Could a Jobs Guarantee Work?

Presidential candidates such as Cory Booker, Elizabeth Warren, and Bernie Sanders have all come out in favor of a Federal Jobs Guarantee (FJG), and the CBPP released a report calling for a FJG to achieve full employment, in line with Keynesian economic theory. America’s lowest ever unemployment rate was 1.2% in 1944, when virtually every American either served in the Army or produced materiel to supply the gargantuan American war machine. 

A FJG would not be unprecedented – India, for instance, has a jobs guarantee program for rural areas. This program, the National Rural Employment Guarantee Act (NREGA) promises 100 days, per household, per year of low wage manual labor to rural citizens of India. This program has had a significant impact on rural labor force participation, and has helped to boost rural wages. NREGA’s work often consists of tasks such as creating irrigation infrastructure, flood/drought relief, or other low-skill jobs. This being said, NREGA also features inefficiencies and possible corruption – 60% of workers did not know how much they had earned, and 32% of land improvement projects never occurred. However, with PM Modi planning to invest gargantuan sums into infrastructure development, NREGA’s role in the Indian economy will not be as large as the Federal Job Guarantee’s role in the American economy.

An American parallel to the FJG can be seen in FDR’s Work Progress Administration (WPA) and Civilian Conservation Corps (CCC). These two programs were enacted as part of the New Deal, in order to revive the US economy following the Great Depression. At its peak, the WPA employed 3.5 million people, and the WPA built 10,000 bridges, 1 million kilometers of streets, and 16 hydroelectric power stations. The WPA did more than just infrastructure – it also built 6000 schools, 2300 stadiums, 1700 parks, and a thousand libraries, for a total expenditure of around 200 billion dollars. The WPA was also notable in that it even sponsored artists and writers – Jackson Pollock, for example, was supported by the WPA during the worst of the Depression. The CCC, meanwhile, had a peak enrollment of 300,000 people, who focused on work such as erosion management, forest protection, flood control, and environmental conservation. Notably, most of the WPA jobs are temporary – a construction project may only last a few years. 

A Federal Jobs Guarantee enjoys some degree of public support – roughly 46% of the American people. But there are a number of questions – would government jobs “crowd out” private employers? How would a FJG be implemented? Ultimately, would Federal jobs amount to simply digging and filling in holes – work for the sake of work?

A Federally guaranteed job would necessarily need to pay at or below minimum wage. If the Federal Government pays a wage higher than minimum wage – say 15 dollars an hour, compared to the minimum wage of $7.25, fast-food workers would quit their minimum wage jobs en masse to gain Federal employment. Paying below minimum wage would eliminate this problem, but also grant the government an unfair competitive advantage over the private sector. Federal jobs below minimum wage could not be in competitive economic areas such as fast food, but rather in non-economically viable sectors such as climate restoration or road repair.

There is also the question of implementation. In India’s NREGA, jobs are handled at the local level, with funding coming from the central government. This is viable – local governments could use federal money to hire workers to clean beaches or parks, for instance. However, local-level implementation would have a tiny impact on unemployment, and would do nothing to improve American infrastructure. A large bureaucracy, at the federal level, would be required to achieve projects on the scale of the Tennessee Valley Authority or New Deal. 

On a fundamental level, however, a Federal Jobs Guarantee is not sustainable. The government can’t fairly compete with free market businesses, so most government jobs will essentially boil down to temporary jobs such as construction. We saw this with the WPA and Tennessee Valley Authority in the United States. There is much work to be done – America has a D+ infrastructure grade, – but such work is best suited as a stimulus during times of economic recession. Argentina, for example, implemented a jobs guarantee program during its 2001 recession. When millions are unemployed and the financial system is on the brink of collapse, the government must act as an employer of last resort, to use massive, temporary construction projects to stimulate demand and kickstart the economy. Otherwise, a jobs guarantee is simply inefficient, and over stimulates the economy – leading to unnecessary debt and greater boom-bust cycle. 

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