The blog of the Urban Institute
October 22, 2019

Envisioning an Effective Federal Job Guarantee

In February, Representative Alexandria Ocasio-Cortez (D-NY) and Senator Ed Markey (D-MA) introduced “a Green New Deal” resolution, which recognizes that the effects of climate change can’t be separated from other forms of insecurity that people experience in their daily lives, including economic insecurity.

The resolution proposes broad ideas for increasing infrastructure investment to ambitiously secure full employment and plan disaster mitigation and management efforts. It points to “guaranteeing a job with a family-sustaining wage” for everyone, along with training and advancement opportunities that are essential for creating high-quality jobs in a changing market. This type of federal job guarantee would be a legal commitment to public employment for anyone seeking work who is unable to find a quality job in the private sector.

Guaranteed job proposals like the one in a Green New Deal are bringing renewed attention to a strategy for creating quality jobs that could help the nation achieve full employment with living wages while also addressing environmental challenges.

The historical context of job guarantees

Policy discourse on full employment (or the elimination of unemployment) is not new. Public job programs date back to the New Deal in the 1930s. Full employment was also an important proposal in the Civil Rights Movement, when civil rights leaders publicly endorsed the universal right to a job with a nonpoverty wage for all Americans. This emphasis shaped early versions of the 1978 Full Employment and Balanced Growth Act, which aimed to promote private sector employment and expand federal authority for subsidizing employment, particularly for low-income and low-skilled adults and youth. But in the end, the act did not include a universal job guarantee.

Today, the Green New Deal proposal is driven by similar socioeconomic concerns of those previous movements—including income inequality, racial inequality, and persistent poverty—to push full-employment plans forward.

Strategies for an effective federal job guarantee

Designing and implementing a federal job guarantee would be a massive undertaking. Research suggests that these types of proposals should include a few key elements to be effective.

Target subsidized jobs to frontline workers and marginalized communities

Ensuring that a job guarantee centers frontline workers and marginalized communities would help raise workers’ wages as they build new in-demand skills, while also supporting local economies that would gain a robust workforce. An effective federal job guarantee could counteract unemployment and address the negative impact of unemployment on psychological and social well-being.

The program could also be a powerful tool to correct racial inequalities. Black workers routinely face an unemployment rate that is roughly twice that of white workers, even after controlling for educational attainment. It could also offer an avenue for modernizing services in communities, such as upgraded public works and transportation infrastructure, which would likely be a universal benefit.

Mitigate displacement of private sector workers

The effects of guaranteed jobs on the labor market are complex, and further analysis is needed to better understand the employment dynamics at play. Wages subsidized through a federal job program can have unintended effects on the regular job market. If guaranteed jobs are all in the public sector and those jobs offer higher wages than the local labor market, some workers currently employed in the private sector may leave for public sector jobs.

Some analysts suggest employers will likely have to offer compensation packages to workers in low-wage sectors that are at least as desirable as those packages offered under the job guarantee. But if the subsidies offered under a federal jobs program can also go to private employers, some businesses may receive a subsidy for wages of workers they may have hired anyway, causing economic inefficiencies.   

Connect job guarantee proposals to job training

A universal job guarantee should not be the only source of investment in addressing environmental, economic, and workforce challenges. Other policies can emphasize reducing societal income inequality and improving the standard of living for people unemployed or struggling in the labor market. Public funding for training and retraining workers for new jobs can improve job opportunities. And expanded tax credits for employers who invest in education and career development for their low-skilled workers could increase the amount of employer-sponsored training.

Addressing environmental challenges and improving job quality

If the US changed its domestic infrastructure to renewable energy, a comprehensive jobs program would be critical to ensuring the nation has the workers it needs to execute that kind of massive shift.

But a job guarantee proposal could benefit more than just plans to address climate change. It could also benefit tomorrow’s workers because innovations needed for a cleaner economy would generate new occupations. Guaranteed job programs and training for jobs in a more environmentally sustainable economy could provide new job opportunities and more financial stability for workers and families struggling in the current labor market.

U.S. Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Ed Markey (D-MA) hold a news conference on February 7, 2019 to unveil their Green New Deal resolution. (Photo by Alex Wong/Getty Images)

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