Job Guarantee and inflation control

2 Apr, 2019 at 18:56 | Posted in Economics | 13 Comments

macThe employment buffer stock approach, which is more usually​ referred to in the literature as the Job Guarantee (JG), defines a policy framework in which government operate​s a buffer stock of jobs to absorb workers who are unable to find employment in the private sector …

The JG approach stands in contradistinction to the NAIRU approach because instead of manipulating the employment rate by creating unemployment when wage-price pressures develop, the government manipulates the buffer employment rate …

There can be no inflationary pressures arising directly from a policy where the ​government offers a wage to any labour not wanted by other employers … Instead of a buffer stock of unemployed being used to discipline the distributional struggle, the JG policy achieves this via compositional shifts in employment through transfers in​ and out of the JG pool. JG policy anchors the general price level to the price of an employed labour buffer stock, and can produce useful output with positive supply side effects.


  1. “the ​government offers a wage to any labour not wanted by other employers”
    The problem is that government’s use of labor is as capricious, arbitrary, and prone to manipulations by local power-seeking officials as the private sector’s. For example, FDR’s Civilian Conservation Corps built a lot of shelters that now government employs Park Rangers to keep me from sleeping in.
    Better to give the Rangers a basic income and let them volunteer to maintain parks because they love nature, and also let me maintain forest and desert roads using public equipment when idle …
    MMT ignores the preferences of the microfoundation that is me!

    • I agree that a JG system could be dominated by “local power-seeking” officials. However it wouldn’t be if JG people were allocated to EXISTING employers. In the latter case, JG people would be allocated in accordance with yjou “microfoundational desires”. Indeed, the so called “Work Programme” in the UK meets your microfoundation requirement, i.e. WP people are given temporary subsidised jobs with existing employers including private sector ones.

  2. the job guarantee is something I just cannot imagine ever being embodied in a working institution.
    the whole point of “a job” is that the worker agrees to follow management’s instruction and rules in exchange for a wage, contingent on 1.) the threat of being fired for failing to show up, make an effort or follow rules; 2.) there being work worth doing that can be imagined or identified by the employing management (or a financing cum investing agency).
    mainstream economics spends enormous effort ignoring the organization of the economy in and by bureaucracy, prattling on endlessly about “markets” — including “labor markets” — that do not exist. and, MMT proposes to counter this wilful ignorance with . . . what? i don’t get it.
    if an employer of last resort cannot fire its employees, it is not really a job that is being offered.
    and, what is the political mechanism that prevents toxic employment in occupations that produce negative present value? “make-work” jobs are not unknown to politics
    at a time when global limits on resources and the earth’s carrying capacity are being overtopped, talk of “full employment” really is problematic — we need mechanisms that will allow us to constrain economic activity and employment, eliminating activity and resource use that has negative social value.
    i do appreciate the intention to surface the distributional struggle that underlies disputes over macro policy, but is this helping? i do not think it is.

    • Bruce, I am not aware that MMT says that a screw up employee in a Job Guarantee job could not be fired. I would liken the situation to public schooling in the US. That US policy promises a right to education through grade 12 does not mean that students face no consequences for bad behavior. Nor does it mean that teachers and principals have no authority whatsoever.

      As to toxic jobs that do harm to the environment or whatever- the MMT idea is that local governments would decide what jobs were to be offered. Surely they can find activities that would not be toxic. And it is not like the private sector does not offer jobs that are truly toxic- and often highly paid at that.

      • “local governments would decide what jobs were to be offered. Surely they can find activities that would not be toxic”
        Local governments scare me, because they do not listen to me. I went to a city council meeting where they were proposing to criminalize homelessness. They heard us out but I could see on their faces that they just cared about their constituents who have more money and vote more. If you give them money to employ people, they will hire everyone to keep me from sleeping outside, which is what I want to do. Everyone will have a job keeping me from being free …

        • why should your desire to sleep outdoors be the paramount interest of the local government? What about the things I want to do?

    • You really should read some of Professor Wray’s writings on the job guarantee. Pretty much everything that you raised has already been addresses.

    • ” what is the political mechanism that prevents toxic employment in occupations that produce negative present value?” If JG people are allocated to EXISTING employers (public and private) doing simple peripheral jobs, the result would be an expansion in the output of the millions of products already produced.

  3. A job guarantee, full employment or similar economic regulation is contrary to the interests of industrialists. And both Karl Marx and Milton Friedman has proved how and why unemployment is necessary for capitalism. Full employment reforms like the first New Deal and the nazi-german Wirtschaftswunder have been saved to history by a misunderstanding. They actually didn’t last very long. But the preparations for WW2 in Germany and US restored the flagging employment levels. The third of the big experiments, the Popular Front in France was not saved by military buildup. Michal Kalecki wrote “Political Aspects of Full Employment” ( ) with those experiences in mind. In Sweden the experiment came to last through the Cold War and up to the great restoration 1990-4. But now the target for macro-economics in Sweden as in the rest of the global capitalism is no longer “…the higher standard of living of the masses.”

  4. The entire buffer stock idea is a load of pseudo technical waffle that boils down to nothing, for reasons I set out here long ago:

    • I think the idea is that current monetary policy already attempts to use a buffer stock of unemployed to try to manage inflation. That is the situation already- so the concept of a buffer stock is hardly ‘nothing’. MMT points out how wasteful and socially harmful the current buffer stock policy is and offers an alternative that is less wasteful and harmful.

      If you want to say the “buffer stock idea is a load of pseudo technical waffle that boils down to nothing” then you should show that current monetary policy should not be understood as utilizing a buffer stock of unemployment. That way you would be at least logically consistent with your quoted statement. However, you actually seem to agree in the article you linked to that current policy can be thought of as managing a buffer stock!

  5. Reading Bill Mitchell you get the impression that participation in the JG is optional for the unemployed. The unemployed receive the benefits irrespective.
    A 1998 paper by Wray I am reading suggests the opposite. No participation, no payments.
    Can any clarify this situation?

  6. How does lifetime employment fit into this conversation? In Japan that is still the case in some companies.

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