Employers of last resort (ELR) are employers in an economy to whom workers go for jobs when no other jobs are available; the term is by analogy with “lender of last resort“. The phrase is used in two senses:
- undesirable jobs, often private sector, which are only taken as a last resort;
- a formal government job guarantee program, where the government promises to act as employer of last resort, employing all comers.
The sense of a job guarantee program is used and advocated by some schools of Post-Keynesian economists, notably by authors of Modern Monetary Theory at the University of Missouri-Kansas City, the Levy Economics Institute (both United States) and in the Centre of Full Employment and Equity (Australia), who advocate it as a solution for unemployment.
Employer of Last Resort (1985)
Other anti-poverty measures
Universal Basic Income
Government as Employer of Last Resort: Full Employment Without Inflation. (2017) . Since WWII it has been the stated policy of the U.S. government to simultaneously pursue high employment and stable prices. Paradoxically, neither accepted economic theory nor practical experience appears to indicate that high or full employment is even possible with stable prices. In this paper we argue that stable prices and truly full employment are indeed possible. In fact, the Humphrey-Hawkins Act sets the goalpost too low; we argue that the government can guarantee a zero unemployment rate, defined as all who are ready, willing, and able to work at the going wage will be able to find a job–only those unwilling (or unable) to work at the going wage would be left without work (which are not normally counted as unemployed). The government does this by acting as the employer of last resort, offering to hire all who show up to work at a fixed wage. In doing so, the government ensures that all who are ready, willing, and able to work at that wage will be provided a job. At the same time, by setting this wage, the government will provide a price anchor that will impart price stability to the system, that is, we will show that a true full employment policy is not, in itself, “inflationary” and indeed could reduce inflationary pressures under some conditions. Further, the full employment policy would help to reduce economic fluctuations (the “business cycle”) through a powerful built-in automatic stabilizer feature.
Employer of Last Resort (2010)
Beyond Full Employment: The Employer of Last Resort as an Institution for Change (2012) Over the past decade and a half the ability of the employer-of-last-resort (ELR) proposal to deliver full employment and price stability has been discussed at length in the literature. A different issue has received relatively little attention—namely, the concern that even when the ELR produces these macroeconomic benefits, it does so by offering “low-paying” “dead-end” jobs, further denigrating the unemployed. In this context, the important buffer stock feature of the ELR is misconstrued as a hydraulic mechanism that prioritizes macroeconomic stability over the program’s benefits to the unemployed. This paper argues that the two objectives are not mutually exclusive by revisiting Argentina’s experience with Plan Jefes and its subsequent reform. Plan Jefes is the only direct job creation program in the world specifically modeled after the modern ELR proposal developed in the United States. With respect to macroeconomic stability, the paper reviews how it exhibits some of the key stabilizing features of ELR that have been postulated in the literature, even though it was not designed as an unconditional job guarantee. Plan Jefes also illustrated that public employment programs can have a transformative impact on persistent socioeconomic problems such as poverty and gender disparity. Women—by far the largest group of program beneficiaries—report key benefits to their communities, families, children, and (importantly) themselves from participation in Jefes. Argentina’s experience shows that direct job creation programs that offer employment at a base wage can have the unique capacity to empower and undermine prevailing structures that produce and reproduce poverty and gender disparities. Because the latter two problems are multidimensional, the ELR cannot be treated as a panacea, but rather as an important policy tool that remedies some of the most entrenched and resilient causes of poverty and gender inequality. The paper examines survey evidence based on narratives by female participants in Jefes to assess these potentially transformative aspects of the ELR proposal.
Is employer of last resort policy sustainable? (2010). A radical proposal to address decisively the problem of mass involuntary unemployment, by way of a government committing itself to stand ready as ’employer of last resort’, has recently been put forward by L. Randall Wray and others. To the question of how such large-scale policies would be financed, there has been a suggestion that issuing outside money would suffice. This review employs some simple modelling to show the limits to ‘printing money’ as a means of financing such an employment policy. The review also critically scrutinizes the claim that the policy can simultaneously act as an antiinflationary device, as well as some other aspects of the proposals.
Randy Wray argues a Job Guarantee Will Suppress Wages (2017) Government as employer of last resort (2017). Since the Employment Act of 1946 a stated policy of the United States government has been to pursue simultaneously high employment and stable prices. However, because many economists and policymakers do not believe that it is possible to have both high employment and stable prices, monetary policy has generally been geared, at least for the past two decades, toward increasing unemployment as a means to achieving stable prices. Senior Scholar L. Randall Wray demonstrates that stable prices and “truly full employment” are in fact compatible with each other if a properly targeted employment program is used.