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Unemployment Insurance for the 21st Century: The Job Guarantee as an Alternative to Enforced Idleness

By L. Randall Wray

This post first appeared at "Great Leap Forward”, my EconoMonitor blog.

As I concluded in my previous blog post:

Olly Olly Oxen Free: it is safe to come out of the dark. A sovereign government faces no financial constraints. We can have payroll tax holiday extensions and unemployment benefit extension. Heck why don’t we go whole-hog and actually create jobs for the unemployed? We need 25 million of them. We can afford them. All we need to do is to find useful things for them to do. That ain’t hard.

The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years… Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy. –John Maynard Keynes 1972, 90-92

I should think it is obvious that we’ve got plenty that would keep 25 million pairs of hands usefully busy. But maybe it is not. After decades of “fuddled” brains, maybe it is difficult to come up with tasks. Let us look to the past for some examples—back to a time when people were (apparently) still able to engage in rational thought. Let me draw on my co-authored paper, Universal Job Guarantee Program: Towards True Full Employment, by L. Randall Wray and Yeva Nersisyan for examples of useful activities to be pursued by a job guarantee (JG) program.

While neoliberals and their ancestors have managed to taint the memory of the New Deal’s job creation programs, the truth is that these programs provided lasting benefits. The nay-sayers actually began to fabricate falsehoods about the program and its participants from the very beginning. With corporate funding and ready access to the media, they painted a picture of lazy tramps leaning on shovels. But the evidence is still plain to see, in the form of public buildings, dams, roads, national parks, and trails that still serve America. For example, workers in the WPA (Works Progress Administration):

shouldered the tasks that began to transform the physical face of America. They built roads and schools and bridges and dams. The Cow Palace in San Francisco, La Guardia Airport in New York City and National (now Reagan) Airport in Washington, D.C., the Timberline Lodge in Oregon, the Outer Drive Bridge on Chicago’s Lake Shore Drive, the River Walk in San Antonio….Its workers sewed clothes and stuffed mattresses and repaired toys; served hot lunches to schoolchildren; ministered to the sick; delivered library books to remote hamlets by horseback; rescued flood victims; painted giant murals on the walls of hospitals, high schools, courthouses, and city halls; performed plays and played music before eager audiences; and wrote guides to the forty-eight states that even today remain models for what such books should be. And when the clouds of an oncoming world loomed over the United States, it was the WPA’s workers who modernized the army and air bases and trained in vast numbers to supply the nation’s military needs.”  (Taylor, N. 2008. American-Made: The Enduring Legacy of the WPA: When FDR Put the Nation to Work. Tantor Media p. 2)

The New Deal jobs programs employed 13 million people; the WPA was the biggest program, employing 8.5 million, lasting 8 years and spending about $10.5 billion. (Taylor p. 3) It took a broken country and in many important respects helped to not only revive it, but to bring it into the 20th century. The WPA built 650,000 miles of roads, 78,000 bridges, 125,000 civilian and military buildings, 700 miles of airport runways; it fed 900 million hot lunches to kids, operated 1500 nursery schools, gave concerts before audiences of 150 million, and created 475,000 works of art. It transformed and modernized America. (Taylor 2008 pp. 523-524)

In many important respects, America is broken again. Its infrastructure is not worthy of a rich, developed country, as recognized by President Obama in his last “state of the union” address when he called for new investments to answer the challenges posed by China. The nation’s public buildings, its roads, its bridges, its playgrounds and parks, and many of its schools are in need of repair. We do not want to over-emphasize public infrastructure investment, however. The needs are at least as great in the area of public services, including aged care, preschools, playground supervision, clean-up of public lands, retrofitting public and private buildings for energy efficiency, and environmental restoration projections.

A new universal direct job creation program would improve working conditions in the private sector as employees would have the option of moving into the JG program. Hence, private sector employers would have to offer a wage and benefit package and working conditions at least as good as those offered by the JG program. The informal sector would shrink as workers become integrated into formal employment, gaining access to protection provided by labor laws. There would be some reduction of racial and gender discrimination because unfairly treated workers would have the JG option, although, JG by itself cannot end discrimination.

Finally, we would also like to emphasize that a JG program with a uniform basic wage also helps to promote economic and price stability. The JG will act as an automatic stabilizer as employment in the program grows in recession and shrinks in economic expansion, counteracting private sector employment fluctuations. Furthermore, the uniform basic wage will reduce both inflationary pressure in a boom and deflationary pressure in a bust. In recession, workers down-sized by private employers can work at the JG wage, which puts a floor to how low wages and income can fall.

Randall Wray

About 

L. Randall Wray is a professor of economics and research director of the Center for Full Employment and Price Stability at the University of Missouri–Kansas City. His current research focuses on providing a critique of orthodox monetary policy, and the development of an alternative approach. He also publishes extensively in the areas of full employment policy and the monetary theory of production. Wray received a B.A. from the University of the Pacific and an M.A. and a Ph.D. from Washington University, where he was a student of Hyman Minsky.

8 Comments

  1. Tim says:

    Well, the obvious argument against this is that public works projects are driven not by what the market says the consumers/public/nation needs, but rather by what some bureaucrat thinks is a good idea. It then siphons resources from the private sector that could be used to create real needed value.

    The counter-argument is that infrastructure projects will never be provided by the market because of the risk and long return timeframe. 

    If someone can come up with a good way to overcome the cronyism/corruption inherent in these types of projects while at the same time come up with a way to identify those projects providing the most value-add without lobbying bias, I’m all for it.

    • Anonymous says:

      The crowding out comments are there so that labour does not get too expensive for the low wage users. If there was no unemployment then companies would have to increase wages to retain good staff, because if they left and went on a works program they could get the same money. It also eliminates the fear of unemployment so employees would not tolerate sharp practices by employers. If the government works program provided health care then companies that relied on minimum wages would find that they have to offer health care to all staff as well just to retain staff. This is only really an issue in the US. 

      The best way to minimise the abuse of cronies getting the deals is to have states to organise the work.     This could then be spent at a county level if necessary. Add additional finds for materials etc then it could be very cost effective. 

  2. Anonymous says:

    What’s more clear with Employment report is that when it comes to joblessness, having a college degree is more important than ever that is why we need the help of High Speed Universities now

    • Anonymous says:

      Which is essential now that they are in debt servitude to the student loans companies. 

  3. Florian Schach says:

    Unemployment
    insurance gets a bad rep for appearing to be payment for not working. However,
    they are absolutely necessary when we are talking bout long term unemployment
    as opposed to joblessness.  That
    insurance is the only way that those seeking work can stay above water and also
    help to stimulate the economy although it may not seem like much (http://eng.am/sZUiGF).
    We don’t want to strip them of the ability to stay in the hunt for work and
    transfer them to the jobless section of the population.