The Job Guarantee and the Economics of Fear: A Response to Robert Samuelson

Pavlina Tcherneva | May 25, 2018

The Job Guarantee is finally getting the public debate it deserves and criticism is expected. Building on several decades of research, the Levy Institute’s latest proposal analyzes the program’s economic impact and advances a blueprint for its implementation. Critics have taken note and are (thus far) restating the usual concerns, but with a notably alarmist tone.

The latest, courtesy of the Washington Post’Robert Samuelson, warns that the Job Guarantee would be 1) an expensive big-government takeover, 2) unproductive and impossible to manage, 3) dangerously disruptive to the private sector, and 4) inflationary.

Samuelson wants us to be afraid—very afraid—of big government. But he forgets that we already have big government—one that devotes hundreds of billions of dollars, time, resources, and administrative effort to deal with all the economic and social costs of unemployment, underemployment, and poverty.

Unemployment is already paid for. In this context, the program does not increase the government’s costs—it reduces them—while also cutting costs to households and firms and creating real actual benefits by supporting families, communities, and the economy. As David Dayen points out, whether we can afford the Job Guarantee is not up for debate.

Will the Job Guarantee create impossible-to-manage make-work projects? This is a fear that James Galbraith—a self-proclaimed former skeptic of the Job Guarantee—calls “an admission of impotence and a call for preemptive surrender.” Kate Aronoff recalls that New Deal projects were often derided as boondoggles. Still, they rebuilt communities, the economy, and people’s lives, while leaving a lasting legacy.

The Job Guarantee is subjected to a unique double standard for managerial efficiency. We never hear objections to going to war, “nation building,” or bailing out the financial sector on the grounds that these efforts would be an “administrative nightmare.” And yet our proposal to put our underutilized labor force to productive use, by using much of the existing institutional infrastructure in the nonprofit and state and local government sectors is dismissed as an impossibly difficult task.

The claim that the Job Guarantee is unproductive misses another basic point: unemployment is inherently unproductive. What is the productivity of an unemployed person and her family struggling to make ends meet, compared to her productivity when she is employed in a public service job with decent pay?

Environmental renewal and restoration, clean up of blighted communities, enrichment programs for children, care for the elderly, and jobs for artists and musicians are unproductive under some definitions—those that treat only work that produces output for sale as productive. We disagree. Employing previously unemployed or underemployed people is inherently more productive than the current model of unemployment and neglect.

Critics think the program will face large skill and geographical mismatches, but ignore the fact that communities with the highest levels of unemployment also have the greatest social needs. The Job Guarantee puts the two together. It “takes the contract to the worker” and “takes workers as they are.” We have provided many examples of such projects that fulfill community needs, are labor intensive, and can employ even the least skilled among us.

But according to Samuelson, the Job Guarantee is dangerous for another reason: workers outside the program who realize that the Job Guarantee offers decent pay, healthcare, and childcare to its employees will stage a “political rebellion.”  This—he supposes—is a much scarier scenario than having millions of workers earning poverty-level wages, without health coverage or affordable childcare.

Which brings us to the fear of disrupting “business as usual” in the private sector. Yes, we want to disrupt business models that can only be successful if they pay poverty-level wages without the benefits that are common in all of the developed countries. In the IT world, “disruptions” are hailed as progressive and innovative. The Job Guarantee is the policy innovation that secures a true antipoverty wage floor for all—one that firms must meet.

And if none of the above scares you, critics want you to fear the program’s inflationary effects that are supposed to result from raising the program’s wage to $15 per hour by 2022. That would establish an effective national minimum wage—raising it from the current abysmal $7.50 an hour to $15 per hour. As wages rise, it is true that that the price level will probably increase as employers adjust to higher labor costs.

But Samuelson, like others, confuses a key issue: a one-time increase in the price level is not inflation (i.e., a continuous rise in the price level). Our model finds negligible inflationary impact from the program and we stress its key anti-cyclical feature: the program shrinks in expansions—i.e., it is a dampening force on inflation.

So let’s recap. What should we fear more: a world in which unemployment and depressed wages are the norm, or one with an employment safety-net and living wages for all?

Samuelson may think the Job Guarantee is a “loony economic agenda.” Thankfully, the architects of the New Deal reforms or the Civil Rights legislation did not think this way. Americans are tired of being told what can and cannot be done. They demand bold action and a majority supports the program. The Job Guarantee is a first step toward completing the Roosevelt revolution and securing Roosevelt’s economic bill of rights.

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3 Responses to “The Job Guarantee and the Economics of Fear: A Response to Robert Samuelson”

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  1. Comment by Charles Abrahams — May 25, 2018 at 2:26 pm   Reply

    An excellent article that covers all the bases.

  2. Comment by Gary Houk — May 25, 2018 at 2:45 pm   Reply

    A wonderful response Pavlina!! This is a critical point in the debate and immediate pushback is exactly what must be done by as many of us as possible. I hope the Washington Post allows this response in their paper so for readers of the Samuelson article to digest.

  3. Comment by OL GriffinMay 28, 2018 at 8:23 am   Reply

    this is the best presentation of a rebuttal to the years of alarmist banter.

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