A FJG requires massive costs-comparable to a new Pentagon

A federal job guarantee would be monumentally expensive, return only limited value from the participants’ work, entail administrative challenges nearly impossible to solve, and be potentially disastrous for economic growth and the private labor market.

Relying on rigorous but basic economics and data analysis, we find the following:

• Job-guarantee participants would be placed in a system that eschewed the most fundamental ways that markets provide information and incentives, such as competition and freely set wages (section 3).

• Under the authors’ own projections of ten to seventeen million participants, a federal job guarantee would, by several-fold, create the world’s largest organization (public or private) measured by employees (section 4).

• Under the authors’ own projections, the program’s annual cost would be comparable to that of the Pentagon (section 4).

• There are multiple reasons why the CBPP and Levy reports may have underestimated participation and cost (section 4).

• Both the CBPP and Levy reports set standards for the type of work to be provided that would be difficult if not impossible to attain, place burdens on state and local governments, and return work of very limited value (section 5).

• An on-demand job guarantee of the scale and scope proposed could cause massive distortions in the wider economy leading to less output and growth, and could prevent workers from investing in critical human capital (section 6). While many commentators have expressed grave concern with job-guarantee proposals, this article represents one of the first detailed analyses of the claims advanced by the policy’s proponents. Because of the unprecedented size and scope of the CBPP and Levy programs, some have dismissed the seriousness of a federal job guarantee as a policy proposal. On the left, economist Paul Krugman has said that “realistically, a blanket jobs guarantee is unlikely to happen.”5

But prominent politicians, including Kirsten Gillibrand, Corey Booker, Bernie Sanders, and Alexandria Ocasio-Cortez, have expressed support for a job guarantee, and it has been discussed by dozens of media outlets including some that have suggested that Democrats make it the center of their 2020 campaign.6

This report also speaks to the recent trend among some politicians toward advocating very large, centralized government programs. These include “Medicare for all” and recent corporate-governance plans, in addition to the job guarantee. These plans often sound good to voters in one or two sentences, but do not hold up to closer inspection.

The authors of the CBPP and Levy plans are often short on details when describing their programs, in which government officials would assign jobs to millions without the help of market signals. After thinking through those details, we find that the case provides a powerful example of the impossibility of such large-scale centralized initiatives in a complex modern society such as our own.