Conference Agenda

Abstract

This paper examines the interplay between labour markets, income distribution, economic structure, and growth. An attempt to challenge the neoclassical synthesis's neglect of the structure and income distribution in macroeconomic analysis, arguing that it's crucial for understanding growth patterns and their sustainability. The Employment Guarantee Program is presented as the alternative to stabilize the economy.

Research questions

The central research question revolves around identifying the factors contributing to sustainable growth that simultaneously reduce poverty and increase income inequality. This question is explored through the lens of different macro regimes and their impact on market structures and income distribution.

Methodological approach

The methodology employs a taxonomy of firms following Rima (2000) based on two dimensions: market orientation (external or internal) and market power (price setter or price taker). This framework allows to analyse four types of enterprises and their distinct relationships with the labour market and income distribution. The analysis integrates both functional and personal income distribution, examining intra-class conflict alongside the classical struggle between these factors. This framework is used to compare two contrasting periods in Argentina: the Convertibility regime (1991-2000) and the Post-Convertibility era (2003-2009). The analysis draws on historical data and economic theory, particularly Post-Keynesian economics, to interpret the observed patterns. A proposal of EGP is assessed and presented as automatic stabilizers of the economy.

Contributions to the literature

Re-emphasizes the significance of functional income distribution in macroeconomic analysis. Introduces a nuanced taxonomy of firms that goes beyond simple classifications, allowing for a more precise understanding of their roles in the economy. It offers a analysis integrating the interplay between exchange-rate regimes, market structures, income distribution, and employment. It provides a strong case for Employment Guarantee Programs (EGPs) as automatic stabilizers, offering a policy recommendation to mitigate economic volatility and reduce inequality.

The study concludes that while a competitive exchange rate is a necessary condition for sustainable growth, it's not sufficient. Employment Guarantee Programs, acting as a counter-cyclical measure, emerge as a crucial policy tool to manage distributional conflicts, stabilize the economy, and provide social protection. The EGPs are presented not as temporary social programs but as a permanent and flexible institutional mechanism capable of acting as an automatic stabilizer, smoothing economic cycles and safeguarding the livelihoods of the most vulnerable members of society

According to current macroeconomic models there is a need to maintain a “natural rate of unemployment” to contain inflation. Put simply, unemployment is considered an (inevitable) cost of price stability. Even some Post Keynesian economists consider the, so-called, balance of payments (BOP) constraint imposes a trade-off between inflation and unemployment in developing countries. On the contrary, what has come to be known as Modern Money Theory (MMT), from inception, argued that full employment and price stability can be achieved simultaneously, through a labor buffer stock or Job Guarantee (JG). In addition to the theoretical literature on the JG, there have been a number of “real world” experiences. In particular, Argentina´s Jefes y Jefas de Hogares Desocupados program (hereinafter, Jefes) has been considered, in the MMT literature, as a JG case study. While the Jefes and its reform have been addressed in the past, this article considers the rationale for such reform within the broader framework of an economic policy based on two fundamental pillars of social inclusion: the expansion of social security, and "Keynesian" demand-side policies that would drive economic growth and, thus, job creation.

While both job creation and expansion of social security allowed for a steep decline in poverty and extreme poverty rates during the 2003-2015 period, reversing the increasing trend of the 1990s, the economy did not get to full employment; in fact, jobs were lost for the less skilled. Not only “Keynesian” demand policies did not create true full employment, but they proved to be inherently inflationary. Indexation of public wages, social security payments and, virtually, every price paid by the government compounded the problem and institutionalized inflation.

After the fall of the currency board, in 2002, Argentina defaulted on its foreign currency public debt and implemented the Jefes, which could have been expanded to achieve full employment and an internally stable currency. Unfortunately, the Jefes was gradually faded-out, along with the potential benefits of transforming it into a true JG. As if this were not enough, Argentina is no longer a “sovereign” currency issuer. It is imperative to retake the road once taken.

Labor markets and, more generally, the world economy is going through an unprecedented transformation driven by technological, environmental and demographic changes. In this context, MMT offers practical solutions for achieving politically determined goals -like, for example, sustainable development goals-. Very especially, the JG can deliver full employment (for all) now.

Minsky’s (1965) Job Guarantee program, originally proposed in the mid-1960s, was designed to address unemployment and poverty. However, as Kalecki (1943) argued, full employment may be technically feasible but politically challenging due to class struggle, a contradiction that we term the ”Kaleckian dilemma.” This paper aims to explore how lessons from the Swedish Rehn-Meidner plan—which achieved low unemployment and controlled inflation for over three decades—might help to deal with this dilemma. While the current Job Guarantee literature outlines features that could partially replicate the Active Labor Market Policies of the Swedish plan, this paper contributes by suggesting an additional desirable feature: the establishment of an institutional framework that encourages collective worker bargaining in wage negotiations. Drawing on the Rehn-Meidner experience and building on Setterfield et al. (2023) approach to the Kaleckian dilemma, we suggest creating a tripartite centralized bargaining council (mediated by the

government) to negotiate wage adjustments at the national level, supporting the Job Guarantee program dealing with the Kaleckian dilemma by increasing the social bargain index to partially offset the reduction in unemployment cost.

In addition to India, which has established a rural employment guarantee since 2003, various other countries are testing, exploring and working towards establishing employment guarantees to respond to some of they key employment challenges. Other countries are looking at how they can help address long-term unemployment, while in others there is a strong focus on youth unemployment or underemployment and crisis related unemployment among specific groups. This session will explore contemporary experiences in large scale public employment programems and empoyment guarantees, from countries as diverse as India, France, South Africa, the Philippines, Iraq and Austria and share some of the lessons emerging, thus helping to position these policy instruments extremely relevant to addressing some of the most persitent and difficult employment challenges today.