Research Topics

A Sectoral Multiplier Analysis for the United States

We assess the sectoral impact of the implementation of a “green” employer of last resort (ELR) program in the US, based on an environmental modification of an extended Kurz’s (1985) multiplier framework and data from OECD Input-Output tables. We use these multipliers to estimate the impact of an “optimal” ELR, designed to maximize the impact on both output and employment while minimizing both imports and carbon emissions. We then test several alternative policy scenarios based upon different compositions of US government expenditure. We provide evidence that (1) investing in the optimal sectors in terms of output, employment, Co2, and import multipliers does not always deliver optimal results in the aggregate; (2) ecological sustainability for the US economy also fosters import sustainability; (3) a rebounding effect in Co2 emissions may be tamed if the ELR satisfies the abovementioned optimality condition, though this undermines its success in terms of output and employment. 

The Greek economy—still fragile due to the lingering effects of the 2009–10 crisis—was hit particularly hard by the COVID-19 pandemic. Greece’s 2020 GDP decline was one of the worst among the group of EU and eurozone member states, along with the highest levels of unemployment and underemployment.

Dimitri B. Papadimitriou, Christos Pierros, Nikos Rodousakis, and Gennaro Zezza update their analysis of the state of the Greek economy on the basis of recently released provisional data for 2020Q4, and model three projections through 2023: (1) a baseline scenario in which no agreement is reached on the disbursement of EU funds (the Recovery and Resilience Facility); (2) a scenario in which EU grants and loans are distributed in a timely manner; and (3) an additional scenario that pairs EU funds with implementation of an employer-of-last resort program. The second scenario would see Greece’s GDP growth return to its pre-pandemic trend—albeit still leaving the economy below the level of real GDP it reached in 2008. The third scenario has the most favorable impact on growth and employment—raising real GDP above its pre-pandemic trend. Failure to achieve a proper recovery of GDP in Greece would be directly related to an absence of fiscal policy expansion.

This Strategic Analysis is the joint product of the Levy Economics Institute of Bard College and INE-GSEE (Athens, Greece). It is simultaneously issued in both English and Greek.

Lessons from Hyman P. Minsky

The job guarantee is a viable policy option for tackling both unemployment and underemployment. Hyman P. Minsky was one of the seminal writers on this subject. The first part of this working paper provides a survey of Minsky’s writings to identify what kind of jobs he had in mind when recommending employer-of-last-resort policies. Minsky favored: (1) jobs increasing socially useful output, providing all of society better public services and goods; (2) jobs guaranteed by the public sector on a project-by-project basis at a minimum wage; (3) jobs in the places where people need them; and (4) jobs taking the people that need them as they are. The second part of the paper suggests policy recommendations for today’s economy. As long as the COVID-19 pandemic still rages on, a targeted public job guarantee program can assist in the social provisioning and distribution of food, shelter, and medical services. After the pandemic, a public job guarantee can reduce poverty and inequality, and bring about a more democratic, sustainable, and socially cohesive economic system.

While the effects of the COVID-19 pandemic have been broadly similar for individuals, families, societies, and economies globally, the policy responses have varied significantly between countries. In the case of Greece, the pandemic abruptly ended the country’s fragile recovery and threw its economy into a dramatic contraction beginning in 2020Q2. Fiscal stimulus programs financed by reserve funds and European-backed structural funds have been implemented, but to date there is no evidence of a significant impact. Given the emergence of COVID-19’s second wave of contagion and the economic consequences of business shutdowns and further job losses, our own growth projections, as well as those from the European Commission, IMF, OECD, and the Greek government, have been revised downward for 2021 and prospects for the beginning of a recovery before the end of 2020 have died out.
 
Using their stock-flow consistent macroeconomic model developed for Greece (LIMG), we run simulations for a baseline scenario and two alternative policy outcomes. The results of the projections for a “business as usual” baseline scenario are pessimistic and show that a V-shaped recovery is not in the cards. The European “recovery funds” alternative scenario projections, while more pessimistic than our report from May 2019, indicate that implementing these funds beginning in 2021Q3 will result in accelerating growth with positive outcomes. A more robust GDP growth rate and consequent employment growth can be realized with the combined effects of the European recovery funds together with an enhanced public job guarantee program. It is this mix of policies that can gain traction and bear fruit in putting the Greek economy on a path to sustainable and inclusive growth.
 
This Strategic Analysis is the joint product of the Levy Economics Institute of Bard College and INE-GSEE (Athens, Greece). It is simultaneously issued in both English and Greek. 

The idea of a universal job guarantee (JG) policy for the United States has become the subject of renewed public debate due to a number of high-profile political endorsements. L. Randall Wray recently coauthored a report that presented a JG proposal—the Public Service Employment program—along with estimates of the economic impact of the plan. However, several other variants have been proposed and/or endorsed. In this policy note, Wray seeks to establish common ground among the major JG plans and provides an initial response to critics.

A Path to Full Employment

Despite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
 
The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
 
Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

Design, Jobs, and Implementation

The job guarantee (JG) is a public option for jobs. It is a permanent, federally funded, and locally administered program that supplies voluntary employment opportunities on demand for all who are ready and willing to work at a living wage. While it is first and foremost a jobs program, it has the potential to be transformative by advancing the public purpose and improving working conditions, people’s everyday lives, and the economy as a whole.
 
This working paper provides a blueprint for operationalizing the proposal. It addresses frequently asked questions and common concerns. It begins by outlining some of the core propositions in the existing literature that have motivated the JG proposal. These propositions suggest specific design and implementation features. (Some questions are answered in greater detail in appendix III). The paper presents the core objectives and expected benefits of the program, and suggests an institutional structure, funding mechanism, and project design and administration.

Amid a recent upsurge in support for a national job guarantee program, L. Randall Wray, Stephanie A. Kelton, Pavlina R. Tcherneva, Scott Fullwiler, and Flavia Dantas outline a new proposal for a federally funded program with decentralized administration. Their Public Service Employment (PSE) program would offer a job—paying a uniform living wage with a basic benefits package—to all who are ready and willing to work. In advance of an upcoming report detailing the economic impact of the PSE, this policy note presents an overview of the goals and structure of the program in the context of current labor market trends and the prospects of poverty reduction.

This paper examines two key aspects of unemployment—its propagation mechanism and socioeconomic costs. It identifies a key feature of this macroeconomic phenomenon: it behaves like a disease. A detailed assessment of the transmission mechanism and the existing pecuniary and nonpecuniary costs of unemployment suggests a fundamental shift in the policy responses to tackling joblessness. To stem the contagion effect and its outsized social and economic impact, fiscal policy can be designed around two criteria for successful disease intervention—preparedness and prevention. The paper examines how a job guarantee proposal uniquely meets those two requirements. It is a policy response whose merits include much more than its macroeconomic stabilization features, as discussed in the literature. It is, in a sense, a method of inoculation against the vile effects of unemployment. The paper discusses several preventative features of the program.
 

The Greek government has agreed to a new round of fiscal austerity measures consisting of a sharp increase in taxes on income and property and further reductions in pension and other welfare-related expenditures. Based on our model of the Greek economy, policies aimed at reducing the government deficit will cause a recession, unless other components of aggregate demand increase enough to more than offset the negative impact of fiscal austerity on output and employment.

In this report we argue that the troika strategy of increasing net exports to restart the economy has failed, partly because of the low impact of falling wages on prices, partly because of the low trade elasticities with respect to prices, and partly because of other events that caused a sharp reduction in transport services, which used to be Greece’s largest export sector.

A policy initiative to boost aggregate demand is urgently needed, now more than ever. We propose a fiscal policy alternative based on innovative financing mechanisms, which could trigger a boost in confidence that would encourage renewed private investment.

Even under optimistic assumptions, the policy status quo being enforced in Greece cannot be relied upon to help recover lost incomes and employment within any reasonable time frame. And while a widely discussed public investment program funded by European institutions would help, a more innovative, better-targeted solution is required to address Greece’s protracted unemployment crisis: an “employer of last resort” (ELR) plan offering paid work in public projects, financed by issuing a nonconvertible “fiscal currency”—the Geuro.

The Greek economy has not succeeded in restoring growth, nor has it managed to restore a climate of reduced uncertainty, which is crucial for stabilizing the business climate and promoting investment. On the contrary, the new round of austerity measures that has been agreed upon implies another year of recession in 2016.

After reviewing some recent indicators for the Greek economy, we project the trajectory of key macroeconomic indicators over the next three years. Our model shows that a slow recovery can be expected beginning in 2017, at a pace that is well below what is needed to alleviate poverty and reduce unemployment. We then analyze the impact of a public investment program financed by European institutions, of a size that is feasible given the current political and economic conditions, and find that, while such a plan would help stimulate the economy, it would not be sufficient to speed up the recovery. Finally, we revise our earlier proposal for a fiscal stimulus financed through the emission of a complementary currency targeted to job creation. Our model shows that such a plan, calibrated in a way that avoids inflationary pressures, would be more effective—without disrupting the targets the government has agreed upon in terms of its primary surplus, and without reversing the improvement in the current account. 

The Greek economy has the potential to recover, and in this report we argue that access to alternative financing sources such as zero-coupon bonds (“Geuros”) and fiscal credit certificates could provide the impetus and liquidity needed to grow the economy and create jobs. But there are preconditions: the existing government debt must be rolled over and austerity policies put aside, restoring trust in the country’s economic future and setting the stage for sustainable income growth, which will eventually enable Greece to repay its debt.

This addendum to our June 2014 report, “Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece,” updates labor market data through 2014Q3 and identifies emerging employment and unemployment trends. The overarching aim of the report, the outcome of a study undertaken in 2013 by the Levy Institute in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour, is to provide policymakers and the general public research-based evidence of the macroeconomic and employment effects of a large-scale direct job creation program in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010 as a condition of the loans made to Greece by its eurozone partners. 

With the anti-austerity Syriza party continuing to lead in polls ahead of Greece’s election on January 25, what is the outlook for restoring growth and increasing employment following six years of deep recession?   Despite some timid signs of recovery, notably in the tourism sector, recent short-term indicators still show a decline for 2014. Our analysis shows that the speed of a market-driven recovery would be insufficient to address the urgent problems of poverty and unemployment. And the protracted austerity required to service Greece’s sovereign debt would merely ensure the continuation of a national crisis, with spillover effects to the rest of the eurozone—especially now, when the region is vulnerable to another recession and a prolonged period of Japanese-style price deflation.   Using the Levy Institute’s macroeconometric model for Greece, we evaluate the impact of policy alternatives aimed at stimulating the country’s economy without endangering its current account, including capital transfers from the European Union, suspension of interest payments on public debt and use of these resources to boost demand and employment, and a New Deal plan using public funds to target investment in production growth and finance a direct job creation program. 

To mobilize Greece’s severely underemployed labor potential and confront the social and economic dangers of persistent unemployment, we propose the immediate implementation of a direct public benefit job creation program—a Greek “New Deal.” The Job Guarantee (JG) program would offer the unemployed jobs, at a minimum wage, on work projects providing public goods and services. This policy would have substantial positive economic impacts in terms of output and employment, and when newly accrued tax revenue is taken into account, which substantially reduces the net cost of the program, it makes for a comparatively modest fiscal stimulus. At a net cost of roughly 1 percent to 1.2 percent of GDP (depending on the wage level offered), a midrange JG program featuring the direct creation of 300,000 jobs has the potential to reduce the unemployed population by a third or more, once indirect employment effects are taken into account. And our research indicates that the policy would do all this while reducing Greece’s debt-to-GDP ratio—which leaves little room for excuses.

This report presents the findings from a study undertaken by the Levy Institute in 2013 in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour. It uses as background the 2011 Levy Institute study “Direct Job Creation for Turbulent Times in Greece,” which focused on the need for direct job creation to address rising unemployment. The focus in this report, however, is different. Here, the aim is to make available to policymakers and the broader public research-based evidence of the macroeconomic and employment effects of a large-scale program of direct job creation program—a cost-effective and proven policy response. The ultimate goal of this undertaking is to draw urgently needed attention to the worsening levels of unemployment in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010.

In this report, we discuss alternative scenarios for restoring growth and increasing employment in the Greek economy, evaluating alternative policy options through our specially constructed macroeconometric model (LIMG). After reviewing recent events in 2013 that confirm our previous projections for an increase in the unemployment rate, we examine the likely impact of four policy options: (1) external help through Marshall Plan–type capital transfers to the government; (2) suspension of interest payments on public debt, instead using these resources for increasing demand and employment; (3) introduction of a parallel financial system that uses new government bonds; and (4) adoption of an employer-of-last-resort (ELR) program financed through the parallel financial system. We argue that the effectiveness of the different plans crucially depends on the price elasticity of the Greek trade sector. Since our analysis shows that such elasticity is low, our ELR policy option seems to provide the best strategy for a recovery, having immediate effects on the Greek population's standard of living while containing the effects on foreign debt.

The job guarantee is a proposal that provides greater macroeconomic stability and secures a fundamental human right. Despite the economic and moral merits of this policy, often the program is rejected because of concerns about its administration. How would the program be implemented? Who will create the jobs? Can work be found for every unemployed individual who wishes to work? This policy note addresses these concerns by elaborating on a proposal for the United States that would run the job guarantee through the social enterprise sector, which includes traditional nonprofit organizations and emerging nonprofit social entrepreneurial ventures. 

Why the Troika’s Greek Strategy Is Failing

Greece’s unemployment rate just hit 27.6 percent. That wasn’t supposed to happen. Why has the troika—the European Commission, International Monetary Fund (IMF), and European Central Bank—been so consistently wrong about the effects of its handpicked policies? The strategy being imposed on Greece depends in large part on the idea of “internal devaluation”: that reducing wages will make its products more attractive, thus spurring a return to economic growth powered by rising exports. Our research, based on a macroeconomic model specifically constructed for Greece, indicates that this strategy is not working. Achieving significant growth in net exports through internal devaluation would, at best, take a very long time—and a great deal of immiseration and social disintegration would take place while we waited for this theory to bear fruit. Despite some recent admissions of error along these lines by the IMF, the troika still relies on a theory of how the economy works that badly underestimates the negative effects of austerity.

A Strategic Analysis

Employment in Greece is in free fall, with more than one million jobs lost since October 2008—a drop of more than 28 percent. In March, the “official” unemployment rate was 27.4 percent, the highest level seen in any industrialized country in the free world during the last 30 years.

In this report, Levy Institute President Dimitri B. Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza present their analysis of Greece’s economic crisis and offer policy recommendations to restore growth and increase employment. This analysis relies on the Levy Institute’s macroeconomic model for the Greek economy (LIMG), a stock-flow consistent model similar to the Institute’s model of the US economy. Based on the LIMG simulations, the authors find that a continuation of “expansionary austerity” policies will actually increase unemployment, since GDP will not grow quickly enough to arrest, much less reverse, the decline in employment. They critically evaluate recent International Monetary Fund and European Commission projections for the Greek economy, and find these projections overly optimistic. They recommend a recovery plan, similar to the Marshall Plan, to increase public consumption and investment. Toward this end, the authors call for an expanded direct public-service job creation program.

Is There Space to Promote Gender Equality in the Evolution of Social Protection?

Social protection systems comprise public policies designed to prevent or alleviate economic insecurity and poverty. Throughout the developing world, social protection strategies and the dialogue surrounding them have recently been undergoing an important evolution. In this policy brief, Senior Scholar and Director of the Gender Equality and the Economy program Rania Antonopoulos highlights the opportunities and challenges for promoting gender equality and empowerment within this shifting policy landscape. Developed with financial support from the United Nations Development Programme, this brief is intended as an advocacy tool in the service of amplifying gender-informed policy considerations in country-level social protection debates. 

A Gender Perspective

This paper discusses social protection initiatives in the context of developing countries and explores the opportunities they present for promoting a gender-equality agenda and women’s empowerment. The paper begins with a brief introduction on the emergence of social protection (SP) and how it is linked to economic and social policy. Next, it reviews the context, concepts, and definitions relevant to SP policies and identifies gender-specific social and economic risks and corresponding SP instruments, drawing on country-level experiences. The thrust of the paper is to explore how SP instruments can help or hinder the process of altering rigid gendered roles, and offers a critical evaluation of SP interventions from the standpoint of women’s inclusion in economic life. Conditional cash transfers and employment guarantee programs are discussed in detail. An extensive annotated bibliography accompanies this paper as a resource for researchers and practitioners.

An extensive annotated bibliography accompanies this paper as a resource for researchers and practitioners.

On November 27, 2012, the Eurogroup reached a new “Greek deal” that once more discloses that there is no political will to address Greece’s debt crisis—or the country’s economic and social catastrophe.

The Employer of Last Resort as an Institution for Change

Over the past decade and a half the ability of the employer-of-last-resort (ELR) proposal to deliver full employment and price stability has been discussed at length in the literature. A different issue has received relatively little attention—namely, the concern that even when the ELR produces these macroeconomic benefits, it does so by offering “low-paying” “dead-end” jobs, further denigrating the unemployed. In this context, the important buffer stock feature of the ELR is misconstrued as a hydraulic mechanism that prioritizes macroeconomic stability over the program’s benefits to the unemployed.

This paper argues that the two objectives are not mutually exclusive by revisiting Argentina’s experience with Plan Jefes and its subsequent reform. Plan Jefes is the only direct job creation program in the world specifically modeled after the modern ELR proposal developed in the United States. With respect to macroeconomic stability, the paper reviews how it exhibits some of the key stabilizing features of ELR that have been postulated in the literature, even though it was not designed as an unconditional job guarantee. Plan Jefes also illustrated that public employment programs can have a transformative impact on persistent socioeconomic problems such as poverty and gender disparity. Women—by far the largest group of program beneficiaries—report key benefits to their communities, families, children, and (importantly) themselves from participation in Jefes.

Argentina’s experience shows that direct job creation programs that offer employment at a base wage can have the unique capacity to empower and undermine prevailing structures that produce and reproduce poverty and gender disparities. Because the latter two problems are multidimensional, the ELR cannot be treated as a panacea, but rather as an important policy tool that remedies some of the most entrenched and resilient causes of poverty and gender inequality. The paper examines survey evidence based on narratives by female participants in Jefes to assess these potentially transformative aspects of the ELR proposal.

The Nonprofit Model for Implementing a Job Guarantee

The conventional approach of fiscal policy is to create jobs by boosting private investment and growth. This approach is backward, says Research Associate Pavlina R. Tcherneva. Policy must begin by fixing the unemployment situation because growth is a byproduct of strong employment—not the other way around. Tcherneva proposes a bottom-up approach based on community programs that can be implemented at all phases of the business cycle; that is, a grass-roots job-guarantee program run by the nonprofit sector (with participation by the social entrepreneurial sector) but financed by the government. A job-guarantee program would lead to full employment over the long run and address an outstanding fault of modern market economies.

A Proposal for Ireland

Euroland is in a crisis that is slowly but surely spreading from one periphery country to another; it will eventually reach the center. The blame is mostly heaped upon supposedly profligate consumption by Mediterraneans. But that surely cannot apply to Ireland and Iceland. In both cases, these nations adopted the neoliberal attitude toward banks that was pushed by policymakers in Europe and America, with disastrous results. The banks blew up in a speculative fever and then expected their governments to absorb all the losses. The situation was similar in the United States, but in our case the debts were in dollars and our sovereign currency issuer simply spent, lent, and guaranteed 29 trillion dollars’ worth of bad bank decisions. Even in our case it was a huge mistake—but it was “affordable.” Ireland and Iceland were not so lucky, as their bank debts were in “foreign” currencies. By this I mean that even though Irish bank debt was in euros, the Government of Ireland had given up its own currency in favor of what is essentially a foreign currency—the euro, which is issued by the European Central Bank (ECB). Every euro issued in Ireland is ultimately convertible, one to one, to an ECB euro. There is neither the possibility of depreciating the Irish euro nor the possibility of creating ECB euros as necessary to meet demands for clearing. Ireland is in a situation similar to that of Argentina a decade ago, when it adopted a currency board based on the US dollar. And yet the authorities demand more austerity, to further reduce growth rates. As both Ireland and Greece have found out, austerity does not mean reduced budget deficits, because tax revenues fall faster than spending can be cut. Indeed, as I write this, Athens has exploded in riots. Is there an alternative path?

In this piece I argue that there is. First, I quickly summarize the financial foibles of Iceland and Ireland. I will then—also quickly—summarize the case for debt relief or default. Then I will present a program of direct job creation that could put Ireland on the path to recovery. Understanding the financial problems and solutions puts the jobs program proposal in the proper perspective: a full implementation of a job guarantee cannot occur within the current financial arrangements. Still, something can be done.

An Augmented Minskyan-Kaleckian Model

This paper augments the basic Post-Keynesian markup model to examine the effects of different fiscal policies on prices and income distribution. This is an approach à la Hyman P. Minsky, who argued that in the modern era, government is both “a blessing and a curse,” since it stabilizes profits and output by imparting an inflationary bias to the economy, but without stabilizing the economy at or near full employment. To build on these insights, the paper considers several distinct functions of government: 1) government as an income provider, 2) as an employer, and 3) as a buyer of goods and services. The inflationary and distributional effects of each of these fiscal policies differ considerably. First, the paper examines the effects of income transfers to individuals and firms (in the form of unemployment insurance and investment subsidies, respectively). Next, it considers government as an employer of workers (direct job creation) and as a buyer of goods and services (indirect job creation). Finally, it modifies the basic theoretical model to incorporate fiscal policy à laMinsky and John Maynard Keynes, where the government ensures full employment through direct job creation of all of the unemployed unable to find private sector work, irrespective of the phase of the business cycle. The paper specifically models Minsky’s proposal for government as the employer of last resort (ELR), but the findings would apply to any universal direct job creation plan of similar design. The paper derives a fundamental price equation for a full-employment economy with government. The model presents a “price rule” for government spending that ensures that the ELR is not a source of inflation. Indeed, the fundamental equation illustrates that in the presence of such a price rule, at full employment inflationary effects are observed from sources other thanthe public sector employment program.

Lessons from Argentina

The literature on public employment policies such as the job guarantee (JG) and the employer of last resort (ELR) often emphasizes their macroeconomic stabilization effects. But carefully designed and implemented policies like these can also have profound social transformative effects. In particular, they can help address enduring economic problems such as poverty and gender disparity. To examine how, this paper will look at the reform of Argentina’s Plan Jefes into Plan Familias. Plan Jefes was the hallmark stabilization policy of the Argentine government after the 2001 crisis. It guaranteed a public sector job in a community project to unemployed male and female heads of households. The vast majority of beneficiaries, however, turned out to be poor women. For a number of reasons that are explored below, the program was later reformed into a cash transfer policy, known as Plan Familias, that still exists today. The paper examines this reform in order to evaluate the relative impact of such policies on some of the most vulnerable members of society; namely, poor women. An examination of the Argentine experience based on survey evidence and fieldwork reveals that poor women overwhelmingly want paid work opportunities, and that a policy such as the JG or the ELR cannot only guarantees full employment and macroeconomic stabilization, but it can also serve as an institutional vehicle that begins to transform some of the structures and norms that produce and reproduce gender disparities. These transformative features of public employment policies are elucidated by turning to the capabilities approach developed by Amartya Sen and elaborated by Martha Nussbaum—an approach commonly invoked in the feminist literature. This paper examines how the access to paid employment can enhance what Sen defines as an individual’s “substantive freedom.” Any policy that fosters genuine freedom begins with an understanding of what the targeted population (in this case, poor women) wants. It then devises a strategy that guarantees that such opportunities exist and removes the obstacles to accessing these opportunities.

Countries in crisis round the world face the daunting task of dealing with abrupt increases in unemployment and associated deepening poverty. Greece, in the face of her sovereign debt crisis, has been hit the hardest. Remediating employment policies, including workweek reductions and employment subsidies, abound but have failed to answer the call satisfactorily. Direct public-service job creation, instead, enables communities to mitigate risks and vulnerabilities that rise especially in turbulent times by actively transforming their own economic and social environment.

With underwriting from the Labour Institute of the Greek General Confederation of Workers, the Levy Economics Institute was instrumental in the design and implementation of a social works program of direct job creation throughout Greece. Two-year projects, funded from European Structural Funds, have begun.

This report traces the economic trends preceding and surrounding the economic crisis in Greece, with particular emphasis on recent labor market trends and emerging gaps in social safety net coverage. While its primary focus is identifying the needs in Greece, broader lessons for direct job creation are highlighted, and could be applied to countries entertaining targeted employment creation as a means to alleviate social strains during crisis periods.

The Minskyan Lessons We Failed to Learn

Senior Scholar L. Randall Wray lays out the numerous and critical ways in which we have failed to learn from the latest global financial crisis, and identifies the underlying trends and structural vulnerabilities that make it likely a new crisis is right around the corner. Wray also suggests some policy changes that would shore up the financial system while reinvigorating the real economy, including the clear separation of commercial and investment banking, and a universal job guarantee.

Case Studies in South Africa and the United States

This paper demonstrates the strong impacts that public job creation in social care provisioning has on employment creation. Furthermore, it shows that mobilizing underutilized domestic labor resources and targeting them to bridge gaps in community-based services yield strong pro-poor income growth patterns that extend throughout the economy. Social care provision also contributes to promoting gender equality, as women—especially from low-income households—constitute a major workforce in the care sector. We present the ex-ante policy simulation results from two country case studies: South Africa and the United States. Both social accounting matrix–based multiplier analysis and propensity ranking–based microsimulation provide evidence of the pro-poor impacts of the social care expansion.

A Strategy for Effective and Equitable Job Creation

Massive job losses in the United States, over eight million since the onset of the “Great Recession,” call for job creation measures through fiscal expansion. In this paper we analyze the job creation potential of social service–delivery sectors—early childhood development and home-based health care—as compared to other proposed alternatives in infrastructure construction and energy. Our microsimulation results suggest that investing in the care sector creates more jobs in total, at double the rate of infrastructure investment. The second finding is that these jobs are more effective in reaching disadvantaged workers—those from poor households and with lower levels of educational attainment. Job creation in these sectors can easily be rolled out. States already have mechanisms and implementation capacity in place. All that is required is policy recalibration to allow funds to be channeled into sectors that deliver jobs both more efficiently and more equitably.

In his State of the Union address President Obama acknowledged that “our most urgent task is job creation”—that a move toward full employment will lay the foundation for long-term economic growth and ensure that the federal government creates the necessary conditions for businesses to expand and hire more workers. According to a new study by Levy scholars Rania Antonopoulos, Kijong Kim, Thomas Masterson, and Ajit Zacharias, the government needs to identify and invest in projects that have the potential for massive, and immediate, public job creation. They conclude that social sector investment, such as early childhood education and home-based care, would generate twice as many jobs as infrastructure spending and nearly 1.5 times the number created by investment in green energy, while catering to the most vulnerable segments of the workforce.

The Macroeconomic Implications of HIV and AIDS on Women's Time-tax Burdens

This paper considers public employment guarantee programs in the context of South Africa as a means to address the nexus of poverty, unemployment, and unpaid work burdens—all factors exacerbated by HIV/AIDS. It further discusses the need for genderinformed public job creation in areas that mitigate the “time-tax” burdens of women, and examines a South African initiative to address social sector service delivery deficits within the government’s Expanded Public Works Programme. The authors highlight the need for well-designed employment guarantee programs—specifically, programs centered on community and home-based care—as a potential way to help offset the destabilizing effects of HIV/AIDS and endemic poverty. The paper concludes with results from macroeconomic simulations of such a program, using a social accounting matrix framework, and sets out implications for both participants and policymakers.

Lessons Learned from South Africa’s Expanded Public Works Programme

Beyond loss of income, joblessness is associated with greater poverty, marginalization, and social exclusion; the current global crisis is clearly not helping. In this new Public Policy Brief, Research Scholar Rania Antonopoulos explores the impact of both joblessness and employment expansion on poverty, paying particular attention to the gender aspects of poverty and poverty-reducing public employment schemes targeting poor women.

The author presents the results of a Levy Institute study that examines the macroeconomic consequences of scaling up South Africa’s Expanded Public Works Programme by adding to it a new sector for social service delivery in health and education. She notes that gaps in such services for households that cannot afford to pay for them are mostly filled by long hours of invisible, unpaid work performed by women and children. Her proposed employment creation program addresses several policy objectives: income and job generation, provisioning of communities’ unmet needs, skill enhancement for a new cadre of workers, and promotion of gender equality by addressing the overtaxed time of women.

 

A Gender Perspective

Widespread economic recessions and protracted financial crises have been documented as setting back gender equality and other development goals in the past. In the midst of the current global crisis—often referred to as “the Great Recession”—there is grave concern that progress made in poverty reduction and women’s equality will be reversed. Indeed, for many developing countries it is particularly worrisome that, through no fault of their own, the global economic downturn has exacerbated effects from other crises manifest in food insecurity, poverty, and increasing inequality. This paper explores both well-known and less discussed paths of transmission through which crises affect women’s world of work and overall wellbeing. As demand for textile and agricultural exports decline, along with tourism, job losses are expected to rise in these female-intensive industries. In addition, the gendered nature of the world of work suggests that women will see an increase in their share among informal and vulnerable workers worldwide, and will also supply more of their labor under unpaid conditions. The latter is particularly important in the context of developing countries, where many production activities take place outside the strict boundaries of the market. The paper also makes this point: examined through the prism of gender equality, the ability of the state to implement countercyclical policies matters greatly. If policy responses at the national and international levels end up aggravating inequities, gender equality processes face many more barriers, especially among the poor.

Unemployment was singled out by John Maynard Keynes as one of the principle faults of capitalism; the other is excessive inequality. Obviously, there is some link between these two faults: since most people living in capitalist economies must work for wages as a major source of their incomes, the inability to obtain a job means a lower income. If jobs can be provided to the unemployed, inequality and poverty will be reduced—although such policy will not directly address the problem of excessive income at the top of the distribution. Most importantly, Keynes wanted to put unemployed labor to work—not digging holes, but in socially productive ways. This would help to ensure that the additional effective demand created by government spending would not be exhausted in higher prices as it ran up against bottlenecks or other supply constraints. Further, it would help maintain public support for the government’s programs by providing useful output. And it would generate respect for, and feelings of self-worth in, the workers employed in these projects (no worker would want to spend her days digging holes that serve no useful purpose). President Roosevelt’s New Deal jobs programs (such as the Works Progress Administration and the Civilian Conservation Corps) are good examples of such targeted job-creating programs. These provided income and employment for workers, actually helped increase the nation’s productivity, and left us with public buildings, dams, trails, and even music that we still enjoy today. As our nation (and the world) collapses into deep recession, or even depression, it is worthwhile to examine Hyman P. Minsky’s comprehensive approach to resolving the unemployment problem.

South Africa and India

Documents relating to the South Africa and India case studies are available below.

SOUTH AFRICA	INDIA
Policy Brief Full Report Appendix A. SAM–SA Technical Report Appendix B. Statistical Analysis Appendix C. Job Identification Tables Appendix D. SAM Reformulation	Policy Brief Full Report Appendix A. SAM-Nana Kotda Village Appendix B. A Note on the Village Sam Appendix C. A Summary Table on Unpaid Work and Its Implications for Public Works Programmes
Annotated Bibliography

Employment Guarantee Policies from a Gender Perspective

There is now widespread recognition that in most countries, private-sector investment has not been able to absorb surplus labor. This is all the more the case for poor unskilled people. Public works programs and employment guarantee schemes in South Africa, India, and other countries provide jobs while creating public assets. In addition to physical infrastructure, an area that has immense potential to create much-needed jobs is that of social service delivery and social infrastructure. While unemployment and enforced “idleness” persist, existing time-use survey data reveal that people around the world—especially women and children—spend long hours performing unpaid work. This work includes not only household maintenance and care provisioning for family members and communities, but also time spent that helps fill public infrastructural gaps—for example, in the energy, health, and education sectors. This paper suggests that, by bringing together public job creation, on the one hand, and unpaid work, on the other, well-designed employment guarantee policies can promote job creation, gender equality, and pro-poor development.