BMJ

Confidential: For Review Only A Federal Guarantee and the Health of Americans

Journal: BMJ

Manuscript ID BMJ-2019-052178

Article Type: Analysis

BMJ Journal: BMJ

Date Submitted by the 16-Aug-2019 Author:

Complete List of Authors: Hensher, Martin; Deakin University, Deakin Health Economics; University of Tasmania, Menzies Institute for Medical Research

Job Guarantee, and Health, US Healthcare Reform, Keywords: Macroeconomics and Health,

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1 2 3 1 4 2 5 6 3 Analysis 7 4 8 9 5 A Federal Job Guarantee and the Health of Americans 10 6 11 7 Martin Hensher, Associate Professor of Health Systems Financing and Organisation1,2 12 8 Confidential: For Review Only 13 14 9 15 10 1 Deakin Health Economics, Deakin University 16 11 2 Menzies Institute for Medical Research, University of Tasmania 17 12 18 13 Correspondence to: 19 20 14 Martin Hensher 21 15 Deakin Health Economics 22 16 Deakin University 23 17 221 Burwood Highway 24 18 Burwood 25 26 19 VIC 3125 27 20 28 21 29 22 Email: [email protected] 30 31 23 Phone: +61 3 9246 8143 32 24 33 25 Word count: 1977 34 26 References: 20 35 27 36 37 28 38 29 39 30 40 41 KEY MESSAGES 42 43 ● Recent proposals for a Federal Job Guarantee could see a future US 44 45 Government commit to provide assured work at a living wage for any 46 American who needed it 47 ● If implemented, a Job Guarantee could bring substantial health 48 improvements for the US population, through a variety of mechanisms 49 50 ● A Job Guarantee would also have important interactions with healthcare 51 coverage and costs, and needs to be considered in close conjunction with 52 healthcare reform proposals 53 ● The Job Guarantee is rooted in Modern Monetary Theory, an emerging 54 approach to macroeconomics that is gaining traction but which remains 55 56 controversial 57 58 59 31 60 32

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1 2 3 33 4 5 34 Contributors and sources 6 35 Martin Hensher has worked on health financing, planning and economics as a senior policy 7 8 36 maker and researcher in the , and Australia, and as a 9 10 37 consultant for the World Bank, World Health Organization and the European Commission. 11 38 Martin’s research on the ecological and economic sustainability of health care systems has 12 Confidential: For Review Only 13 39 included examining a number of emerging heterodox economic approaches, two of which 14 40 are gaining in significance: ecological economics and “Modern Monetary Theory” (MMT). 15 16 41 MMT economists’ proposal for a Federal Job Guarantee has gained some important support 17 42 and interest amongst a number of prominent US Democrats. There has been little or no 18 19 43 discussion of what a Job Guarantee or Modern Monetary Theory more generally might mean 20 21 44 for US health and healthcare. This article builds on the MMT literature (and its critics) and 22 45 on the broader literature on and health to draw some initial conclusions in this 23 24 46 area. 25 47 26 48 Patient involvement 27 28 49 No patients were involved. 29 30 50 31 51 Conflicts of Interest 32 33 52 We have read and understood BMJ policy on declaration of interests and have the following 34 53 interests to declare: 35 36 54 This research was supported by an Australian Government Research Training Scholarship. 37 55 38 39 56 Licence 40 41 57 The Corresponding Author has the right to grant on behalf of all authors and does grant on 42 58 behalf of all authors, an exclusive licence (or non exclusive for government employees) on a 43 44 59 worldwide basis to the BMJ Publishing Group Ltd ("BMJ"), and its Licensees to permit this 45 60 article (if accepted) to be published in The BMJ's editions and any other BMJ products and 46 47 61 to exploit all subsidiary rights, as set out in The BMJ's licence. 48 49 62 50 63 51 64 52 65 53 54 55 56 57 58 59 60

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1 2 3 66 A Federal Job Guarantee and the Health of Americans 4 5 67 6 68 Standfirst 7 69 Some striking proposals for economic reform have emerged in the early stages of the race 8 70 for the 2020 Democratic Party nomination. Martin Hensher examines how a Federal Job 9 10 71 Guarantee might impact on US health and healthcare. 11 72 12 Confidential: For Review Only 73 Several proposals for very significant reform of the US healthcare sector have emerged from 13 14 74 the Democratic Party’s 2020 Presidential nomination contest and recent legislative

15 1 2 16 75 proposals. Yet less attention has been paid to a policy idea in the platforms of various 17 76 prominent Democrats which also has the potential to be of great significance to the health of 18 19 77 Americans – the proposal for a “Federal Job Guarantee”. This article will briefly describe the 20 78 concept of the Job Guarantee (JG) and its possible implications for health and healthcare. It 21 22 79 will also briefly outline the economic theory – “Modern Monetary Theory” (MMT) – in which 23 80 the Job Guarantee has its origin, and which is rapidly gaining attention in both economic and 24 25 81 political discourse. 26 27 82 28 83 29 30 84 The Job Guarantee 31 85 Two candidates for the Democratic Party’s 2020 Presidential nomination have included a 32 33 86 “job guarantee” or a guaranteed right to work in their platforms (, Kirsten 34 35 87 Gillibrand), and others have discussed it at various stages (e.g. Elizabeth Warren, Cory 36 88 Booker); it also figured in the recent resolution.3 More than one detailed 37 38 89 proposal for a Federal Job Guarantee has been published, but the best-developed comes 39 90 from a number of economists associated with the Modern Monetary Theory approach to 40 41 91 macroeconomics.4 Under it, a federally funded Public Service Employment program would 42 92 provide a standing offer of work at a living wage ($15 per hour in this proposal), along with 43 44 93 key benefits, including healthcare coverage. Employees of this program would be deployed 45 46 94 on a wide range of public works and community development activities, delivered through 47 95 federal, state, local and non-profit agencies. The authors argue that this proposal would 48 49 96 effectively eliminate unwanted joblessness and , and would rapidly force 50 97 up private sector wages to match this “living wage” alternative, lifting millions out of 51 52 98 and greatly improving the incomes of the working poor.4 Proponents argue that the Job 53 99 Guarantee offers the most efficient “automatic stabilizer” for the economy throughout the 54 55 100 business cycle, able to adjust up and down to reflect the changing economic health of the 56 57 101 private sector. In economic downturns, the JG would provide guaranteed employment to 58 102 stop people falling into poverty and losing employability, while also supporting aggregate 59 60 103 demand to lift the economy out of recession. In boom times, workers will simply exit the JG

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1 2 3 104 program for the private sector, as firms offer higher wages to secure the additional labor they 4 5 105 need. 6 106 7 8 107 Health and Healthcare impacts of a Job Guarantee 9 10 108 Decades of accumulated evidence from the US and overseas have shown a strong and 11 109 consistent association between unemployment and a range of adverse health outcomes, 12 Confidential: For Review Only 13 110 including all-cause mortality, mortality from cardiovascular disease and suicide, and higher 14 111 rates of mental distress, substance abuse, depression and anxiety.5 6 More recent evidence 15 16 112 also indicates that job insecurity is similarly associated with poorer self-assessed health 17 113 status, mental distress, depression and anxiety.7 8 Unemployment and economic adversity 18 19 114 are intimately related with despair and lack of hope, which have increasingly been linked 20 9-11 21 115 with mortality and the rise and severity of the opioid epidemic. Figure 1 therefore 22 116 attempts to illustrate the direct health benefits that a JG program might be expected to bring 23 24 117 for individuals and populations. Clearly, a Job Guarantee program on this scale has not 25 118 been tried before, so it would be quite unjustified to claim that these health benefits can be 26 27 119 assured. Nonetheless, for health professionals and anyone concerned about population 28 120 health and the health of the poor and disadvantaged, the Job Guarantee certainly merits 29 30 121 much closer attention – implementing a JG program would indeed be a bold experiment, but 31 32 122 one that could offer dramatic payoffs in improved health status nationwide. 33 123 34 35 124 36 125 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

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1 2 3 126 Figure 1: Health effects of a Job Guarantee Program 4 5 127 6 Pathways Mechanisms Likely Health Benefits 7 8 Decreased unemployment 9 Decreased 10 underemployment 11 12 Confidential:Reduced incentive For to Review claim Only disability benefits Reduced premature 13 Direct benefits for 14 individual Job » Increased wages for low- » mortality from suicide, 15 Guarantee workers paid workers opioid and substance 16 Decreased household abuse, cardiovascular 17 poverty disease 18 19 Reduced job insecurity Reduced mental distress, 20 Healthcare coverage depression and anxiety 21 22 Reduced opioid and other Increased wages for low- substance abuse 23 Impacts on wider paid workers 24 labor market Reduced anxiety about job Better access to 25 healthcare 26 (knock-on benefits » insecurity » 27 for all low-paid or Increased pressure for Short-term disability less 28 insecure workers) employers to provide likely to progress to long- 29 healthcare coverage term disability 30 31 Macroeconomic 32 multiplier effects Increased disposable » incomes and consumption, » 33 on aggregate 34 decreased unemployment 35 demand 36 37 Community development, Reduced opioid and other cohesion and renewal 38 substance abuse 39 Community Community support 40 benefits of JG » programs for elderly, frail » Reduced isolation and 41 projects and vulnerable people mental distress 42 Local environmental clean- 43 Improved physical activity up and improvement 44 45 46 128 47 48 129 49 130 The implementation of a Federal Job Guarantee program would also have very significant 50 51 131 implications for healthcare. In the absence of single payer health reform like -for- 52 132 All, a JG program with mandated health cover for all participants would be a powerful force 53 54 133 driving increased rates of health coverage amongst lower paid workers. Current healthcare 55 56 134 reform proposals from Democratic lawmakers and candidates have been summarised into 57 135 four broad categories 2: Medicare-For-All, a single-payer, federally-administered program 58 59 136 covering all US residents; Federal Public Plan options, allowing individuals and employers to 60

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1 2 3 137 buy into a public health plan (e.g. Medicare); Medicare buy-ins for older adults; and State 4 5 138 Public Plan options, e.g. via Medicaid buy-ins for individuals. A Job Guarantee program is 6 139 theoretically compatible with all these models of reform, and with the status quo; but without 7 8 140 accompanying healthcare reforms, the inflationary impacts on healthcare costs of 9 10 141 introducing a JG could be significant (due to the relatively rapid expansion of JG workers 11 142 newly covered by health insurance). In practice, introducing a Job Guarantee program 12 Confidential: For Review Only 13 143 would probably require the simultaneous introduction of something like the Federal Public 14 144 Option (or at least a dedicated Federal health plan which all JG workers would join), as a 15 16 145 vehicle by which to guarantee both coverage and cost control. 17 146 18 19 147 The JG is also entirely consistent with Medicare-For-All, given that employment ceases to be 20 21 148 the factor determining healthcare cover were Medicare-For-All to be implemented. Indeed, 22 149 the Job Guarantee would have particular salience in managing the wider economic impact of 23 24 150 Medicare-For-All: the potential demise of the private health insurance industry could cause 25 151 significant unemployment, which the JG program would mitigate by providing guaranteed 26 27 152 employment for retrenched workers. 28 153 29 30 154 One final healthcare impact of the Job Guarantee should also be mentioned. A key purpose 31 155 of the JG is to put a floor under low wages. If other employers pay significantly less than the 32 33 156 JG rate, they will risk seeing their staff exit to the Job Guarantee program – where they will, 34 157 by definition, be assured of a job. Where the lowest paid staff in healthcare organisations 35 36 158 are paid less than the JG rate, a Job Guarantee program would put upward pressure on 37 38 159 wages for these poorly-paid health workers. While this may be unpalatable to healthcare 39 160 employers, it is one of the explicit goals of the JG, which views ensuring a living wage and 40 41 161 guaranteed employment as probably the single most important mechanism by which to 42 162 improve the overall welfare of society.4 Upwards pressure on healthcare costs through 43 44 163 improved wages at the bottom of the healthcare workforce would need to be 45 46 164 counterbalanced by thoroughgoing reform to tackle the large economic rents captured by 47 165 key stakeholders at the top.12 48 49 166 50 167 51 52 168 Paying for a Job Guarantee Program 53 169 An obvious question to ask of the proponents of a Job Guarantee program is, of course, 54 55 170 “how would you pay for it?”. Answering this question requires a brief examination of the 56 57 171 increasingly prominent school of economic thought known as “Modern Monetary Theory” 58 172 (MMT). The Job Guarantee proposal described above 4 was developed by individuals who 59 60

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1 2 3 173 have been central to the rise of MMT in recent years, and the JG is perhaps the most 4 5 174 distinctive policy prescription emanating from this school. 6 175 7 8 176 Modern Monetary Theory follows a long tradition in economic history in noting that the state 9 10 177 creates fiat money (literally, “from nothing”), i.e. money not backed by physical commodities 11 178 such as gold or silver.13 14 Central banks in modern states can now create electronic 12 Confidential: For Review Only 13 179 “keystroke” money and deposit it in the accounts of private banks, the national treasury or 14 180 (theoretically) the public – the essential mechanism of “Quantitative Easing” in the period 15 16 181 after the 2008-09 financial crisis. Armed with this capability, a sovereign currency-issuing 17 182 government can always afford to purchase whatever goods and services are available for 18 19 183 sale in the currency it issues, and can never “run out of money” for domestic purchases. 20 21 184 However, governments that borrow in foreign currencies, or tie their currencies to that of 22 185 other nations or to a physical commodity, forego this freedom. 23 24 186 25 187 Given their assertion that currency-issuing governments cannot run out of funds, MMT 26 27 188 theorists argue that sovereign governments should base their on the principle of 28 189 “functional finance” – using taxation and government spending to achieve core social and 29 30 190 economic objectives (for example ), rather than to follow the accounting goal 31 14 32 191 of a balanced budget. Under MMT, the overarching goal of macroeconomic policy is to 33 192 deliver full employment while maintaining low and stable price .15 34 35 193 36 194 Over the last three to four decades, macroeconomic policy in the USA and most other high 37 38 195 income countries increasingly gave much greater priority to price stability alone, and 39 40 196 overwhelmingly relied on (via central banks setting interest rates) to control 41 197 inflation. Under MMT, by contrast, the goal of full employment and stable prices should be 42 43 198 achieved first and foremost by fiscal policy (taxation and spending), rather than by monetary 44 199 policy. The government should be willing to run whatever deficit is required to achieve full 45 46 200 employment; hence the development of the Job Guarantee concept as an automatic 47 201 stabilizer. MMT sees the real constraint upon the economy not as lack of money, but the 48 49 202 availability of real physical resources and labor; if the government or the private sector is 50 51 203 chasing a scarce supply of real resources, then price inflation will result. If demand 52 204 overshoots and starts to drive up the prices of resources, then MMT-based policy would put 53 54 205 on the brakes through reduced public spending and/or increased taxes; conventional policy 55 206 would try to slow price increases by raising interest rates. Conventional economic thinking 56 57 207 sees the primary goal of taxes as being to raise revenue. Under MMT, taxes do provide 58 59 208 revenue for the government to spend; but this is secondary to their use as policy tools to i) 60

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1 2 3 209 manage demand in order to control prices, ii) discourage harmful and undesirable forms of 4 5 210 consumption (e.g. tobacco taxes, pollution taxes etc.), and iii) effect redistributional goals. 6 211 7 8 212 9 10 213 Controversies and Prospects 11 214 MMT’s relatively sudden emergence into economic and political debate is striking, and 12 Confidential: For Review Only 13 215 comes at a time of great polarisation. For some, MMT offers a more accurate description of 14 216 the workings of the macroeconomy and more effective policy tools with which to address 15 16 217 pressing social, economic and environmental problems which have been exacerbated by 17 218 conventional macroeconomic policies.14 16 For its critics, MMT is a fringe economic theory 18 19 219 that lacks rigour and courts inflationary dangers 17, and constitutes a direct danger to fiscal 20 18 21 220 rectitude. Yet some financial commentators who are not allied with the academic MMT 22 221 camp have recently suggested that this approach may now offer the most accurate 23 24 222 description of the current state of some advanced economies, and that an ever-greater 25 223 reliance on fiscal policy as the primary tool of macroeconomic management may now simply 26 27 224 be unavoidable.19 20 28 225 29 30 226 Whether MMT is a truly viable approach to macroeconomic management remains to be 31 32 227 tested in the real world. A future US Government which used MMT as a guide to its 33 228 macroeconomic policy could not sidestep the need for thorough-going systemic reform of 34 35 229 what US healthcare does and how it is organized, not just how it is financed. It could be 36 230 confident in its ability to finance universal or greatly expanded health coverage – but only if 37 38 231 this expanded coverage was accompanied by major reforms to control prices and reduce 39 40 232 economic rents, to avoid the real risks of inflation that could accompany increased coverage. 41 233 Successful health reform will still need to tackle all the structural problems and sectional 42 43 234 interests that bedevil the US healthcare sector, and MMT does not pretend to offer magical 44 235 solutions to these real challenges. 45 46 236 47 237 Similarly, a Federal Job Guarantee is, thus far, an untested policy option. Yet those working 48 49 238 in health and healthcare should understand the level of ambition implicit in the MMT-inspired 50 51 239 proposal for a Federal Job Guarantee program, and be willing to at least entertain the 52 240 possibility that a JG could have large positive impacts on both population health outcomes 53 54 241 and on healthcare coverage rates. Success can never be guaranteed in public policy; 55 242 nevertheless, the future implementation of a Federal Job Guarantee has the potential to 56 57 243 mark a seismic shift in the seriousness of efforts to deal with the social and economic 58 59 244 determinants of health in America, offering lessons of worldwide significance. 60 245

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1 2 3 246 References 4 247 5 6 248 1. Levitt L. Medicare for All or Medicare for More? The JAMA Forum. JAMA. 7 249 2019;322(1):16-7. 8 9 250 2. Neuman T, Pollitz K, Tolbert J. Medicare-for-All and Public Plan Buy-In Proposals: 10 11 251 Overview and Key Issues. San Francisco, CA: Henry J Kaiser family Foundation; 12 252 2018.Confidential: For Review Only 13 14 253 3. Ocasio-Cortez A. H. Res. 109: Resolution recognizing the duty of the Federal 15 254 Government to create a Green New Deal. Washington DC: House of Representatives; 16 255 2019. 17 18 256 4. Wray LR, Dantas F, Fullwiler S, Tcherneva P, Kelton S. Public service employment: a 19 20 257 path to full employment. Levy Economics Institute of Bard College; 2018 April 2018. 21 22 258 5. Jin RL, Shah CP, Svoboda TJ. The impact of unemployment on health: a review of the 23 259 evidence. CMAJ: Canadian Medical Association Journal = Journal De L'association 24 260 Medicale Canadienne. 1995;153(5):529-40. 25 26 261 6. Oswald AJ. Happiness and economic performance. Economic Journal. 27 262 1997;107:1815-31. 28 29 263 7. Burgard SA, Brand JE, House JS. Perceived job insecurity and worker health in the 30 31 264 . Social Science & Medicine. 2009;69(5):777-85. 32 33 265 8. Kim TJ, von dem Knesebeck O. Is an insecure job better for health than having no job 34 266 at all? A systematic review of studies investigating the health-related risks of both job 35 267 insecurity and unemployment. BMC Public Health. 2015;15(1):985. 36 37 268 9. Case A, Deaton A. Mortality and morbidity in the 21st century. Washington, D.C.: 38 269 Brookings Institution; 2017 1 May 2017. 39 40 270 10. Graham C, Pinto S. Unequal hopes and lives in the USA: optimism, race, place, and 41 42 271 premature mortality. J Population Econ. 2019;32(2):665-733. 43 44 272 11. Ruhm C. Deaths of despair or drug problems? Working paper 24188. Cambridge MA: 45 273 National Bureau of Economic Research; 2018. 46 47 274 12. Stelzner M, Nam DT. The big cost of big medicine: calculating the rent in private health 48 275 care. Amherst, MA: The Hopbrook Institute; 2019 January 2019. 49 50 276 13. Wray LR. Modern money theory: a primer on macroeconomics for sovereign monetary 51 277 systems. New York: Palgrave Macmillan; 2012. 52 53 278 14. Nersisyan Y, Randall Wray L. Modern Money Theory and the facts of experience. 54 55 279 Cambridge J Econ. 2016;40:1297-316. 56 57 280 15. Mitchell W, Wray LR, Watts M. Macroeconomics. London: Macmillan International / 58 281 Red Globe Press; 2019. 59 60

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