Americans want more than just money
When the labour-force drop-out problem is chronic, a different kind of policy may be needed—a government-job guarantee
Donald Trump’s election as president should have reminded liberals that Americans want more than money from their work. They responded to Trump’s promise of jobs more than to Hillary Clinton’s promise of government benefits because in addition to money, people also need dignity, a sense of self-reliance and respect within their community. For centuries, jobs have provided all of those. To say that work is disappearing would be an exaggeration. But despite the low unemployment rate, fewer Americans have jobs than in years past.
This new class of non-workers may be able to survive on the government dole, the charity of friends and family or via black-market activities like drug sales. But they’ve probably lost some of the dignity and respect that used to come with working for a living. Falling employment has been linked to declining marriage rates, reduced happiness and opiate abuse. Some economists even blame disappearing jobs for the recent rise in mortality rates afflicting white Americans.
What’s more, the longer people stay out of the labour force, the more trouble they will have getting back into it. They lose work ethic, skills and connections, and employers become suspicious of the large gaps in the resumes. Economists Brad DeLong and Larry Summers have shown that this so-called labour-market hysteresis can have potentially large, long-lasting negative effects on the economy.
When the economy is in recession, the best approach is probably a combination of fiscal and monetary stimulus. But when the labour-force drop-out problem is chronic, as it is now, a different kind of policy may be needed—a government-job guarantee.
The US has used an approach like this before. In 1935, the administration of President Franklin Roosevelt established the Works Progress Administration (WPA), which employed millions of American men, mostly in public-works projects. WPA employees received hourly wages similar to other unskilled workers in the surrounding area. Most of them built infrastructure and buildings, but a few were paid to make art and write books. The total cost of the programme was high—$1.3 billion a year, or about 1.7% of US gross domestic product. An equivalent expenditure now would be a little more than $300 billion, or about half of federal defence spending. But the popularity of the programme is hard to deny, given Roosevelt’s resounding victory in his re-election bid in 1936.
The idea of a new work programme isn’t a new one—economists on all sides of the political spectrum have been kicking it around for years now. It has received support from Stephanie Kelton, an adviser to the Bernie Sanders presidential campaign, and from Kevin Hassett, who is reportedly Trump’s pick to lead the Council of Economic Advisers. Jeff Spross has an excellent article in Democracy exploring the idea in depth.
William Darity of Duke University has been a particularly avid promoter of a job guarantee. He describes it thus: “Any American 18 years or older would be able to find work through a federally funded public service employment programme—a ‘National Investment Employment Corps.’… Each National Investment Employment Corps job would offer individuals non-poverty wages, a minimum salary of $20,000, plus benefits including federal health insurance. The types of jobs offered could address the maintenance and construction of the nation’s physical and human infrastructure, from building roads, bridges, dams and schools, to staffing high quality day care.”
There is no shortage of work to be done. Even beyond the tasks Darity lists, the US is full of jobs that need doing, from elder care to renovation of old decaying buildings, to clean-up of lead and other pollution, to construction and staffing of transit systems.
Darity estimates the cost of the programme at $750 billion a year, Spross at $670 billion. That’s about equivalent to all of the US’s current anti-poverty programmes, and would be about twice the size of the old WPA. So this would be a very big deal. But the true cost to society would be considerably less, because the jobs would provide value. Better infrastructure, more childcare and elder care, and a cleaner, healthier environment would make the nation a richer, better place to live—in other words, those benefits should defray much of the programme’s cost. Also, the programme would take people off of the welfare rolls and cut government anti-poverty spending. Finally, even when the economy isn’t in a recession, more income will probably increase demand in the local economy.
Many people on the left and elsewhere don’t like this idea. They doubt that government make-work will provide dignity. And they believe strongly in the theory that automation will soon put large numbers of people out of a job entirely. The only solution, they say, is to change US culture and values to make work less important, and to rely on programmes like universal basic income. On the right, some would inevitably see the plan as a first step on the road to socialism.
Maybe the critics will prove right in the long run. But for now, forcing a dramatic change on American culture is a lot harder than simply giving people jobs. Robot-driven unemployment and new social values are still mostly in the realm of science fiction, while the American public wants jobs now. A job guarantee looks like a very good thing to try. Bloomberg
Noah Smith is a Bloomberg View columnist.