This article concerns the concept of ELR (Employer of Last Resort) – the idea that government should apply a policy of full employment at living wage (not "minimum wage" as we know in Israel – since this wage is impossible to live with!).
Once the government adapts ELR – it takes care of providing any number of jobs required to complement the "natural" jobs (jobs existing prior to introducing ELR) and reach full employment. "Full employment", in William Vickrey's words, is the ability to get a job within 48 hours (William Vickrey (1914-1996) was a Nobel prize laureate in Economics).
Note that the current unemployment figures in Israel are greatly underestimated, since much of the current employment is at "minimum wage" and even below it.
ELR is a well known concept in the USA, the European Union, the World Bank and the OECD, to name a few. ELR was advocated by the late economists Hyman Minsky and William Vickrey. Some of its currently salient proponents are affiliated with the Levy Economic Institute. ELR is high on the publication agenda of Randal Wray and Mathew Forstater of the Levy Institute.
Endorsing an ELR program is not a quick fix. It requires careful planning and setting of a graduated time table. It requires much work for coordinating it with non-ELR jobs and dynamically changing the number of jobs in the ELR program in order to avoid inflation.
Introduction
ELR is hailed as solution to systemic failures to provide decent employment to significant part of the population. Unemployment and indecent employment are major factors in creating poverty and extreme inequality. The recent events in Tunisia and Egypt are a dramatic manifestation of the consequences of these systemic failures.
As indicated, ELR claims to present a solution. ELR is supported by many economists. The Levy Institute is haven for some of its salient proponents. They have been advocating it for many years now. There is little progress in making ELR a household brand name for correct economic policy. At the same time there is no serious discussion of alternative solutions.
Why is the idea of ELR so marginalized? Why do so few of the Economics discourse leaders and decision makers mention it? Why is the public left with no prospects for improvement?
We should not satisfy ourselves with blaming it on Neo Liberals and corrupt politicians. The fact is that members of the public, even ones who are familiar with concept of ELR, do not consider it a solution for lack of detail regarding how it can actually be implemented. Many ELR propositions have not taken care of "the last mile" – how a practical ELR program gets Joe and Jill do a meaningful job – even one with prospects for promotion out of basic ELR wage.
The purpose of this article is to present ideas regarding the following question: "How can an ELR program systematically instill meaningful content into the jobs it creates?"
The answer to this question fills a vital gap in ELR propositions. It will also enable its proponents to present ELR to the general public and to decision makers in the political sphere as a viable solution to unemployment-/ indecent employment-generated poverty and inequality. Tunisia and Egypt events make answering this question ever more urgent.
"The Hillock and the Valley" parable
Said R. Abba: "… Two men, one of whom had a hillock in his field and the other a valley (or pit); he who had the valley, when he saw the hillock, said: If one would sell it to me, I would buy it to fill tip the valley. Then it happened they met, and he who had the valley said: Sell me the hill. And he answered: Take it for nothing, so that you remove it."
(excerpt from the Babylonian Talmud, Tract Megillah, translation: Michael L. Rodkinson, http://www.sacred-texts.com/jud/t04/meg02.htm, p.35)
The "Hillock and the Valley" parable tells the whole story, once we find what the Hillock and the Valley should be likened to. An ELR program creates a hillock of new employees. Just adding them to the economy is problematic. What are they supposed to do? The best thing we could do is finding a suitable valley to fill. Where should we look for the valley?
Filling up the Valley of Neglect
In fact, there's no need to look around very far. Most countries have had their share of neglect. Crumbling Infrastructure, collapsing education and health systems, traffic accidents, crime, deteriorated environment and social problems are sources of damage draining real wealth out of the economy. Most countries have ample plans and experts who propose effective corrective measures in their respective areas of expertise. Execution of such plans requires recruiting many new employees spanning a wide spectrum of education and skill – from unskilled to experts. A Benefit-Cost analysis for each individual plan can serve a means for prioritizing the plans. Financing good plans is not an issue: Like virgin soil, long neglected problems have a positive Benefit-Cost balance. The benefit to the government is two-sided:
As a service provider, required to spend its budget on coping with damage inflicted by a source of damage, the government will be exposed to lower costs in areas where damages are effectively mitigated. At the other side, the government will benefit from higher tax revenues received from people affected by less damage, from the new employees and by even more employees whose jobs are created by the economic multiplier effect.
The two men in the parable will get their level fields. ELR jobs are instilled with meaningful, useful content. Unemployment-/indecent employment-induced poverty can be eliminated at the same time that major societal and environmental problems are mitigated. No more workfare musical chairs: People recruited to ELR jobs programs will work in long-needed projects and activities, gaining dignity as they serve other people in alleviating their problems.
Systematic Survey of Damage Sources and Corrective Projects and Activities
A systematic survey of damage sources and corrective projects and activities is the complementary piece for turning ELR into PELR – Purposeful ELR. The survey, conducted as an on-going activity will create and maintain a bank of plans, each with its specific Benefit-Cost value, each requiring its own skill mix of workers, each with its own training requirements. Workers recruited for a project will benefit from training offering "light at the end of tunnel" – real jobs requiring the training they are in the process of acquiring. And there's much more to it: Projects and activities will offer opportunities for promotion and advanced expertise.
PELR – Multi-Disciplinary Endeavor
ELR has been a little known acronym used by Economists residing in the niches created by Minsky, Vickrey and a few others. PELR turns to a much broader audience: Experts in all potential areas suitable for initiating ELR projects and activities, and the general public, who will be able to understand the concrete benefits and the mechanics of a real ELR program.
ELR proponents will thus be able to get prime time for their vital propositions.
Conclusion
ELR is a solution to systemic failures to provide decent employment to a significant part of the population. It has not, however, been able to gain enough attention among Economics discourse leaders and decision makers. This may have been caused by not providing a clear way of instilling meaningful content into ELR jobs.
Such a way exists: Turning ELR jobs to coping with long neglected sources of damage to society and the environment. This way involves a multi-disciplinary endeavor by economists as well as other experts in many areas. This widening out from a niche in Economics thinking to a wide spectrum of disciplines is likely to buy-in many people's support to the idea of ELR and make the public recognize its merits – a crucial step for making decision makers adapt it.
