MMT: Full employment and the Job Guarantee (JG)

What is the Job Guarantee?

Modern Money Theory’s (MMT) description of the economy leads to one of its core policies, that the government can guarantee full employment with decent pay (and benefits and annual leave). In other words:

Under the Job Guarantee program, government offers community service employment to anyone ready and willing to work who cannot find a job in the private sector or regular public sector, no means tests, no time limits. (Murray et al,, 2017)

The Job Guarantee anchors the currency

A Job Guarantee values the money based on a “labour standard” (rather than the discontinued gold standard). Randall L. Wray notes:

A universal job guarantee (JG) .. offers equal access, equal pay, and equal treatment .. The program’s wage and its benefits and working conditions will set the standard that all other employers must meet. It “levels up” by “hiring off the bottom.” It takes workers “as they are,” provides them with jobs and decent treatment, and forces other employers to compete .. also importantly from the MMT view, the JG “anchors” the currency. (Wray, 2022, p.154)

Murray et al write that “A labour standard expresses the value of money in terms of labour, just as the gold standard expressed it in terms of gold” (Murray et al, p.v, 2017).

How does a Job Guarantee work?

Stephanie Kelton writes in The Deficit Myth:

The federal government announces a wage (and benefit) package for anyone who is looking for work but unable to find suitable employment in the economy. Several MMT economists have recommended that the jobs be oriented around building a care economy. Very generally, that means the federal government would commit to funding jobs that are aimed at caring for our people, our communities, and our planet.  (Kelton, 2021, p.64)

How do you pay for the Job Guarantee?

MMT recognises that taxes do not fund government spending, so full employment is only a political decision. As they point out:

The question is not “can we afford full employment?” but, rather, “why should we put up with the tremendous social and economic costs of unemployment, when we can implement a job guarantee program to satisfy the requirements for a functioning labor standard?” (Murray et al,, 2017)

Jobs created in this way produce community assets, and wages can always be taxed back to the government.

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