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Book Review
November 2023

A proposal for achieving full employment

The Case for a Job Guarantee. By Pavlina R. Tcherneva. Polity Press, 2020, 147 pp., $12.95 paperback.

One of the earliest discussions of work relief was by the great Indian economist Kautilya (375–283 B.C.E.). In his treatise Arthashasra, Kautilya recommended public works projects aiming to alleviate poverty. Work relief programs of a more recent origin include the Civilian Conservation Corps and the Works Progress Administration of the 1930s and 1940s in the United States, South Africa’s Expanded Public Works Programme started in 2004, and the Mahatma Gandhi National Rural Employment Guarantee Act enacted in India in 2005. In The Case for a Job Guarantee, Pavlina R. Tcherneva discusses job guarantees as recent policy iterations of work relief. Job-guarantee proposals are distinctive because they assume that full employment is achievable only if there is a public employment opportunity for all people who seek paid work.

In The Case for a Job Guarantee, Tcherneva makes five main arguments. First, involuntary unemployment is commonplace and correlated with detriments for the unemployed and others. Second, the prevailing theory of full employment is not supported by empirical research. Third, full employment can only be maintained with the use of a job guarantee. Fourth, a job guarantee provides goods and services not currently produced by the private and public sectors, and a job guarantee would reduce the detriments correlated with involuntary unemployment. Fifth, a job guarantee can contribute to price stability by expanding the supply of experienced workers and by minimizing wage fluctuations.

Tcherneva reviews research that documents the existence of involuntary unemployment even during times of low unemployment rates. This research, which covers employment before the COVID-19 pandemic, shows that the number of people in involuntary unemployment had exceeded the number of available jobs. Based on her review, Tcherneva concludes that traditional employment policies have failed to achieve full employment.

Tcherneva’s research shows that involuntary unemployment harms the unemployed and others. Unemployment is correlated with reduced mortality, reduced lifetime earnings, increased poverty rates, higher rates of alcoholism, a greater incidence of depression, and an overall decline in physical health. Children in families with unemployed adults are more likely to suffer from malnutrition, mental health problems, stunted growth, and reduced educational success. Unemployment is associated with the social ills of urban blight, crime, inequality, and reduced technological innovation, and its consequences include higher income transfers, prison costs, and healthcare costs. Finally, because the unemployed are not working, there is forgone productive output.

Tcherneva argues that these individual and social costs of unemployment call into question the cogency of the prevailing theory of full employment structured around the assumption of a natural rate of unemployment. The natural rate of unemployment is commonly called the nonaccelerating inflation rate of unemployment. This rate is a hypothesized amount of unemployment corresponding to a stable price level that economies tend toward in the long run. Tcherneva argues that the existence of a natural rate of unemployment is not substantiated by empirical research. If the natural rate is not a supported hypothesis and if unemployment has detrimental effects, a new definition of full employment is needed.

A job guarantee produces full employment because its purpose is to employ all people who wish to work. Using research on past direct public employment programs, Tcherneva shows the promise of a job guarantee, noting that job-guarantee work would complement work already performed by private firms and government agencies. The author finds that job-guarantee work can be performed in the general areas of care services, environmental conservation services, and community services. These areas are recommended on the basis of research that identifies unmet public needs. In particular, a job guarantee can be situated as part of a broader policy aiming to move the economy toward environmental sustainability. The positions created by a job guarantee would be at a fixed wage set above the official poverty threshold and provide the benefits of health insurance, paid leave, and childcare.

Tcherneva further argues that, besides providing a defined form of full employment, a job guarantee would help stabilize prices. First, it would increase the pool of trained workers, reducing wage pressures in labor markets. Second, the set wage of the job guarantee would act as a price buffer stock. Buffer stocks stabilize the price of a given commodity by ensuring that the commodity is bought and sold in any amount at a publicized price. A job guarantee acts as a buffer stock for labor by employing all people who wish to do job-guarantee work at the set wage. Also, this wage would not be indexed to any price series, which would minimize its inflationary or disinflationary effects. The number of people employed through a job guarantee would increase (decrease) during economic contractions (expansions). This changing number would help minimize price fluctuations, all else held equal.

The job guarantee proposed by Tcherneva would be financed by a central or federal state. Local governments and nonprofits would submit proposals for employment projects. Tcherneva argues that the funding of a job guarantee should be considered in real terms (increased number of people employed, reduced detrimental effects of unemployment, tempered price fluctuations) and not as a financial cost. Thereby, she argues that the outcomes of a job guarantee are a net social benefit. In support of her view, Tcherneva cites a research paper she coauthored that uses macroeconomic modeling and finds that a job guarantee would create private-sector jobs, increase state-level revenue, and reduce poverty (in addition to providing a form of full employment). Although Tcherneva argues that it is best to consider a job guarantee in real rather than financial terms, she does provide a financial estimate of the cost of a job guarantee. She finds that a job guarantee would cost approximately 1 percent of gross domestic product in the United States, but this estimate does not consider any reductions in other government social spending due to unemployment.

The Case for a Job Guarantee is written for a general audience. It can be an appropriate reading in introductory courses on employment, macroeconomics, and public policy. Social scientists who are interested in the theoretical assumptions and research that underpin proposals for a job guarantee will find the book to be useful. The book is short, so the amount of space devoted to the presentation and appraisal of different economic theories, social statistics, and other employment policies is limited.

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About the Reviewer

Justin Holt

Justin Holt is an economist in the Office of Publications and Special Studies, U.S. Bureau of Labor Statistics.

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