Jobs increase growth---their own evidence [LS Reads Blue].

Building on the theory of effective demand and modern money theory (MMT), Post Keynesians have proposed two alternative paths to full employment. The first and most common approach relies on fiscal policy to fill the demand gap. The second approach calls for direct job creation through an employer of last resort or job guarantee program (JG). Neither policy was designed to address environmental concerns and indeed both promote growth. However, when compared, it is clear that the JG offers advantages over demand management policy with respect to both employment and the environment.

The demand gap approach seeks a handle on employment via the manipulation of aggregate demand. When aggregate demand in the private sector is insufficient for full employment, fiscal policy can be enacted to boost demand (Arestis and Sawyer 2004) & (2003).The three essential goals of the demand gap approach are: (1) increasing aggregate demand (2) stimulating private investment and (3) increasing productive capacity (P. Tcherneva 2008). This approach suffers from two obvious weaknesses. On the employment front, it is indirect. If the goal is to increase employment, why not hire workers directly?9 On the environmental front, the flaw of the demand gap approach is that aims to achieve full employment through economic growth. As Tcherneva notes, “this is a pro-investment progrowth policy” (ibid.).

The JG approach proposed by Minsky (1968), Wray (1998), and Mitchell (1998) represents an alternative path to full employment. Rather than acting through aggregate demand to stimulate private investment, the JG achieves full employment by directly hiring workers. This offers three advantages over demand management. First, it eliminates unemployment immediately. Second, it channels government spending directly to employment. And perhaps most importantly, it can be used to influence not only the quantity but also the quality of employment.10

With regard to environmental goals, however, the most important advantage of the JG is that it severs the link between aggregate demand and employment. As Mitchell and Wray point out, “ELR achieves full employment without regard to the level of aggregate demand” (2005, p. 236). If employment and aggregate demand can be decoupled, then it may be possible to decouple employment from economic growth. In other words, a JG might provide a means for overcoming the existing trade-off between economic and environmental goals.

In the context of Boulding’s model, a JG provides a novel solution to the problem of overproduction. Suppose a situation in which production and consumption are diverging such that profit expectations are falling. According to the demand gap approach, there are two possible outcomes: (1) falling production, rising unemployment and possibly a depression, or (2) rising consumption, increased aggregate demand and stable employment. With a JG in place, the third option is to allow production and aggregate demand to fall, while maintaining full employment, thus avoiding a depression. In this case, both the economic objective of full employment and the environmental goal of reducing output (throughput) are achieved.

A JG eliminates the negative impact of falling production on the level of employment. If JG workers earn a lower wage than private sector workers (and workers spend what they get), aggregate demand and consumption also fall. Of course, a JG as such does not necessarily serve environmental objectives. After all, it will increase employment and aggregate income, and thus it seems a JG must increase aggregate demand, output (throughput) and economic growth.10 However, owing to the special nature of JG employment, it may in fact be made consistent with falling aggregate output and income in the long-run.

In this regard, the most important feature of the JG is that it transcends the conditions of monetary production. Because JG work is not constrained by money profits, it can be channeled to all kinds of socially beneficial projects that cannot and will not be undertaken by the private sector.11 This is the basis for the “green jobs” JG proposal put forward by Forstater (2003, 2004, 2005). However, green jobs represent only one of the possibilities opened up by a JG, and by itself, a green jobs’ approach is not likely to bring about the required reduction in growth necessary for a sustainable economy. Another more radical potential opened up by the removal of the profit constrain is that of reducing productivity.

As proposed, a JG will hire off the bottom and “the pool [of JG labor] will tend to contain the least productive workers” (Wray 1998, p. 139). And since the object of the program is to provide jobs, JG employment should be more labor-intensive than private sector employment further reducing productivity. Rather than viewing low productivity as a bad thing, if environmental sustainability requires reduced growth, low productivity ought to be a policy goal.12 Moreover, it is easy to see how reducing productivity is consistent with improved working conditions since the simplest ways to achieve lower productivity are slowing down the production process, decreasing the length of the working day and replacing mechanized mass production with more humane and less alienating forms of craft labor. Finally, while reduced productivity as a policy goal may be a tough sell, it should not be forgotten that the point of a JG is to improve peoples’ lives and not to increase output.13