The Corner

Economy & Business

A Job Guarantee: Yes, the Price Tag Is a Big Problem

Greg Ip, writing in the Wall Street Journal, is skeptical of a federal guarantee of a well-paying job. He fears — justifiably — that it would cause the private sector to shrink. But he’s not concerned about the price tag.

Yes, a job guarantee would cost a fortune, but ignoring the obvious political impediments, the price tag isn’t the catastrophe some critics claim. To hire all the official and unofficial unemployed and half the involuntary part timers at $15 an hour plus $3 an hour for benefits would cost around $450 billion, or 2.3% of gross domestic product. The actual cost could be much lower: Many of the unemployed won’t take up the federal offer because they expect to get something better, don’t like what’s being offered, or face some sort of obstacle (family, disability, etc.).

But that’s not a full accounting of the cost. If you’re guaranteeing jobs at $18 in compensation per hour, you’re also going to have to hire a lot of people who are making less than that. What’s weird is that Ip understands this. Just a few paragraphs after this passage, he writes,

According to the Economic Policy Institute, 39% of the workforce, some 54 million people, now earn $15 an hour or less. All would have an incentive to quit and join the federal program.

Of course, most wouldn’t because their employers would, grudgingly, raise pay to keep them, then pass the cost on to customers, a de facto inflation tax. Indeed, advocates say the job guarantee accomplishes the same thing as a $15 minimum wage without the job loss.

Nonetheless, potentially millions of workers would end up on the federal payroll instead of in the private sector.

Right. That’s why the cost estimate earlier in the article is extremely optimistic.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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