Today, TAPPED will feature a series of guest posts on progressive solutions to the unemployment problem. Marshall Auerback is a Roosevelt Institute Braintruster.
The U.S. government can proceed directly to zero unemployment by offering a universal job guarantee available to anybody through the thick and thin of the business cycle. Furthermore, by fixing the wage paid under this job-guarantee program at a level that does not disrupt existing labor markets (a wage level close to the existing minimum wage, for example), price stability can be largely achieved. Other benefits could be provided, including vacation and sick leave, contributions to Social Security, and, most important, health-care benefits, providing scope for a bottom-up reform of the current patchwork health-care system.
A job-guarantee program is desired because a more-or-less free-market system does not (and, perhaps, cannot) continuously generate true full employment. Rather, our current system relies on unemployed labor and excess capacity to try to dampen wage and price increases. However, it pays unemployed labor for not working and allows that labor to depreciate and develop behaviors that act as a barrier to future private-sector employment. Social spending on the unemployed prevents aggregate demand from collapsing into a depression-like state, but little is done to enhance future growth and demand, which can be done via the job guarantee by providing them with employment, greater education, and higher skill levels.
The job-guarantee program would in effect create a "buffer stock" of "shovel ready" labor, which could be employed by the private sector, as private-sector output improves in line with an improving economy. Additionally, the program would allow for the elimination of many existing government welfare payments for anyone not specifically targeted for exemption and would command greater political legitimacy, as society places a high value on work as the means through which individuals earn a livelihood. Minimum-wage legislation would no longer be needed as it would be established via the job-guarantee program. Labor would welcome the safety net of a guaranteed job, and business would recognize the benefit of a pool of available labor it could draw from at some spread to the government wage paid to job-guarantee employees. Additionally, the guaranteed public-service job would be a countercyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector and decreasing government jobs and spending as the private sector expanded.
The aim would be to replace unemployment and underemployment with paid employment, so that those who are at any point in time surplus to the requirements of the private sector (and mainstream public sector) can earn a reasonable living rather than suffer the indignity and insecurity of underemployment, poverty, and social exclusion. Thus, this increase in public-sector employment would contribute to the reduction in the adverse social pathologies normally associated with long-term unemployment (family breakdown, higher incidences of disease, higher rates of crime), while also mitigating the negative externalities that tend to increase with rising levels of production by increasing the share of final output that is associated with green, public-sector employment. So our society would likely derive significant health and environmental benefits, along with the obvious gains from having an economy approaching something close to full employment.