“Yigongdaizhen” and job guarantee: a case in Shanghai in the early 1950s

“Yigongdaizhen” (以工代赈) was a Chinese-style government direct employment policy that shared some core features with Job Guarantee. This study explores the history of Yigongdaizhen in the early 1950s and rediscovers its value as an employment policy. This case study provides empirical evidence of the feasibility of the Job Guarantee in developing countries. Moreover, it provides historical experience for implementing Job Guarantee programs, the most important of which is how the Communist Party of China (CPC) government overcame two major challenges. First, Yigongdaizhen in Shanghai was in an extreme macroeconomic environment with both inflation and unemployment problems because of the conflict between limited real resources and aggregate demand. The CPC government knew that the main problem was not how to finance its fiscal expenditure but how to reallocate limited real resources. It adjusted its fiscal structure, which effectively reallocated real resources to Yigongdaizhen and stabilized inflation. Second, the CPC government lacked experience in implementing Yigongdaizhen. It designed a decentralized management model for Yigongdaizhen that featured democratic management and policy experiments and facilitated its learning process to develop management capabilities.