Wage subsidies are a better alternative than job guarantees.

Ed, 1-14-2020, "Can We Put Everyone to Work? — The Alternatives to a "Job Guarantee."," Niskanen Center, https://www.niskanencenter.org/can-we-put-everyone-to-work-the-alternatives-to-a-job-guarantee/

First, even though guaranteed jobs would be designed not to compete directly with the private sector, a JG would still be disruptive. Private employers would lose workers if they did not match a job-and-benefit package worth some $20 per hour. JG advocates are confident that private employers have enough slack to raise wages without cutting employment, but I am not so sure. JG jobs would not only offer good wages and benefits, but also, as advocates promise, they would be more accommodating than many private sector jobs to workers’ personal schedules, family needs, and disabilities. A large outflow from private employment to guaranteed jobs could raise the cost of the program sharply.

Second, I think advocates overstate the ease of creating 10 to 15 million meaningful new public service jobs. To avoid competing with the private sector, they could not be jobs in hotels or factories. They could not require advanced skills or investments in heavy equipment, which would mean JG workers could play a limited role in projects like replacing aging bridges or building green energy infrastructure. When we read advocates’ descriptions of JG jobs, they talk about things like teachers’ aides, recycling, and planting trees on vacant lots. How many workers could be absorbed in such jobs before they became mere make-work?

Third, many of those who remain out of work in today’s booming economy are, almost by definition, among the “hard to employ.” Those include people with criminal records, unstable housing, substance abuse issues, family situations that interfere with regular work schedules, and borderline mental and physical conditions that fall short of full disability but still create problems on the job. Programs that try to find work for the hard-to-employ are not a new idea. Many existing programs are well run. Still, their experience shows that lasting success requires intensive, one-on-one casework to help with things like soft job skills and support with personal issues. Even then, success rates are far from 100 percent. The leading JG proposals do not, in my view, come close to budgeting enough for administration, counseling, and support services.

Work Requirements

 Although the issues just discussed make me skeptical of guaranteed jobs, I am no less skeptical of the leading conservative alternative – work requirements on welfare recipients. Welfare reforms of the 1990s already imposed work requirements on most recipients of cash welfare. The current administration now wants to extend work requirements to noncash programs such as SNAP, Medicaid, and housing assistance.

A recent report from the  claims that the welfare reforms of the 1990s prove that work requirements can increase employment and reduce dependence. I see two reasons to doubt such confidence.

For one thing, backers of work requirements assume there are many nondisabled welfare recipients who are able to work, but who choose not to. The data show otherwise. They show that a majority of nondisabled welfare recipients already work or face serious barriers to work. The following chart from the  shows data for Medicaid recipients. The figures for SNAP, housing assistance, and other programs are similar.

As the chart shows, well over half of Medicaid recipients are already working, and nearly half work full time. Some 12 percent are not working because of caregiving responsibilities and another 7 percent because they are in school. Although the chart excludes people who have qualified for Social Security disability programs, 11 percent even among the officially nondisabled cite illness or disability as their reason for not working. That leaves just a sliver who fall into the category of “not working but able to work.”

A second problem is that the kind of work requirements that conservatives favor are not, in practice, very work-friendly. They often place unrealistic burdens on beneficiaries, such as detailed record keeping, frequent verifications, and unrealistic allowances for family needs or irregular work schedules. Administrative lapses are often punished with extended lockouts from benefits. Furthermore, these programs – like some JG proposals – offer inadequate personal assistance to the hard-to-employ, leaving it up to them to find work or training and to deal with personal barriers to work.

In the end, then, many people who ought to qualify for assistance fail to do so. Many who are pushed off welfare rolls do not find work. On balance, work requirements trim welfare rolls but increase poverty. Cynics say that is the intended outcome.

Wage Subsidies

Progressives promise jobs in the public sector. Conservatives propose using the stick of work requirements to push people into private-sector jobs. Wage subsidies fall somewhere between these alternatives. They focus on private- rather than public-sector jobs, but they use a carrot rather than a stick to encourage employment.

By far the largest wage subsidy program is the Earned Income Tax Credit (EITC). In existence since 1975, it has earned wide bipartisan support. Liberals like it because it raises 6 million families out of poverty each year. Conservatives like it because it encourages work and self-sufficiency.  called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

The amount of wage subsidy offered under the EITC varies both with income and the number of dependent children. For the lowest-paid workers, it provides a bonus of 35 to 45 cents for each dollar earned. Once earnings approach the official poverty level, the subsidy is gradually phased out. Benefits are paid in a lump sum, once a year, as a refundable tax credit.