6to. Congresso Nacional de Estudios del Trabajo, ASET (Asociacion
Argentina de Especialistas en Estudios del Trabajo), August 14, 2003
This paper evaluates the
strategies of providing unconditional basic income support and those of
guaranteeing employment. It begins with a cursory examination of the key ideas
behind job guarantee (JG) and income guarantee (IG) proposals. Since much
discussion has centered on whether we can afford either program and how much
each may cost, we address the issue of financing head-on. A clear understanding
of modern money and the functional operation of sovereign currencies reveals
that there are no financial constraints to implementing either a JG or an IG.
Therefore, questions of whether we can “afford” these policies can be addressed
more adequately by distinguishing between financial expenditures and
real costs, as both high unemployment and deficient household income bring
about substantial economic, social and political real costs.
The main task of the paper is to offer a
comparative analysis of these policy stances, concentrating in particular on the
Employer of Last Resort (ELR) and the Basic Income Guarantee (BIG) alternatives.
It is argued that the two goals of ensuring adequate income and guaranteeing a
job are not mutually exclusive. Quite to the contrary, they can be complementary
and compatible, as they share some important common benefits.
There are, however, several clear
advantages of job guarantee programs over policy proposals of universal basic
income. In particular, there are three critical advantages under consideration.
First, an ELR program is a much more powerful stabilizer of the business cycle
than any other income support scheme. A second, and closely linked to the first,
benefit is the fact that the ELR program, not only eliminates unemployment, but
also enhances price stability by counterbalancing inflationary and deflationary
pressures. And third, ELR provides an important anchor for the value of the
currency. Basic Income Guarantees do not address adequately any of these three
important economic problems.
Job Guarantees and Income Guarantees: A Brief Overview
I.Employer of Last Resort (ELR)
In modern economies, the primary
way for individuals to provide for their families’ (and their own) well-being is
through paid employment. Unemployment, by contrast, has a dire impact on the
jobless, which brings tremendous social, political and economic costs to society
as a whole.
History offers an abundance of
direct job creation programs that have aimed to deal with the problem of
unemployment. Although they vary greatly in purpose and design, three common
objectives can be discerned:
1)reduce unemployment, whether it is cyclical or structural,
2)target a specific demographic group that is considered to be particularly
disadvantaged (i.e. the long term unemployed, those below the poverty or
indigency line, the young, the elderly, women, and aboriginal people),
3)provide a socially valuable service or good that would not be produced
otherwise by the private sector or other government programs.
Job creation programs are usually
of limited duration. They either specify a fixed participation term for the
beneficiaries (from a few months to a few years) or expire (and/or are
There has been a recent revival
of interest in specific job creation programs, in particular, employment
guarantee schemes that are known under the names of the Employer of Last Resort
(ELR), Job Guarantee (JG) or Public Service Employment (PSE) (Mosler, 1997-98;
Wray, 1998; Mitchell 2000 and 2001; Harvey 2000). These will be the focus of our
The programs differ from their predecessors in that they are universal, face no
time limit, and benefit from a design that ensures both full employment and
enhanced price stability.
The idea of ELR is certainly not
new. Hyman Minsky long argued that a full employment strategy ought to be
developed by the government, whereby the primary goal is to create an infinitely
elastic demand for labor at a floor or a minimum wage that is independent of
business profit expectations (Minsky 1986, p. 308).
The Center for Full Employment
and Price Stability has advanced such a proposal, which has six key ingredients
(quoted from CFEPSDigest, 2001:2:1):
1.The program offers a job to anyone who is ready, willing and able to
work regardless of race, gender, education, work experience, or immigration
status, and regardless of the performance of the economy. Just listing those
conditions makes it clear why private firms cannot possibly offer an infinitely
elastic demand for labor. The government must play a role. At a minimum, the
national government must provide the wages and benefits for the program,
although this does not actually mean that ELR must be a government-run program.
2.ELR hires off the bottom. It is an employment safety net. It
should not compete with the private sector or even with non-ELR employment in
the public sector. It is not a program that operates by “priming the pump”, that
is, by raising aggregate demand. Trying to get to full employment simply by
priming the pump with, e.g. military spending could generate inflation. That is
because military Keynesianism hires off the top. But by definition, ELR hires
off the bottom; it is a bufferstock policy—and like any bufferstock program, it
must stabilize the price of the bufferstock—in this case, wages at the bottom.
3.The goal is full employment, but with loose labor markets. This is
virtually guaranteed if ELR hires off the bottom. With ELR, labor markets are
loose because there is always a pool of labor available to be hired out of ELR
and into private firms. Right now, loose labor markets can only be maintained by
keeping people out of work—the old reserve army of the unemployed approach.
4.The ELR compensation package should provide a decent standard of
living even as it helps to maintain wage and price stability. We have
suggested that the wage ought to be set at $6.25/hr in the USA to start. A
package of benefits could include healthcare, childcare, sick leave, vacations,
and contributions to Social Security so that years spent in ELR would count
5.ELR experience prepares workers for post-ELR work—whether in the
private sector or in government. Thus, ELR workers should learn useful work
habits and skills. Training and retraining should be an important component of
every ELR job.
6.Finally, ELR workers are engaged in useful activities. For the
U.S.A. we have proposed that they focus on provision of public services,
however, a nation like Argentina may have much greater need for public
infrastructure; for roads, public utilities, health services, education. ELR
workers should do something useful, but they should not do things that are
already being done, and especially should not compete with the private sector.
These are the basic features of
an ELR program. Many other questions remain to be examined, but this task is
beyond the scope of this paper.
II.Basic Income Guarantee (BIG)
The literature on income
guarantees is equally abundant with proposals. Interest in such programs too has
reemerged in recent years. Basic Income Guarantee (BIG) is the generic name used
to refer to the wide range of schemes. Despite their differences, BIG programs
share a common objective: to provide “a government ensured guarantee that no
one’s income will fall below the level necessary to meet their most basic needs
for any reason” (Weiderquist, 2003).
Income is viewed as a central
dimension to human well-being. Types of income guarantees usually fall in one
of two categories. The first are those “that attempt to define in absolute terms
some level of income necessary for providing a minimum standard of living—that
is providing a subsistence income” (Baetz, 14, 1972). For the second type, the
cardinal test is “its conduciveness to bring about income equalization within
the broader context of the distribution of resources, both material and
nonmaterial, in the community” (Katz, 45-46, 1972). In other words, proponents
of these income guarantee schemes tend to regard poverty in more relative than
absolute terms, whereby the ultimate objective is reducing the disparities in
the distribution of income among the entire population (Baetz, 15, 1972).
Although the basic income
guarantee in its pure form aims to replace all social security benefits, there
is recognition in the literature that, whichever method of defining a basic
income guarantee is chosen, a single colossal income maintenance plan cannot
achieve this objective for all. It has been suggested that a BIG must be
combined with other types of programs, like health, housing, social insurance
and other social services. It is expected, however, that a BIG will replace (or
modify) the need for some of the already existing such schemes.
Atkinson (1995) discusses several
main arguments advanced in support of BIG. First, a basic income guarantee helps
low-paid workers whose tax allowances are inadequate and those individuals out
of work who do not qualify for social security benefits. BIG replaces tax
allowances with a refundable tax credit. Furthermore, BIG is an independent and
universal system, that provides benefits regardless of marital or employment
status. There will be no special payment to the unemployed and those returning
to work will not lose their benefits. Finally, a widely proclaimed advantage is
its administrative simplicity. Since benefits are not means-tested, the costs
associated with screening will arguably disappear.
Here too other questions need to
be addressed. What will be the effect of BIG on wages and labor force
participation? Will it introduce incentive problems? What are its economic and
Baetz outlines what he considers
to be six essential criteria for realizing guaranteed income programs:
1)Do the programs lend themselves to efficient administration?
2)Will they provide most help to those who need it most?
3)Are they equitable (fair to all concerned)?
4)Do they enhance human dignity and a spirit of community?
5)Are they economically feasible?
6)Are they politically acceptable? (Baetz, 20, 1972)
I will later assess how well
(comparatively) job guarantee programs fulfill some of these criteria. Our next
task is to discuss the issue of financing for these programs.
Modern Money and Financing for JG and IG
Much discussion has been devoted
to financing job or income guarantee schemes. Charley Clark (2003) estimates
that the program costs of running a BIG in the United States in 1999 would have
averaged about $2 trillion. Harvey (2003) offers his own calculations of running
a Public Service Employment program for 1999 and compares them to Clark’s
estimates, arriving at about a tenth of the cost (for details see Clark 2003 and
Harvey 2003). Wray alternatively approximates that an ELR program would cost
about $50 billion a year (Wray, 1998) and for Australia, Mitchell and Watts
(1997) argue that a job guarantee will run about A$7.4billion a year.
While the size of these estimates
is not immaterial, especially for political considerations, the specific purpose
of this section is to show that any government with sovereign control over its
own currency can afford to pay for any program no matter how ‘expensive’ it is.
I will not to argue here whether
government spending can be too large or too small. What I will contend is that,
operationally, governments face no financial constraints for programs funded in
their domestic currency. A clear understanding of the working of modern
monetary systems is advanced by the State Money theory, also known as the
taxes-drive-money or Chartal approach, outlined in Wray (1998),
Charles A. E. Goodhart (1997), George. F. Knapp
( 1973), and Abba. P. Lerner (1947).
To use Abba Lerner’s words, money is “a creature of
the state” [Lerner 1947,
312-317]. Any government chooses the unit of account and defines what serves as
money and what satisfies the tax liability (i.e. what it will accept in payment
of taxes). When modern states impose taxes denominated in the state’s monetary
unit they transfer goods and services from the private to the public sector.
Governments need to spend – they need a navy, police force, and social workers,
to name a few. To ensure that it is able to buy the services of private agents,
the state imposes a tax liability, which creates a demand for the
Government’s money. In turn, government spending provides the supply of
that which is required to pay taxes.
Understanding modern money and its operation has some
Since the government is the single issuer of its currency, spending always comes
first, while taxation follows later. Governments cannot tax
before they spend; neither can they tax more than they have already
provided to the public. Furthermore, deficits are a normal condition of the
system. Balanced budgets are the theoretical minimum that can be achieved. A
surplus in the first year of the currency’s operation is impossible; surpluses
in subsequent years are limited to the sum of the previous years’ deficit
spending. Private sector hoarding pf government money ensures that deficits are
generated; that is, the desire to net save causes deficits. Since spending is
independent of taxation, there are no financial constraints in the domestic
currency. The market demand for the currency determines the size of the deficit.
Attempts to operate on a fixed quantity rule (i.e. placing caps on
expenditures or otherwise restricting the issue of the currency) results in
unemployment. Furthermore, the value of the money is determined by what is
required to obtain it. In the current system, the pool of unemployed maintains
the value of the dollar. This means that there is a pool of reserve labor that
finds it hard (in the case of the unemployed, impossible) to obtain the dollars
necessary to pay taxes. Some economic agents are able to obtain and hoard
dollars, others are not, and are therefore unemployed.
It has been demonstrated
previously by Wray (1998), Bell (2000), and Bell and Wray (2002-3) that
government spending creates high-powered money, while taxation destroys it. In
other words, a balance sheet approach to government spending reveals that
government purchases lead to reserve credits to the banking system and tax
payments lead to reserve debits. Operationally, sovereign governments do not
stockpile tax collections for future spending. Spending and taxation are two
independent processes. Governments spend simply by crediting bank accounts or by
writing treasury checks, which are later deposited in some private agent’s bank
summarize, money is a creature of the state. Governments tax to generate demand
for their currency. The primary function of sovereign currency is to allow
governments to spend and consume (i.e. to transfer real goods and service from
the private to the public sector).
The discussion of how modern
money works is extensive.
However, from what has been said thus far it should be clear that there are no
‘financial’ constraints to implementing either a job guarantee or an income
Comparative Study of ELR and BIG
Both programs share important
common benefits. Both provide a powerful demand-side economic stimulus. They
target low-income groups and hold the promise of resolving many issues
associated with high levels of unemployment and poverty. Furthermore, both
programs are guaranteed universally at an income or a wage that aims to provide
for the most important basic needs of the population and to establish a decent
minimum standard of living. In addition, both will likely reduce the cost of
other social programs significantly, albeit not eliminate them entirely.
An ELR program like the one
suggested in this paper shares most of the benefits of a BIG, without some of
its drawbacks. Moreover, the ELR design carries three critical features which
are not present in income guarantee schemes: 1) ELR provides an anchor for the
value of the currency, 2) it stabilizes the business cycle far better than
universal income support programs and 3) it enhances price stability.
I.ELR provides an anchor for the value of the currency
As the taxes-drive-money approach
suggests, the value of the currency is determined by what is required to obtain
it for payment of the given tax liability. In the case of a BIG, there is
clearly no such requirement, as income payments are disbursed universally and
unconditionally. If a program is instituted whereby the population can
obtain freely the unit, which fulfills the tax obligation, the value of the
currency will deteriorate sharply.
By contrast, in the ELR program
the value of the currency is linked to the public sector wage. In Argentina,
the current Heads of Household program pays 150 pesos per month, whereby
recipients are required to work for about 20 hours a week, making for a basic
public service hourly wage of about 1.89 pesos (we round up to 2 pesos for ease
of calculations and assume that the program is accessible to all, as per the
suggested design above). To illustrate the effect of a change in the wage on the
value of the currency, let’s assume that instead of paying 150 pesos a month,
the government decides to pay 300 pesos a month. The hourly wages jumps from 2
to 4 pesos. Given the same level of tax liability and stable prices, it now
takes workers half the time to earn what they used to before the increase in the
public sector wage. The value of the currency, therefore, falls sharply. If, by
contrast, the government cuts the monthly wage in half to 75 pesos, workers will
need to work twice as much to obtain the same amount of pesos as before. It
becomes harder to obtain the currency, which raises its value.
Thus a Job Guarantee program can
be designed in such a way as to provide a stable benchmark for the value of the
II.ELR stabilizes the business cycle far better than universal income
Note that the government’s spending on public
employment fluctuates countercyclically. In downturns, private business
establishments lay-off workers who then find employment in the public sector. As
a result, government spending automatically increases, providing for the
necessary economic stimulus. Conversely, as the economy improves and the private
sector expands, it pulls workers out of the public employment pool, shrinking
government spending and reducing deficits. This serves as a powerful automatic
stabilizer that operates to ensure that government’s spending is just at the
right level to maintain full employment.
A basic income guarantee can act as a
countercyclical stabilizer if it were to target the unemployed or if it acted as
an incremental supplement depending on the size of an individual’s income. In
its purest form however, BIG will have no stabilizing effect to the economic
cycle since it pays a basic income guarantee to all recipients regardless of
their income size of employment status.
III.ELR enhances price stability, while BIG does not.
Both ELR and BIG are criticized
as demand-side government programs which can cause inflation. Policies of
“priming the pump,” such as military Keynesianism, may very well be inflationary
as they primarily hire from the top (competing for the most desirable workers)
(Wray 1998, p. 179). Programs such as ELR or BIG which hire off the bottom or
target low-income groups will not introduce the same inflationary pressures.
The difference between the two, however, is that there is nothing inherent in
BIG programs which promises that they will not be inflationary. The most we can
say about income guarantees is that their effect on prices is ambiguous. By
contrast, ELR ensures that its implementation itself will not introduce
inflationary pressures and will, in fact, enhance price stability.
There are two main reasons why
this is the case. The first is that ELR is a bufferstock program, which operates
on a fixed price/floating quantity rule. The second is that any government
deficit spending associated with a public employment program will always be at
the right level. We explain:
1)A bufferstock program with a fixed price/floating quantity rule:
Economists usually fear that high
levels of employment can introduce wage-price spirals. Thus, it is necessary to
show how ELR actually contributes to wage stability, thus, promoting price
stability. As Wray explains (ibid, 135-137), the key is that the ELR
scheme is designed as a “bufferstock” program, which operates on a fixed
price/floating quantity rule. The idea is to use labor as the bufferstock
commodity, and, as is the case with any buffer stock commodity, the program will
stabilize that commodity's price.
As discussed above, the wage
offered to public sector employees is fixed exogenously and does not compete
with wages in the private sector. This ensures that when demand for labor in the
private sector rises, wages are bid up and workers are hired away from public
sector jobs (the bufferstock is “sold”). Conversely, when the private sector
lays off workers, they find employment in the public sector (the bufferstock is
“bought”). In other words, when there is an upward pressure on the
bufferstock’s price, the commodity is sold, and when there are deflationary
forces, it is bought. Thus the program provides the countervailing pressure on
prices by ensuring wage stability in the public sector and a powerful
The program operates on a
fixed price/floating quantity rule, because the price of the bufferstock
(the public sector wage) is fixed, and the quantity of the commodity (the public
sector employment) is allowed to float. The exogenous public sector wage is
perfectly stable and, since labor is a basic commodity (employed directly and
indirectly in the production of every other kind of commodity), it serves as a
perfect benchmark for all other commodity prices. It is in this sense that the
public sector wage provides a stable anchor for prices in the economy. This
important inbuilt feature of the ELR program has no comparable counterpart in
income guarantee proposals.
2)Deficit spending on ELR is always at the right level
What is deemed to be the right
level of deficit spending largely depends on the goals that are pursued. For
BIG supporters the right level is the one that will provide a basic
income for every member of society. For ELR advocates it is the level which
ensures full employment. However, the countercyclical design of the job
guarantee program also ensures that deficit spending will counteract
inflationary or deflationary pressures. No such provision exists in income
Inflation or deflation occur when
aggregate demand is too large or too small relative to aggregate production or
productive capacity of the economy. The key to offsetting these pressures is to
boost income and spending just to that level sufficient to purchase the entire
full employment output, no more and nor less. By design the ELR program
guarantees that any resulting budget deficit is never too big or too small.
Government spending will increase until unemployment is eliminated, at which
point deficits will stop growing, ensuring that aggregate demand does not exceed
the full employment level of aggregate supply. Conversely, if unemployment grows
again, so will deficit spending to bring the two into equilibrium. In other
words the automatic countercyclical and stabilizing feature of the ELR program
ensures that spending rises when it is too low and stops increasing the when
full employment level of output is reached. By contrast basic income programs
cannot claim any such countervailing force to price changes.
Both BIG and ELR are expected to
enhance human capital, alleviate the indirect social costs of unemployment or
poverty, and reduce spending on other programs such as welfare, unemployment
insurance and other aid. The enhancement of human capital is likely to lead to
labor productivity gains which will counter inflationary pressures. ELR however
directly provides for the maintenance and appreciation of human capital
as training and education are explicit features of the program. As Forstater
points out: “ the enhanced human capital would reduce the productivity-adjusted
cost of hiring out of this pool relative to unemployed workers and thereby
diminish inflationary pressures” (Forstater, 1999, p 14). Furthermore, by
addressing the problem of unemployment head-on, ELR also reduces the social and
economic costs associated with it.
Forstater further points out that
job guarantee programs place less pressure on prices, since they increase both
aggregate supply and aggregate demand, while income maintenance programs
boost aggregate demand only (ibid). And finally, he advances a strategy
for economic flexibility, where ELR work enhances private sector efficiency and
growth. This can be done through maintaining and developing public
infrastructure, providing for costly environmental cleanup or reducing
rigidities linked to high levels of capacity utilization. By enhancing private
sector productivity, public sector projects will support a non-inflationary
and currency stability and providing a powerful countercyclical stabilizing
mechanism are three critical advantages of job guarantee programs over income
Other Points of Comparison
Apart from the three key factors
discussed above, there are other points of departure between the two programs
that are worth considering.
Some have argued that the
administration of an ELR will be a logistical nightmare (Widerquist and Lewis,
1997). It is quite true that mailing out a single check to BIG recipients is
administratively much easier than organizing, implementing and coordinating an
ELR program. There is little reason to believe, however, that the
administrative costs of running an ELR will be large and unmanageable.
Currently in the United States, the Social Security program involves writing a
social security check to beneficiaries, much the same way that the basic income
guarantee is proposed to work. The disability part of the social security
system, however, involves a very complex and difficult administration as it
deals with the thorny issue of screening and determination of eligibility for
disability benefits. Regardless of the intricate management of the Social
Security Administration, the total administrative costs are less than 1% of the
Difficult administration has not
thwarted the implementation of many important policy programs. Managing the
military or the national space agency involves very complex administration, but
few argue for scrapping these programs. Policy is a matter of national priority
and political will. To organize and carry out an ELR program may be more complex
than simply writing a government check to BIG recipients. However, the benefits
ELR offers of economic, price and currency stability while eliminating
unemployment by guaranteeing a job at a living wage, far outweigh those of
simply offering a basic income guarantee.
Finally, Philip Harvey correctly
observes that a major advantage of administering a universal BIG is the
possibility of eliminating the screening process of recipients in attempt to
determine who is entitled to income support without having to work (Harvey 2003,
p. 22). It is unrealistic to argue, however, Harvey continues, that BIG will
end the relative disadvantage certain groups suffer with respect to others. If
in this case, more targeted remedial measures are necessary to achieve social
justice, the administrative problems associated with screening for eligibility
will reemerge (ibid, p. 24). It is thus unclear that BIG truly offers a vast
improvement with respect to program management.
Recipients of various kinds of
government assistance have sometimes been subjected to social stigmatization.
There is reason to believe that in this respect BIG beneficiaries may suffer
more than ELR beneficiaries. Most countries have had experience with two
different kinds of income support programs, which we can call ‘workfare’ and
‘fair work.’ Nancy Rose, explains the distinction:
Workfare is shameful and stigmatized, mandatory programs for the ‘undeserving’
poor to make them prove that they are not ‘shirking work’, and to therefore end
‘welfare dependency’; fair work encompasses voluntary programs for the
‘deserving’ poor who become unemployed due to recessions, depressions,
automation, and natural disasters, i.e., ‘through no fault of their own’. (Rose,
p. 2, 2000)
Both BIG and ELR want to
guarantee income or employment universally, without any demeaning means-test. If
BIG is instituted and accepted as a truly universal program, similar to the
current social security program in the US, beneficiaries will not be stigmatized
simply for receiving these benefits. They will, however, very likely be
stigmatized for the fact that they are not working.
Furthermore, it is possible that
BIG maybe perceived as a ‘dole’ payment. Of course, BIG proponents desire to
advance a program which offers its recipients the means of a decent living, not
the meager pittance of a ‘dole’ payment that imposes the humiliating work
requirement and blames the unemployed for the social problem of unemployment.
An ELR program resolves at least some of the problem of unemployment, offering
participation to anyone willing and able to work on volunteer basis. The pay is
adequate and the work is rewarding. It is much more likely that an ELR program
will be associated with other job guarantee or fair work programs. This is not
to say that ELR workers may not be stigmatized. It is possible that certain
disadvantaged individuals of specific race, gender or age group come to dominate
the ELR labor force. The problem of stigmatization cannot be fully avoided but
it can certainly be alleviated with active government involvement. First, the
program can be marketed as a support program for private sector activities.
Second, the kinds of jobs an ELR offers can be creatively designed so as to
carry more weight and prestige. Wray suggests that an “ELR can be promoted as a
universal ‘AmeriCorps’ service, open to all who would like to perform community
service.” It is quite feasible, through various incentives, to create an ELR
that is perceived as an advantage on the resume, rather than a stigma (Wray,
Incentive Problems and Human Development
One objection to income support
programs is that they introduce a work incentive problem. What will be the
impact of a BIG on labor force participation? How many people will leave their
jobs, opting to live on their income support alone? Some have argued that an
adequate income guarantee will certainly reduce work incentives, while others
believe that it can be designed well enough to provide the monetary incentives
for people to seek gainful employment. As Reuben Baetz argues, the incentive
problems cannot be adequately evaluated until ample opportunities for meaningful
work to all have been provided (Baetz, 16, 1973). To this end, it is impossible
to judge what the effects of a BIG on work incentives will be, until all members
of society enjoy equal access to employment. For this reason, securing the
right to employment must be our first task, before we are even capable of
evaluating the effects of a BIG in an environment where work really is a choice.
As argued above, the ELR can be designed in such a way as to provide a living
wage that will address the issue of poverty and allow for a dignified human
existence. To the extent that not all members of society can profit from
working because they are too young, too old or too sick to work, a form of basic
income guarantee is certainly necessary.
Some have questioned the labor
market as the appropriate place where humans can truly achieve dignified human
existence. Put differently, in a world of job scarcity and because of the
demeaning nature of many existing jobs, the right to work is much less appealing
that the right to income. Philip Harvey, neutralizes such claims by stating
that “judgments … made on conditions that exist when the right to work has not
been secured … [cannot] call into question the benefits that could be achieved
if the right was secured” (Harvey 2003, p. 20). Harvey’s contention is
analogous to Baetz’s argument discussed above. How can we evaluate whether the
marketplace offers adequate opportunities for human development, if many people
are denied access to employment and income, and thus are largely precluded from
taking part in the marketplace activities.
An ELR program can meaningfully address both
the incentive and the human development problems. By offering a carefully
determined fixed (but adjustable) wage, it provides the necessary means of
subsistence. At the same time, the wage does not compete with those offered in
the private sector, thereby encouraging ELR workers to seek higher remuneration
for private sector work. Furthermore, the ELR program creates, maintains and
improves the working skills, training and education of the ELR workers, keeping
them employable. Additionally, since the goal is not to compete with private
sector activities, the nature of the jobs can be designed in such a way so to
provide people with various employment opportunities that are oriented more
toward social integration and meaningful community involvement. For example
these can include jobs that today people may perform only on volunteer basis.
With an ELR in place, workers will be able to do much more for their communities
because of the access to resources and the support that would not be otherwise
In their book Building
America, Harry Boyte and Nancy Kari have laid out a roadmap to civic duty,
community involvement and citizenship that redefines what it means to work: not
simply obtaining the means to an end, but thinking about the larger context of
what it means to make or produce something (Boyte and Kari, 1996, p.4). These
considerations should be included when determining the kinds of activities we
incorporate in the design of an ELR program. Work is at the center of
citizenship, the authors argue (ibid, p. 7). ELR can incorporate certain forms
of work that have not been traditionally remunerated. For example, childcare
which currently is not recognized as paid work for many women, can be integrated
into the ELR program. Many activities, which stand at the heart of the
community, enhance social inclusion and neighborhood commitment can and should
be defined as useful ELR work.
ELR Improves the Investment Environment
Both BIG and ELR claim to
alleviate the problem of poverty. To the extent that they are successful and
poverty is reduced (eliminated according to BIG supporters), many social ills
will also be addressed, such as poor health, certain crime activity,
homelessness, malnutrition, school dropout rates, racial and ethnic antagonism.
With less crime and higher aggregate demand due to the increase in income from
BIG or ELR, the investment climate is expected to improve. Less social and
political unrest (which too can result from high unemployment and poverty rates)
also bode well for investment activity. ELR however, has a clear advantage over
BIG as it maintains an employable and visible pool of labor that
can be tapped by private investors should they need trained and skilled workers
for their ventures. By contrast, while a BIG may provide the income necessary
to sustain a decent standard of living, it does not deal with the loss of skill
and training and deterioration of human capital that result from unemployment,
especially if it is long-term.
ELR further attracts foreign
direct investment by promoting maximum output and consumer demand. ELR
improves the investment climate by maintaining a large and productive pool of
labor available for hire at a stable compensation package. ELR strengthens the
economy and hence strengthens and stabilizes the currency. BIG cannot claim to
offer either of these results.
To the extent in which we live in
wage-labor economies and an increasingly globalized world, where equitable
benefits from trade can be reaped only in conditions of full employment, we must
secure the right to work as expressly recognized by the Universal Declaration of
Human Rights, adopted by the United Nations General Assembly, December 10, 1948.
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