The Employer of Last Resort Approach to Full Employment

Abstract

An ELR program is an effective approach for employing all those who are ready, willing, and able to work.

The government can afford such a program because the federal government can buy anything for sale in terms of its own currency, merely by providing the currency; the government can always afford to hire unemployed labor.

Moreover, the program is not inflationary. Demand-pull inflation is avoided because the program does not increase aggregate demand beyond the full employment level. And cost-push inflation is avoided because the government determines the ELR wage and then lets markets determine how many workers are interested in being paid that wage—the wage is fixed but the quantity floats.

This paper addresses affordability, inflation, and other concerns about the ELR approach. It concludes that such a program can be used to provide a job to everyone who is willing and able to work and that such a program can be implemented without bankrupting the economy, without setting off a wage-price spiral, and without creating make-work jobs.

Keywords: ELR, employer of last resort, unemployment, full employment, inflation