When All Else Has Failed, Why Not Try Job Creation?

By L. Randall Wray

The US continues to hemorrhage jobs even as some purport to see “green shoots”. All plausible projections show that unemployment will rise even if our economy begins to grow. Personally, I think those green shoots will die this winter because the stimulus package is far too small and because the financial system is going to crash again. The longer we wait to actually address the unemployment problem, the worse are the prospects for a real recovery.

In his recent piece, Paul Krugman writes:

Just to be clear, I believe that a large enough conventional stimulus would do the trick. But since that doesn’t seem to be in the cards, we need to talk about cheaper alternatives that address the job problem directly. Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German- style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.

The point is that we need to start doing something more than, and different from, what we’re already doing. And the experience of other countries suggests that it’s time for a policy that explicitly and directly targets job creation.


As Krugman reports, Germany has avoided massive job losses by subsidizing firms that retain workers but reduce hours worked. The EPI’s proposal follows a similar strategy. This is fine so far as it goes—in a sense it allows workers, firms, and government to share the burden of reduced output and thus reduced work hours required. That is more equitable but in my view it is not a path toward recovery. While I do agree with Krugman that greater aggregate demand stimulus is required, there is no reason to believe that would provide a sufficient supply of jobs for all who want to work.

The final sentence in the Krugman post makes far more sense: let’s create MORE jobs, MORE work hours, and MORE payroll. A new, New Deal program with a permanent and universal job guarantee that will supply as many jobs as there are job seekers. Not only will this provide jobs in the New Deal style program, but it will also save jobs and increase work hours in the rest of the economy. Why go for second or third best when the best option is available?

Winston Churchill remarked “The Americans will always do the right thing………. after they`ve exhausted all the alternatives”. Direct job creation is the right way to put the economy onto a sustainable path to recovery.

For discussion and ideas on direct job creation and full employment, go here; here; here; and here.

2 Responses to When All Else Has Failed, Why Not Try Job Creation?

  1. "MORE jobs, MORE work hours, and MORE payroll."So isn't what you're advocating Keyserlingism without war? It's never been done. If you look at the history of the 1950s and 60s, you'll understand why. Rearmament was always central to the political strategy.On September 23, 1952, General Dwight D. Eisenhower, the Republican Party nominee for the office of President of the United States, was scheduled to give a speech in Cleveland, Ohio. That speech was preempted, however by Richard M. Nixon's Checker's Speech. Instead of delivering his prepared speech, Eisenhower presented a his reaction to Nixon's defense of his finances.Nevertheless, the text of Ike's unspoken speech was published in the Washington Post and New York Times. It's theme was to have been "Prosperity without War." Fifty-seven years later, that theme resonates in the title of the Sustainable Development Commission report, Prosperity without Growth?, first published last March, with a revised, second edition (sans question mark) published last week."There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression."Eisenhower's speech was a sustained polemic expressly directed at the Truman administration policies conceived by Leon Keyserling. Although Ike didn't name Keyserling in the speech, he did the next best thing. He cited the protest resignation of the Edwin G. Nourse, whom Keyserling succeeded as Chairman of the Council of Economic Advisors. To anyone familiar with Keyserling's conceptual role with regard to the economics of NSC-68, several passages in Ike's speech stand out as direct indictments."The inflation we suffer is not an accident; it is a policy. It is not, as the Administration would have us believe some queer and deadly kind of economic bacteria breathed into the atmosphere by Soviet communism…"Now, Ike's feeble prescriptions were woefully inadequate to the magnitude of the problems he so acutely critiqued in his speech. That's why I only sort of like Ike. It's not as if Truman and his advisors didn't have some pretty wicked problems to try to manage. And the military-industrial complex that President Eisenhower warned about in his farewell address didn't exactly evaporate during his term in office.

  2. Watch out, any plan like this needs political approval. If this ELR idea gets rearranged as a subsidy to the private sector, we will be much worse off!