Job Guarantee

BIBLIOGRAPHY

A job-guarantee program is one in which government promises to make a job available to any qualifying individual who is ready and willing to work. Qualifications required of participants could specify age range (e.g., teens), gender, family status (e.g., heads of households), family income (e.g., below poverty line), educational attainment (e.g., high school dropouts), residency (e.g., rural), and so on. The most general program—sometimes called an employer of last resort (ELR) program—would provide a universal job guarantee by which government promises to provide a job to anyone legally entitled to work.

Many job-guarantee supporters see employment not only as an economic condition, but also as a right. L. Randall Wray and Mathew Forstater (2004) justify the right to work as a fundamental prerequisite for social justice in any society in which income from work is an important determinant of access to resources. Philip Harvey (1989) and John Burgess and William F. Mitchell (1998) argue for the right to work on the basis that it is a fundamental human (or natural) right. Such treatments find support in modern legal proclamations such as the United Nations Universal Declaration of Human Rights, the U.S. Employment Act of 1946, and the Full Employment Act of 1978. Amartya Sen (1999) supports the right to work on the basis that the economic and social costs of unemployment are staggering, with far-reaching consequences beyond the single dimension of a loss of income (see also Rawls 1971). William Vickrey identified unemployment with “cruel vandalism,” outlining the social and economic inequities of unemployment and devising strategies for its solution (Forstater and Tcherneva 2004). A key proposition of such arguments is that no capitalist society has ever managed to operate at anything approaching true full employment on a consistent basis. Further, the burden of joblessness is borne unequally, concentrated among groups that already face other disadvantages: racial and ethnic minorities, immigrants, younger and older individuals, women, people with disabilities, and those with lower educational attainment. For these reasons, government should and must play a role in providing jobs to achieve social justice.

There are different versions of the job-guarantee program. Harvey proposed to provide to anyone unable to find work a public sector job with pay approximating a “market wage”; more highly skilled workers would receive higher pay (1989). Argentina’s Jefes program (examined below) targets heads of households only, offering a uniform basic payment for what is essentially half-time work. In another model, initially proposed by Hyman Minsky (1965) and developed further at the Center for Full Employment and Price Stability, University of Missouri—Kansas City, and independently at the Centre of Full Employment and Equity, University of Newcastle, Australia, the federal government provides funding for a job-creation program that offers a uniform hourly wage with a package of benefits (Wray 1998; Burgess and Mitchell 1998). The program could provide for part-time and seasonal work as well as other flexible working conditions as desired by the workers. The package of benefits would be subject to congressional approval, but it could include health care, child care, payment of Social Security taxes, and usual vacation and sick leave. The wage would also be set by Congress and fixed until Congress approved a rate increase, much as the minimum wage is currently legislated. The perceived advantage of the uniform basic wage is that it would limit competition with other employers because they could attract workers out of the ELR program by offering them a wage slightly above the program wage. Since the basic wage is held constant, it will not go up in competition with private employers, to try to bid workers away from them.

Proponents of a universal job-guarantee program operated by the federal government argue that no other means exists to ensure that everyone who wants to work is able to obtain a job. Advantages include poverty reduction, amelioration of many social ills associated with chronic unemployment (such as health problems, spousal abuse and family breakups, drug abuse, crime), and enhanced skills from training on the job. Such a program would improve working conditions in the private sector because employees would have the option of moving into the ELR program; hence, private sector employers would have to offer a wage and benefit package and working conditions at least as good as those offered by the ELR program. The informal sector would shrink as workers become integrated into formal employment, gaining access to protection provided by labor laws. There would be some reduction of racial or gender discrimination because unfairly treated workers would have the ELR option, although, of course, an ELR program by itself cannot end discrimination. Still, it has long been recognized that full employment is an important tool in the fight for equality (Darity 1999). Mathew Forstater has emphasized how an ELR program could be used to increase economic flexibility and to improve the environment, as projects can be directed to mitigate ecological problems (1999).

In addition, some supporters emphasize that an ELR program with a uniform basic wage helps to promote economic and price stability by acting as an automatic stabilizer as employment in the program grows in recession and shrinks in economic expansion, counteracting private sector employment fluctuations. The federal government budget becomes more counter-cyclical because its spending on the ELR program likewise grows in recession and falls in expansion. Furthermore, the uniform basic wage reduces both inflationary pressure in a boom and deflationary pressure in a bust. In a boom, private employers can recruit from the ELR pool of workers, paying a premium over the ELR wage. The ELR pool acts like a “reserve army” of the employed, dampening wage pressures as private employment grows. In recession, workers downsized by private employers can work at the ELR wage, which puts a floor to how low wages and income can go.

Critics argue that a job guarantee would be inflationary, and they point to a version of a Phillips Curve approach, according to which lower unemployment necessarily means higher inflation (Sawyer 2003). Some argue that an ELR program would reduce the incentive to work, raising private sector costs because of increased shirking, because workers would no longer fear job loss; in fact, workers might be emboldened to ask for greater wage increases. Some argue that an ELR program would be so big that it would be impossible to manage; some fear corruption; others argue that it would be impossible to find useful things for ELR workers to do; still others argue that it would be difficult to discipline ELR workers. It has been argued that a national job guarantee would be too expensive, causing the budget deficit to grow to unsustainable levels, and that higher employment would worsen trade deficits (Aspromourgous 2000; King 2001). (See Mitchell and Wray 2005 for responses to all of these critiques.)

There have been many job-creation programs implemented around the world, both narrowly targeted and broad-based. The United States’ New Deal of the 1930s contained several moderately inclusive programs, including the Civilian Conservation Corps and the Works Progress Administration. Sweden developed broad-based employment programs that virtually guaranteed access to jobs, until government began to retrench in the 1970s (Ginsburg 1983). In the aftermath of its economic crisis that came with the collapse of its currency board in December 2001, Argentina created Plan Jefes y Jefas in April 2002, which guaranteed jobs for poor heads of households (Tcherneva and Wray 2005). The program successfully created two million new jobs that provided not only employment and income for poor families, but also needed services and free goods to poor neighborhoods. More recently, India passed the National Rural Employment Guarantee Act (2005), which commits the government to providing employment in a public-works project to any adult living in a rural area. The job must be provided within fifteen days of the applicant’s registration, and must provide employment for a minimum of 100 days per year (Hirway 2006). These real-world experiments provide fertile ground for testing the claims on both sides of the job-guarantee debate.

BIBLIOGRAPHY

Aspromourgos, Tony. 2000. Is an Employer-of-Last-Resort Policy Sustainable? A Review Article. Review of Political Economy 12 (2): 141–155.

Burgess, John, and William F. Mitchell. 1998. Unemployment Human Rights and Full Employment Policy in Australia. Globalization, Human Rights, and Civil Society, ed. Melinda Jones and Peter Kreisler, 112–130. Sydney: Prospect Press.

Darity, William, Jr. 1999. Who Loses from Unemployment. Journal of Economic Issues 33 (2): 491–496.

Forstater, Mathew. 1999. Full Employment and Economic Flexibility. Economic and Labour Relations Review 11: 69–88.

Forstater, Mathew, and Pavlina R. Tcherneva, eds. 2004. Full Employment and Price Stability: The Macroeconomic Vision of William S. Vickrey. Cheltenham, U.K.: Edward Elgar.

Ginsburg, Helen. 1983. Full Employment and Public Policy: The United States and Sweden. Lanham, MD: Lexington Books.

Harvey, Philip. 1989. Securing the Right to Employment: Social Welfare Policy and the Unemployed in the United States. Princeton, NJ: Princeton University Press.

Hirway, Indira. 2006. Enhancing Livelihood Security through the National Employment Guarantee Act: Toward Effective Implementation of the Act. Levy Economics Institute Working Paper 437 (January). http://www.levy.org/default.asp?view=publications_view&pubID=108fd5fff36.

King, John E. 2001. The Last Resort? Some Critical Reflections on ELR. Journal of Economic and Social Policy 5 (2): 72–76.

Minsky, Hyman P. 1965. The Role of Employment Policy. In Poverty in America, ed. Margaret S. Gordon, 175–200. San Francisco: Chandler.

Mitchell, William F., and L. Randall Wray. 2005. In Defense of Employer of Last Resort: A Response to Malcolm Sawyer. Journal of Economic Issues 39 (1): 235–245.

Rawls, John. 1971. Theory of Justice. Cambridge, MA: Harvard University Press.

Sawyer, Malcolm. 2003. Employer of Last Resort: Could It Deliver Full Employment and Price Stability? Journal of Economic Issues 37 (4): 881–908.

Sen, Amartya. 1999. Development as Freedom. New York: Knopf.

Tcherneva, Pavlina, and L. Randall Wray. 2005. Gender and the Job Guarantee: The Impact of Argentina’s Jefes Program on Female Heads of Poor Households. Center for Full Employment and Price Stability Working Paper 50 (December). http://www.cfeps.org.

Wray, L. Randall. 1998. Understanding Modern Money: The Key to Full Employment and Price Stability. Cheltenham, U.K.: Edward Elgar.

Wray, L. Randall, and Mathew Forstater. 2004. Full Employment and Economic Justice. In The Institutionalist Tradition in Labor Economics, ed. Dell Champlin and Janet Knoedler, 253–272. Armonk: NY: M.E. Sharpe.

L. Randall Wray