How Many People Would Be Helped by a Federal Jobs Guarantee?

A new report looks at the concept of a federal job guarantee—and who might be helped and hurt by such a program.
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This photo taken on May 3rd, 2018, shows a worker cutting steel at a factory in Huaibei in China's eastern Anhui province.

Opponents of federal job guarantees point to the high price tags associated with such programs.

Over the course of the last few years, there's been a push for the federal government to provide or guarantee jobs to Americans struggling to find employment in the private sector. The idea doesn't just exist on the fringes of labor reform: Well-regarded liberal think tanks have published proposals for a federal jobs guarantee program; Senator Cory Booker (D-New Jersey) unveiled legislation for a pilot jobs program in April.

But how many people would actually participate in a federal jobs program? That's a central question behind a new report from Hamilton Project researchers Ryan Nunn, Jimmy O'Donnell, and Jay Shambaugh, who take a look at the concept of a federal job guarantee and who might be helped and hurt by such a program.

There are plenty of obvious benefits of some kind of federal job guarantee, as advocates are quick to point out: A federal job guarantee would likely be politically popular, appealing even to more conservative voters thanks to its pro-work effects and messaging; it would reduce poverty, by increasing employment and potentially increasing wages among both program recipients and low-wage workers in the private sector; it could be a boon for Americans living in economically distressed areas, many of whom have been left behind by the current recovery; it could go a long way toward reducing the racial inequality that still holds minorities back; and it could serve as an effective response to economic slowdowns.

Opponents of federal job guarantees point to the high price tags associated with such programs, and the potentially damaging effects they could have on small businesses that can't afford to compete with the wages offered by the federal government.

The magnitude of all these effects depends heavily on the details of the program—whether it's available to all Americans or only certain demographics in targeted locations, for example—and, crucially, the program take-up. To shed some light on the latter factor, which has often gotten short shrift in program proposals, the Hamilton Project researchers look at who is likely to participate in a large-scale federal jobs program. As the figure below, from the report, demonstrates, there are almost 100 million Americans who are currently either unemployed, earning less than $15 per hour, or out of the labor force:

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But a good many of those Americans may be unlikely to jump into such a program. Many of the unemployed, for example, are likely simply in between jobs and capable of finding a better position. Meanwhile, well over half of those who are currently not in the labor force are either caregivers, disabled, or ill, making them unlikely to rejoin the labor force.

Many of the proposals released so far have assumed that take-up will be limited to the unemployed or those out of the labor force. But, as the Hamilton Project researchers point out, the wage offered by such a program is also a crucially important determinant of take-up. There are currently about 28 million Americans who work full time and earn less than $15 per hour. Many of those are likely potential participants in a federal jobs guarantee program that pays at least $15 per hour, as are part-time workers who would like to work full-time but have been unable to find such positions. By contrast, there are only five million Americans who work full time and earn less than $10 per hour.

"If a federally supported job offers a minimum hourly wage of between $7.25 and $10, a relatively modest fraction of currently employed U.S. workers would likely be affected," the researchers write. "However, at higher hourly wages like $15, a federal program would have more-sweeping implications for the U.S. labor market, affecting an unknown fraction of 27.9 million full-time workers, 15.9 million part-time workers, 5.9 million unemployed workers, and tens of millions of people who are outside the labor force."

The implications of the program wage rate also vary significantly by geography. A federal jobs program with a $15 wage, for example, will have much higher take-up in a state like Mississippi (where almost 40 percent of workers earn less than $15 per hour) than in New York or Massachusetts. Still, Nunn, O'Donnell, and Shambaugh conclude that a federal job guarantee could (depending on the wage and the private sector's reaction) ultimately reach tens of millions of Americans.

The researchers also note a couple of potential negative unintended consequences of a federal jobs program (beyond the cost): it could result in decreases in human capital, as workers leave school for federal jobs, and it could allocate workers to less productive jobs than they might otherwise have found. Wages and employment, however, would see boosts.

"The larger programs would likely cost hundreds of billions of dollars a year and could lift employment rates by 2 to 4 percentage points depending on take-up," the researchers write. "Higher-wage job guarantees would also lift more out of poverty and raise wages of the bottom 80 percent of workers by roughly 5 percent."

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