The document outlines a policy proposal called "Labor Conversion" that would establish a $20 per hour federal minimum wage. It proposes that $15 per hour would go to workers as take-home pay, while $7.50 would be paid by corporations and $12.50 would be funded by the government as a "pass-through" allocated to state and local governments. This is intended to increase domestic production and consumption by putting purchasing power and funding for social services directly into the wage bill based on labor units. The proposal is evaluated as having theoretical support from Keynesian, Post-Keynesian, Sraffian, and Marxist approaches by establishing a measure of socially necessary output and production relations based on the labor unit
First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel
1. 12th International Post Keynesian Conference
Where Do We Go From Here?
September 25, 2014
First Postulate Pilloried:
Policy as Analytical Tool for
Sketching a Heterodox Citadel
John Casey Nicolarsen
12th International Post Keynesian Conference ///// First Postulate Pilloried
2. Introduction
⢠Outline of Presentation
â Advancement of âclassicallyâ-inspired policy proposal path
for wage system (âLabor Conversionâ)
â Investigate: anticipated tendencies resulting from policy
path propositions
â Further examination: current political, institutional and
historical dynamics
â Theoretical Appeal: policy evaluated from traditions of
â Keynesian / Post Keynesian
â Sraffian
â Marxian
12th International Post Keynesian Conference ///// First Postulate Pilloried 2
3. Introduction
⢠Outline of Presentation
â Analytical Pillorying: Marginal Productivity Theory with
Respect to Income (First Postulate: âthe wage is equal to the marginal product of labourâ)
â Implications Resulting from Policy: Epochal Adjustment?
â Where is the Citadel? Itâs Located Beyond the Capitalist Epoch
â Restatement, Main Points, Conclusion
12th International Post Keynesian Conference ///// First Postulate Pilloried 3
4. Policy Proposal Path for Wage System
⢠âClassicallyâ Re-Imagined: Minimum Wage Policy
â âLabor Conversionâ [not âTax Inversionâ]
⢠Redefined: Full-Time Employment
⢠Restructured: Competition
⢠Required: Political Organization [setting aside for the moment]
12th International Post Keynesian Conference ///// First Postulate Pilloried 4
5. Policy Proposal Path for Wage System
⢠Minimum Wage Policy: âLabor Conversionâ (not âTax Inversionâ)
â Federal Minimum Wage set to $20.00 per hour
note: figures are purely
demonstrative
⢠$15.00 per hour take-home for labor
⢠Corporations pay $7.50 of hourly wage (roughly what is paid now)
⢠Government pays $12.50 (âpass-throughâ or âpiggy-backâ on labor unit)
â $15.00 an hour purchasing power for $7.50
â $7.50 âDemand Gapâ is directly in the Wage Bill
â $5.00 âFiscal Pushâ to States is in the Wage Bill
â ⌠in sum, a $12.50 Federal Government funded labor unit
âpass-throughâ to State, Local, and Municipal Governments
(âback of the envelopeâ)
12th International Post Keynesian Conference ///// First Postulate Pilloried 5
6. Policy Proposal Path for Wage System
⢠Minimum Wage Policy: âLabor Conversionâ
â Distribution of âFiscal Pushâ ($5.00) âŚ
⢠$2.00 to State Governments
â Education, Pension/Retirement Funds, Infrastructure
⢠$2.00 to Local / Municipal Government Bodies
â Education, Pension/Retirement Funds, Local Investment
⢠$1.00 pure âFloatâ component
â T.B.D.; but, perhaps per capita Federal tax credits
â $7.50 is, again, the âDemand Gap,â or localized and
domestic purchasing power
12th International Post Keynesian Conference ///// First Postulate Pilloried 6
7. Policy Proposal Path for Wage System
⢠Minimum Wage Policy: âLabor Conversionâ
â Business Enterprises, Entrepreneurs, âNature of the Firmâ
â fundamentally altered, different tendencies, adjusted conception
â profit-seeking enterprises will tend to âplaceâ labor and production
domestically and compete for ârealâ goods (infrastructure, labor)
â State and Local Governments
â will have available funds based directly on labor units for social services
â Jobs with/for State and Local governments (rebuilding, development,
green industrialization)
Âť a given level of socially necessary output - based on the labor unit -
is classically determined in advance [has theoretical implications]
12th International Post Keynesian Conference ///// First Postulate Pilloried 7
8. Policy Proposal Path for Wage System
⢠Minimum Wage Policy: âLabor Conversionâ
â HYPER-INFLATION!!!
⢠Nope ⌠no real limits are being crossed
⢠still high unemployment (âslackâ), nowhere near capacity
utilization
⢠But ⌠yes, the inflation that policy-makers are trying for solely
with monetary policy will occur (ânaturallyâ)
â $7.50 labor-cost to Firms (and non-profits) is a floor ⌠can offer
more ⌠and have âpass-throughâ ($12.50) on top of a higher wage
â Firms (Business Enterprises, Entrepreneurs) will compete through
benefits, perks, paid vacation days
12th International Post Keynesian Conference ///// First Postulate Pilloried 8
9. Policy Proposal Path for Wage System
⢠Full-Time Employment
â Federal Law defining âfull-timeâ employment as
25 hours per week
⢠Thatâs crazy! Is it?
â What do the Germans work?
⢠1,397 avg. annual hours per worker = ~ 27 hour per week
(OECD figures, 2012)
â What for United States?
⢠1,790 avg. annual hours per worker = ~ 34.5 hours per week
(OECD figures, 2012)
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10. Policy Proposal Path for Wage System
⢠Full-Time Employment
â Greater potential for rebuilding middle class âŚ
â Two âfull-timeâ jobs would be 50 hours per week
⢠hard, but doable
â Point: 25 hour work week is not crazy
â NOTE: Higher minimum wage ($20 here) is still not in real
terms what it was in the 1970s (would be $26 today)
⢠but ⌠local production/consumption of real social goods
compensates for shortfall (education, infrastructure, retirement services)
âwealth is disposable time and nothing moreâ
Source: Anonymous (1821, pamphlet); cited by Marx in the Grundrisse (1857)
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11. Policy Proposal Path for Wage System
⢠Competition (at Government Level)
â A different sort of âBorder Warâ
â States and Local/Municipal Governments will compete for
workers, not through tax breaks for Corporations
â e.g., one minimum wage job means $6,500 net local funds
⢠25 hours * $20 = $26,000 (total)
⢠25 hours * $15 = $19,500 (take-home / disposable)
â $6,500 annual split into âŚ
Âť $5,200 (State & Local Funds)
Âť $1,300 (T.B.D / float) again: figures are purely
demonstrative
(âback of the envelopeâ)
12th International Post Keynesian Conference ///// First Postulate Pilloried 11
12. Policy Proposal Path for Wage System
⢠Competition ⌠some familiar objections âŚ
â DEBT!!! How will we fund it?
⢠sham issue ⌠Federal Government is the monopoly
issuer of the currency (it can be afforded)
â infrastructure / public investment determined at polity-level
⌠rebirth of a âpolitical economyâ (i.e., State/Local/Municipal level)
â implications for social mobility; i.e., do you like more
private enterprise, or more socialized investment?
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13. Anticipated Tendencies
⢠Increased Productivity âŚ
â due to ⌠less hours ⌠better pay âŚ
⢠Investment decisions of Firms / Business Enterprises âŚ
â Cost of importing demand from abroad vs. local/domestic production?
â Firms weigh $15.00 purchasing power for $7.50 ⌠plus labor unit âpass
throughâ funds at State/Local level for roads, bridges, trolley cars, etc.
âŚ
â changes structure of production ⌠more production and consumption
goods (real goods) and less financialization (more to-the-asset-finance though)
â Environmental implications? Shipping and fuel costs?
⢠Rebuilds communities (polities) from the ground up âŚ
â educational institutions, infrastructure, pension funds
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14. Anticipated Tendencies
⢠Terms of Trade âŚ
â Revealed: who owns the U.S. debt is increasingly answered
and confirmed (no more scary stories re borrowing from China)
â Reduces trade deficit, decreases imported demand from
abroad and increases exports (while providing jobs, skills, and production)
â tendency for manufacturing to âre-shoreâ production in a
new âstyleâ ⌠high tech
⢠potential exists for small scale, high output production ⌠via
machine process âŚ
⢠integrated and competitive production âcellsâ for domestic
manufacturing
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15. Political, Institutional and Historical Dynamics
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⢠Politics âŚ
â as of now ⌠Austerity ⌠Secular Stagnation
â Political Dysfunction, Deadlock
â No movement at Federal level for badly needed infrastructure and
green energy investment
⢠Policy Proposals ⌠similar in âformâ to that here âŚ
â Paul Ryanâs âdiscussionâ piece for âOpportunity Grantsâ to States
â The Levy Institute - JĂśrg Bibowâs proposal for a Euro Treasury Plan
based on per capita GDP figures
⢠âthe grants would be proportionate to member-statesâ shares of eurozone GDPâ
⢠âLabor Conversionâ proposition is to push Fiscal policy and
production directly through the hourly wage âŚâclassical determinacyâ
â not denying there would be implications for salaried work; abstracting from that here
16. Political, Institutional and Historical Dynamics
⢠âLabor Conversionâ policy path also warranted due to âŚ
â Failure of more evenly allocating the share of the gains made in
productivity (technological advance & stagnating real wages)
â failure of distributing gains made in production is real-world
reflection and failure of Marginal Productivity Theory with
respect to Income
â In other words: Neoclassical/Marginal Productivity is not
universal or timeless ⌠must consider production relations
Âť Points to inherent conflictual nature of capitalist social arrangement
â Reflects failure to recognize ongoing âabstinenceâ-theoretics
of proto-Neoclassicals ⌠i.e., N.W. Senior made âabstinenceâ
a factor of production
â âAbstinenceâ has been directed into Financial Assets
(money/equity capital) ⌠since early 70s
12th International Post Keynesian Conference ///// First Postulate Pilloried 16
17. Political, Institutional and Historical Dynamics
⢠âLabor Conversionâ policy path also warranted due to âŚ
â Unequal distribution of income, wealth, and resources
â fundamentally conflictual nature of capitalism is obvious
â therefore, policy must âtargetâ or âconvertâ labor unit
âcommodityâ directly into social production
Âť capitalism is not equipped to handle socialized
investment, either logically or ideologically
â the nature of Finance Capital (financialization) is to drain demand
for production and consumption goods from the future and
destroy it in the present
â ânon-realizedâ demand in the present ⌠that is, we have a
âglutâ of non-realized demand from future being wasted today
â itâs being imported too
12th International Post Keynesian Conference ///// First Postulate Pilloried 17
18. Theoretical Appeal: Policy Evaluation
⢠âLabor Conversionâ policy path is supported by Labor
Unit in Keynes, Sraffa, and Marx
Âť provides avenue for communication between theoretical approaches
Âť window to new social formation (âepochâ) and Heterodox Citadel
⢠Keynes ⌠labor unit is clear measure of output which can be
aggregated and made homogeneous
⢠Sraffa ⌠quantitative labor magnitude used as basis for wage
payments
⢠Marx ⌠labor unit imparts quantitative information regarding
socially necessary [re-]production and social relations in
production (potential for class-informed analysis)
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19. Theoretical Appeal: Policy Evaluation
⢠Keynesian / Post Keynesian Approach
â Short-Period Effective Demand under âLabor Conversionâ âŚ
⢠further informed when knowing directed production by virtue of labor unit
â Uncertainty and Expectations under âLabor Conversionâ âŚ
⢠certainty of macro-aggregates based on labor unit
⢠employment figures give magnitudes of State and Local socialized investment,
consumption and development funds (âdemand gapâ and âfiscal pushâ in money values)
â for Keynes the labor unit is the âŚ
⢠sole productive factor of production [labor is sole real physical input into process (w/ money)]
⢠provides clear measure of output
â can be reduced to homogeneous unit
â can be aggregated
â therefore, warranted in pushing Fiscal âsocialization of investmentâ and
âDemand Gapâ directly through labor unit (hourly wage)
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20. Theoretical Appeal: Policy Evaluation
⢠Sraffian Approach
â the âLabor Conversionâ policy path reflects labor unit output
taken as given (datum)
⢠conceptually, would be âdirectedâ labor instead of âdirectâ (current)
or âindirectâ (past) labor in Sraffian system
â the labor unit âpass-throughâ is given in advance âŚ
⢠therefore ⌠potential to partially âsolveâ for system
â gives magnitudes for educational investment, pensions, and infrastructure
â tendencies of the system point to a âlong periodâ effective
demand of socialized investment and long-period prices of
production to move towards each other
⢠Post Keynesians and Sraffians can âtalkâ given new policy path
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21. Theoretical Appeal: Policy Evaluation
⢠Sraffian Approach
â âpass throughâ funds will equalize via inter-State and intra-
State Local/Municipal Government competition (âgravitateâ)
â By use of standardized labor unit âŚ
⢠uncertainty is mitigated and expectations are firmed up
â they become theoretically viable in Sraffian (Neo-Ricardian) system
⢠long-period âcenters of gravitationâ are more theoretically fertile
â Sraffians can âdoâ policy (make policy assumptions) and
solve for partial outcomes based upon labor unit âpass-throughâ
in money prices
12th International Post Keynesian Conference ///// First Postulate Pilloried 21
22. Theoretical Appeal: Policy Evaluation
⢠Marxian Approach
â âLabor Conversionâ is not a revolution, but a movement
towards a fundamentally new mode of production (social formation)
â the underlying commodification and exchange of labor-power
and capital (money capital) are only being reaffirmed
in part âŚ
Âť avoids Proudhonâs error
â Certain amount of socially necessary production undertaken
solely by virtue of labor unit
12th International Post Keynesian Conference ///// First Postulate Pilloried 22
23. Theoretical Appeal: Policy Evaluation
⢠Marxian Approach
â a âcommonsâ is being created directly via the âpropertyâ of
labor unit
⢠commons of: infrastructure, education, green investment,
retirement funds, social services, etc.
â price formation and system reproduction is founded on
âclassically-determinedâ analytical mechanics of an
âexchange-basedâ system beyond supply and demand
schematics
⢠analytical distinction
â applies to Keynesian / Post Keynesian and Sraffian approaches too
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24. Analytical Pillorying of Marginal Productivity
⢠First Postulate: âthe wage is equal to the marginal product of labourâ
â âLabor Conversionâ policy directly socializes investment and
production based on labor unit magnitudes
â analytical and âclassically-determinedâ maneuver whereby Marginal
Productivity is âturned on its headâ and wage (labor unit) is equal to
and calls for direct socialized investment and social reproduction
â the First Postulate is âpilloriedâ in that it is âŚ
⢠specifically addressed (Keynes accepted it for the sake of argument)
⢠over-written, in that Neoclassical economics has succeeded in âinstillingâ this
universal maxim into everyday life
⢠noted as being based on ideological framework from classical liberalism of John
Locke which Keynes crushed with âThe End of Laissez-Faireâ (1926)
12th International Post Keynesian Conference ///// First Postulate Pilloried 24
25. Implications Resulting from Policy: Epochal Adjustment?
⢠A Theoretically Coherent Heterodox Citadel is âŚ
â based on a renewed articulation of Laborâs apriority over Capital
â situated in a mode of production beyond a capitalist social formation
⢠Current policy proposals all call for more of the same âŚ
â increase minimum wage
â give tax breaks
⢠Increasing nominal minimum wages does nothing to address
the conflicting structural features of capitalist epoch or profits as
ârealâ variables claiming âreal wagesâ for capitalist class
⢠Failure of wage advocates and Obama Administration
â e.g., $10.10 Federal or $15.00 for fast food workers when over $26.00
is real-wage adjusted level of 1970s when a middle class âexistedâ
12th International Post Keynesian Conference ///// First Postulate Pilloried 25
26. Restatement, Main Points, Conclusion
⢠âLabor Conversionâ âŚ
â Put the âDemand Gapâ and a âFiscal Pushâ in the wage bill
based on labor units to direct socially necessary investment:
⢠infrastructure
⢠green energy, environmental, ecological
⢠retirement funding, pensions, social security
⢠educational investments (human capital)
â Adjust âheatâ - economic activity - with monetary policy
â Our economies are âdryâ ⌠austerity and secular stagnation
reflect that system is at a theoretical end
â We are going the wrong way!
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27. Restatement, Main Points, Conclusion
⢠Main Points to âTake Homeâ âŚ
â a Heterodox Citadel exists ⌠but ⌠only under socio-provisioning
relations that are fundamentally altered beyond and analytically distinct
from purely capitalist social relations
â Keynesian/Post Keynesian and Sraffian and Marxian approaches can
all have simultaneous theoretical coherence under a different mode of
production
â One path to an alternative socio-provisioning framework and to a
âHeterodox Citadelâ is through the labor unit as evidenced by the
âLabor Conversionâ policy path advanced here
12th International Post Keynesian Conference ///// First Postulate Pilloried
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28. 12th International Post Keynesian Conference
Where Do We Go From Here?
September 25, 2014
Thank You
John Casey Nicolarsen
12th International Post Keynesian Conference ///// First Postulate Pilloried
29. Present Propositions for Social Revolution
⢠Required: Political Organization
â Are you truly being represented? (politically)
â Does anyone really believe that money is not fully king in
politics as of this point? (Citizens United / McCutcheon)
⢠Suggested: Coalition or Unity political party
â #1 agenda item:
⢠National Voting Holiday
⢠Mandatory voting requirement for all citizens
â a truly representative democracy requires this
12th International Post Keynesian Conference ///// First Postulate Pilloried 29