A SMOOTH economic transition after independence – and boosted demand for a new Scottish currency – could be achieved through the introduction of a job guarantee for all, a new paper has argued.
The report from Modern Money Scotland spells out how such a guarantee – which would see every working-age adult in the country offered a government-funded job – would come with numerous benefits while being estimated to cost around 2% of the country’s GDP (gross domestic product).
The MMS paper also looks at the role a universal basic income (UBI) could play in an independent Scotland’s Wellbeing Economy, but concludes it is not a “panacea” and could have negative consequences.
Instead, a targeted basic income, aimed at lower-income households and those who are unable or unwilling to take up the job guarantee, could help to lay the groundwork for a stable and prosperous economy post-independence, it argues.
The MMS report, authored by Cameron Archibald, comes just days after Humza Yousaf appointed Neil Gray to the role of Cabinet Secretary for a Wellbeing Economy.
Yousaf was seen as the more left-wing candidate in the SNP leadership election, and his refusal to allow Kate Forbes to continue as finance secretary, combined with Gray’s title, would suggest a shift away from more traditionalist fiscal policy.
Steven Hail, an associate professor and academic director in economics at Torrens University in Australia, said he “whole-heartedly” endorsed the ideas laid out in the peer-reviewed MMS report.
Hail went on: “A national job guarantee can be part of a successful strategy to achieve a rapid transition towards an equitable and ecologically sustainable economy in a newly independent Scotland.
“In addition to its environmental and social benefits, its operation as a superior automatic fiscal stabiliser is of vital importance, and one of the reasons a job guarantee (alongside universal public services) is much to be preferred to a UBI as a mechanism for lifting people out of poverty.”
A job guarantee, the MMS report says “would set an effective wage floor within the Scottish economy, setting new social standards for firms to meet”. It would also be “self-targeting and counter-cyclical”, meaning that as the number of jobs in the private sector rose, the number of government-funded ones would fall, and vice versa.
Such a move would also have a disproportionate impact on women, the young, disabled, and ethnic minorities, the report argues, as it is these groups who are most likely to be part of the 300,000 Scots who are unemployed.
On a job guarantee, the paper states: “Notable examples include Argentina’s Plan Jefas y Jefes de Hogar, the Swedish Rehn–Meidner model, and India’s National Rural Employment Guarantee.
“Despite the differences between the three economies, all showed similar results with declining poverty, labour market inclusivity, high satisfaction, declining household debt, and economic growth.”
It also argues that a job guarantee would be anti-inflationary by creating a “Buffer Stock” effect: “When the private sector faces a recession, workers who are let go can be automatically supported.”
Based on the 90% uptake, a job guarantee would cost Scotland £4 billion a year, the report estimates, which represents 2.2% of the country’s GDP.
A job guarantee would allow people to participate productively in their local economies and build “an inclusive, decentralised, and prosperous labour market”, it states.
Elsewhere, it is argued that a UBI could prove costly (as much as 35% of GDP) as well as damaging to a fledgling Scottish currency. Such large-scale cash transfers could “severely weaken” exchange rates.
It is also suggested that UBI may potentially “harm immigration as new Scots would face high tax bills” without receiving anything in return until they’ve established their residency.
Instead, a targeted basic income, rolled out after a job guarantee, is the best way forward for the wellbeing economy, the report says, and would prevent any negative consequences from mass replacement of benefits such as families being forced deeper into poverty.
The report concludes: “For this vision to become a reality, it will require the Scottish Parliament to obtain the full powers of a normal independent country – in particular controlling levers over fiscal and monetary policy.
“From this, an independent Scotland can lead the way out of the current cost of living crisis and bring needed stability to the country’s communities.”
Read Modern Money Scotland’s new report in full on their website: www.modernmoney.scot/policy-papers
