Why is the job guarantee a better anti-inflationary policy than the NAIRU?
Currently, Central Banks around the world use unemployment to control inflation. The non-accelerating inflation rate of unemployment (NAIRU) is the benchmark policy guide for deciding when to step on the brakes and slow down economic growth. If, for example, the Federal Reserve deems that the pool of the unemployed has shrunk to “undesirable” levels, it raises interest rates with the intent to reduce purchasing power, increase unemployment, and hopefully remove inflationary pressures.
By contrast the job guarantee expands in recessions (deflationary periods) and contracts in expansions (inflationary periods), responding counter-cyclically to changes in aggregate demand by establishing an above-poverty wage floor, providing jobs for all who need them, producing socially useful output, and reducing the outsized costs of unemployment.
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