The mainstream interpretation of Keynes’s economics seemed to offer theoretical justification for policies that could tame the business cycle, promote full employment, and eliminate poverty. The two main levers to be used would be fine-tuning of investment spending to keep it at the full-employment level, supplemented by welfare spending to keep aggregate demand high while protecting the unfortunate who might be left behind by a rising tide. While Hyman Minsky is best known for his work on financial instability, he was also intimately involved in the postwar debates about fiscal policy and what became the War on Poverty. Indeed, at Berkeley he was a vehement critic of the Kennedy/Johnson policies and played a major role in developing an alternative.
[…]
Minsky argued that we need a “bubble up” policy, not trickle down economics (Minsky 1968). Spending should be targeted directly to the unemployed, rather than to the leading sectors in the hope that tight labor markets might eventually benefit lagging sectors and poor households. For this reason, he advocated an [Employer of Last Resort] program that would take workers as they are and provide jobs that fit their skills (Minsky 1965, 1968, 1973, 1986). He argued that only the federal government can offer an infinitely elastic demand for labor, ensuring that anyone willing to work at the going wage would be able to get a job. Further, he argued that in the absence of tight full employment, the true minimum wage is zero; however, with an ELR program, the program wage becomes an effective minimum wage.
[…]
ELR could include part-time work, child maintenance, and a discounted youth wage, if desired. In addition to providing jobs where they are most needed, ELR would also provide public goods and services where most needed – in urban ghettos – to help quell unrest.
To ensure taxpayer support of the program, it would need to provide readily visible public benefits. Minsky advocated a progressive income tax, and would distribute the benefits of publicly produced goods and services progressively (Minsky no date). Hence, taxpayers would get something for their taxes – parks, safety, clean streets, education, child care and elder care, etc. – but there would be a strong redistributive bias. He recognized that the program would probably need a permanent cadre to provide critical services – as the public becomes accustomed to receiving public services from the ELR program, these cannot be suddenly shut off (Minsky 1973).
One of the goals of the program would be to make labor more homogenous through education and training, but Minsky opposed any education or skills requirement for admission to the program (Minsky 1965). He also opposed means-testing, which would turn the program into what is now called workfare […] He recognized that the nation would still need some programs for skilled workers who lose high wage jobs and fall into the ELR program. As discussed, a dynamic economy would always be creating structural unemployment, so retraining programs would be needed to ameliorate skills mismatch. He also recognized that the nation would still need welfare for those who could not, or should not work […] However, he showed that an ELR program by itself would solve most of the poverty problem […] He saw ELR as an alternative to the dole, arguing that unemployment compensation just institutionalizes unemployment. By contrast, jobs affirm the dignity of labor and allow all to participate more fully in the economy.