Carlos García, José Luis de la Fuente – Is it Time for a Job Guarantee Programme in Spain?

If Spanish society provides for mandatory schooling and universal health care, why not implement a job guarantee for those who want it?

Carlos García Hernández is managing director of the publishing house Lola Books

José Luis de la Fuente O’Connor @jlfuenteoc1 is Professor at the Polytechnical University of Madrid

Originally published in Spanish in Cinco Días (El País)

Translated and Edited by BRAVE NEW EUROPE

Is it time to launch a job guarantee program in Spain? We think so, and we base our conviction on events that are taking place all over the world. Firstly, the US Federal Reserve has turned its policies of recent decades around to give more importance to achieving full employment than to controlling inflation. Second, the Green New Deal has made its appearance on the political scene. The aim of the Green New Deal is to make life on our planet sustainable and to control the foreseeable consequences of climate change by incorporating full employment policies to achieve this. This is the framework for the program we are proposing.

All this makes us think that in an advanced society such as ours it is no longer an illusion to defend the veracity of this statement: the only way to achieve permanent full employment is to prohibit involuntary unemployment, and therefore it is necessary to implement a program that guarantees that everyone who wants and can work has access to a decent job.

If our society provides for universal health care and mandatory schooling up to a certain age at the expense of the state, why not argue that anyone who wants to work can be guaranteed access to a job? The right to universal health care is a ban on deaths due to lack of access to medical services. Similarly, the right to education is a prohibition of the lack of basic education. Therefore, guaranteed work would be a prohibition of involuntary unemployment. Employment provides people with dignity and respect, both spiritual and intellectual, as well as the opportunity to participate in society better and more actively and efficiently.

A Spanish translation of Pavlina Tcherneva’s book “The Case for a Job Guarantee” (En favor del Trabajo Garantizado) is being launched these days. It is full of facts and arguments explaining in detail what such a program should consist of and how to implement it correctly.

After reading Tcherneva’s book we can conclude that the massive unemployment we have suffered for decades in Spain, long before the Covid-19 crisis, is due to three phenomena.

The first refers to the fact that this unemployment is a monetary phenomenon. This is because in our country there are 3,802,814 people who offer their labour in exchange for a salary, but nobody hires them.

Secondly, unemployment in Spain is a political problem. This problem stems from the lack of monetary sovereignty. If Spain were to issue its own currency, the state could hire the 3,802,814 unemployed, since monetarily sovereign states don’t suffer financial restrictions in their own currency and do not need to collect taxes or issue debt in order to be able to spend. Therefore, unemployment in monetarily sovereign states is a political choice. A sovereign Spain could have a public spending policy that guarantees permanent full employment by law.

Third, unemployment in Spain is an administrative phenomenon. The best way to organise a policy of permanent full employment in a sovereign Spain would be through the implementation at municipal level of job guarantee programs based on employment buffer stocks. In this way, there would always be a reserve of job offers in the employment offices. Therefore, anyone who came to these offices would leave with a public service job with a decent salary and working conditions.

Moreover, in a situation where there is no raw materials crisis, this job guarantee scheme would also serve as a method for achieving price stability. The labour factor is present in the creation of all goods in the economy. Therefore, regulating the price of labour through the job guarantee would also stabilise the price of all goods in the economy. In this way, full employment would play the role of an automatic stabiliser that unemployment now plays. In times of economic crisis, the size of the job guarantee program would increase so that demand and production of goods and services would not collapse. In times of economic boom, the wage level in the economy would increase, but it would remain close to that of the job guarantee. In this way, not only would full employment be compatible with price stability, but price stability would be the consequence of full employment.

The cost of implementing a job guarantee program for three million people in Spain with a gross salary of 1,300 euros per month would be more or less 45, billion euros/year, i.e. approximately 4.5% of GDP. This figure would be reduced by the unemployment benefits currently paid to the unemployed that wouldn’t have to be paid anymore, which would substantially lessen the total cost of the program. If, in addition, the materials and services with which the job guarantee program would be developed were to involve an outlay of around 10 billion euros, the net GDP growth would be between 1.8 and 2.5%. This growth would be generated by the production and consumption of the three million people who would be leaving unemployment. The number of new jobs induced by this activity would also mean the creation of another half million jobs. A guaranteed work plan in Spain would therefore cost around the 45 billion euros referred to above.

Such measures would not be impossible within the European Union and the euro if the European Union were to change its treaties. Above all, it would be necessary for the 3% public deficit limit set by the Stability and Growth Pact to be removed. If this were to happen and the European Union were to recognise that the correct level of public deficit is that which guarantees full employment without inflation thanks to job guarantees based on employment buffer stocks, the problem of mass unemployment in Spain could be solved within the European Union. However, there is no indication that the European Union will reform its treaties in this direction. Consequently, within the European Union and the single currency zone there will be no end to mass unemployment.

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1 Comment

  1. “….unemployment in Spain is a political problem. This problem stems from the lack of monetary sovereignty”. That rather conflicts with the fact that when Spain DID HAVE monetary sovereignty, i.e. before it joined the EZ, unemployment was about the highest in Europe.

    Second, the article makes the common claim that JG would give us “price stability”. I fail to see how. In particular, given excess demand for particular types of labour and products in the economy in general, why does JG prevent the price of those types of labour and products being bid upwards? Obviously JG might improve the employability of those involved, perhaps via incorporating training. But any such training is bound to be low quality compared to say a proper university degree or 2 or 3 year apprenticeship.

    Third, the above article, like the vast majority of articles on this subject, fails to address the following point. JG schemes inevitably involve a high “unskilled to skilled labour ratio”. Indeed the above article makes NO ALLOWANCE AT ALL for the costs of skilled labour needed to run JG schemes. And as the economics text books explain, the more the latter ratio diverges from the normal ratio found with regular employers, the lower will output per head be. That helps explain why the JG scheme implemented in the US in the 1930s, the WPA, was often referred to as “We Piddle Around”.
    The latter poor skilled/unskilled ratio can be remedied by subsidising JG people into work with EXISTING employers (public and private): something which has actually been implemented in Switzerland, though I don’t know if that Swiss system is still up and running.

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