A Jobs Guarantee results in decreases in productivity, crowds out the private sector, and is comparative worse than UBI.

And my colleague Tim Harford’s latest column is devoted to thepsychological effectsa jobs guarantee might produce, in contrast with universal basic income, the even more radical policy often held up as the alternative. We have often, and sympathetically, covered UBI in Free Lunch, but given scant attention to the jobs guarantee. The reason is that I find it a policy proposal that raises more questions than it solves — and the many unanswered questions make it hard to pass judgment one way or the other. That is true even in the case of relatively detailed and costed schemes such as the one put forward by the Center on Budget and Policy Priorities. First, is a jobs guarantee seen as linked to an (otherwise unconditional) universal basic income? The model could be: we will give everyone an unconditional income, but we will do so by offering everyone an unconditional job. The obvious question then is: what about those who turn down the jobs offered? Is this workfare or welfare-to-work by a nicer name? If so, it is confused or dishonest to think of it as a new or indeed a particularly progressive policy. Much more interesting is to treat it on its own merits as a standalone system, which could be put in place alongside a UBI if one so wished. Then, of course, the test is what it achieves that UBI does not (or better than UBI does). Second, is the rationale for a jobs guarantee a cyclical one — to step in to hire when the private sector sheds jobs in downturns? That would meet a clear need. It would also go some way towards addressing the biggest problem with a work guarantee: that it would guarantee neither meaningful nor useful work, since a countercyclical jobs policy would presumably employ people who would otherwise not work at all. Some sympathetic commentary on a jobs guarantee fits it into a context of macroeconomic policy that is too timid to ensure genuine full employment, which causes particular harm to vulnerable groups that are the first to be fired in a downturn and the last to be hired in an upswing. But it would seem that the right policy answer to this real problem is better (more aggressive) macroeconomic demand management in fiscal and monetary policy. And in unavoidable cyclical downturns, why are New Deal-style public works programmes (temporary public sector employment expansion) or policies to encourage private businesses to keep people employed (such as Germany’s Kurzarbeit) not superior better than a guarantee system? If a jobs guarantee is advocated because it is thought to be impossible to do these other policies well, then it is literally a third-best solution. Third, is the jobs guarantee instead to be seen as a permanent solution to a structural problem of insufficient or bad job opportunities that persist over time or in particular places? Some versions clearly see it this way, as a main argument offered in its favour is that by guaranteeing jobs at decent wages, it put a floor under wages and labour conditions in all jobs in the economy. Again, this addresses a very real problem — but again, the question is whether it distracts from better solutions. Dean Baker sets out some serious concerns about a permanent jobs guarantee programme. In addition to the difficulty of ensuring that government can offer enough “real” jobs, he worries that they may displace better jobs, because it could be cheaper for public sector managers to hire workers on jobs guarantee terms than through conventional recruitment. Paradoxically, a jobs guarantee could worsen conditions in the middle even if it lifts the floor. We need to go back to basics. The root problems are twofold. First, in the US in particular, there are insufficient employment opportunities, overall and especially in the most left-behind places. In Europe, labour market participation is a smaller problem — participation rates are at record highs and rising. But, second, too many of what jobs are on offer are precarious and on poor terms everywhere. The solution to these problems would involve strong labour demand, widely dispersed across an economy’s territory, and sufficient outside opportunities for workers to be able to demand decent terms. Correct macroeconomic policy helps with the former, and redistributive policies (including UBI) can ensure sufficient demand also in hard-hit areas. Active labour market policies, income floors through minimum wages and redistributive policies (including, again, UBI) address the latter. A jobs guarantee, in contrast, still needs to prove it is more than a distant second-best on either count.