The Costs and Benefits of a Job Guarantee: Estimates from a Multi-Country Econometric Model

Abstract

The Job Guarantee (Mosler 1997-8, Mitchell and Muysken 2008, Wray 1998; hereafter, JG) is a policy proposal designed as an alternative to the neoclassical natural rate of unemployment or non-accelerating inflation rate of unemployment (NAIRU). Whereas that approach presumes that some positive percentage of the total labor force must be sustained as involuntarily unemployed in order to avoid accelerating inflation, the JG literature argues instead that a buffer stock of the employed can enable true full employment without compromising price stability, with the additional benefit of mitigating the economic and social costs of involuntary unemployment. The purpose of this paper is to provide such estimates derived for the first time from a model that places the U. S. economy in a global context with dozens of other countries. To do this, the JG is simulated within the multi-country version of the Fairmodel (Fair 2004).

Keywords: job guarantee, employer of last resort, automatic stabilizers, fiscal policy, unemployment, simulation

JEL Classification: E6, E62, E32, E37