Public Service Employment-Assured Jobs Program: Further Considerations
Wray, L. Randall, Journal of Economic Issues
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 Recently, there has been a revival of interest in government provision of public service jobs in an employer of last resort program, perhaps modeled on the Works Progress Administration (WPA) program of the 1930s.(1) In its most comprehensive form, the program would employ anyone who is ready, willing, and able to work. As such, I will call it the Public Service Employment-Assured Jobs Program (PSE-AJP, or PSE for short) because it assures that a job will be made available to all who meet basic employability requirements (see below).
While not all advocates agree on the compensation to be provided for such work, I recommend that each employee receive a basic, fixed, uniform wage plus full medical coverage and free child care. Sick leave and vacation time would be provided after some minimum service requirement is met. Time worked in PSE would count toward Social Security program benefits. As the program develops, additional benefits, such as free or reduced-cost housing, might be added. The goal would be to raise the level of compensation sufficiently so that anyone working full time in PSE would be able to obtain a standard of living above a reasonably defined poverty threshold. As our nation's general standard of living rises, the poverty threshold would be increased - with the PSE compensation package rising commensurately. I also recommend that the basic wage be relatively "sticky," in nominal terms, in order to act as a "price anchor";(2) however, periodic adjustments will have to be made if inflation occurs - much as the minimum wage is currently adjusted upward after fairly long periods of stability.(3) In any case, the real problem facing the world in coming years will be deflation, and the sticky basic wage will help to stabilize prices on the downside, too.
In the remainder of this article, I will briefly respond to questions that are frequently raised concerning the proposal.
Can We Afford It? Won't the Budget Deficit Explode?
A half century ago, Abba Lerner realized that all of the conventional wisdom about government finance is confused and recommended replacing it with a "functional finance" approach. According to Lerner, "The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money, and its withdrawal of money, shall all be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound" [Lerner 1943, 39]. In a similar vein, Fagg Foster [1981, 966] argued that "whatever is technically feasible is financially possible. . . . The question is no longer whether the funds can be made available; the only question is should they be made available." Quite simply, if there are any unemployed resources, we can "afford" to put them to work without worrying about the size of the deficit.(4)
Won't It Be Inflationary? …