Maintaining Full Employment: Public Service and Economic Stabilization

Project Date:
Jun 2000
Award Amount:
$35,000
Project Programs:
Future of Work

Welfare reform legislation mandates that recipients of government aid find jobs, regardless of business cycle conditions. But when demand for workers in the private sector slows, jobs are hard to come by for low-skilled workers. Edward Nell and Raymond Majewski, economists at the New School University, propose an Employer of Last Resort (ELR) program, by which government would employ workers to produce valuable public goods when job creation is slow in the private sector, and give them job training and placement services. But such a program would have macroeconomic effects, because of its size and its intervention on the supply and demand sides of the labor market. With support from the Foundation, Nell and Majewski will run a computer simulation of the national economy under their ELR program, testing the costs and benefits of the ELR under different conditions: varying rates of unemployment, monetary policy approaches, and supply and demand shocks.

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