Full Employment Through a Job Guarantee: A Response to the Critics

Abstract

In the past few years, there have been a number of critical assessments of the job creation proposal that has been variously termed the Job Guarantee (JG), Public Service Employment (PSE), Buffer Stock Employment (BSE), or Employer of Last Resort (ELR) program. (The terms are interchangeable and reflect the evolution of the literature.)

This paper reviews the progress of the development of the JG approach and responds to the main criticisms, i.e., that: 1. JG increases employment by stimulating aggregate demand and thus operates no differently from any 'Keynesian' fiscal policy or monetary policy; 2. JG could increase employment but it cannot enhance improve price stability—it is still subject to a 'NAIRU' constraint of some sort; 3. JG is, at best, a 'make work' program and replaces unemployment with underemployment; 4. ELR proposals have ignored the substantial logistical problems generated by cyclical fluctuation of participation in the program; 5. JG supporters have ignored impacts on long-term government finance imposed by the government budget constraint; and 6. JG supporters ignore the 'fact' that it will violate the external balance goal.

Keywords: ELR, unemployment, job guarantee, public service employment, buffer stock employment, employer of last resort