Sen. Cory Booker, D-N.J., recently proposed a federal program guaranteeing a job for anyone who wants one. It sounds a lot more radical than it is. Properly implemented, a job guarantee could be a good way of fighting recessions and getting more Americans into the workforce in the long term.
Economist Adam Ozimek, writing in Forbes, wasn’t a fan of Booker’s plan, calling it “absurd” and “insane” for the government to provide jobs with a salary of $24,600. “According to the Census, there are currently 50 million wage and salary workers with annual earnings below $25,000,” he said. “Is this a joke? The idea here is to nationalize what a quarter of the U.S. labor market and therefore economy? Half of it?”
Assuming a 40-hour workweek for 50 weeks a year, $24,600 a year is equivalent to a wage of $12.30 an hour, which, although considerably higher than the current federal minimum wage of $7.25, is less than the $15 Booker supports.
As a general rule, guaranteed government jobs should always pay minimum wage — for them to pay more is, effectively, a minimum wage hike, since any workers earning less in the private sector could switch to the government version. As for benefits, McDonald’s offers them, as does Wal-Mart, so it makes sense that government jobs would too.
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But Booker’s proposal is merely a start — any real program would have much more regional variation. Employers in rural Kansas simply can’t afford to pay as much as those in downtown Boston, and workers need less to live because rent and other living costs are lower. Thus, it makes sense that government jobs would pay different wages in different places. Even if government-provided jobs did pay slightly more than private-sector jobs at Wal-Mart or McDonald’s in some regions, those companies would almost certainly raise their wages to compete.
Finally, a job guarantee could just begin as a government work program. It’s not such a radical idea; President Donald Trump’s economic adviser Kevin Hassett has endorsed it at one point. The idea, similar to programs implemented under President Franklin Roosevelt during the Great Depression, is attractive for a few reasons.
First, unlike many welfare programs, a job guarantee produces useful goods and services — better roads, nicer buildings, new infrastructure, cleaner public spaces, etc.
Second, jobs provide a dignity that traditional welfare programs, or even innovative ones like universal basic income, probably don’t. Third, a government jobs program, would be a very effective tool for fighting unemployment created by recessions.
Finally, a government job program could help bring more Americans into the labor force long-term. Holding any kind of job improves people’s work ethic and helps teach basic skills of the workplace. And it’s a valuable addition to their resume, if and when they decide to look for a higher-paying job.
But it’s important to note that this final benefit is hypothetical. Studies of public-sector jobs programs show that these efforts haven’t been very successful at promoting increased employment; programs such as job training and subsidies for private-sector employment have been much more successful.
It is possible that government will offer jobs but that very few people will take them. That would certainly limit the program’s cost, but also make it pretty ineffective as a tool for reducing poverty. It’s also possible that those who do take government jobs will stay there forever instead of moving up the job ladder — not the worst outcome, but not great either.
So the idea of a government job provision is less scary than critics think. But there’s no assurance that it will be a game-changer for poor Americans.