A job guarantee drains the private sector, triggering spiraling wage inflation.

The change from describing the job guarantee as a wage- and inflation-containing institution to one geared towards improving the bargaining power of workers is quite remarkable. One need only to take stock of the various features and benefits that Wray et al. now include in their jobs program proposals. For example, in keeping with the movement demand for “$15 and Fairness,” the Levy Institute proposes to set the wage in their jobs program at $15 per hour, which would effectively function as the new US federal minimum wage.29 As Dean Baker points out, however, there are approximately 40 million US workers currently earning less than $15 per hour—the federal minimum wage remains $7.25 per hour. This could mean one of two things: either low-wage private sector employers would have to raise wages quickly in order to retain employees, or the JG program would have to absorb a lot of displaced private sector workers.30 It is hard to imagine employers tolerating this without a substantive fight. Additionally, this does not account for whatever “spillover effects” a substantial JG-induced wage increase might generate up the income ladder (or at least proximate to the JG wage). This is not to suggest simply that significant increases at the bottom of the wage distribution are not necessary and justifiable, but rather to point out that this outcome is incompatible with JG theorists’ previous insistence that the program would serve a “price stabilization” function—at least short of some other institutional mechanism, such as coordinated wage bargaining or a broad incomes policy.

Current JG proposals also aim to provide workers with benefit packages and, notably, access to public health insurance. Although this is commendable, Wray underestimates how forceful the pull might be from the low-wage private sector to the JG program because of these features.31 In a country where low-wage workers are far more likely to be un- or under-insured, access to health benefits in the JG would likely prevent workers from leaving the program even if marginally higher paying work were to be available in the private sector. This lends credence to the argument that the only way the program might be implemented is if it contains wages and conditions significantly below those found in current JG proposals. Wray seems to assume, or predict, in his statistical models that over certain timespans the low-wage private sector would be forced to harmonize wages and conditions upwards, but Baker points out that Wray underestimates how much wage pull and price inflation private sector employers and wealthier consumers will tolerate.32 Furthermore, Wray makes clear that JG employment would not be “at-will,” as is currently the case with all nonunionized employment in the United States. JG workers would have access to a grievance process and could not be fired at the discretion of their state or local public employer without just cause. Here again, contemporary JG advocates do not appreciate how much of an improvement basic just-cause dismissal procedures in the JG would be over nearly all low-wage private sector work in the United States, and, consequently, how much this aspect of the JG might incentivize workers to enrol in the program and stay put.