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EMPLOYMENT GUARANTEES SHOULD BE UNCONDITIONAL AND DEMAND DRIVEN by Bill Mitchell
There was an interesting paper published by the World Bank (March 1, 2012) – Does India’s employment guarantee scheme guarantee employment? – which offers some insights into how the Indian employment guarantee works. I thought it was an odd title because by definition the NREGA scheme is an employment guarantee. The relevant issue is a guarantee to whom. The World Bank research confirms the outcomes of my own work on the Indian scheme that it’s conditionality reduces its effectiveness. Those who gain jobs benefit but there is a shortage of jobs on offer relative to the demand for them. Modern Monetary Theory (MMT) shows that an unconditional, demand-driven employment guarantee, run as an automatic stabiliser, is the most superior buffer stock approach to price stability. Conditional (supply-driven) approaches not only undermine the job creating potential but also reduce the capacity of the scheme to act as a nominal anchor.
I discuss the concept of a Job Guarantee in considerable detail in this blog – When is a job guarantee a Job Guarantee? . Essentially, as developed within Modern Monetary Theory (MMT), the Job Guarantee comprises an unconditional and universal job offer at the minimum wage (calibrated to be an inclusive living wage) to anyone who wants a job. It would mostly eliminate unemployment (except frictional) and probably eliminate underemployment.
The reality is the Job Guarantee approach is the only guaranteed way that the national government can ensure there are enough jobs available at all times without activating an inflationary spiral. It is a very modest approach given those aims – choosing to work via the automatic stabilisers.
http://bilbo.economicoutlook.net/blog/?p=19981
There was an interesting paper published by the World Bank (March 1, 2012) – Does India’s employment guarantee scheme guarantee employment? – which offers some insights into how the Indian employment guarantee works. I thought it was an odd title because by definition the NREGA scheme is an employment guarantee. The relevant issue is a guarantee to whom. The World Bank research confirms the outcomes of my own work on the Indian scheme that it’s conditionality reduces its effectiveness. Those who gain jobs benefit but there is a shortage of jobs on offer relative to the demand for them. Modern Monetary Theory (MMT) shows that an unconditional, demand-driven employment guarantee, run as an automatic stabiliser, is the most superior buffer stock approach to price stability. Conditional (supply-driven) approaches not only undermine the job creating potential but also reduce the capacity of the scheme to act as a nominal anchor.
I discuss the concept of a Job Guarantee in considerable detail in this blog – When is a job guarantee a Job Guarantee? . Essentially, as developed within Modern Monetary Theory (MMT), the Job Guarantee comprises an unconditional and universal job offer at the minimum wage (calibrated to be an inclusive living wage) to anyone who wants a job. It would mostly eliminate unemployment (except frictional) and probably eliminate underemployment.
The reality is the Job Guarantee approach is the only guaranteed way that the national government can ensure there are enough jobs available at all times without activating an inflationary spiral. It is a very modest approach given those aims – choosing to work via the automatic stabilisers.
http://bilbo.economicoutlook.net/blog/?p=19981
