Pros and Cons of Designing a Job Guarantee Program

Seminar | September 5 | 4-6 p.m. | 2521 Channing Way (Inst. for Res. on Labor & Employment), Director's Room

 Bill Spriggs, Howard University

 Institute of Research on Labor & Employment

Policy makers frustrated with slack labor markets, diverging wage and productivity growth, and continued lag in the incomes of Black workers have increasingly begun to consider legislation that would guarantee everyone a job.

The right to a job has been part of U.S. policy debates before. The preamble to the Humphrey-Hawkins Full Employment Act, passed in 1978, vows to “translate into practical reality the right of all Americans who are able, willing, and seeking to work to full opportunity for useful paid employment at fair rates of compensation.” That intent clearly has not been actualized. When the Act was passed in October 1978, the unemployment rate was 6.0%. Since 1985, Americans have seen the unemployment rate above that level nearly 40% of the time.

Granting workers the right to a job removes labor market frictions that cause unemployment, such as discrimination, relocation costs, sticky wages, and obsolete skills. A job guarantee would totally redefine the meaning of the “labor market.” It requires, therefore, assessing what the labor market does well, and the extent to which the “guarantee” might be disruptive or fail to address the market’s shortcomings. For instance, the guarantee flattens the return to schooling on the probability of employment. Tighter labor markets and rising wages in some labor markets send signals to slack markets with sagging wages to help provide migration signals. The job guarantee could put a short in that signal.

In this talk, Spriggs will discuss what a job guarantee would solve, and what problems would remain. For instance, while relocation costs place great burdens on workers living in high unemployment areas, price signals of rising wages in tighter labor markets provide incentives for workers to move. Research has found that in the long run, local labor markets do balance from that migration. Would a job guarantee ensure that workers would relocate faster—since a job guarantee reduces any uncertainties about success from the move, especially essential for those with less skill? Would guaranteed jobs provide enough stimulus to solve problems of inadequate local demand to bring dying communities back to life?

Alternatively, would job guarantees prevent labor markets from clearing in the private sector by keeping wages too high, and choke off recovery for the community? How might a job guarantee affect the divergent rates of return to education between Blacks and whites?

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