Is Jefes de Hogar an Employer of Last Resort Program An assessment of Argentinas ability to deliver

1
Is Jefes de Hogar an Employer of Last Resort
Program?An assessment of Argentinas ability
to deliver the promise of full employment and
price stability

• Mathew Forstater,
• Pavlina R. Tcherneva
• L. Randall Wray
• Center for Full Employment and Price Stability
• University of Missouri Kansas City
• forstaterm_at_umkc.edu tchernevap_at_umkc.edu
  wrayr_at_umkc.edu

2
ELR vs JEFES Outline

• Sovereign Currencies
• The Employer of Last Resort (ELR)
• Six key features
• Can we afford ELR?
• Wouldnt it be inflationary?
• Why full employment policy requires fiat currency
• Argentinas JEFES Program preliminary evaluation
• Is Argentinas JEFES an ELR program?

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The Employer of Last Resort Six key features

• ELR Offers an Infinitely Elastic Demand for Labor
  
• ELR Hires off the Bottom
• ELR Operates with Loose Labor Markets and Creates
  an Employable Pool of Labor
• ELR Pays a Fixed Living Wage
• ELR Maintains and Enhances Human Capital
• ELR Employees Perform Valuable Work

4
Can We Afford ELR?

• Sovereign Financing
• No funding restrictions of a Currency Board or
  other fixed exchange rate regimes
• Deficit spending does not crowd out

5
Is ELR Inflationary?

• 2 Key institutional features
• Government spending is always at the right level
  the operation of the ELR program ensures that
  budget deficits will never be too large or too
  small.
• The basic ELR wage is set exogenously by the
  government and is therefore a sufficiently stable
  benchmark price for laborit is effectively a
  minimum wage.
• Other anti-inflationary features
• ELR program enhances private sector productivity
• It maintains non-inflationary reserve capacity
• Flexible full employment avoids bottlenecks and
  rigidities
• Increases both aggregate demand and aggregate
  supply
• Maintains human capital
• Reduces other social and economic costs

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Why ELR Requires Fiat Currency?

• The Experience with the U.S. Great Depression
  demonstrated that the gold standard was highly
  deflationary
• Similarly, Argentinas currency board and
  Washington Consensus austerity programs did not
  allow Argentina to revive its economy in times of
  need

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Argentinas JEFES Program

• 150 pesos per month to a head of household for a
  minimum of 4 hours of work daily
• Participants work in community services and small
  construction or maintenance activities, or are
  directed to training programs (including
  finishing basic education).
• The household must contain children under age 18,
  persons with disabilities, or a pregnant woman.
  Households are generally limited to one
  participant in the Jefes program.
• The program grew very quickly with total spending
  reaching about 1 of GDP, with more than 5 of
  the population participating.

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Impact of JEFES on Indigency and Poverty
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JEFES Program Beneficiaries
Beneficiaries According to Unmet Basic Needs
Poor sanitation 44.90 More than 3 members
per room 21.80 Inadequate housing
8.60 Kids that do not go to school 0.90
Dependency rate 3.9 (number of family
members per employed individual in the
household) Household with at least with one
unmet basic need 56.80
10
JEFES Program Beneficiaries According to
Educational Attainment
45
40
35
30
25
percent
20
15
10
5
0
never schooled
less than primary
primary education
less than
high school
less than university
university
education
completed
highschool
education
education
education
education
completed
completed
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
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JEFES Program Beneficiaries According to
Distribution of Personal Income
Quintile 5
Quintile 4
Quintile 3
Quintile 2
Quintile 1
0
10
20
30
40
50
60
70
80
percent
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
12
JEFES Program Beneficiaries According to Gender
36
Male
Female
64
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
13
Degree of Satisfaction with the Program
80
70
60
50
percent
40
30
20
10
0
Very satisfied
Satisfied
Not Satisfied
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
14
How did you feel when you requested the program ?
80
70
60
50
40
percent
30
20
10
0
Respected
Politically used
Undervalued
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
15
Reasons why you are satisfied with the program
I have an income
I do what is required
I can do something
I help the community
I work in a good environment
I learn
0
5
10
15
20
25
30
35
40
45
percent
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
16
What would you like to do as part of the program ?
go to school
training
community project
work in production
work in firms
other
0
5
10
15
20
25
30
35
percent
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
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Project TypologyDistribution of JEFES Workers
by Type of Employment
work in firms
1
other
school attendance
3
2
training
7
community projects
87
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
18
Types of Community Projects
Micro enterprises (mainly in agriculture)
26
Social and community services
17
Maintenance and cleaning of public spaces
14
Public lunchrooms
11
Educational activities
10
Construction and repair of homes and social
infrastructure
8
Healthcare and sanitation
5
Administrative support
4
Child care
2
Elderly care
1
Other
2
Total
100
Source Ministry of Labor, Employment and Social
Security, Argentina
19
Reentry Into the Private Sector evolution in
the insertion rate of beneficiaries into the
labor market
80,000
76,068
70,000
60,000
50,000
40,000
30,000

20,000
Sep '02 -- Sept '03
18,948
57,120
10,000
0
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
SOURCE Ministry of Labor, Employment and Social
Security, Argentina
20
Reentry into the Private Sector Minimum Wage
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Is JEFES an ELR Program?
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JEFES Report Card