A job guarantee must aim to overcome involuntary unemployment through an infinitely elastic demand for labor – its not workfare.

To overcome the problem of involuntary unemployment, which can cause societal and personal issues as shown in the forgone chapters, the idea of a Job Guarantee is prominent in the economic literature. A variety of papers approached this topic using a multitude of labels, including “buffer stock employment” (Mitchell, 1998), “public service employment” (Forstater, 2003),“employment of last resort” (Wray, 2006) or “guaranteed job program” (Wisman, 2010). In this thesis, the underlying concept is coined by the term Job Guarantee. All of these concepts share the same idea: overcoming involuntary unemployment by creating an infinitely elastic demand for labor by the state. It is important to note is that it is not a ’workfare’ program, implying that people would have to work in order to receive their social benefits, but rather have an option to exit unemployment. The goal is further to enable social inclusion through a job (Kaboub, 2007).

With a Job Guarantee, the state offers employment to anyone willing to work at a certain wage. By this, a lower limit to the price of labor is being set (Kaboub, 2007). This can have an impact on the private economy, especially in the low-wage sector. As workers do have an outside option, it is being argued that an increase in the bargaining power of workers takes place (Kaboub, 2007). In an economy without JG, the hiring behavior of firms depends on the business cycle and profit expectations, workers suffer from recessions (Minsky and Kaufman, 2008). With a Job Guarantee, the pool of workers in the public program will increase during recession; in times of economical booming, the pool will get smaller (Kaboub, 2007).