Issues With The Job Guarantee

The Job Guarantee (JG) is a policy whereby the government guarantees public jobs to all people at a decent wage. It is meant to function like an employer of last resort. I have raised concerns with this idea elsewhere, but have never written a post about it. So let me lay out those concerns here.

  1. Jobs Require Capital. It is not the 1800s anymore. You can’t give someone a job by handing them a hoe and sending them out into a field. These days most worthwhile work takes place in the context of complicated production projects that require a good deal of capital (buildings, machines, tools, etc.) to operate. It’s hard for me to see how this capital can be mobilized in a Job Guarantee situation where people just randomly show up to the presumably thousands of JG offices across the country with all sorts of skills and for indefinite periods of time. Some advocates of the JG say that they intend on backing each worker with $50,000 of capital. But this is a dollar figure, not tractors, cranes, buildings, vehicles, etc. What kinds of physical stuff will be at each JG office? Will there just be a capital shed with all sorts of knick knacks sitting around to be mobilized depending on who shows up to the JG office that week?
  2. JG Jobs Must Be Essentially Unnecessary. If the JG is going to act as a employer of last resort, then what that means is people should move on and off the JG and that the size of the workforce on the JG will greatly differ across the business cycle and throughout the country. Because you can’t rely on the JG for any kind of predictable of constant flow of workers, this means that the jobs you have JG workers do must be essentially unnecessary. That is, they must be jobs that we can do with or without. Any job that was very important to do is not the kind of thing you could rely on the JG to fill. Instead, you’d hire someone permanently for it, e.g. with public teachers. Given these dynamics, the JG winds up in a weird limbo position. If the job is an important one that you really need done, then you shouldn’t use the JG to staff it. However, if the job is not so important, then you have a hard time explaining why it should be done at all. The JG thus would seem to only make sense for these middle-ground jobs that are kind of nice if people do them, but really not a big deal if they don’t. I don’t know how many jobs that describes, but it seems kind of narrow.
  3. JG Jobs Must Be Short Term. Related to point (2), because the JG workforce should theoretically turn over a lot and shrink a lot in cyclical upturns, this means that any work that is only valuable over long-term stints is basically ruled out. Training someone up for a job when they may bail at any time doesn’t make much sense, nor does embarking on any project that will fail if people bail in the middle of it. Of course, the possibility that people may bail is a problem all firms face. But the JG does not have the same ability of firms to protect themselves against that possibility. The JG would pay a fixed wage that cannot go up (this is an essential part of its anti-inflation scheme), meaning that, unlike a firm, it could not try to entice the worker to stay by offering a raise. Additionally, because the JG operates off of whoever shows up, it could not, unlike a firm, go out and specifically try to hire someone with the same skills as the person who is bailing. Given this, all jobs must be short-term, low-training type jobs that can provide value relatively immediately.

So, taken together, the JG seems to me like it would consist of low-capital, short-term jobs that are not that important to do. That is, it takes on the sheen of a make-work program that doesn’t even probably build much in the way of skills. Add that to the fact that there will absolutely be times across the thousands of JG offices in the country where there simply isn’t anything to do and you are setting yourself up for some rather unfortunate outcomes.

What’s particularly strange to me about the JG approach is that there seems to be a much more common way to boost public employment without running into these kinds of problems. Instead of guaranteeing an undefined job to whomever, the government would actually put together projects whose purpose it is to hire a lot of people and then go out and specifically hire people for those projects. To the extent that the goal is to hire certain types of people who are especially vulnerable to unemployment (e.g. young high school graduates who aren’t going on to college), you would set the project up with that in mind and screen who you hire to try to bring in the targeted population.

By establishing a set project, you can reasonably determine the necessary capital and mobilize it for that purpose. You can also make sure it is somewhat valuable and worth doing because you don’t have to worry about people dropping out (as you can hire new people). And you can do a longer-term project for the same reason: you are actively going out and hiring people, not just trying to find work for whoever happens to show up. This targeted Public Works approach, which can be ramped up and down cyclically as needed, seems to largely overlap with the JG goal while avoiding many of its seeming pitfalls.