Why is the job guarantee wage the effective minimum wage and labor standard for the economy?
The job guarantee is a “public option for work” open to all individuals regardless of their income or labor market status. As a result, the work and pay conditions offered in the job guarantee will become the effective standard for the entire economy. There is some empirical evidence that illustrates this effect (Tcherneva, 2012).
Given that the job guarantee offers essential benefits not available to all private sector workers (e.g., guaranteed health insurance in the US), some people may be drawn to the program. To retain them, private firms will need to match not just the pay but also the benefits and working conditions that the job guarantee establishes. This ‘disruptive’ aspect of the job guarantee is designed to incentivize firms to raise wages, improve working conditions, and offer more stable employment. The implementation of the job guarantee can be phased in gradually to allow sufficient time for firms to adapt.
Tcherneva, Pavlina R. 2012. “Beyond Full Employment: The Employer of Last Resort as an Institution for Change”, Working Paper #732, Levy Economics Institute, Annandale-on-Hudson, September.
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