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Government as Employer of Last Resort: Full Employment Without Inflation


  • L. Randall Wray

    (The Jerome Levy Economics Institute)


Since, WWII, it has been the stated policy of the U.S. government to simultaneously pursue high employment and stable prices. Paradoxically, neither accepted economic theory nor practical experience appears to indicate that high or full employment is even possible with stable prices. In this paper, we argue that stable prices and truly full employment are indeed possible. In fact, the Humphrey-Hawkins Act sets the goalpost too low; we argue that the government can guarantee a zero unemployment rate, defined as all who are ready, willing, and able to work at the going wage will be able to find a job--only those unwilling (or unable) to work at the going wage would be left without work (which are not normally counted as unemployed). The government does this by acting as the employer of last resort, offering to hire all who show up to work at a fixed wage. In doing so, the government ensures that all who are ready, willing, able to work at that wage will be provided a job. At the same time, by setting this wage, the government will provide a price anchor that will impart price stability to the system, that is, we will show that a true full employment policy is not, in itself, "inflationary" and indeed could reduce inflationary pressures under some conditions. Further, the full employment policy would help to reduce economic fluctuations (the "business cycle") through a powerful built-in automatic stabilizer feature.

Suggested Citation

  • L. Randall Wray, 1998. "Government as Employer of Last Resort: Full Employment Without Inflation," Macroeconomics 9802006, EconWPA.
  • Handle: RePEc:wpa:wuwpma:9802006 Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 56; figures: included

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    References listed on IDEAS

    1. J. MUYSKENS & C. de Neubourg, 1986. "Introduction," Discussion Papers (REL - Recherches Economiques de Louvain) 1986031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. William J. Baumol & Edward N. Wolff, 1996. "Protracted Frictional Unemployment as a Heavy Cost of Technical Progress," Economics Working Paper Archive wp_179, Levy Economics Institute.
    3. Marlene Kim, 1997. "The Working Poor: Lousy Jobs or Lazy Workers?," Macroeconomics 9712002, EconWPA.
    4. Marlene Kim, 1997. "The Working Poor: Lousy Jobs or Lazy Workers?," Economics Working Paper Archive wp_194, Levy Economics Institute.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. ¿Ingreso universal o trabajo universal?
      by Lucas Llach in La ciencia maldita on 2009-08-17 05:02:49
    2. Some Links & More on Ireland
      by duncanseconomicblog in Duncan's Economic Blog on 2009-12-08 16:19:15


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    Cited by:

    1. Jon D. Wisman & Michael Cauvel, 2016. "Why Has Labor Not Demanded Guaranteed Employment?," Working Papers 2016-02, American University, Department of Economics.
    2. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Springer;The Association for Social Economics, vol. 40(2), pages 139-155, July.
    3. Dimitri B. Papadimitriou, 1998. "(Full) Employment Policy: Theory and Practice," Economics Working Paper Archive wp_258, Levy Economics Institute.
    4. Jon Wisman, 2013. "The Growth Trap, Ecological Devastation, and the Promise of Guaranteed Employment," Challenge, Taylor & Francis Journals, vol. 56(2), pages 53-78.
    5. Jon D. Wisman & Aaron Pacitti, 2017. "Guaranteed Employment and Universal Child Care For a New Social Contract," Working Papers 2017-05, American University, Department of Economics.
    6. Mathew Forstater, 1999. "Savings-Recycling Public Employment: An Assets-Based Approach to Full Employment and Price Stability," Macroeconomics 9908003, EconWPA.
    7. Mathew Forstater, 1998. "Selective Use of Discretionary Public Employment and Economic Flexibility," Macroeconomics 9802014, EconWPA.
    8. William Darity, 2013. "From Here to Full Employment," The Review of Black Political Economy, Springer;National Economic Association, vol. 40(2), pages 115-120, June.
    9. Tony Aspromourgos, 2000. "Is an Employer-of-Last-Resort Policy Sustainable? A review article," Review of Political Economy, Taylor & Francis Journals, vol. 12(2), pages 141-155.
    10. Julio Lopez-Gallardo & Luis Reyes-Ortiz, 2011. "Effective Demand in the Recent Evolution of the US Economy," Economics Working Paper Archive wp_673, Levy Economics Institute.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics


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