A Jobs Guarantee is structurally inefficient, ineffective, and requires massive tax increases

Though no doubt there would be some demand spillovers from well‐​paid jobs, the net consequence is highly likely to be weaker private sector job creation in poor regions, which has been the experience of countries such as Britain with a nationwide minimum wages and public sector national pay bargaining. Proponents of the scheme see “higher labor standards” as a good thing, but absent productivity improvements, policies which raise labor costs significantly will reduce the quantity of workers demanded.

There’s good reason to expect the policy will reduce the efficiency and productive potential of the economy too. Taxes will eventually need to be raised to cover the net cost of the program. In infrastructure and care giving provision, costs will rise – because nobody would now work in these directly substitutable sectors for less than the wage and conditions offered in the job guarantee program. This will waste resources, and there’s highly likely to be overinvestment in lots of relatively low value ventures and programs to ensure workers are employed, especially given the explicit aim is to provide employment rather than deliver projects at low cost.

Throwing resources at regions with higher levels of unemployment and after recessions too will work directly against market signals and deter the mobility of labor (in geographic and industrial terms) and capital to its most productive uses given prevailing market conditions. This is important: yes, employment is highly likely to have some positive externalities; but the real driver of better living standards over time are productivity improvements, discovered by market‐​based activity.

Proponents of this policy seem to put an enormous weight on the idea that time out of the labor market has huge scarring consequences which could be ameliorated by any type of temporary employment. But the literature on this shows that temporary jobs do not provide the workers with skills to improve longer‐​term labor market outcomes.