The “Bite-Sized” Explanation of The Job Guarantee as an Automatic Stabilizer

The national government funds the Job Guarantee through deficit spending.

The Job Guarantee creates a pool of employed workers outside of the private sector which the private sector can hire from at any time.

When the economy is doing well, demand for more goods and services pressures business to increase production. To do that, business needs labour.

Business hires workers out of the Job Guarantee and the Job Guarantee pool shrinks. As each worker leaves the Job Guarantee for private sector employment, that is another worker that the national government is no longer paying. So, as the Job Guarantee pool shrinks, the national government’s deficit also shrinks automatically, reflecting the smaller payroll.

When the economy is doing poorly, demand for more goods and services is less and so, business reduces production, laying off workers.

When business lays off workers, those workers leave the private sector, entering the Job Guarantee and the Job Guarantee pool expands. As each worker enters the Job Guarantee from private sector employment, that is another worker that the national government is now paying. So, as the Job Guarantee pool expands, the national government’s deficit also expands automatically, reflecting the larger payroll.

No politicians making crack-pot decisions on job creation.

The state of the economy automatically decides the appropriate level of the federal deficit to maintain full employment indefinitely.