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Carney: The Problem with the ‘Job Guarantee’ Is Not That It’s Too Expensive. It’s That the Left Hates Us

Bernie Sanders
AP Photo/Mark Humphrey

The idea that every American should be guaranteed a job stems from one simple observation.

Unemployment is terrible.

Human beings are meant for work. It’s built into the very fabric of our beings, knotted into our DNA just like walking and eating. Without work we wither. Joblessness creates hopelessness, drug addiction, even early death. Even school shootings are connected to unemployment, according to a recent study. Idle hands are the Devil’s playthings and his game is soul-destroying.

Right now in the United States, the official unemployment rate stands at 4.1 percent, a very low number historically. The number of newly unemployed hit the lowest level since 1969 last week. Still, it’s a big country, so that means that there are 8.8 million people counted as officially unemployed. If you count those who are underemployed, working part-time but wanting full-time work, or out of the labor force but still wanting a job, there are 16.5 million people who are involuntarily jobless. If you count the number of people who are officially retired or disabled but would like to return to the workforce, the number is even higher.

To be sure, some level of unemployment is indeed sort of voluntary. People do not ordinarily want to lose their jobs. But people who find themselves out of work do not typically take the first job they could get–and they should not. It’s beneficial to society to have them search for jobs where their skills are a better fit. One of the purposes of unemployment benefits is to facilitate laid-off workers’ search for the right jobs. It provides liquidity to the labor market, which helps the economy run more efficiently.

But even at our currently low level of unemployment, it is clear that there are millions of people who would work but cannot. As Matthew C. Klein of Barron’s explains:

This is by design. While there is considerable variation across sectors, labor is the biggest input cost for businesses. Many central bankers in the U.S. and elsewhere therefore believe the best way to stabilize inflation is to keep wage growth under control.

To do that, they try to target the unemployment rate. Too high, the thinking goes, and pay will rise too slowly, if at all. Too low, and you get a spiral of accelerating wage growth and rising prices as companies try to preserve margins.

Put another way, policy makers aim to keep workers insecure about their jobs without triggering a recession.

In other words, our monetary policymakers use unemployment to stabilize the economy. The unemployed workers are means to the end of price stability. The biggest debate in monetary policy right now is whether we have already hit “full employment” (which means, the level of unemployment below which inflation will get too high) or whether unemployment could go a bit lower. Notably, no one in this debate thinks full employment could reasonably be below three percent.

One of the central animating ideas behind the Job Guarantee recently backed by Senators Bernie Sanders, Cory Booker, and Kirsten Gillibrand is that there could be a better way. Set up a system that will offer a job to anyone who is ready, willing, and able to work. Pay these workers a fixed wage that would not increase if workers leave for private sector work. That is important because the goal is to use the program as an employer of last resort that stabilizes labor prices by setting a soft floor and a guard against inflation. Since workers in the Job Guarantee program cannot demand higher wages, there is a break on the “wage-price spiral” that terrifies so many monetary policy folks. At the same time, the labor market would stay liquid enough that if the economy were thriving, private employers could lure away the workers by promising higher pay.

So the Job Guarantee would act as a counter-cyclical, automatic stabilizer for the economy, automatically raising government spending when jobs shrunk in the private sector and lowering it when the private sector expanded.  Warren Mosler, the former bond trader turned economic guru, describes the program as providing “transition jobs” that people would work in until the economy recovered to create private sector work.

The Job Guarantee holds certain attractions for conservatives. Minimum wage legislation would no longer be necessary because the threat of exploiting desperate workers with low wages would be gone. Anyone taking a job at a wage below what the Job Guarantee paid would obviously be signaling that the non-monetary rewards for the job outweighed the higher wage, perhaps because the job provides valuable experience, an easier lifestyle, or desirable connections.  Spending on other social programs such as food stamps would also become less necessary and the indirect costs of unemployment–jail, drug treatment, retraining workers too long out of a job–would also decline.

The jobs need not be government jobs. As currently conceived, the price of labor would be paid for by the federal government, perhaps in block grants to the states and divvied out to towns and cities. These could then disperse the money through local government programs creating jobs or to non-governmental agencies and even charities set up to employ the Job Guarantee workers.

What Sanders, Booker, and Gillibrand have so far backed is not quite a program. It’s more of a notion with hopes of growing up into a program. But make no mistake. This is not an idea that has suddenly sprung from nowhere into the speeches of Democratic politicians. It has been around at least since the Great Depression and garnered support in the Civil Rights era. In more recent years, a number of sober and serious–albeit leftwing–economic thinkers have put a lot of thought into how it could work. Pavlina Tcherneva of Bard College, for example, has put together this FAQ explaining her version of the Job Guarantee in exhaustive detail.

While there is zero possibility a Job Guarantee would be enacted by the current Congress, if the Democrats take control of the House and the Senate in November, calls for a Job Guarantee could gain steam. The debate may intensify even earlier. Sanders, Booker, and Gillibrand appear to think it could be a winning issue for Democrats in the midterm election, perhaps attracting back the white working-class voters the party lost in 2016 by promising them economic security. That may not be as effective as they hope, however, since many would prefer to see their jobs protected by better trade policies than be assured that politicians have created a safety net that will catch them when they are thrown from the Great Wall of Chinese imports.

The plan may also be so twisted by politics that it becomes toxic. For one thing, Democratic politicians are unlikely to couple the implementation of the Job Guarantee with the removal of minimum wage or the downsizing of food stamps and other social spending programs that have powerful supporters in the party. They will feel pressure to set the wage too high, so that instead of the Job Guarantee providing an employer of last resort it competes with a large part of the private sector. Bernie Sanders, for example, is reportedly considering setting the wage at $15 an hour plus benefits equal to 20 percent of the wages. This would be destabilizing, going far beyond providing jobs to the jobless and instead taking workers away from private sector job creators or forcing them to raise wages.

These are signs that politics may be the undoing of the Job Guarantee. If politicians are already setting the wage level too high, they probably cannot be trusted not to raise the wage level in the future. When prices rise, in particular, they will want to provide cost-of-living adjustments. So much for the price anchor role of a Job Guarantee. And once a Job Guarantee is up and running, it will foster a cottage industry of people and organizations to implement it. These will create a lobby for raising the wages to keep the program going once the private sector starts hiring workers away.

Democrats will also be tempted to pay for the program by raising taxes on the wealthy and the near-wealthy. But this would be pro-cyclical. When the economy contracted and the demand for Job Guarantee work rose, the taxes would have to go up, further slowing the economy. So much for economic stabilization.

Politics will also undermine the Job Guarantee in a more insidious way. As everyone knows, we live in a deeply divided country. Red states and blue states. MAGA and Resist. Red pilled and SJW. And those divisions will play out in a quite nasty way in the Job Guarantee Debate.

One of the big questions that arise when we talk about the government funding jobs for those who cannot find them in the private sector is: what kind of jobs? What will the people do who will be paid by this program?

Here’s how Pavilina Tcherneva of Bard describes the work:

I propose to design the JG as a “National Care Act” that addresses the urgent environmental and care needs of communities across the United States. The jobs will be useful and targetted to neglected areas. The program can act as a preparedness response, providing jobs to the unemployed on-demand in monitoring, rehabilitation, and investment projects that serve the public good.

She gives a number of examples: building community gardens, artist collectives putting on shows for their community, converting rails to trails, converting abandoned mines into useful and environmentally friendly uses. Others I’ve talked to have mentioned working on bike lanes, preserving and restoring Native American heritage sites, and assisting at a Planned Parenthood clinic.

Also providing legal assistance to accused criminals, making use of the skills of unemployed attorneys. Helping “undocumented aliens” navigate through the U.S. immigration system. Advising clients on how to keep government benefits that an administrator has denied them. Providing safety for women seeking abortions.

I have not found one Job Guarantee advocate who told me that these would not be acceptable jobs, although quite a few refused to return my inquiries about this.

So what about jobs that might be controversial in another direction? Can the Job Guarantee be used to build hunting blinds and public shooting ranges in state parks? Can home school collectives use it to hire music teachers and baseball coaches? Can out of work folks be marshaled to restore old churches? To staff pro-life pregnancy crisis centers? Advise people living in states with strict gun laws about how to obtain legal firearms? Teach hunting courses? Clear ATV trails in national parks?

Can we employ people of the Job Guarantee to Build the Wall?

The most public advocates of the Job Guarantee refused to answer these questions. Privately, however, several supporters told me that while the first list–bike lanes through abortion guards–would count as serving the “public good,” the things on the second list–building gun ranges to building the Wall–would not.

In other words, projects that serve the values and cultural preferences of liberals and America’s left would be included, in effect subsidized by the federal government. Projects that reflect the values and cultural preferences of conservatives and America’s right would be excluded, marked with a badge of inferiority and marginalized by the federal government.

The Job Guarantee is not just about providing jobs. It is about creating a federal army to carry out the projects of the Blue State Elite.

This could be fixed, of course. The program could, in theory, be designed to be value neutral, to allow for any legal public project to hire from the Job Guarantee pool. But at least some of the supporters of the Job Guarantee find this unfathomable. They just cannot stand the idea of using their program to help us hunt deer or protect the border. They will not let conservatives use the Job Guarantee for conservative purposes because they hate those purposes and they hate conservatives.

I suspect that at least some culturally conservative Americans, while they might not like to see a program funded by their government funding jobs to aide illegal aliens, would tolerate it for a system that stabilized the economy, anchored inflation, and eliminated unemployment. Not all, of course. But perhaps enough to give a value-neutral Job Guarantee enough support to make it a plausible program. But, at least as far as I can tell, most liberals would rather live without the Job Guarantee than to allow one that built gun ranges for Red Staters.

The silence of the most public supporters of the Job Guarantee, including the economists who back it, is revealing. It suggests they know that there is a huge struggle over left and right values waiting in the wings and they would prefer not to have it discussed.

Ultimately, Democrat hopes to win back the voters they lost in 2016 with the promise of job security will be crushed America’s familiar political divisions. And the Job Guarantee will likely remain an interesting idea killed by leftwing politics.

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