Beyond Full Employment: The Employer of Last Resort as an Institution for Change

Levy Economics Institute of Bard College Working Paper No. 732

27 Pages Posted: 27 Sep 2012

See all articles by Pavlina R. Tcherneva

Pavlina R. Tcherneva

Bard College - The Levy Economics Institute

Date Written: September 27, 2012

Abstract

Over the past decade and a half the ability of the employer-of-last-resort (ELR) proposal to deliver full employment and price stability has been discussed at length in the literature. A different issue has received relatively little attention — namely, the concern that even when the ELR produces these macroeconomic benefits, it does so by offering “low-paying” “dead-end” jobs, further denigrating the unemployed. In this context, the important buffer stock feature of the ELR is misconstrued as a hydraulic mechanism that prioritizes macroeconomic stability over the program’s benefits to the unemployed.

This paper argues that the two objectives are not mutually exclusive by revisiting Argentina’s experience with Plan Jefes and its subsequent reform. Plan Jefes is the only direct job creation program in the world specifically modeled after the modern ELR proposal developed in the United States. With respect to macroeconomic stability, the paper reviews how it exhibits some of the key stabilizing features of ELR that have been postulated in the literature, even though it was not designed as an unconditional job guarantee. Plan Jefes also illustrated that public employment programs can have a transformative impact on persistent socioeconomic problems such as poverty and gender disparity. Women — by far the largest group of program beneficiaries — report key benefits to their communities, families, children, and (importantly) themselves from participation in Jefes.

Argentina’s experience shows that direct job creation programs that offer employment at a base wage can have the unique capacity to empower and undermine prevailing structures that produce and reproduce poverty and gender disparities. Because the latter two problems are multidimensional, the ELR cannot be treated as a panacea, but rather as an important policy tool that remedies some of the most entrenched and resilient causes of poverty and gender inequality.

The paper examines survey evidence based on narratives by female participants in Jefes to assess these potentially transformative aspects of the ELR proposal.

Keywords: Employer of Last Resort, Full Employment, Gender Inequality, Poverty

JEL Classification: D63, E6, E24, I3

Suggested Citation

Tcherneva, Pavlina R., Beyond Full Employment: The Employer of Last Resort as an Institution for Change (September 27, 2012). Levy Economics Institute of Bard College Working Paper No. 732. Available at SSRN: https://ssrn.com/abstract=2153220 or http://dx.doi.org/10.2139/ssrn.2153220

Pavlina R. Tcherneva (Contact Author)

Bard College - The Levy Economics Institute ( email )

30 Campus Road
Annandale-on-Hudson, NY 12504-5000
United States

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