EPIDEMIC OF UNEMPLOYMENT AND ITS FACTS: PART II

Epidemic treatments are often based on proactive solutions, early interventions and direct approaches wherever possible. What the literature on the costs of unemployment and the social determinants of health suggests is that directly creating employment opportunities for the unemployed is in and of itself an important policy objective. One such direct approach to joblessness is a job guarantee, aka, employer of last resort, buffer stock employment, or public service employment. The advantage of this type of program is that it not only stresses job creation as an end in itself, but also explicitly aims to address other forms of social deprivation. This makes the job guarantee a unique multipronged intervention tool that can tackle unemployment by addressing the material, psychosocial and behavioural factors that produce the vicious dynamic that make joblessness such a challenging problem to solve. Existing work has emphasized the macroeconomic benefits of this proposal, including but not limited to its superior countercyclical stabilization mechanism, ability to formalize labour markets and establish an effective minimum wage, produce socially useful output, enhance human capital, and alleviate income and gender disparities. The aspect of the job guarantee is that it is also a preventative program. It inoculates against the vile effects of unemployment by preventing the contagion effect from mass layoffs and the worsening of individual scarring effects, as well as by alleviating the outstanding community problems that are linked to unemployment, such as urban blight, crime, poverty, homelessness, and others.

When it comes to epidemics, preparedness and prevention are essential. The Centre for Disease Control and Prevention, for example, has a detailed readiness response protocol in case of an outbreak. Government warehouses around the country contain stockpiles of vaccines (against N1H1, Ebola, etc.) that are shelved and can be disbursed in case of need. In a similar fashion, the job guarantee is a type of preparedness response. It is proposed as a permanent program that provides job opportunities for those who wish to work on an as needed basis. By design, the job guarantee will maintain a reserve of types of jobs and places of work that can accommodate new entrants into the program and let them go without disruption should they find alternative employment. The ability to absorb or shed employees is not a unique challenge for the job guarantee. Indeed, every labour market in the private, non-profit, or public sectors deals with entrants and leavers on an ongoing basis. Furthermore the creation of jobs relatively quickly need not be a tall task. Experience has shown that large-scale employment programs can be up and running in a matter of months. Once such programs are in place, finding work for any additional entrants is a much easier task by comparison.

The second and perhaps more important aspect of the intervention for the purposes of our discussion is prevention. Because the job guarantee complements private-sector employment by fluctuating counter cyclically, it ensures, by design, that mass unemployment does not develop and thereby restrains the contagion effect from an initial onset of private-sector layoffs. The first preventative feature of the job guarantee is that it does not allow unemployment to accelerate rapidly, as it does under the status quo. Typically, conventional policies turn their attention to unemployment with considerable delay. The existing automatic stabilizers such as unemployment insurance (UI) or Temporary Assistance to Needy Families (TANF) put a floor on collapsing aggregate demand, but are not pro-employment growth policies by definition or design. Additional stimulus in the form of indirect measures (tax and interest rate cuts, subsidies, incentives) usually arrives too little and too late and just like it is very difficult to contain an epidemic once it has spread. It is very difficult to reverse unemployment once we allow mass layoffs to persist and propagate.

The job guarantee, by contrast, does not allow the contagion effect from mass layoffs to spread widely. First, it fundamentally changes aggregate spending patterns, as compared to those under existing welfare policies. Programs such as UI and TANF are small and temporary. Once they expire, the unemployed face greater economic insecurity. The instability in consumption that arises as a result is exacerbated by increasingly protracted jobless recoveries. When unemployment is a permanent feature of the economy, the uncertain prospects of reemployment fundamentally depress the spending patterns of households that include the unemployed and those with precarious work. By contrast the job guarantee is an employment safety net. As a “guarantee” it promises that a job opportunity at an above-poverty wage will always be available when one need it, rain or shine, in good times or bad. The job guarantee also ensures that people never involuntarily slip into long-term unemployment. The existence of the job guarantee itself and the ability to enrol in it without delay, makes spending patterns more stable than in its absence. A permanent job guarantee program brings additional benefits to individuals and households. One of the most often-cited reasons for job dissatisfaction is job insecurity; individuals in temporary work report overwhelmingly greater anxiety and unhappiness with their jobs relative to workers with stable full-time employment. The fear of unemployment has been found to substantially decrease the mental health of employees. There is evidence that subsidized employment via public works has a much higher happiness return than unemployment or idleness. Furthermore, active labour market programs, such as direct job creation, are more effective than income support programs (such as UI) in helping individuals transition to paid employment. The second preventative feature of the job guarantee is that it not only stops the contagion effect from unemployment in its tracks, but it also thwarts the social and economic costs of unemployment. It is, in a sense, a method of inoculation.

As discussed above, providing jobs to the jobless is a worthy policy goal as an end in itself, as it prevents the scarring effects from unemployment. However, interventions focusing on providing jobs and income alone, with little regard for the multiplicity of problems that the unemployed experience will not be entirely successful. The job guarantee offers another important preventative feature. The job guarantee program can help alleviate other social problems. It can be a useful labour market intervention and institutional tool for addressing several deprivations in concert.