The job guarantee

It is apparent that more work is needed to crack the hard shell of misinformation regarding how money works that pervades both sides of the political spectrum, media, and the general public. However, a number of readers have begun to get it and are now looking for some practical application. I’ll return to some more “educating” soon, but first, what follows is a basic framework for the job guarantee so that those who are running ahead have something to build upon.

Why a job guarantee?

As we have discussed, there is NO natural rate of unemployment. Unemployment is completely unnatural. It is a direct result of the way modern monetary and capitalist market systems function, as evidenced by the fact that there was no unemployment in traditional or agrarian societies. Money causes unemployment since people must earn it to survive and pay taxes.

Modern capitalist economies never have and never will attain full employment. I won’t go over the reasons again here, but the evidence is all around us and today and throughout history.

There is no valid and just economic, social or political reason for a nation to leave productive labor unemployed. Please let me know if you can find one. Aside from the loss of real tangible value to society and the economy (how many lives, including their own, would be made better if the tens of millions of willing workers were able to contribute productively to society and the economy), unemployment has also been linked to crime rates, drug addiction, family breakdowns, mental health problems, and a host of other social ills.

So what’s the alternative? A job guarantee would solve a host of social and economic problems, increase the real wealth of a nation, and bring greater price and economic stability. It can most certainly be afforded – in fact it costs us in all kinds of ways NOT to implement such a system. Aside from the fact that affordability simply isn’t an issue for currency-issuing nations, the program’s nominal costs are actually very minimal when one accounts for the offsetting savings from taxes received and reduced government welfare spending; and they are net positive for the overall economy when one accounts for fiscal stimulus plus the multiplier effect on the private sector economy and the mitigation of productivity losses from recessions. Recent estimates of a simulated job guarantee in the US indicate that GDP would increase by over one trillion dollars. That's real enough!

So what is the job guarantee?

Simply a guarantee of a job to all who are ready, willing, and able to work.

When the economy is in a downturn and the private sector lays off workers, the program will expand. When the economy recovers, the private sector will hire them back and the program contracts. It functions as a buffer stock of labor (today we have a buffer stock of unemployed people). In the interim, everyone has a job and ideally receives on-the-job training and skill development.

The job guarantee recognizes that full employment should be the goal of monetary and fiscal policy, and ensures that the nation’s productive workforce does not suffer decline and loss of human capital/productive skills during business cycle downturns.

There is also a recognition that the government can afford anything for sale in its own currency (simply by crediting bank accounts as it does with most spending), and that “buying” the nation’s unused labor is non-inflationary since these are resources not otherwise being “used” – in the same way that buying surplus inventory isn’t inflationary.

Yes, it’s really quite simple, but of course there are important details to consider. Let’s dispel a few of the common concerns by outlining how the program could work.

The basic framework

The job guarantee approach that is often advocated goes something along these lines:

• The job guarantee is for people the private sector does not want to hire at any given time. If the private sector desires and can afford to hire them again, they can simply offer them a better job. It is not about the government hiring away workers in competition with the private sector.
• The government would pay for the program costs and wages, but workers would still be taxed as other workers and the government would see a significant offset in spending from other programs.
• Those in the job guarantee program would not be government employees. Charities, not-for-profit organizations, and other local organizations – possibly municipalities, counties, etc. – would offer job opportunities through the program. The pool of previously unemployed workers would now be able to help serve the community in a host of practical ways that enhance the overall quality of life.
• All employment opportunities would be managed locally throughout the country. Local organizations and leaders know what is needed most in their communities and who can best qualify to provide the work and training needed. They also have a vested interest in seeing successful outcomes.
• The job guarantee would provide a basic living wage and benefits to all participants. This would effectively eliminate the minimum wage and create a floor for private sector compensation, benefits and work conditions.
• While there would likely be a modest one-time impact to costs from the implementation, the program would not be inflationary (i.e. there is no wage-price spiral effect). The degree of price changes would be a result of where the wage/benefit level is set, which can be debated.
• Employees would be given on-the-job training. The fact that they remain employed and even may improve their skills helps keep them more employable for the private sector as it recovers.
• Employees would have performance reviews and can still be fired. They would be given several opportunities to succeed but must meet normal employment requirements to stay in the program.

Only a failure of imagination would prevent all employable workers from being productive. Build houses for the low income, improve or add city parks and public spaces, provide after school and child care services, staff libraries and museums, offer free music and art lessons and other educational opportunities to underserved areas, build community gardens, develop community makers spaces, provide personal visits and care for the elderly, restore historic sites, install solar panels on public property, …

So let’s get creative. What does your community need most? What skills are available amongst the pool? How can community and organizational leaders collaborate to achieve the most benefit?

What would a job guarantee do?

Provide the basis for broad-based social and economic justice.

• Create a buffer stock of employable labor for the economy.
• Bring price stability (lessens downturns and anchors prices during upswings), while maintaining stable economic growth.
• Eliminate the minimum wage.
• Remove hundreds of billions from unemployment insurance payments, food and nutrition assistance programs, incarceration costs, and many other welfare programs.
• Significantly increase GDP and overall demand for goods & services due to the additional spending from a fully hired population (note that those at the lower end of the wage spectrum spend a higher proportion of their income and so have a higher multiplier effect on the economy).
• Enhance the lives of millions of currently unemployed and underemployed workers, providing them with an opportunity to provide for their families and improve their skills and lives.
• And so much more…

When something makes this much sense, it’s worth sharing! Spread the word!

For those who wish to dive into the literature on the subject there are different names given to various different proposals along these lines. The most common terms are the Employer of Last Resort or ELR (Minsky), Right to Employment (Harvey), and the Job Guarantee (Mosler, Wray, Forstater, Murray, and others).