JGs are key to business confidence - macroeconomic stability.

A JG offers a job at a fixed money wage to any individual ready, willing and able to work, thereby creating an infinitely elastic labour demand at that wage. The money wage represents a ‘liveable wage’ and can be supplemented with a benefits package.8 The programme is financed by the federal government, but the type of job is determined by the local government who are informed about unmet social needs. This level of decentralisation also helps to reduce policy lags.9

The purpose of a JG is to address macroeconomic inefficiency and mitigate the ‘indignity and insecurity of underemployment, poverty and social exclusion’ (Quirk et al. 2006: 2), along with the ‘amelioration of many social ills associated with chronic unemployment (health problems, spousal abuse and family break-up, drug abuse, crime), [while enhancing] skills due to training on the job’ (Wray 2012). The implementation of a JG would ensure that unemployment and poverty rates satisfy Europe 2020 targets.10

While specific policies for a Eurozone stabilisation function are still to be developed, Juncker et al. (2015b) argue that the design of such a mechanism rests on four guiding principles. Here we assess how the features of the JG align with each principle.

First, Juncker et al. (2015b: 15) argue that a Eurozone stabilization function ‘should not be an instrument for crisis management’, which is the role of the European Stability Mechanism (ESM).11 Instead, its role should be to improve the overall economic resilience of EMU and individual Eurozone countries and thus help prevent crises, so that future interventions by the ESM were less likely. In this vein, the JG should be viewed as a permanent and automatic mechanism which is embedded in the EMU architecture.

The JG generates a ‘buffer stock’ of (job-ready) workers from which employers can recruit. The size of the buffer stock is driven by the ‘normal’ economic flux of non-JG sector activity; the buffer stock expands (declines) when the non-Job Guarantee (private/public) sector activity declines (expands) (Mitchell 1998; Fullwiler 2005). Thus implementation of the JG gives rise to macroeconomic stability since guaranteed employment and stable wage income anchors consumer and business confidence, and facilitates the restoration of household balance sheets and access to credit following a macroeconomic shock. This, in turn, promotes a stable foundation for a recovery in private sector consumption and investment and lessens the severity of a downturn. By establishing a ‘floor’ to economic and social costs arising from reduced economic activity, the JG would strengthen the resilience of the EMU when confronted with both country-level and systemic economic shocks, as well as contagion effects from financial instability. The automatic nature of the JG would also help to reduce lead-lag times which are often associated with policy-making.