IDEAS home Printed from https://ideas.repec.org/a/clr/wugarc/y2023v49i2p103.html

Simulating the Economic Effects of an Employer of Last Resort Programme for Austria

Author

Listed:
  • Maximilian Mayerhofer

Abstract

Unemployment in Austria has increased considerably since the late 1970s, reaching its climax during the recent Covid-19 crisis with 409,639 individuals being registered unemployed in 2020. Conventional policy instruments appear insufficient to effectively address the persistent rise in unemployment over the decades. An increasingly prominent policy approach is the employer of last resort (ELR) which offers public employment at a base wage to everyone willing and able to work. The aim here is to simulate the economic effects of an ELR covering all registered unemployed people in Austria in 2020 using a static input-output model. The channel through which the ELR operates is the additional income generated by employing the unemployed. This income is assumed to translate into household consumption expenditure, ultimately spurring aggregate demand. The simulation results indicate that in a middle-bound scenario with respect to the programme wage, the ELR would raise output (Produktionswert) by 2 2% of GDP, value added by 0 9% of GDP, employee compensation by 0 4% of GDP and non-ELR employment by a total of 36,000 full-time equivalents. The results indicate that implementing an ELR programme would not only remove involuntary unemployment but also be accompanied by beneficial macroeconomic effects.

Suggested Citation

  • Maximilian Mayerhofer, 2023. "Simulating the Economic Effects of an Employer of Last Resort Programme for Austria," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(2), pages 103-123.
    • Handle: RePEc:clr:wugarc:y:2023v:49i:2p:103
    as

    Download full text from publisher

    File URL: https://emedien.arbeiterkammer.at/viewer/pdf/AC08890876_2023_2/wug_2023_49_2_0103.pdf
    File Function: PDF-file of article
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gregg, Paul & Tominey, Emma, 2005. "The wage scar from male youth unemployment," Labour Economics, Elsevier, vol. 12(4), pages 487-509, August.
    2. Tamara Premrov & Leonard Geyer & Nicolas Prinz, 2022. "Arbeit für alle? Kosten und Verteilungswirkung einer Jobgarantie für Langzeitbeschäftigungslose in Österreich," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 48(1), pages 59-82.
    3. Michael J. Murray, 2012. "The Regional Benefits of the Employer of Last Resort Program," Review of Radical Political Economics, Union for Radical Political Economics, vol. 44(3), pages 327-336, September.
    4. Rainer Eppel & Ulrike Famira-Mühlberger & Thomas Horvath & Ulrike Huemer & Helmut Mahringer & Hubert Eichmann & Julia Eibl, 2018. "Anstieg und Verfestigung der Arbeitslosigkeit seit der Wirtschaftskrise. Entwicklung, Ursachen und die Rolle der betrieblichen Personalrekrutierung – Synthesebericht," WIFO Studies, WIFO, number 62228, October.
    5. L. Randall Wray, 1997. "Government as Employer of Last Resort: Full Employment without Inflation," Economics Working Paper Archive wp_213, Levy Economics Institute.
    6. Hyman P. Minsky, 1968. "Effects of Shifts of Aggregate Demand upon Income Distribution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 50(2), pages 328-339.
    7. Dimitri B. Papadimitriou, 2008. "Promoting Equality Through an Employment of Last Resort Policy," Economics Working Paper Archive wp_545, Levy Economics Institute.
    8. Scott T. Fullwiler, 2007. "Macroeconomic Stabilization through an Employer of Last Resort," Journal of Economic Issues, Taylor & Francis Journals, vol. 41(1), pages 93-134, March.
    9. Pavlina R. Tcherneva, 2019. "The Federal Job Guarantee: Prevention, Not Just a Cure," Challenge, Taylor & Francis Journals, vol. 62(4), pages 253-272, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ekkehard Ernst & Rossana Merola & Jelena Reljic, 2025. "Fiscal Policy Instruments for Inclusive Labor Markets: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 39(5), pages 2020-2041, December.
    2. Hannah Quinz & Jörg Flecker, 2023. "„Marienthal reversed“: Wie wirkt eine Arbeitsplatzgarantie für langzeitarbeitslose Menschen im österreichischen Kontext?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(3), pages 79-104.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Taylor & Francis Journals, vol. 40(2), pages 139-155, January.
    2. Hannah Quinz & Jörg Flecker, 2023. "„Marienthal reversed“: Wie wirkt eine Arbeitsplatzgarantie für langzeitarbeitslose Menschen im österreichischen Kontext?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(3), pages 79-104.
    3. Andrea Bonanomi & Alessandro Rosina, 2022. "Employment Status and Well-Being: A Longitudinal Study on Young Italian People," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(2), pages 581-598, June.
    4. Thomas Barnay, 2016. "Health, work and working conditions: a review of the European economic literature," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(6), pages 693-709, July.
    5. Dickson, Matt & Donnelly, Michael & Kameshwara, Kalyan Kumar & Lazetic, Predrag, 2024. "The Scarring Effect of Graduate Underemployment: Evidence from the UK," IZA Discussion Papers 17364, Institute of Labor Economics (IZA).
    6. Michelle Yin & Garima Siwach & Dajun Lin, 2023. "Vocational Rehabilitation Services and Labor Market Outcomes for Transition‐Age Youth with Disabilities in Maine," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(1), pages 166-197, January.
    7. Matteo Picchio & Stefano Staffolani, 2019. "Does apprenticeship improve job opportunities? A regression discontinuity approach," Empirical Economics, Springer, vol. 56(1), pages 23-60, January.
    8. Ferdi Kesikoğlu & Ali İhsan Balcı & Ersin Eraslan, 2025. "Determination of the Convergence of Turkey and European Union Countries in Terms of Youth Labor Indicators by Cluster Analysis," Sustainability, MDPI, vol. 17(16), pages 1-25, August.
    9. Cockx, Bart & Ghirelli, Corinna, 2016. "Scars of recessions in a rigid labor market," Labour Economics, Elsevier, vol. 41(C), pages 162-176.
    10. Jon Wisman, 2013. "The Growth Trap, Ecological Devastation, and the Promise of Guaranteed Employment," Challenge, Taylor & Francis Journals, vol. 56(2), pages 53-78.
    11. Stefan Eriksson & Dan-Olof Rooth, 2014. "Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment," American Economic Review, American Economic Association, vol. 104(3), pages 1014-1039, March.
    12. Bart Cockx & Matteo Picchio, 2013. "Scarring effects of remaining unemployed for long-term unemployed school-leavers," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 176(4), pages 951-980, October.
    13. Sandra M. Leitner, 2022. "A skill‐specific dynamic labour supply and labour demand framework: A scenario analysis for the Western Balkan countries to 2030," LABOUR, CEIS, vol. 36(4), pages 471-504, December.
    14. Machin, Stephen & McNally, Sandra & Ruiz-Valenzuela, Jenifer, 2020. "Entry through the narrow door: The costs of just failing high stakes exams," Journal of Public Economics, Elsevier, vol. 190(C).
    15. Zwysen, Wouter, 2013. "Where you go depends on where you come from: the influence of father’s employment status on young adult’s labour market experiences," ISER Working Paper Series 2013-24, Institute for Social and Economic Research.
    16. Möller Joachim & Umkehrer Matthias, 2015. "Are there Long-Term Earnings Scars from Youth Unemployment in Germany?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(4-5), pages 474-498, August.
    17. Devillanova, Carlo & Raitano, Michele & Struffolino, Emanuela, 2019. "Longitudinal employment trajectories and health in middle life: Insights from linked administrative and survey data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 40, pages 1375-1412.
    18. Chiara Cavaglia & Sandra McNally, 2025. "Young people, human capital investment and the Great Recession," CVER Research Papers 042, Centre for Vocational Education Research.
    19. Rannenberg, Ansgar, 2009. "The Taylor Principle and (In-) Determinacy in a New Keynesian Model with hiring Frictions and Skill Loss," SIRE Discussion Papers 2009-48, Scottish Institute for Research in Economics (SIRE).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:clr:wugarc:y:2023v:49i:2p:103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sepp Zuckerstaetter (email available below). General contact details of provider: https://edirc.repec.org/data/awakwat.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.