What Type Of Full Employment? A Critical Evaluation of “Government as the Employer of Last Resort” Policy Proposal
Abstract: The article offers an evaluation of the policy proposal originating in some Post-Keynesian circles over the last half-dozen years in support of full employment based on the Minskian view of “government as employer of last resort” (ELR). This ELR proposal is evaluated on its on own merit as well as in relation to alternative Keynesian and neoclassical proposals put forth historically. Such is done first by reviewing Keynes's original perspective on how to achieve full employment and then by showing how, in rejecting Keynesian full employment, neoclassical economists have replaced it with a competing proposal in support of guaranteed income. This is then followed by a detailed analysis of the ELR policy proposal using a Kaleckian framework that shows how an ELR policy is compatible with both a “high wage” full employment and a “low wage” full employment. However, it is pointed out that the choice of the ELR wage would not only have an impact on labour-force participation at ELR full employment but it would also have implications on wage inflation depending on whether or not the ELR wage would disturb the existing wage structure. While supporting the ELR alternative as a clear improvement over the existing policy system in which governments maintain a permanently high level of unemployment in order to keep downward pressure on wage inflation, the author does raise some critical concerns regarding the nature of the so-called “loose labour market” ELR full employment that would ensue from its implementation.
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| Format: | Digital revista |
| Language: | English |
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Universidad Nacional Autónoma de México, Facultad de Economía
2004
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| Online Access: | http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S0185-16672004000100015 |
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| Summary: | Abstract: The article offers an evaluation of the policy proposal originating in some Post-Keynesian circles over the last half-dozen years in support of full employment based on the Minskian view of “government as employer of last resort” (ELR). This ELR proposal is evaluated on its on own merit as well as in relation to alternative Keynesian and neoclassical proposals put forth historically. Such is done first by reviewing Keynes's original perspective on how to achieve full employment and then by showing how, in rejecting Keynesian full employment, neoclassical economists have replaced it with a competing proposal in support of guaranteed income. This is then followed by a detailed analysis of the ELR policy proposal using a Kaleckian framework that shows how an ELR policy is compatible with both a “high wage” full employment and a “low wage” full employment. However, it is pointed out that the choice of the ELR wage would not only have an impact on labour-force participation at ELR full employment but it would also have implications on wage inflation depending on whether or not the ELR wage would disturb the existing wage structure. While supporting the ELR alternative as a clear improvement over the existing policy system in which governments maintain a permanently high level of unemployment in order to keep downward pressure on wage inflation, the author does raise some critical concerns regarding the nature of the so-called “loose labour market” ELR full employment that would ensue from its implementation. |
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