Just What Is a Job Guarantee?
These days it seems like a job guarantee can mean anything you want it to mean.
I don’t want to keep writing about the job guarantee (JG), but I feel like I owe a response to Max Sawicky’s piece on the subject.
Before getting into his article, it is helpful to again restate my main criticism of the idea, the one I have been making for three years now (over and over and over and over). My main criticism is that the kinds of jobs that are appropriate for the program are not very good jobs and that advocates consistently claim that they will be able to do jobs that they can’t actually do.
This criticism is aimed at the canonical JG proposal that says that the program’s intent is to set a fixed minimum wage and act as an employer of last resort (ELR) for the bottom of the labor market. Importantly for this post, the fixed minimum wage is key to the canonical JG’s design because it allegedly allows private employers to hold down the inflationary wage demands of their own workers by being able to hire out of the JG labor pool with ease. For as long as the JG wage is fixed, all the private employers have to do if their workers get too demanding is undercut them by offering a JG worker a wage above the set JG wage, knowing that the JG office will not counteroffer to try to hold on to their workers.
Here’s Randall Wray:
If the wage demands of workers in the private sector exceed by too great a margin the employer’s calculations of their productivity, the alternative is to obtain [JG] workers at a mark-up over the [fixed minimum wage]. This will help offset the wage pressures caused by elimination of the fear of unemployment. The ELR pool will operate as a “buffer stock,” and just as a buffer stock of any commodity can be used to stabilize the price, the government’s labor “buffer stock” will help stabilize the price of [non-JG] labor to the extent that workers in the ELR pool are substitutes for [non-JG] labor.
Essentially, the government’s [fixed minimum wage] determines the wage for the lowest productivity group — the pool of unskilled and semi-skilled workers during periods of normal demand. Those workers whose productivity is substantially above [the fixed minimum wage] will find jobs in the private sector; those with lower productivity will find [JG].
What this means, among other things, is that the production undertaken by a JG program cannot rely upon skilled workers who can command wages higher than the minimum wage. This means that the only production it can undertake is the kind of stuff that can be done exclusively with lowly skilled workers. So it is not enough for you to find a job that a low-skilled worker can do; it has to be a job that is possible to do in an overall productive unit with no skilled workers in it at all.
Furthermore, since the program has no ability to retain workers in upswings, the jobs must be able to be dropped at a moment’s notice and left unfilled. And because you cannot select workers based on project need or do long-term projects, the work must require low levels of capital.
When you put all these constraints together, what you are left with are make-work jobs that look suspiciously like the last time this country did workfare in the 1990s and 2000s.
Here is how Sawicky responds to this point:
The presumption that a job guarantee would be like workfare — despite the fact that the current proposals call for decently paid, full-time work with benefits — implies a certain expectation of the political environment in which the guarantee would be implemented. The degree of political clairvoyance implied here is unpersuasive.
Sawicky seems to think my argument that the jobs will look like workfare jobs is based on my political analysis that this is how the government will choose to run the program. But my argument is not about political constraints. It is about the constraints of the JG proposal itself. It is not politicians that say the jobs must be those capable of being done by “unskilled or semi-skilled workers” at a fixed minimum wage and able to go unfilled at a moment’s notice. It is the JG advocates themselves who say that this is what the jobs must be like. Put differently, mine is a technical argument, not a political argument.
Sawicky then goes on to flesh out his own JG proposal, which envisions production that clearly would not be appropriate for a canonical JG program. His proposals are “large-scale infrastructure projects”; “rebuilding coastlines, reclaiming land damaged by industry and mining”; “a national electric grid”; “public broadband”; and “school repair.”
Perhaps “school repair” and “reclaiming land” could qualify for the canonical JG program. I can’t really say because I don’t really know what all that involves. But clearly large-scale infrastructure projects do not qualify, as those projects require highly skilled workers and a great deal of capital. The same goes for a national electric grid and public broadband.
There are probably low-skilled tasks that go along with big construction projects, building an electric grid, and building public broadband, but recall from above that the canonical JG program says the work must be doable by a team made up exclusively of lower-skilled workers. The JG program will not be able to hire the necessary engineers who command wages way above the fixed minimum. And of course, even if it did hire them, it would not be able to retain them or the lowly skilled workers if the economy heats up, meaning that a half-constructed building would theoretically just have to sit there half-constructed until the economy goes into recession again.
When I asked Sawicky about these problems, he explained that, to him, a JG entails creating permanent public enterprises that pay a spectrum of wages according to skill. So he gets around the make-work problem by simply proposing a plan that he calls “job guarantee” that is nonetheless nothing like what the regular JG advocates say they want.
It is possible, of course, for the government to build big pieces of infrastructure publicly if it is willing to create its own construction company that has its own pool of highly skilled heavy machine operators and engineers that it pays high wages to do so. Indeed, it is possible for the government to do any kind of production provided it is willing to hire all the appropriate workers for the task at the appropriate wages and on a permanent basis. But, again, this is not what the canonical JG is about.
“Job Guarantee” as the New “Full Employment”
Sawicky’s article, and the flowering of dozens of mutually incompatible proposals that all go under the name “job guarantee,” suggests to me that Matt Yglesias is probably right about how to ultimately treat this development. Rather than treating “job guarantee” as referring to a specific set of ideas coming from a specific set of scholars, what has happened (and what will continue to happen) is that “job guarantee” has become a catch-all slogan for any and all jobs programs. In this way, many thought leaders with radically different ideas can nonetheless be united in their goal for the creation of a “job guarantee.”
What this means, then, is that “job guarantee” is just the new “full employment.” The Left has been talking about full employment forever and making reference to that concept any time it is doing employment-promotion policy. “Full employment” never referred to a specific proposal, but rather an ambition or target to strive for. “Job guarantee” now fills the same role and also sounds a lot better than “full employment,” which means it is probably a positive development all things considered.
Of course, there is still a risk in all of this that something more akin to the canonical JG program gets implemented (rather than just ordinary public production now being called job guarantee, as Sawicky advocates) and thus a risk that we wind up with a new workfare. This is especially a concerning risk for as long as we keep talking about the job guarantee using the exact same rhetoric Democrats used to advocate for the 1996 welfare reform. But it seems the best strategy to mitigate that risk is probably the Sawicky one: adopt the new “full employment” slogan but work to fill it up with less objectionable content.