Why Politicians Want the U.S. to Guarantee You a Job
(Bloomberg) -- The U.S. economy has been growing nonstop for nearly a decade, unemployment is low, wages are steadily rising and the stock market keeps hitting new records. Yet one of the hottest topics among left-of-center think tanks, lawmakers and potential presidential candidates is the idea of a guaranteed job for everyone who wants one. What’s behind the sudden push?
1. Why are job guarantees in vogue?
The economic expansion hasn’t treated everyone equally. The official unemployment rate as of August was 3.9 percent, at or near what economists say is full employment. Yet the number jumps to 7.4 percent, or 12 million Americans, when including those who haven’t looked for a job in the last month or want full-time positions rather than part-time gigs. Some economists say the total unemployed, underemployed and uncounted is 16 million, when also factoring in those who want a job but haven’t looked in the past year or haven’t been available to work for a variety of reasons. What’s more, real wage growth (adjusted for inflation) remains stagnant. About a third of the workforce makes $15 an hour or less, according to the left-of-center Economic Policy Institute. Political analysts say these factors contributed to the election of President Donald Trump, whose 2016 campaign tapped into voters’ economic angst with calls for tighter immigration controls, protectionism and a revival of old-line manufacturing.
2. Where did the idea come from?
It dates back to Renaissance-era European humanists who pushed cities to provide work for the poor. One of the most prominent modern proponents was President Franklin D. Roosevelt, who in 1944 called for an expanded Bill of Rights that included the right to employment. He suggested Uncle Sam should step in and provide jobs if companies couldn’t, building on his New Deal programs, such as the Works Progress Administration, that put millions to work during the Great Depression. He died in office the next year and his idea disappeared from mainstream thought, although Martin Luther King Jr. in the 1960s unsuccessfully tried to resurrect it. Five decades later, it’s making a comeback.
3. Who’s backing job guarantees now?
A slew of liberal politicians, including U.S. Senator Bernie Sanders, the Vermont independent who ran for president in 2016 and is expected to run again in 2020. Two Democratic senators, Cory Booker of New Jersey and Kirsten Gillibrand of New York, have endorsed the idea. They see job guarantees as a way to regain the upper hand with alienated voters. Some prominent congressional candidates are proposing a job guarantee in one form or another in hopes it will help them win office. These politicians draw from papers published by such liberal think tanks as the Center for American Progress, which calls job guarantees part of a “Marshall Plan for America,” and the Levy Institute.
4. How would it work?
There are many variations. The vision of President Roosevelt, and of some recent proponents, is for the government to act as the employer of last resort. Teaching, child care, after-school programs, health care, elderly care and construction are among the types of jobs mentioned. More recent versions would have nonprofit groups and state and local governments act as the employers, with the federal government playing a secondary role as a provider of training. The basic idea is that every citizen would have a job at a decent-enough wage to cover housing, transportation and food. Booker’s legislation would create federally funded pilot programs in up to 15 communities. Most proposals would also provide benefits such as health care and sick leave.
5. How much would this cost?
Federal spending would rise but so would federal tax revenue. The net effect, one proposal estimates, is a $378 billion per year increase in the budget deficit in the first five years. The projection assumes the program would employ 15 million people largely in public-service jobs at nonprofit organizations, in public schools and in state and local governments. It includes reduced government spending on anti-poverty programs like food stamps and housing subsidies. Another estimate said the cost to the U.S. to directly employ nearly 11 million people would be about $543 billion a year. The U.S.’s current budget deficit is set to reach just over $800 billion this fiscal year and to surpass $1 trillion by 2020.
6. What do critics say?
Some economists and politicians criticize the idea as anti-business and unaffordable. Even some Democrats dismiss it as costly and impractical. One problem, they say, is that a government-promised job at $15 an hour would prompt those already working -- often without benefits -- to leave their lower-paid jobs. And that would force companies to compete, triggering wage inflation that could lower profits or drive some companies out of business. The Federal Reserve might also have to raise interest rates to stop the economy from overheating, which could throw people out of work and add to the cost of a job guarantee. It’s also a big policy shift, requiring political and voter backing because it would mark a substantial reshaping of the U.S. labor economy.
7. Has this been tried elsewhere?
Not yet, but other countries have tried a form of job guarantee. Since 2006, India’s National Rural Employment Guarantee Scheme has ensured millions of rural farmers have an income in the dry season. U.S. economists who studied the program reported in 2018 that it increased earnings of low-income households by 13 percent. Most of that was due to higher wages and increased work in the private sector, not from the program itself. In other words, it worked as advocates predicted: The program pushed up wages and increased employment everywhere. A 2014 study by a RAND Corp. economist found that the program also fostered greater entrepreneurship.
The Reference Shelf
- Bloomberg Opinion columnists Noah Smith and Conor Sen debate the job-guarantee idea.
- Think tank proposals from the Center for American Progress, the Center on Budget and Policy Priorities, the Levy Institute and the Economic Policy Institute
- Academic studies conclude that a version of a job-guarantee program in India lifted many boats and encouraged entrepreneurship.
- The 1978 Humphrey-Hawkins Act, which created the U.S. Federal Reserve’s dual mandate to promote maximum employment along with price stability, is seen as one form of job guarantee.
- A prominent left-of-center economist explains why a job guarantee would be impractical to put in place.
- A small group of economists who believe in “Modern Monetary Theory,” which says budget deficits don’t matter in good times or bad, are big proponents of job guarantees.
©2018 Bloomberg L.P.