Musgrave, Ralph S. (2009): Creative destruction of 'government as employer of last resort'.
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The claim that the unemployed should be allocated to ‘government as employer of last resort’ schemes (like the WPA in the US in the 1930s) has major flaws. One flaw is the assumption that public sector work of this sort is less inflationary than private sector employment. A second flaw is the idea that WPA type schemes should be separate from existing employers. Once these two flaws are removed, WPA turns into a temporary employment subsidy that creates jobs with existing employers public and private.
A second argument leads to the same ‘temporary employment subsidy’ conclusion: as unemployment falls, the marginal product of labour falls, till NAIRU is reached. The above subsidy compensates for this fall, and thus reduces NAIRU.
Yet a third argument leads to the same conclusion: this temporary subsidy imitates a perfect labour market, a zero unemployment scenario. Thus this subsidy should facilitate a move towards zero unemployment.
|Item Type:||MPRA Paper|
|Original Title:||Creative destruction of 'government as employer of last resort'.|
|Keywords:||Unemployment; employment subsidy; employer of last resort; work progress administration.|
|Subjects:||J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J60 - General
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J63 - Turnover; Vacancies; Layoffs
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J68 - Public Policy
|Depositing User:||Ralph Musgrave|
|Date Deposited:||11. Dec 2009 07:49|
|Last Modified:||12. Feb 2013 05:36|
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Private Sector "Employer of Last Resort". (deposited 13. Nov 2009 17:31)
Private Sector "Employer of Last Resort". (deposited 31. Mar 2010 05:59)
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