Post-Keynesian approach promises to restore.Download:Associated Program(s):Author(s):
Working Paper No. 519 | November 2007
The Impact of Argentina’s Jefes Program on Female Heads of Poor Households
In 2002, Argentina implemented a large-scale public employment program to deal with the latest economic crisis and the ensuing massive unemployment and poverty. The program, known as Plan Jefes, offered part-time work for unemployed heads of households, and yet more than 70 percent of the people who turned up for work were women. The present paper evaluates the operation of this program, its macroeconomic effects, and its impact on program participants. We report findings from our 2005 meetings with policymakers and visits to different project sites. We find that Jefes addresses many important community problems, is well received by participants, and serves the needs of women particularly well. Some of the benefits women report are working in mother-friendly jobs, getting needed training and education, helping the community, and finding dignity and empowerment through work.Download:Associated Program(s):Author(s):
Working Paper No. 517 | October 2007
What Are the Relative Macroeconomic Merits and Environmental Impacts of Direct Job Creation and Basic Income Guarantees?View More View Less
There is a body of literature that favors universal and unconditional public assurance policies over those that are targeted and means-tested. Two such proposals—the basic income proposal and job guarantees—are discussed here. The paper evaluates the impact of each program on macroeconomic stability, arguing that direct job creation has inherent stabilization features that are lacking in the basic income proposal. A discussion of modern finance and labor market dynamics renders the latter proposal inherently inflationary, and potentially stagflationary. After studying the macroeconomic viability of each program, the paper elaborates on their environmental merits. It is argued that the “green” consequences of the basic income proposal are likely to emerge, not from its modus operandi, but from the tax schemes that have been advanced for its financing. By contrast, the job guarantee proposal can serve as an institutional vehicle for achieving various environmental goals by explicitly targeting environmental rehabilitation, conservation, and sustainability. Finally, in the hope of consensus building, the paper advances a joint policy proposal that is economically viable, environmentally friendly, and socially just.Download:Associated Program(s):Employment Policy and Labor Markets The Distribution of Income and Wealth Economic Policy for the 21st CenturyAuthor(s):Related Topic(s):