Bill Mitchell — A Job Guarantee job creates the required extra productive capacity

Even though the US government has shutdown, the BLS is still open for data downloads. That is something. More on that data another day. Today I have been working on a formal academic paper (to be presented at a conference in December) which examines the concept of “capacity-constrained” unemployment. This concept says that capacity constraints may create bottlenecks in production before unemployment has been significant reduced (this would be exacerbated if there are significant procyclical labour supply responses). In this case any expansion in government demand may have insignificant real effects – that is, the real output gap is not large enough to allow all the unemployed to gain productive jobs. This argument is often use to attack the Job Guarantee. It can be shown that while private sector investment, which is government [governed?] by profitability considerations can be insufficient (during and after a recession) to expand potential output fast enough to re-absorb the unemployed who lost their jobs in the downturn, such a situation does not apply to a currency-issuing government intent on introducing a Job Guarantee. The point is that the introduction of a Job Guarantee job simultaneously creates the extra productive capacity required for program viability.

Bill Mitchell – billy blog
A Job Guarantee job creates the required extra productive capacity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Pavlina R. Tcherneva — The Job Guarantee is Not Workfare

For a couple of years Ralph Musgrave has been arguing that the Job Guarantee provides jobs that are essentially the same as those in the private sector with the same kinds of inflationary effects. For this reason, he has been treating the JG a simple job subsidy with a training component, similar to various active labor market policies (ALMP) around the world.

By contrast, much of the JG literature has focused on the differences between the JG and conventional public or private sector employment and on the program’s countercyclical effects (here is the latest model that compares the inflationary and distributional effects of different fiscal policies, including the JG/ELR). All of these arguments are familiar to readers of this blog and will not be rehashed here. We have also described various types of JG to deal with a number of implementation issues. Most recently, I proposed a model that utilizes the social entrepreneurial and non-profit sectors.

Read the rest at New Economic Perspectives

The Job Guarantee is Not Workfare
By Pavlina R. Tcherneva