Solving the Gordian knot: dealing with Spain’s unemployment crisis with a job guarantee program

Abstract

Spain has experienced a history of chronically high and intractable unemployment. The Job Guarantee has been theorized as a policy proposal that aims to produce tight full employment and enhances macroeconomic and price stability. This paper provides an overview of some of the explanations to the causes of unemployment and the performance of traditional active labor management policies. A simulation of a job guarantee programme for the historic 1999–2019 period is provided using an econometric model of the Spanish economy. In addition to eradicating unemployment, we find that the job guarantee programme attenuates the economic cycle, sustains higher real incomes, and does not compromise price stability.