The Job Guarantee Strikes Back

Economist John Miller of Wheaton College wrote a sharp critique this week of my work on the job guarantee. I was pleased to see it. In nearly five months, Miller is the first economist on the left to respond on the basis of economics rather than retreating to blanket declarations that job-guarantee opponents are either nefarious or uninformed.

Miller’s piece is also a reminder that those with whom we disagree are never monolithic. While criticizing my arguments against the job guarantee as proposed by economists at the Levy Economics Institute and the Center on Budget and Policy Priorities (CBPP), he quickly pivots to the virtues of government hiring programs in general. In the process, he especially exposes the excesses of the Levy proposal.

Miller, like many on the left, also casts his policy goals for the labor market as an essential response to the challenge of climate change. Here he could contribute more to the debate by unpacking what exactly he means by the “environmental crisis” we face and whether large-scale government hiring is the best or most direct way to address that crisis.

The Central Planner’s Problem

Miller and I are in full agreement that “the prospect of a federal job guarantee must have spooked Max Gulker.” His understanding of why I am spooked is more problematic. To Miller, the labor market is defined by powerful firms profiting from exploitive relationships that workers are forced to accept as their least-bad option. Nobody should minimize the struggles of the working poor and chronically unemployed. But Miller ignores the troublesome details of how a job-guarantee program would work and the economic interdependencies among all of us that would cause its consequences to be well beyond what its proponents intend.

Suppose that instead of driving your own job search, you were assigned a job by a government agency. A competent and well-meaning staff would process millions of resumes and job descriptions and match each worker to a job.

Think about where you would end up if the decision-makers’ knowledge of your skills, preferences, and goals were limited to a sheet of paper, a volume of information that would already challenge decision-makers. Your current work situation may be far from perfect, but the vast majority of people would inevitably wind up with inferior matches because of the fundamental limits to the information held by the planning agency.

This is the system at the heart of the job-guarantee proposals laid out by both the Levy and CBPP authors. In fact, any true guarantee must take agency regarding who gets what job out of the hands of workers and employers, who can only opt in or out. As the number of bad matches reaches millions, the individual losses in productivity don’t just add up, they spill over.

Some who are chronically unemployed or underemployed would earn more, and in isolation that is of course a good thing. But they would do so without necessarily building any skills, and only at the pleasure of a democratic electorate that Miller must recognize is rather unpredictable.

Given Miller’s awareness of the balance of power between workers and employers, he must account for the fact that the job guarantee as proposed by the Levy and CBPP economists would create a locus of financial and decision-making power far greater than even the largest corporations. Many on the left think such power is sanctified if part of a government of their design, but in my view these relationships could easily become just as exploitative as anything in the private sector.

How do we truly empower the chronically unemployed and underemployed? We engage with them as individuals with their own skills, preferences, and goals. We help them to build their networks and seek training as they desire. And we do it on the local, even neighborhood, level, even though this will lead to short-term differences in outcomes, because this variation can teach us what actually works far better than anything Miller or I can write down.

From One Flawed Proposal to Another

Miller implies that I am wrong to worry about the job guarantee leading to “economic disaster.” By peeling away millions from the private sector into a system that is necessarily inferior in assigning jobs, disaster could indeed ensue. Miller accurately summarizes concerns expressed by economist Dean Baker and me that the program would attract millions more than the authors intend. But before he has a chance to explain why we’re wrong or why this wouldn’t be a bad thing, he suddenly pivots.

“The goal of a job guarantee could be accomplished by public-sector spending large enough to bring about genuine full employment,” writes Miller, shifting his focus for the remainder of the article to a more traditional government stimulus-and-employment program.

Many of the potential government jobs Miller highlights, such as infrastructure, healthcare, and clean-energy technology, are expressly excluded from the Levy job-guarantee proposal. The Levy economists’ “human buffer stock” must be kept busy with tasks that do not require special skills and do not directly compete with specific private sector industries.

Miller’s choice of government jobs underscores the problematic trade-offs inherent in any large government employment program cleverly termed the “impossible quadrilateral” by Hugh Sturgess. The jobs Miller proposes promise more value to society than the chores favored by the Levy Institute, but necessarily raise issues of skill requirements and nationalizing entire industries.

Unskilled workers might be able to help out with large infrastructure or clean-energy projects, but these require skilled contractors, workers, and even scientists. How will Miller’s plan attract these workers from the private sector? How much will the government pay? And as resources are diverted from the private sector, those issues of the inferior allocation of resources rear their head again.

Advancing the Debate

For Miller, this is all worth it to combat climate change, “another national and global emergency which demands immediate action.” If we must take immediate action to avoid an intolerable catastrophe, why don’t we consider proposals that address the problem in the most immediate, direct, and certain manner possible? It would seem that folding other parts of the Left’s policy agenda into such a plan would only drum up controversy and take up valuable time in both legislation and implementation.

I’m continually disappointed in the unwillingness of many free market advocates to engage with even the idea of global warming. They miss an opportunity to think about nongovernmental solutions to a challenging set of problems. However, those who support radical and immediate action do their cause no favors by presenting a doomsday scenario while not defining precisely what would or could happen and the range of possible outcomes.

When the U.N. reports on climate change came out last fall, I took a look and wrote about my best understanding here. What I saw was a serious set of challenges that demand a prominent place in our discussion of policy but don’t rise to the Hollywood disaster intimated by Representative Alexandria Ocasio-Cortez and others.

Miller stops short of this kind of fearmongering, but is clear that “this is no time for half- measures.” He could greatly advance the debate by telling me why my reading of the U.N. report is wrong or whether the threats I summarized are enough to justify an emergency mentality. Given the radical measures on the table, this is no time for half-explanations.

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Max Gulker

Max Gulker is an economist and writer who joined AIER in 2015. His research often focuses on free markets and technology, including blockchain and cryptocurrencies, the sharing economy, and internet commerce. He is a frequent speaker at industry conferences, especially on blockchain technology. Max’s research and writing also touch on other economic topics, including governance, competition, and small businesses.
 
Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.