Promoting Equality Through an Employment of Last Resort Policy

Unemployment has far-reaching effects, all leading to an inequitable distribution of well-being. To put an economy on an equitable growth path, economic development must be based on social efficiency, equity—and job creation. Many economists, however, assume that unemployment tends toward a natural rate below which it cannot go without creating inflation. This paper considers a particular employment strategy: a government job creation program, such as an employment guarantee or employer-of-last-resort (ELR) scheme, that would satisfy the noninflationary criteria. The paper analyzes the international experience of government job creation programs, with particular emphasis on the cases of Argentina and India. It concludes by considering the application of an ELR policy to the developing world, and as a vehicle for meeting the Millennium Development Goals.