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Guaranteed Jobs: Too Big to Succeed GUARANTEED JOBS: TOO BIG TO SUCCEED Guaranteed Jobs: Too Big to Succeed Anne Kim May 2018 P1 GUARANTEED JOBS: TOO BIG TO SUCCEED MAY 2018 Guaranteed Jobs: Anne Kim Too Big to Succeed INTRODUCTION As the party out of power, But if Democrats are to craft a winning agenda for 2020, bigness and boldness alone are Democrats have the luxury of insufficient; political feasibility and substantive thinking big as they consider plausibility are also necessary ingredients. That’s why the latest big and bold idea catching the eye how to topple President of potential 2020 contenders – a federal jobs Donald Trump in 2020. Bold, guarantee – is ultimately a disappointment. ambitious ideas are what Touted by advocates as a way to achieve the party sorely needs if it is “permanent full employment,”1 the notion of a federally guaranteed job for anyone who wants to capture voters’ attention one has won support from three rumored and woo them from Trump’s presidential hopefuls so far, including New York corrosive grip. Sen. Kirsten Gillibrand,2 Vermont Sen. Bernie Sanders and New Jersey Sen. Cory Booker. Last week, Booker revealed draft legislation3 to pilot a federal jobs guarantee program in up to 15 localities nationwide, while Sanders has floated a much more ambitious national plan4 focused on public works projects at a scale not seen since the Great Depression. Under both proposals, participants would earn wages of up to $15 an hour, along with benefits such as paid family and sick leave and health insurance. “There is great P2 GUARANTEED JOBS: TOO BIG TO SUCCEED dignity in work – and in America, if you want to Unfortunately, the idea also suffers from a provide for your family, you should be able to find variety of fatal defects, including its size, timing a full-time job that pays a fair wage,” said Booker and relevance and any number of practical in a press release announcing his effort.5 obstacles that make it administratively unworkable as well as politically untenable. For Under both proposals, participants one thing, it rests on the dubious assumption would earn wages of up to $15 that the American electorate – at a time when an hour, along with benefits such public cynicism and distrust toward government as paid family and sick leave and remain at all-time highs6 – is ready to embrace health insurance. a dramatically expanded role for the federal Booker’s endorsement speaks to the inherent government as the nation’s largest staffing surface appeal of a jobs guarantee. To borrow agency and employer. More fundamentally, President Bill Clinton’s famous formulation, the idea betrays a deep lack of faith in the Americans who “work hard and play by the inherent resilience of the American economy rules” deserve a shot at self-sufficiency, and and its people to weather disruption and the promise of work for all who want it invokes change. Most Americans don’t share the left’s Americans’ innate sense of fair play. Proponents inordinate confidence in government’s ability also rightly point out stark disparities in to engineer shared prosperity from the top employment between certain groups, the down. Aggressive advocacy of a panacea like result of discrimination and other structural government guaranteed jobs can only reinforce barriers that guaranteed access to meaningful public impressions that progressives will always employment could arguably remedy. default to “big government” as the solution to complex economic problems. CONCEPTUAL FLAWS While a federal jobs guarantee certainly passes According to the leading proposal the “bigness” test, its very bigness is a central for a national guaranteed jobs conceptual weakness, at least in the current program, it would cost roughly political environment. It is far too large a $543 billion a year to create 10.7 hammer in search of a nail. million new federal jobs covering every worker unemployed or According to the leading proposal for a national underemployed in January 2018. guaranteed jobs program, it would cost roughly $543 billion a year to create 10.7 million new It’s hard to fathom why proponents believe federal jobs covering every worker unemployed there is public appetite for a jobs program or underemployed in January 2018 (a figure of this scale today, especially given that the known as “U.6”).7 That would put the number of nation’s official unemployment rate is at its job guarantee participants at nearly five times lowest in nearly 20 years, employers in many the size of the entire current federal workforce.8 places are complaining of worker shortages, P3 GUARANTEED JOBS: TOO BIG TO SUCCEED the economy is set to grow at a solid pace and example, reports that real wages for the middle fears of inflation are currently preoccupying quintile of workers grew by only 3.4 percent central bankers and financial markets.9 And between 1979 and 2016, while labor’s share of even though workforce participation is lower national income has also steadily fallen despite than it could or should be compared to historical healthy corporate profits.12 More Americans standards,10 the magnitude of unemployment are also losing access to traditional employer- and underemployment is nowhere near what provided benefits, such as health insurance. it was the last time a massive federal works At the same time that the share of employers program was proposed and implemented, offering health insurance has dropped by 10 which was during the Great Depression. Then, percentage points since 1999,13 according to the unemployment rates were running at upwards of Kaiser Foundation, more Americans are finding 15 to 25 percent11 while the private sector was themselves to be no longer employees at all but wholly crippled. members of the ever-precarious “gig economy.” Though some proponents might imagine an Especially vulnerable are the workers with the automation apocalypse that could ultimately least amount of education, the one group that throw millions of Americans out of work, talking has remained consistently underemployed about a national jobs guarantee program now is, despite rising fortunes for others. In March, for at best, still wildly premature. Moreover, even if instance, just 44 percent of Americans without a such a circumstance should occur, it’s far from high school diploma were working,14 compared settled that Americans would prefer a large- to 72.6 percent for college graduates.15 While scale public jobs program over other strategies a jobs guarantee program could potentially to manage economic disruption, including, help some of these less-educated workers, a heaven forfend, their own abilities to learn big question is why they should be shunted new skills and adapt to change. to relatively low-skilled public jobs rather than given the opportunity to increase their skills and A second and more serious conceptual flaw compete for skilled openings currently going with a jobs guarantee is that it seeks to solve begging. the wrong problem. While the lack of jobs is a continuing concern for some groups in some In March, for instance, just 44 areas and absolutely should not be overlooked, percent of Americans without a the biggest malady ailing the middle and high school diploma were working, working classes isn’t so much the quantity of compared to 72.6 percent for jobs as their quality – in the form of stagnant college graduates. wages, declining benefits and the loss of stability As for the question of wages, proponents of and security. In this context, a national jobs a job guarantee argue their plan would put guarantee program isn’t just too big a hammer, upward pressure on wages by forcing private but the wrong tool altogether. sector employers to compete for workers. This Though wages are finally ticking upward, the argument, however, rests on a very large and long-term trend toward stagnation is still far unproven assumption: that enough workers from being erased. The Brookings Institution, for would in fact prefer a “public option” over private P4 GUARANTEED JOBS: TOO BIG TO SUCCEED sector work to create that pressure. Many perpetuity. In any event, the potential impact workers, for instance, might choose a lower- on private sector wages would be indirect at paid private sector job in the short term with the best when other, more targeted ideas could potential for advancement in the future, rather have broader impact on workers’ incomes and than a public job capped at $15 an hour into financial security. PRACTICAL OBSTACLES Even setting aside the conceptual and political A second set of practical concerns involves weaknesses of a federal jobs guarantee, any the role of the private sector and the effect number of practical obstacles could also prove these new federal workers would have on labor insurmountable. markets. While job guarantee advocates seek to create a new “floor” in the labor market17 For instance, one such practical question is the and prompt the private sector to raise its own kind of jobs government would provide. Booker’s wages to compete for workers, it’s not clear that proposal, for instance, imagines that participants this is, in fact, what would happen. What could would work in fields that are “currently under- occur, however, is the displacement of private provided, like child and elder care, infrastructure, sector providers of child care, elder care and and community revitalization.” What’s not clear, other services if the federal government ends however, is how the government will gauge up competing directly with existing employers. demand in a particular sector so it will know While some may not find this outcome how many workers to deploy. Also unanswered objectionable if big companies were the ones to are where and how to place them.
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