Another May day (Labour day) went by and writers, intellectuals, economists, social critics could not help but pause and wistfully remember the most divisive political and economic thought that circumscribed a moral and economic hyperventilation of 200 years, and perhaps beyond.  “Working men of all countries unite…” wrote the young philosopher and journalist in the making, Karl Marx.

Karl Marx is both a figure of contention and massive intellectual fervour to the world of an economist. From Marx, “a capitalist”[1]- who is often derided to have spent more time studying capitalism than propagating alternatives to it, we are chillingly reminded of the greatest threat of our times, of capitalism, and that which looms like a dark cloud in a sloppy plain- the problem of unemployment. From the far developed United States, to the developing “elephant” economy of India, the persistent lack to both create and sustain jobs is a matter of concern, ignoring the easy use of the term “jobless growth”, with unemployment rate within the US observed to be one of its highest at 4.1% this March. [2]

With the gift of Keynesian economics, we no longer live under the unbridled delusion of laissez faire as the last word, and as economic thought has progressed, we have familiarised ourselves with the concept of state postulated Employment Guarantee, or rather the state as the Employer of Last Resorts (ELR). The idea became more relevant post the industrial revolution, based on the idea that capitalism if left to its devices will never gravitate to full employment levels. For more than three centuries neoclassicals took unemployment to be a transitory phenomenon and denied the existence of voluntary unemployment. However, the push back of the Great Depression (25% unemployment rate) and revelations of Keynes, propelled the US government to introduce the New Deal program, giving rise to the earliest relief to the “reserve army of labour”[3].

The literature first proposed by John H.G. Pierson proposed an Economic Performance Insurance, which would institute the state as an employer of last resorts, ensuring ‘guaranteed’ full employment. However, it was not enough to ensure employment, but to sustain it in the long run, which is only possible with high levels of consumer demand. To avoid unforeseen scenarios of ‘oversaving’, he emphasized on the need for government to guarantee the “volume of consumer spending that is consistent with the full employment level of production”. That is, it is not enough to ensure current market demand, but also future markets.[4]

In the present day, in an ambitious take the Democrats rallying behind the rackety Bernie Sanders can be found triggering new debates on ‘job guarantee’. [5]A job for everyone sounds a novel idea, and displays too suspiciously benevolent a state, but there is a barrage of reasons to be sceptical. 

Firstly, job guarantee is too large a burden on the exchequer with estimated as $378 billion annually in the first five years and $415 billion each of the following five years for the US itself. [6]  Apart from the issue of the bills, critics have for long had doubts about its “capability to deal with structural unemployment, inflation, and logistical problems”. [7] 

Another critique of such programs is the fear that a diminishing “reserve army of labour” increases labour bargaining power, putting pressure on the wage-inflation spiral. However, a counter argument suggests that “a skilled pool of employable ELR workers presents a greater “threat” to private sector employees than the traditional reserve army of the unemployed”. Thus, there should not fear of runaway inflation. Of course, there can be expected a short run pressure on businesses to increase their prices to be set competitively as set by the government[8]. But if we go by the term Marx coined, “socialization of investment”, perhaps to maintain a stability in price and low unemployment, job guarantee is the way to go in the long run.  

“I expect to see the State . . . taking an ever-greater responsibility for directly organizing investment . . .” [p. 164]-Das Kapital

However, the central problem with employment by the state lies in its implementation, and top-to-bottom corruption. And thereby lies the tale.

After World War II the Swedish implemented a full employment model that has garnered immense interest. Introduced by two Swedish economists- Gösta Rehn and Rudolf Meidner – it emphasized strongly on “right to work” than “right to income”. Apart from guaranteeing work to individuals who seek them, it essentially entailed “solidaristic wage policies within but also between sectors” with the help of its strong trade unions, which left firms which were unable to withstand international competition to potentially shut down, the driving factor being that employment had to be “defended”, owing to the idea what Schumpeter likened as “creative destruction”.

Most certainly such a policy leads to massive downsizing in the short run. It is here that they envisioned the role of public authorities, in reintegrating people into the labour market, especially the ones victims of structural unemployment, and developing their productive capacities. [9]Without a doubt these programs were very expensive, and along with other Nordic countries Sweden too had to incur tremendous amount on public facilities. But the results have been favourable.

Unemployment rate in Sweden kept well under 3% until the late 1980’s, which saw opposition from white collar unions to the reduction of wage differentials between high and low profit industries, as well as the gradual localization of bargaining.

Ever since then, Sweden has seen unemployment rates that have well crossed its familiar low rates fluctuating between 4-7%, reaching a record high 9.6% in July 1993. [10]

The Indian Parliament in 2005 passed the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) which chose 200 districts out of 600 rural  districts in India for undertaking rural projects that aimed at guaranteeing 100 days of employment to a member of every household, with an estimated expenditure of 1.3% of GDP in its first year of implementation.[11]Included in this employment scheme is the guarantee that if the government is unable to provide a job to a qualified applicant within 15 days of an application being submitted, the applicant will receive unemployment insurance. This attempt by India to target the rural population, which accounts for 75% of its population, widens the scope of the idea “Employer of Last Resorts” for the state, regardless of still being a developing country.

After more than a decade of its inception, it is imperative to critically examine NREGA. Often chided for its mismanagement and lack of administrative backup for providing for grievances and even discriminatory practises [12], it is plagued by concerns of barely fulfilling even 50 days out of its 100-days guarantee within the act. In 2006-07 after it was implemented, only 17 days of employment were available on average per rural household, which though rose to an average number of days worked per householder to 54, but still way below the ceiling. [13]The average days of employment provided per Household in as recent as 2017-18 is as low as 45.87 out of the guaranteed 100 days. [14]It must be noted that it is not the amount of work, but also the wage that has cast aspersions to this scheme. Wage delays have been increasingly a case of worry for the Indian states, with the figure going to as huge as 78.88% of the total Wage Liability (Payment Due) under MGNREGA by 2016. [15]Moreover, despite revisions in its wages, the highest ceiling on per day wage is nearly just 3.5 dollars. [16]

Certainly there is some silver lining to the proposed job guarantees that are making the rounds. In the Indian context, a study done by a group of economists — UC San Diego's Karthik Muralidharan and Paul Niehaus and the University of Virginia's Sandip Sukhtankar gives some astounding results. They estimated that the job guarantee scheme in Andhra (one state with such scheme) increased not only earnings for low-income households by 13.3 percent but 90 % of that increase is due to higher wages and increased work in the private sector, not the job guarantee program itself. Further, it also increased employment in the private sector! [17]