Musgrave, Ralph S. (2009): Workfare: a marginal employment subsidy for public and private sectors (2nd edition).
Download (276Kb) | Preview
Workfare has had a chequered history because it has not been well thought out. It increases employment not just because it calls the bluff of the workshy; this element need not be all that harsh. It works because it acts as a marginal employment subsidy of a type not tried before (except unwittingly as part of workfare). The subsidy is as follows.
As full employment is approached (i.e.given rising demand), dole queue labour gets progressively less suited to available vacancies, which induces employers to out bid each other in an attempt to attract or retain better quality or more suitable labour, and this is inflationary. This phenomenon is behind NAIRU, the level of unemployment below which it is allegedly impossible to go. But the above unsuitability of the unemployed is temporary for each person: a job usually appears sooner or later for which they are suited. Thus the antidote is to compensate employers for this unsuitability, i.e. subsidise the unemployed into temporary jobs and this is more or less what workfare has always consisted of. This ought to reduce NAIRU.
The above NAIRU reducing characteristic of workfare is key to proving it should operate as much in the private as public sector. In fact it works better in the former because the private sector is better at employing relatively unskilled labour.
It is often claimed that workfare should take the form of specially set up job creation schemes. The arguments for this do not stand inspection (and nor do a large majority of other arguments for these schemes). Thus workfare jobs should be with existing employers.
To effect workfare in this form, the unemployed are made available to all employers at little or no charge to the latter, while the number of jobs so created is strictly limited so as to prevent employers replacing existing em¬ployees with workfare employees.
The above all amounts to saying that there is a much stronger case for heavily subsidised temporary employment agencies than for subsidised normal employment agencies (Job Centres in the U.K.). Or to put it yet another way, in a totally free market (i.e. in the absence of unemployment benefit) the unemployed have the choice of doing nothing, or doing a job other than their usual one for a while. To date, governments have subsidised only the former. This booklet claims governments should subsidise the latter activity (perhaps at the expense of the former).
|Item Type:||MPRA Paper|
|Original Title:||Workfare: a marginal employment subsidy for public and private sectors (2nd edition)|
|English Title:||Workfare: a marginal employment subsidy for public and private sectors (2nd edition)|
|Keywords:||workfare; "marginal employment subsidy"; "employer of last resort"; unemployment|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand
|Depositing User:||Ralph Musgrave|
|Date Deposited:||23. Mar 2009 07:13|
|Last Modified:||13. Feb 2013 15:29|
Addison, J T (1979) Does Job Creation Work? in Job 'Creation' - or Destruction? London Institute of Economic Affairs.
Armstrong, H, and Taylor, J, (1978) Regional Economic Policy Southampton, Philip Alan.
Ashby, P (1988) A Proposal for Action Credit St. George's House Windsor, England Baily, M N, and Tobin, J, (1978)
Inflation Unemployment Consequences of Job Creation Policies in Creating Jobs (J L Palmer editor) Washington Brookings Institution.
Basset, P, (1991) Companies Give Employment Scheme Cold Shoulder, The Times, 1 January, London.
Bernstein (1982), The Politics of Welfare Cambridge Mass. Abt Books.
Berthoud, R, (1978) Training Adults for Skilled Jobs London, Policy Studies Institute. Beveridge, W, (1942)
Social Insurance andAllied Services London, HMSO.
Binyon, M, (1981), The Russian who Advocates Unemployment, The Times, 20 January, London.
Burton, J, (1987) Would Workfare Work? University of Buckingham Employment Research Centre, Occasional Paper No 9.
Calmfors, L, and Forslund, A, (1991), Real Wage Determination and Labour Market Policies: The Swedish Experience. The Economic Journal, September, p. 1130.
Daniel, W W, (1974) A National Survey of the Unemployed I London, Political and Economic Planning.
Disney, R, and Webb, S, (1991) Why are There So Many Long Term Sick in Britain? The Economic Journal March 1991, p.252.
Fluckiger, Y, Schonenberger, A, and Sarinejadan, M, (1985) Low Unemployment in Switzerland: A Miracle? University of Buckingham, Occasional Paper on Employment Studies No 3. Francomb, M J, (1979)
Job Creation in Canada in Work Creation (M P Jackson and V J B Hanby editors) Farnborough, England, Saxon House.
Garraty, J A (1979) Unemployment in History, Harper & Row.
Friedman, M, (1976) Humphrey-Hawkins in Newsweek 2 August, p.55.
Germanis, P G, (1983) Workfare: Breaking the Poverty Cycle in Mandatory Workfare Programs for Able Bodied Food Stamp Recipients (J Helms Chairman) Washington U.S. Government Printing Office.
Ginsburg, H, (1983) Full Employment and Public Policy: The United States and Sweden Toronto, Lexington Books.
Haveman, R H, (1970) Evaluation of Public Expenditures under Conditions of Unem¬ployment in Public Expenditure and Policy Analysis (J Margolis and R H Haveman, editors), Markham.
Helms, J, (1983) Mandatory Workfare Programs for Able Bodied Food Stamp Recipients Washington U.S. Government Printing Office, (Hearing before the Committee on Agriculture, Nutrition and Forestry, U.S. Senate).
Jackman, R, and Layard, R, (1986) A Wage Tax, Worker Subsidy Policy for Reducing the Natural Rate of Unemployment in Wage Rigidity and Unemployment (Beckerman W, editor), John Hopkins University Press.
Jackson, M P, and Hanby, V J B, (1979) Work Creation, Farnborough, England, Saxon House.
Janerus, I, (1979) Job Creation in Canada in Work Creation (M P Jackson and V J B Hanby editors) Farnborough, England, Saxon House.
Johnson, G, and Tomola, J, (1979), The Fiscal Substitution Effects of Alternative Approaches to Public Service Employment Policy Journal of Human Resources 12 Winter 1979 pp. 3-26
Kesselman, J R, (1978) Work Relief Programs in the Great Depression in Creating Jobs (J L Palmer, editor) Washington Brookings Institution.
Keynes, J M (1936) General Theory of Employment Interest and Money (1973 edition) London, Macmillan.
Layard, R (1986) How to Beat Unemployment, Oxford University Press.
Mattila, J P, (1974) Job Quitting and Frictional Unemployment American Economic Review, March, pp.235-39
Metcalf, D, (1982) Alternatives to Unemployment London Policy Studies Institute. Minford, P, (1985) Unemployment, Cause and Cure, Basil Blackwell.
Palmer, J L, (1978) Creating Jobs Washington Brookings Institution.
Pigou, A C, (1927) Wage Policy and Unemployment Economic Journal September. Rein, M, (1982) Dilemmas of Welfare Policy New York Praeger.
Ridley, F F, (1980) The Job Creation Programme: Administrative Problems of Im¬plementation Public Administration Autumn 1980, pp.261-285.
Roberts, K, Dench, S, and Richardson, D, (1986) The Changing Structure of Youth Labour Markets Department of Employment Research Paper No 59, England, HMSO.
Schiller, R S, and Brasher, C N, (1990) Workfare in the 1980s: Successes and Limits Policy Studies Review Vol. 9, No.4, pp.665-680.
Wachter, M L, (1978) Comments by Michael L Wachter in Creating Jobs (J L Palmer, editor) Washington Brookings Institution.
Wood, L, (1991) Minister to Hear Argument for End of Employment Training Fin¬ancial Times 4 March, p. 8, London.