Published by Centre of Full Employment and Equity (CofFEE)

Under the JG scheme, the government continuously absorbs workers displaced from private sector employment. The “buffer stock” employees would be paid the minimum wage, which defines a wage floor for the economy. Government employment and spending automatically increases (decreases) as jobs are lost (gained) in the private sector. The approach generates full employment and price stability. The JG wage provides a  floor that prevents serious deflation from occurring and defines the private sector wage structure.

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In this paper I develop the argument that the NAIRU is a costly and unreliable target for policy makers to pursue. It is argued that full employment demands that policy emphasise the number of jobs rather than some politically acceptable (though high) unemployment rate. Many commentators who are otherwise sympathetic to the goals of full employment are skeptical of a policy approach that chooses along the lines of the JG to endogenise the budget deficit. There is a fear that it will make inflation impossible to control. To answer these claims, the inflation control mechanisms inherent in the JG model are outlined. The final section indicates other issues that are relevant but not addressed.