B --- Jobs guarantee leads to a wage price spiral when the market combats the resulting inflation.

When the economy is at full employment, however, the JG could increase tendencies toward wage-price spirals. The fear associated with being laid off would be reduced and that would buttress worker bargaining power by just that much more. This certainly adds to the risk of a wage-price spiral. But again, it doesn’t increase the risk all that much. After all, at full employment workers really don’t fear the sack all that much anyway.

The real risk of a wage-price spiral is always and everywhere when exogenous factors increase prices. The two that come to mind are (i) substantial currency depreciations and (ii) increases in input costs, such as oil or other commodities. Wage-price spirals then tend to kick in as workers and capitalists try to use their market power to distribute the resulting inflation. Workers try to fob the price increases onto capitalists through wage hikes, while capitalists try to fob it onto workers and competing capitalists through price increases.

It is in such an environment that a JG could prove to greatly increase the tendency toward wage-price spirals. Such spirals are always a sort of battle fought between workers and capitalists and the more confident and self-assured both sides are, the more they will feel ready to duke it out. A JG program would greatly increase worker confidence and in doing so would add fuel to the fire under circumstances conducive to a wage-price inflation.