Jobs guarantee costs hundreds of billions, devastates the private sector and leads to a wage price spiral.

#2: The cost is enormous. A federal jobs guarantee will cost at least hundreds of billions of dollars per year and much more during a recession when the employment rolls for the government would naturally increase. Here are the cost estimates from both plans based on people participating in the jobs guarantee:

With annual federal outlays at roughly $4.5 trillion, we’re talking about anywhere from a 10-20% increase in spending to pay for the jobs guarantee. As for how to pay for it, advocates are split on whether it should be paid for at all. Paul et al. provide a few possible tax increases but don’t devote much attention to the matter. Stephanie Kelton says, “What the models show is you can do this without creating an inflation problem and therefore why would you pay for it with tax increases of one kind or another?”2Even though the cost of the program could be partially offset through decreasing social assistance costs, it’s still very uncertain how and when these savings would materialize. What we’re left with is a new program taking up funding that could be used instead for things like increased childcare, training support, expanded health care coverage, and more.

#3: It could crowd out tens of millions of private sector jobs. There are currently 54 million people who earn $15 an hour or less. When they find out the federal government is offering $15 an hour plus benefits and permanent job security, many of those workers would quit their current job and join the federal workforce.3 Companies that could afford to would raise wages to keep some of these workers; other companies would simply go out of business. The labor markets would be controlled by the government in ways never seen before in America. And even if just half of low-wage private sector workers quit, the number of federal employees would rise by between 35 and 40 million.4 Costs to the government would then rise to anywhere from $1.6 trillion to $2.24 trillion per year, and the private sector would see massive repercussions.

#4: Inflation would rise. A sudden increase in the cost of labor for businesses will lead to inflation throughout the economy because of higher business costs that will need to be passed on to consumers. In addition, when only those at the bottom of the income distribution get a defacto raise to $15, there are upstream consequences. Workers who were making $15 an hour may demand $20 an hour now. Workers making $20 an hour might want $25 an hour and so on. This may seem like a benefit, but “this is a story of serious wage-price spiral, unless we introduce other measures,” warns progressive economist Dean Baker.5 We have been very fortunate that inflation has been well under control for the last few decades. A federal jobs guarantee could change that pretty quickly.