Since we wrote about it last week, there has been a flurry of in-depth critiques of proposals for a US government jobs guarantee. Some were substantive, others were less so.

Most of the reservations about this policy fit into one of three categories: Cost, implementation, and human capital. We'll address them one by one, from least defensible to most:

1) Human capital: Some writers cast doubt on the ability (or willingness) of unemployed and underemployed Americans to perform the work that would be required of them.

This essentially is a question of human capital, though it is usually framed as a training or allocation problem. For example, Dylan Matthews of Vox observes that childcare and eldercare, which are both proposed as potential public-sector jobs, “require significant training to do effectively”.

Indeed, economist James Heckman's studies of successful early-childhood programs have shown that quality of childcare matters a lot, and quality care does require training. But in the programmes he studied, “staff were recruited from the local community” and then trained. He found the benefits of these programmes accrued over the course of the children's lives, and provided an internal rate of return of nearly 14 per cent.

What's more, the alternative for communities with high unemployment is usually not private childcare or elder care -- it is uncompensated (and underfunded) childcare and elder care.

More broadly, such questions of worker fitness belie a fundamental misunderstanding of the way human ability is developed. Numerous studies show that on-the-job training and learning is far more effective than formal education or classroom-based jobs training. What's more, non-cognitive skills play an important factor in a person's quality of life, and those can only be practiced or learned through mentorship, which makes a (minor) appearance in a jobs guarantee proposal from Bard College's Pavlina Tcherneva.

2) Cost and inflation: Other persistent worries include the cost of employing a large amount of people, and the wage inflation that might result from this type of policy.

First, the costs: Tcherneva found that “direct program expenditures would be about 1.3 percent to 2.4 percent of GDP”. But the government already funds major costs of unemployment, so when reduced need for benefits is factored in, the net cost would initially be between 0.8 per cent and 2 per cent of GDP, she said, citing a forthcoming piece of research from Scott Fullwiler. (In current US dollars, 2 per cent of GDP is about $390bn.)

Costs could fall further from there, she writes:



...these estimates are based on very conservative assumptions regarding potential savings on a wide range of other federal, state, and local programs that are targeted to low-income households. In 2015, for example, the federal government spent $104 billion on food and nutritional service programs, including $74 billion for the Supplemental Nutrition Assistance Program (SNAP), $21 billion for Child Nutrition, $6 billion for the Women, Infants, and Children program (WIC), $17.3 billion on Temporary Assistance to Needy Families (TANF), $50 billion in housing assistance, and $64 billion on EITC, to name some of the main anti-poverty expenditures. Additionally, total direct spending by states for social services and income maintenance for those on public welfare was $505 billion (this does not include spending on health, policing, or corrections).



For example, the average cost of incarceration in the United States is $35,000 per year per inmate, which is slightly below the $37,440 in wages and benefits that the JG provides. In New York State, the cost is $75,000 per inmate—the equivalent of two JG jobs. And in New York City, it is $169,000 per inmate per year, or equal to four-and-a-half livingwage JG jobs.

Then we have the wage inflation question: A jobs guarantee could lead to temporary trouble at corporations that don't have pricing power, since they would need to raise wages to compete for workers. That would cut into margins. At the same time, many of these businesses operate in consumer-goods sectors, and as workers start shopping at places other than Dollar General, the companies would simply be trading margin expansion for organic growth. Or, as Dean Baker argues, it could lead to “doctors and lawyers getting pay hikes to protect their living standards”. But these professions are also service-based, and in return for higher costs of living, doctors would receive a larger potential paying client base. And while corporate lawyers would probably not receive a similar benefit (see the point about margins above), lawyers at smaller firms who represent individuals could see their businesses grow.

3) Implementation: This, in our view, is the biggest challenge -- though not an insurmountable one. In fact, Tcherneva's paper includes a detailed proposal. She suggests that municipalities and local non-profits suggest projects, which would need to be approved by the US Department of Labor. Then local unemployment offices would be turned into job centres, which would be:

...responsible for providing all types of work to the unemployed. If there are private job openings, they can try to place the unemployed there, or in other traditional nonprofit or public sector work. But if those opportunities are in short supply, the One-Stop Job Centers will also serve as public job banks that will present the unemployed with several public work options provided though the JG program.



The public job banks will already have an arrangement with local schools, libraries, nursing homes, environmental groups, and other community organizations to accept newly unemployed people as trainees, where they can shadow teachers, coaches, nurses, and librarians and assist them with ongoing work until such time when a more appropriate work opportunity may be found for them.

There are two broader worries about implementing a jobs guarantee, however. The first, which is easy to counter, comes from WaPo's Megan McArdle:

...modern roads aren’t built by armies of men wielding shovels, but with expensive heavy machinery you must be trained, expensively, to use. There are infrastructure tasks that virtually anyone can do, such as painting schools. But they aren’t what we most need done — and, also, someone’s already being paid pretty well to do them.



The government doesn’t much use many of the skills that low-wage workers have, such as bartending or short-order cooking. And it doesn’t have much presence in areas that employ a lot of low-skilled, undifferentiated labor: retail, fast food, call centers. Even in categories where the government does have needs, those needs are limited. The federal government might well be able to use more home health-care aides, day-care workers and clerks. It probably cannot use 25 million of them.

This analysis is flawed because it doesn't acknowledge the steep inequalities in the way US public goods are distributed.

Though the proportion varies by state, property taxes make up a significant amount of funding for public schools, along with local government institutions like public libraries. So a jobs guarantee programme would effectively direct the most public money to the areas where tax revenues are low and the need for public community services is high. (Safe to say, no-one is getting “paid pretty well” to paint a public school in a poor neighbourhood.)

The second criticism will probably need to be addressed in the policy itself -- and it concerns the one thing that could cause a jobs guarantee to lose public support. If these community jobs banks are not run well, they could become ineffective rent-extraction centres.

To deal with this, accountability and oversight mechanisms will be crucial. In one proposal, four academics from Duke University recommend a federal oversight authority, in the style of the WPA's successful “Division of Progress Investigation”.

It might be fitting to go further, however. First, it is important to remember that at least one study of India's National Rural Employment Guarantee Scheme (NREGS) found that it was most successful when the workers were paid directly with SmartCards, rather than through local middlemen. Because local corruption is a risk in the US as well, such direct salary payments would probably be warranted.

Graft is not the only way to become a rentier, of course. NGOs that don't listen to the residents of communities they serve can unintentionally commit harm by deploying resources in the wrong places and imposing formulaic solutions on idiosyncratic local problems.

But that could be addressed too. Because many of those problems can be fixed by listening to community members, it might be sensible to include a community oversight board that would report to federal oversight authorities.

All of this would be work intensive, to be sure -- but there are 16m underemployed Americans out there, after all.

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