A recent post considered one way of including a job guarantee in the income-expenditure model. Doing so makes it possible to represent various macro effects of a job guarantee within the model. An obvious effect is that the program would deliver a degree of demand stabilization. An effect that is perhaps not quite so obvious is the way in which a job guarantee would ensure supply-side changes in the economy automatically impact on demand, actual output and employment. Before illustrating a few of these effects, the modified income-expenditure model will be briefly outlined and tailored to present purposes. A fuller discussion of the model is provided in the earlier post.
When Marx’s theory of value is interpreted in a simultaneist way, it is relatively easy to calculate the ‘monetary expression of labor time’ (or MELT). This is true, at least, when the MELT is defined as the money value created per raw hour of employment. When it is defined as the money value created per hour of abstract labor, there are additional complications due to labor complexity. In the ensuing discussion, either the MELT can be understood in terms of raw hours of labor (i.e. hours of concrete labor) or all labor can be assumed simple. The MELT can then be calculated as new value added, measured in monetary terms, divided by productive employment. If it were not for the ‘productive’/’unproductive’ distinction, the simultaneist MELT (in terms of concrete labor) could be calculated from the National Accounts as the ratio of Net Domestic Product at current prices to Total Employment. Retaining the productive/unproductive dichotomy complicates matters somewhat, because it is then necessary to exclude unproductive activity from the calculations, but no other hurdles appear to be present.