Universal job guarantee is a government policy that ensures every citizen who wants employment can obtain a job. In this blog, Jake Shepherd interviews University of Oxford economists Maximilian Kasy and Lukas Lehner to discuss the benefits of a successful job guarantee scheme in Austria, and its implications for UK policymakers.
As part of its ‘plan to get Britain working’ and deliver economic stability, the Labour Party has pledged to increase the employment rate to 80% – the highest in the G7. Could a job guarantee programme be the key to achieving this ambitious target?
In May 2020, when the world was shut down during the COVID-19 pandemic, the SMF made the case for a universal job guarantee. An innovative social policy which involves the state providing jobs as an ‘employer of last resort’, we argued it could effectively minimise mass unemployment, keep the economy moving, and reduce the economic and social ‘scarring’ associated with long periods out of work.
Four years later, as countries are looking for new ways to tackle unemployment, job guarantee programmes are gaining traction on policy agendas across Europe. This includes a pilot study in the Austrian town of Marienthal, overseen by the University of Oxford, which has demonstrated significant economic and social benefits for the community. The initiative has earned praise from prominent international organisations, which endorse it as a promising example of job guarantee in action.
Maximilian Kasy and Lukas Lehner are the economists who led the design and evaluation of that programme. Speaking with the SMF, they guide us through the project, explaining its outcomes and, against the backdrop of the upcoming general election, the implications for UK policymakers, including considerations for scaling up the policy.
What was the Marienthal job guarantee programme?
Launched in Marienthal, Austria in 2020, the initiative offered a universal and unconditional guarantee of a well-paid job to every resident unemployed for over a year. The project was funded by the country’s Lower Austrian Public Employment Service and delivered by local job centres, and lasted three and half years.
Marienthal’s job guarantee programme created employment opportunities in both the public and the private sectors. It included a two-month training period to help residents prepare for their new roles, with specialist support from social workers, doctors, and psychologists for those who needed it. A key feature of the scheme was that participants received a real wage, compensating them directly for their work without drawing on benefits.
Kasy, Oxford Professor of Economics, and Lehner, a researcher at the Institute for New Economic Thinking, say the Marienthal project stands out for two main reasons. First and foremost, it was not a ‘normal’ employment programme as it involved a significant degree of government intervention not typically seen in labour market policies. They also emphasise that it was entirely voluntary, supporting residents to find work, including part-time and flexible jobs, if they want it. The scheme does not force participation or involve sanctions, it simply aimed to improve people’s options and provide an “alternative below which no one needs to go”.
“It differs from any conventional, pre-existing active labour market policies, in that its participation was entirely voluntary.”
This, the researchers said, was designed to create meaningful employment, not only in terms of preserving people’s personal freedoms but also avoiding potential skills mismatches and productivity concerns. As part of this “purpose mindset”, jobs included in the programme focused predominantly on public and community benefit, such as the renovation of old furniture, public gardening, and supporting elderly residents in the community. To ensure local needs were met, the types of jobs created were deliberated in collaboration with residents.
“The idea was not to dig holes and fill them again just to create labour, but instead to provide positive externalities.”
What were the study’s findings?
The programme Kasy and Lehner worked on can be considered a success. The main takeaway is that new jobs were created – 110 in total, representing around 2% of the active labour force. The natural consequence of this was an increase in participants’ incomes, and improvements in their economic wellbeing.
But the benefits of the scheme go beyond income and financial security, we were told. The voluntary nature of the job, combined with a focus on meaningful public-serving activities, also enhanced participants’ non-economic wellbeing. The researchers found that stability had improved across a range of social and mental health measures, including greater life satisfaction, better mental health, and a stronger sense of collective purpose.
“All this led to contributed to the effects that we found, which were very positive effects on economic and social wellbeing of participants.”
There were also long-term effects. Lehner explained that the scheme created additional work in the labour market without displacing existing jobs. Despite economists’ concerns about crowding or spillover effects, market employment was unaffected. Another worry is that, knowing they would have a job guarantee after a year of unemployment, job guarantee participants might be less motivated to seek regular jobs. There is no evidence to support this counterargument, as no resident declined a job offer.
“It goes against grain that people don’t want to work. No one was a ‘benefit scrounger’.”
The idea of the job guarantee is to create jobs to directly provide guaranteed employment without pressuring people to accept other low-quality, low-pay jobs. Nevertheless, through participation in the scheme, many job seekers were able to transition into employment. By the end of the scheme, one-third had found jobs with outside employers, one-third had remained employed by the job guarantee, and about one-third had retired or was unable to work due to poor health. This, Lehner explains, shows the policy can serve as a “stepping stone” to the wider market and can “eliminate” long-term unemployment. Overall, it produced a “sizable intervention” for the town, and “shows us how such a scheme can work in practice”.
“Within less than a year, the scheme virtually eliminated long-term unemployment.”
Did it encounter any challenges?
Lehner believes the toughest challenge faced by the project was the selection of suitable job opportunities. He explained that overcoming this obstacle involved engaging local residents, empowering them to determine which roles and activities would be most beneficial. This approach addressed local issues, while playing a crucial role in fostering trust within the community. Previous SMF research has argued that a job guarantee scheme should be locally delivered, targeting areas with the greatest need of support.
“It was not about coming with a top-down approach from the public administration or from the researchers, but by giving people a say in creating their own jobs.”
An obvious concern regarding a programme of this kind is the cost. Kasy mentioned that while he did not yet have the complete data needed for a thorough cost-benefit analysis, he estimates the net costs are minimal. Because unemployed residents would have received government benefits anyway, while participating in the scheme meant they paid social insurance contributions and taxes, any expenditure was “immediately offset”. He believes that, considering the pilot’s positive outcomes – increased economic security, improved wellbeing, and tighter community cohesion – any additional costs can be seen as money well spent.
“It’s pretty clear that the overall price tag for a job created for the government is a lot less than the nominal price tag.”
What are the wider implications of the project?
There is a question of policy and there is a question of politics, Kasy says. “Even though the findings of the Marienthal study are positive and there is little to suggest it couldn’t be scaled up, that doesn’t mean there’s the political will to do it.” While there is international excitement around this type of programme – such schemes are already in place in France, Italy, and Greece, and the European Commission recently announced it will be funding new initiatives – ultimately, he said, it all comes down to political decision makers.
“There is nothing that we found indicates that there could be fundamental reasons why this wouldn’t scale in a similar form.”
One way around this, Kasy suggests, is by using a job guarantee to pursue other priorities. For instance, highlighting the infrastructure needed to reach the UK’s net zero ambitions, he explains that a job guarantee can provide the workforce to support other national goals. This integrated approach is only logical, Kasy contends, and he urges policymakers to broaden their thinking to ensure the delivery of different political projects. Along these lines, the SMF has recommended that guaranteed jobs are allocated to building sustainable infrastructure and developing green skills to help fight climate concerns.
“To find a majority, don’t pit saving the planet against fighting poverty or fighting unemployment.”
What should a national job guarantee programme look like?
Lehner says that a UK job guarantee programme ought to follow the principles of the Marienthal pilot. On a national level, it should prioritise the country’s most vulnerable areas and people, such as those who have experienced unemployment for long periods or with health constraints. According to Lehner, this approach would “fundamentally change the logic of UK job centres”, which are recognised as imposing tough, stringent conditions on unemployment benefits. Kasy echoes this sentiment, adding “it cannot be emphasised enough that participation in these schemes are voluntary, and should not be based on sanctions and surveillance”.
“The very fact that these things are universal or unconditional means that sanctioning and surveillance can be dropped because it saves a lot of public resources along the road.”
With the general election fast approaching, political parties are seeking new pledges to strengthen the economy. When asked about the inclusion of a job guarantee in election manifestos, Lehner believes it could be effective for both sides. Reiterating his earlier point, he suggests integrating a job guarantee programme with other challenges the UK faces, such as achieving net zero ambitions or increasing housing supply. While not a technical requirement for implementation, having it in manifestos would be crucial on a political level both to gaining support for a job guarantee policy, while having the potential to fulfil other important commitments.
“I think on a manifesto pledge, it works quite well to bundle the call up with other challenges that we face, such as the green transition.”
