In defence of the Job Guarantee

In any problem-solving task, it is crucial to construct the initial problem in a meaningful way, because it influences the discourse and the solutions that follow. We argue that labour underutilisation is the central problem facing Australia not only due to the lost GDP but also because it punishes individuals via income insecurity and other associated costs (such as ill-health, family breakdown). We construct this problem as a system failure due to ill-conceived and executed macroeconomic policy imposing on vulnerable individuals who are powerless to improve their outcomes. We define full employment in terms of providing sufficient spatially distributed jobs and hours of work to match the labour force preferences at current money wages. This is in sharp contrast to orthodoxy which depicts unemployment as individual failure, yet at the same time argues that the full employment unemployment rate needs to be high to control inflation. While the neo-liberal approach fails to deal with the systemic nature of the problem, progressives are divided on both the problem and its solution. For example, the Basic Income (BI) model advocates the introduction of a universal basic income payable to all citizens. Most BI proponents construct the income insecurity problem as a lack of income rather than a lack of jobs and so they cannot outline a viable path to full employment. By contrast, we propose a Job Guarantee (JG) as a direct response to unemployment. The JG thus addresses the principle cause of income insecurity by restoring the role of State as an employer of last resort. The JG has been criticised by other progressive economists who prefer a Keynesian expansion mediated by incomes policy and controlled investment. In this paper we argue that if one constructs unemployment as systemic failure within a fiat currency economy (a flexible exchange rate) and desires to achieve sustainable full employment, as defined above, with price stability and environmental sustainability, then a JG is essential, but this does not preclude a complementary Keynesian expansion. An (indiscriminate) Keynesian expansion in isolation is unlikely to lead to the employment of the most disadvantaged members of society and does not incorporate an explicit counter-inflation mechanism.