Who better to explain the Federal Job Guarantee than Pavlina Tcherneva, who wrote her first paper on the subject in 1996, when it was called the Employer of Last Resort? This was at the height of the Clinton “Goldilocks economy,” which boasted of full employment. Needless to say, the ELR did not capture the popular imagination. Now, almost a quarter of a century later, the conversation has shifted. The FJG is getting noticed. With the campaign season heating up, we are re-releasing this interview from 2018, in which Tcherneva talks about her newest working paper. She talks to Steve about the wide-ranging effects of chronic unemployment and defines the essential components of the solution.
The Job Guarantee is not just a policy for full employment, but for structural reform. It takes on macroeconomic, socio-economic, and labor market problems and shifts the paradigm for stabilization. We have a choice: we can stabilize the economy with a pool of unemployed workers, or it can be stabilized with a pool of the employed. The public sector is the only one that can serve this countercyclical function, through the power of the public purse.
Tcherneva points out that the government has price supports for commodities like dairy, soybeans and corn. The most important commodity is neglected: Wage labor. She reminds us that economists, going back to Adam Smith, have always recognized that labor is a special input of production -- unlike machinery, factories, or raw material. Labor is the one commodity that reproduces the economy and the social reality. Yet it is the one commodity that is not supported by public policy.
Now that the Job Guarantee has come out of the closet, there are plenty of distorted, diminished proposals that miss the mark. According to Tcherneva there are three essential components for a Job Guarantee that will serve its full macroeconomic function:
1. It must be a permanent program
2. It must be universal
3. It must establish a wage floor
The wonks in our audience will appreciate the discussion of the JG as a preventive program, going much farther than merely preventing unemployment. It will prevent crashes in the labor market and the collapse of aggregate demand. There’s a marked difference in the way workers spend into the economy when they’re receiving unemployment insurance versus when they have guaranteed employment, even at a minimum wage. It’s the difference between retrenchment and full economic engagement. The less wonky will be grateful for Tcherneva’s clear, direct illustration of these concepts.
This interview covers a wide range of related issues, from the three most common arguments against the Job Guarantee, to the faux Keynesians, serving up crank schemes for economic growth. After listening to this episode you will be armed and ready for the onslaught of lies and misconceptions the candidates will be slinging.