The Federal Job Guarantee—A Policy to Achieve Permanent Full

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March 9, 2018

The Federal Job Guarantee—A Policy to Achieve

Permanent Full Employment

Mark Paul

, William Darity, Jr.

, and Darrick Hamilton

This report was commissioned by the Center on Budget and Policy Priorities’ Full Employment Project. Views

expressed within the report do not necessarily reflect the views of the Center.

Introduction

Full employment has been part of the policy discourse in the United States since the early

twentieth century. One of the most notable proponents of true full employment—defined as an

economy in which any person who seeks a job can secure one—was President Franklin D.

Roosevelt; his vision of “economic security” for all is a touchstone for full-employment advocates.

For Roosevelt, direct hiring programs such as the Works Progress Administration (WPA) and the

Civilian Conservation Corps (CCC) were great successes during the Great Depression. While they

provided much-needed—albeit temporary—relief during the economic catastrophe, their size and

transient nature were insufficient to achieve the long-term impact on employment that Roosevelt,

and the full-employment supporters that came before and after him, sought.

Today, economists and policymakers, including the governors of the Federal Reserve System, tend

to associate “full employment” with a four-to-six percent unemployment rate, using the standard

measure of unemployment.

This measure of unemployment counts workers who do not have a job,

have actively looked for work in the previous four weeks, and are currently available for work; it

does not count the millions who have stopped actively seeking employment, or those inadequately

employed in temporary, seasonal, or other precarious employment situations. The four-to-six

percent unemployment rate referred to above is based on a conception defined by economists as the

non-accelerating inflation rate of unemployment (NAIRU). It is noteworthy that this “target” has

changed throughout time. Moreover, an economy with these unemployment rates needlessly

Mark Paul is a Postdoctoral Associate at the Samuel DuBois Cook Center on Social Equity at Duke University.

William Darity Jr. is the Samuel DuBois Cook Professor of Public Policy, African and African-American Studies and

Economics and the Director of the Samuel DuBois Cook Center on Social Equity at Duke University.

Darrick Hamilton is Professor of Economics and Urban Policy at the Milano School of International Affairs,

Management and Urban Policy and Department of Economics at the New School for Social Research, and Director of

the Doctoral Program in Public and Urban Policy at The New School.

This measure in known as “U-3” in the monthly employment report from the Bureau of Labor Statistics.

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condemns millions of U.S. workers to unemployment and underemployment, often resulting in

severe economic hardship for those left behind by decisionmakers’ policy choices.

At today’s relatively low unemployment rate of 4.1 percent (January, 2018), 6.7 million workers

remain unemployed, an additional 5 million are working part-time though they would prefer full-

time work, and job seekers still substantially outnumber job openings.

Moreover, this aggregate

picture masks the fact that unemployment does not affect all workers equally. Historical

unemployment data highlight the persistent trend of discriminatory labor market practices that result

in substantially higher unemployment rates for some social groups. For instance, black workers

routinely face an unemployment rate that is roughly twice that of white workers, even after

controlling for educational attainment.

There is recent evidence that narrowing of the racial

unemployment gap occurs as the labor market tightens, but these gaps may be exacerbated during

economic downturns.

FIGURE 1: Unemployment Level by Race

Bureau of Labor Statistics, “Job Openings and Labor Turnover Summary,” U.S. Department of Labor, January, 2018,

https://www.bls.gov/news.release/pdf/jolts.pdf.

Janelle Jones and John Schmitt, “A College Degree is No Guarantee,” Center for Economic and Policy Research, May,

2014, http://cepr.net/documents/black-coll-grads-2014-05.pdf.

The gap in unemployment between white and black workers is relatively stable across time. Further, recent research

suggests that the unexplained portion of the wage differentials between white and black workers has been growing

during the past forty years. For further discussion, see Mary C. Daly, Bart Hobijn, Joseph H. Pedtke, “Disappointing

Facts about the Black-White Wage Gap,” Federal Reserve Bank of San Francisco, September, 2017,

http://www.frbsf.org/economic-research/publications/economic-letter/2017/september/disappointing-facts-about-

black-white-wage-gap/.

Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos, “Racial Gaps in Labor Market Outcomes in the Last

Four Decades and over the Business Cycle,” Federal Reserve Board, June, 2017,

https://www.federalreserve.gov/econres/feds/files/2017071pap.pdf.

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While achieving full employment is an important aspect of generating equitable growth in the

economy, policymakers should also be concerned with developing policies that guard against

poverty-level wages. Although unemployment is a major predictor of poverty in the United States,

data indicate that simply having a job is an insufficient condition for the escape of poverty. A study

by the Economic Policy Institute found that despite being employed, 28 percent of U.S. workers

took home poverty-level wages in 2011, leading to grave economic conditions for these workers and

their families.

The U.S. government has intervened in the labor market to support full employment and non-

poverty wage policies. Government programs and policies including the Federal Reserve's dual

mandate, the Earned Income Tax Credit (EITC), minimum wage laws, living wage ordinances,

Medicare and Medicaid, and the Supplemental Nutrition Assistance Program (SNAP) have gone

some distance toward protecting the economic well-being of millions of Americans. Though the

current anti-poverty and social insurance regime slashed poverty rates nearly in half in 2016 (when

compared to poverty rates in the absence of these programs), it largely bypassed those without

employment; and the shift to a work-based safety net, inaugurated by the 1996 welfare reforms

under the Personal Responsibility and Work Opportunity Reconciliation Act signed into law by

President Clinton, further exacerbated a safety net riddled with holes for those without work.

Although the programs listed above may have been effective in reducing unemployment, poverty,

hunger, and other social ills, they fall short of providing a social insurance system that offers a

genuine path to full employment and the elimination of poverty. We recommend a slate of bold

legislation to achieve and maintain full employment and end working poverty in the U.S. economy.

We recommend:

• The permanent establishment of a National Investment Employment Corps (NIEC). The NIEC will

provide universal job coverage for all adult Americans. The permanent establishment of the

NIEC would eliminate involuntary unemployment.

• The elimination of poverty wages through the pay structure of the NIEC. The federal job guarantee

would provide a job at a minimum annual wage of $24,600 for full-time workers (poverty line

for a family of four) and a minimum hourly wage of $11.83. Workers would have the

opportunity to advance within the program, rising from the minimum wage in the program to

an estimated mean salary of $32,500. The wage would be indexed to the inflation rate to

ensure that the purchasing power of enrollees is maintained and the wage will vary to allow for

some degree of regional variation. The minimum wage rate in the program will also rise to

meet the national minimum wage if it were to exceed the wage rate recommended here.

“The State of Working America,” Economic Policy Institute, http://www.stateofworkingamerica.org/fact-

sheets/poverty/.

Danilo Trisi, “Safety Net Cut Poverty Nearly in Half Last Year,” Center on Budget and Policy Priorities, September,

2016, https://www.cbpp.org/blog/safety-net-cut-poverty-nearly-in-half-last-year.

In effect, the job guarantee can set a new minimum degree of compensation by providing a fallback position to

workers. If the federal minimum wage is raised above the current wage proposed in the program, the program wage shall

be revised upward to meet the federal minimum wage. This will alter the cost estimates provided below.

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• The inclusion of fringe benefits. To provide a true non-poverty wage and meet the fundamental

rights of American citizens, the policy will include health insurance for all full-time workers in

the program. The health insurance program should be comparable to that offered to all civil

servants and elected federal officials. In addition, the NIEC would offer benefits such as

retirement plans, paid family and sick leave, and one week of paid vacation per three months

worked. These benefits, in conjunction with non-poverty wages, will set a reasonable floor in

the labor market—which, through competitive forces, will result in private-sector workers

having the dignity of fringe benefits as well.

A Bold Policy to Achieve Permanent Full Employment

The persistence of involuntary unemployment in the U.S. economy is the status quo—but it need

not be. Recent research has highlighted the policy mechanisms behind rising inequality in the United

States; likewise, unemployment substantially affects inequality and is itself affected by the policy.

While the Federal Reserve initially had a single mandate of price stability, the 1978 Full Employment

and Balanced Growth Act (commonly known as the Humphrey-Hawkins Act) legally required the

Federal Reserve to pursue “maximum employment,” thereby creating the modern dual mandate of

the Federal Reserve. While the maximum employment mandate has resulted in sizable employment

gains when the Federal Reserve chooses to prioritize it, the mechanism has proven far from

sufficient in achieving full employment in the Keynesian sense—that is, an economy where anyone

who wants a job can find a job.

Although the federal government has established full employment as a national goal in the past—

via the Employment Act of 1946 and the Full Employment and Balanced Growth Act of 1978—it

has failed to achieve these goals through macroeconomic stabilization policies, monetary or fiscal.

The only time the United States was operating near full employment was during World War II.

From 1943 to 1945, the U.S. operated at an average unemployment rate under 1.7 percent.

Thus,

this paper proposes the creation of a National Investment Employment Corps to achieve permanent

full employment in the U.S. economy through large-scale, direct hiring by the federal government.

We argue that not only would such a policy bring the economy to sustained full employment, but it

also would constitute a sizable restructuring of the labor market.

Joseph Stiglitz, Nell Abernathy, Adam Hersh, Mike Konczal, and Sue Holmberg, “Rewriting the Rules of the

American Economy,” The Roosevelt Institute, May, 2015, http://rooseveltinstitute.org/rewriting-rules-report/.

Dean Baker, Sarah Rawlins, and David Stein “The Full Employment Mandate of the Federal Reserve. Its Origins and

Importance,” Center for Economic and Policy Research; Fed Up; and The Center for Popular Democracy, July 2017,

http://cepr.net/images/stories/reports/full-employment-mandate-2017-07.pdf.

Bureau of Labor Statistics, Historical Statistics of the United States Colonial Times to the 1970, Part I (U.S. Government

Printing Office, 1975), Series D 85-86 Unemployment: 1890-1970, 135.

William A. Darity Jr., “A Direct Route to Full Employment,” 37 no. 3-4 (2010), pp. 179-181.

For other scholarly work exploring similar job guarantee proposals, see Harvey 1989, 2000; Wray and Forstater 2004;

Wray 2008; and Tcherneva 2012, 2013.

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The federal job guarantee would provide a job, at non-poverty wages, for all citizens above the age

of 18 that sought one.

The minimum wage rate in the program is $11.83 an hour, equivalent to

$24,600 per year for full-time workers, which is the current poverty line for a family of four. This

rate would be indexed to inflation, ensuring that workers’ purchasing power is maintained over

time.

The program would incorporate wage variation based on time and performance in the

program, a worker’s previous experience, education, and region of residence; thus, we estimate a

mean annual wage for all employees at approximately $32,500.

The permanent establishment of the NIEC would eliminate persistent involuntary unemployment

in the economy, ensuring that the United States lives up to the unfunded mandate to achieve and

maintain full employment as outlined in the Full Employment and Balanced Growth Act of 1978.

But we know that a job is not sufficient for workers to live a life of decency and guard against

poverty. To provide an adequate living for workers and keep them and their families financially

stable, workers will receive a benefits package in addition to a non-poverty wage as part of their

compensation.

At this time, we estimate additional expenditures of $10,000 per full-time worker per year to

provide adequate health insurance and benefits. Since workers would be public employees, the

insurance would be comparable to current health insurance plans offered to civil servants, including

members of Congress.

Other fringe benefits will also be provided to workers, including paid family

and sick leave and one-week paid vacation per three months worked.

An Abbreviated History

The idea of a federal job guarantee is not novel. Government intervention in the labor market to

ensure full employment has been part of the political and policy debate at the national level at least

since President Roosevelt’s final State of the Union address in 1944, wherein Roosevelt introduced

what he called an Economic Bill of Rights.

The speech was grounded in Roosevelt’s belief that “the

American Revolution was incomplete and that a new set of rights – economic rights and rights

analogous to Nobel Laureate Amartya Sen’s more recent conception of human capabilities – was

necessary to finish it.”

The first “article” of his proposed second Bill of Rights was the right to

employment. The second was the right to “earn enough” to lead a life of dignity. Roosevelt was

Complementary youth employment programs should be considered. For a recent discussion of full employment for

the young, see Harold A. Pollack, “Full Employment for the Young, Too,” Center on Budget and Policy Priorities,

September, 2017, https://www.cbpp.org/research/full-employment/full-employment-for-the-young-too.

This was initially part of the Full Employment Bill of 1945, S380.

The details of the wage scale should be established by a committee within the Department of Labor.

Benefits, such as health insurance, are critical to the financial health of workers. For instance, medical bills are

currently the leading cause of bankruptcy in the United States.

Estimate was established using 2017 premiums published for non-postal workers by the U.S. Office of Personnel

Management, https://www.opm.gov/healthcare-insurance/healthcare/plan-information/premiums/.

Frankling D. Roosevelt, State of the Union Message to Congress, January 1944,

http://www.fdrlibrary.marist.edu/archives/address_text.html

Cass Sunstein, The Second Bill of Rights: FDR’s Unfinished Revolution and Why We Need It More Than Ever (New York: Basic

Books, 2004).

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convinced that security—“physical security…economic security, social security, moral security”—

was central to the success of the American experiment.

Roosevelt, a defender of private property and state-sanctioned capitalism, was convinced—and

rightly so—that the free market alone could not provide the necessary security to the American

people. In the absence of the provision of adequate opportunities for work by the private sector to

eliminate involuntary unemployment, Roosevelt envisioned the creation and maintenance of a

public-sector jobs option to provide employment for all seeking work. Prior to the 1944 State of the

Union address, Harry Hopkins, a trusted advisor to Roosevelt and one of the chief architects of the

New Deal, strongly advocated a permanent federal employment program; while Roosevelt

supported the idea, the administration was not able to secure it.

The country’s pursuit of genuine full employment—meaning the elimination of unemployment—

through a job guarantee did not end with Roosevelt; rather it was just beginning. In 1946, two years

after Roosevelt’s introduction of an Economic Bill of Rights, Congress passed the Employment Act

of 1946. Although this was a markedly weaker version of the failed Full Employment Bill of 1945, it

nevertheless helped reshape how the federal government would view its role in the pursuit of full

employment.

Those seeking a mechanism for permanent full employment knew their work was far from over.

It is often forgotten that full employment was a cornerstone of the famed 1963 March on

Washington. Civil rights leaders including Bayard Rustin, Dr. Martin Luther King Jr., and Coretta

Scott King publicly endorsed the universal right to a job at non-poverty wages for all Americans.

Although their work in the 1960s resulted in significant strides with regard to civil rights, economic

rights were largely left unrealized.

After Dr. King’s assassination, Coretta Scott King doubled down on the pursuit of authentic full

employment legislation. Her work was instrumental in shaping an early version of the 1978 Full

Employment and Balanced Growth Act, better known as the Humphrey-Hawkins Act, and early

versions of the bill established a federal Job Guarantee Office, signaling the government’s direct

involvement in ending unemployment through direct employment.

While this office was eventually cut from the legislation, the final bill established an interim five-

year target of three percent unemployment for individuals 20 years of age and older, and four

percent for individuals age 16 and over within five years, with full employment to be achieved ‘‘as

soon as practicable’’ thereafter. The proposal, as originally drafted, would have been enforceable; it

established a legal right to work where the unemployed would have the right to demand

employment from the federal government. The bill, which was passed into law, has been largely

June Hopkins, Harry Hopkins: Sudden Hero, Brash Reformer (New York: St. Martin’s Press, 1999).

Phillip Harvey, “The Right to Work and Basic Income Guarantees: Competing or Complementary Goals?” Rutgers

Journal of Law and Urban Policy 2, no. 1.

Helen Lachs Ginsburg, “Historical Amnesia: The Humphrey-Hawkins Act, Full Employment and Employed as a

Right,” The Review of Black Political Economy, 39, no. 1 (2012), pp. 121-136.

The act was an amendment to the 1946 Employment Act drafted by Leon Keyserling.

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ignored in practice, as the final version weakened the full employment mandate from a commitment

to a “goal.” The U.S. government has never achieved the reasonable employment targets set in the

law, close to 40 years since passing the 1978 Full Employment and Balanced Growth act.

Other countries have employed varying forms of a job guarantee program to promote full

employment and poverty alleviation. Perhaps the best known examples are India’s National Rural

Employment Guarantee Act (NREGA) and Argentina’s Jefes y Jefas. India’s program, the largest

direct employment scheme in the world, with over 600 million workers eligible for employment,

provides up to 100 days of guaranteed paid employment per year for rural households. Recent

research indicates that the program increased earnings for low-income households and increased

employment in the private sector. Income for the low-income households increased 13.3 percent,

with the vast majority (90 percent) of the increase coming from higher wages in private employment

rather than wages earned through program employment.

The Argentinian case provides additional

insight into large-scale direct employment programs, where the government successfully provided

guaranteed employment to a head of household for at least four hours a day to engage largely in

community development projects.

While both of these programs differ in important ways from

what we propose here, the research evaluating them to date provides useful guidance for full

employment policy design and implementation.

Benefits of Permanent Full Employment

The benefits of permanent full employment in the U.S. economy through the creation of the

NIEC would be substantial. They include, but are not limited to:

• The elimination of involuntary unemployment. A public option for employment means workers will

no longer be forced into unemployment. The policy would eliminate cyclical and structural

unemployment and provide workers with the dignity and sense of purpose that comes with

employment. Furthermore, the elimination of involuntary unemployment would bypass the

social and personal ills associated with unemployment, such as the erosion of skills, increased

rates of physical and mental illness, suicide and attempted suicide, and failed relationships,

among others.

• A true floor in the labor market. While minimum- and living-wage laws have historically been

implemented to place a floor in the labor market, they fail to provide viable pathways to

William Darity Jr. and Darrick Hamilton “Full Employment and the Job Guarantee: An All-America Idea” in Michael

Murray (ed.) Full Employment and Social Justice: Solidarity and Sustainability, Palgrave forthcoming.

Karthik Muralidharan, Paul Niehaus, Sandip Sukhtankar, “General Equilibrium Effects of (Improving) Public

Employment Programs: Experimental Evidence from India,” National Bureau of Economic Research, 2017,

http://www.nber.org/papers/w23838?utm_campaign=ntw&utm_medium=email&utm_source=ntw.

For an in-depth discussion of Argentina’s Jefes y Jefas program, see Pavlina Tcheneva and L. Randall Wray,

“Employer of Last Resort Program: A case study of Argentina’s Jefes de Hogar Program,” SSRN, 2005,

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1010145.

Arthur H. Goldsmith, Jonathan R. Veum, and William A. Darity Jr., “Unemployment, Joblessness, Psychological Well-

being and Full Employment: Theory and Evidence,” Journal of Socio-Economics 26, no. 2 (1997), pp. 133–58; William A.

Darity Jr., “Employment Discrimination, Segregation, and Health,” American Journal of Public Health 93, no 2 (2003), pp.

226-231. 

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employment or out of poverty for those looking for work but unable to obtain employment in

the first place. The job guarantee would function as a de facto floor in the labor market,

greatly increasing the bargaining position of workers throughout the economy. For private

employers to attract employees, they would have to offer a job that is at least as good as the

one offered by the government.

• The elimination of working poverty. Unemployment is one of the strongest predictors of poverty in

the United States. Households whose usual breadwinners are out of work are three times

more likely to be poor than working households.

The job guarantee would substantially

reduce poverty by eliminating involuntary unemployment and setting a non-poverty wage and

compensation floor in the labor market.

• Improving workers livelihoods as the Federal Reserve manages its dual mandate. As noted above, the

Federal Reserve has a dual mandate—maximum employment and price stability. Through its

use of monetary policy, the Federal Reserve plays a vital role in promoting full employment;

however, monetary policy has proven insufficient for eliminating involuntary unemployment.

Historically, the Federal Reserve has had a significant role in increasing unemployment as a

result of combating any inflationary pressures that may exist in the economy. With a job

guarantee policy in place, the Federal Reserve can conduct monetary policy without

promoting rising levels of unemployment. In this scenario, the job guarantee program can

maintain employment and consumption expenditures while the Federal Reserve employs

monetary policy to reduce private investment in order to cool the economy. Thus, U.S.

workers would be less vulnerable to the Federal Reserve not adhering to their responsibility of

a dual mandate appropriately due to their cultural over-emphasis—a function of their close

ties to the financial sector—on price stability.

• The restoration of local and state tax bases. By providing for full employment, the job guarantee will

increase employment, and therefore expenditures and tax revenues for local and state

governments. Although the job guarantee is designed as a universal program, more resources

will flow to communities that currently have the highest rates of unemployment and

underemployment (presumably because of higher uptake of NIEC employment

opportunities). This will result in increased government resources to better serve their

constituents.

• Macroeconomic stabilization. The job guarantee would function as a robust automatic stabilizer in

the economy, maintaining levels of employment during economic downturns through direct

hiring, and freely allowing workers to flow from the jobs program to the private sector during

economic boom times. While workers may see some decrease in their purchasing power

during an economic contraction, the job guarantee will automatically expand as demand for

employment in the private sector contracts, providing a buffer to incomes and guarding

against major pitfalls in effective demand.

• The provision of socially useful goods and services. During the Great Depression, the Works Progress

Administration (WPA) and Civilian Conservation Corps (CCC) were public employment

programs designed to put Americans back to work. The programs were implemented near the

height of the Great Depression, when the national unemployment rate reached 25 percent.

Marilyn Achiron, “Fighting Poverty at Work,” OECD, 2009,

http://oecdobserver.org/news/archivestory.php/aid/3066/Fighting_poverty_at_work.html.

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These programs, implemented under the Roosevelt administration, provided goods and

services that benefited all Americans by facilitating the logistics and technological expansion

of our public infrastructure, including 650,000 miles of new or improved roads; 39,000

schools built, improved, or repaired; 4,000 new or improved utility plants; and 225,000

concerts performed. Under a job guarantee, even those who do not receive employment via

the NIEC will likely benefit through the increased provision of public goods and socially

desirable goods and services. Furthermore, the provision of productive goods and services will

dampen inflationary concerns.

Program Logistics

The majority of Americans secure their livelihoods, and those of their dependents, through paid

employment, yet a job at non-poverty wages is out of reach for millions of Americans. Since most

people must live by work, a first objective of an economic-security program must be to reach and

maintain full employment. Thus, it is the purpose of the NIEC to provide employment for all

persons seeking a job and to perform the work necessary to maintain and expand the nation’s

physical and human infrastructure. The establishment of the NIEC will provide a direct mechanism

for achieving permanent full employment in the U.S. economy.

The NIEC would be administered by the Department of Labor and overseen by the Secretary of

Labor.

The Secretary would administer employment grants to eligible entities, including state,

county, and local governments, as well as Indian Nations, to engage in direct employment projects.

These projects should be designed to address community needs and provide socially beneficial

goods and services to communities and society at large.

In addition, the Secretary shall work with federal agencies to identify areas of needed investment

in the U.S. economy, including goods (examples: infrastructure, energy efficiency retrofitting) and

services (examples: elder care, child care, job training, education, and health services). If projects at

the local, county, or state level are inadequate to maintain full employment in the region, the

Secretary shall intervene in the locality to provide adequate employment opportunities. Projects will

be designed to assure full employment in all localities.

The NIEC can be deployed to cover a wide scope of activities including, but not limited to, the

repair, maintenance, and expansion of the nation's infrastructure, housing stock, and public

buildings; energy efficiency upgrades to public and private buildings; assistance with ecological

restoration and services to reduce the country’s carbon footprint; engagement in community

development projects; provision of high-quality preschool and afterschool services; provision of

teachers’ aids; provision of high-quality elder care and companionship; rejuvenation of the nation’s

defunded postal service; support for the arts; and other activities that shall support the public

good.

Similar to the New Deal jobs programs, which were operated by the federal government, employees of the NIEC at all

levels would be federal employees.

If the program supported the postal service, the USPS could be expanded to provide basic financial services through a

public banking system, as has been advocated by the Postmaster General. Office of the Inspector General, “Providing

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Because of the vital role of state and local governments in providing public workers and services,

it is essential that federal agencies and the NIEC are empowered to work closely with these

governments. Local and state governments will be encouraged to develop employment proposals in

conjunction with community leaders, local government officials, labor organizations, and local

residents to ensure the proposals will serve the needs of the constituents and available pool of labor.

The employment proposals may not be used to employ individuals who will replace or speed the

displacement of existing employees or individuals who would otherwise perform similar work.

The program will cover wage, benefits, and material expenses.

This structure will largely parallel

the direct employment programs under the New Deal, whose projects were developed and proposed

by local and state governments. Fostering partnerships and buy-in from local and state partners is

critical to the success of the program, as localities may be most aware of the skills of their available

workers as well as projects that will provide the greatest benefit to their communities.

Who is eligible to work under the program? Employment opportunities under the NIEC are open

to all individuals age 18 and older in the United States.

While much of the existing safety net in

the U.S. forces individuals and families to be exposed to poverty before receiving assistance, the

NIEC will provide a job upon request from those who are unemployed, underemployed, or

currently outside of the labor force.

Employment can be either part-time (20 hours a week) or full-time (35–40 hours a week)

depending on the needs of the employee. For employees to receive their compensation, they must

show up to their job and perform the tasks assigned to them. As was the case with the WPA, a

Division of Progress Investigation (DPI) should be established to monitor shirking or corruption. If

workers are found to be negligent, or generally disruptive to the workplace, disciplinary action can

be taken by the DPI.

The duration of employment shall be as long as the individual is in need of employment at non-

poverty wages. To assist with individuals’ move from the job guarantee to other employment

opportunities, the program shall establish a website and database listing individuals employed under

the program as available for, and seeking, employment. Thus, in many respects, job recipients under

the program will still function as a reserve pool of workers; however, they will be gainfully employed

under the program rather than subject to unemployment and economic and personal hardship, as

well as the social stigma associated with being unemployed. In turn, individuals shall be allowed up

to one day (8 hours) per employed month to seek alternative employment and for professional

development.

Non-Bank Financial Services for the Underserved,” Unites States Postal Services, January, 2014,

https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-007_0.pdf

Learning from past experiences such as the Comprehensive Employment and Training Act of 1973 (CETA), it is vital

that the program is designed to avoid state and local governments utilizing the program to pay for existing state and local

government jobs which would normally be financed through local tax revenues. The purpose of the NIEC is to

complement, not replace, existing local and state employment.

Localities would be able to supplement expenses; for instance, if there are local minimum wage ordinances above the

pay rate determined at the federal level for the NIEC, the specific locality would be responsible for the additional

compensation above that provided by the NIEC.

Additionally, there is need for complementary legislation that provides summer employment opportunities for teens.

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The wage for employees should be set at a minimum of $11.83 an hour, plus benefits, and indexed

to inflation. While most benefits will be available to all workers, since this is primarily a jobs

program, to avoid the moral hazard of participation solely for the health insurance benefit, health

insurance will only be available to full-time workers (35–40 hours per week). Wage variation would

be built into the program to account for workers’ previous experience, education, and region of

residence, as well as the prospect of promotion within the NIEC. Therefore, while the base wage in

the NIEC will be $24,600 for full-time workers, we estimate a mean wage for all employees at

approximately $32,500. Regional variation could follow the scales currently used in the federal

government established by the Office of Personnel Management.

Once the program is initiated, it will take time, perhaps two to three years, to scale the program to

meet countrywide demand for employment.

In the initial phases of the program, the supply of

employment opportunities will likely be insufficient to meet the demand for jobs. During this

period, the Secretary shall target employment grants and engage in direct hiring in areas with the

greatest level of need. These should be determined by indicators such as the unemployment and

“underemployment rate” (“U-6” from the monthly employment report)

, the poverty and extreme

poverty rate, and the employment-to-population ratio (EPOP).

To manage projects past, present, and future, we recommend that the NIEC create a website

where all projects will be listed. The website can function as a jobs and projects bank, where a list of

the needs of communities, states, and the federal government will be maintained and updated, along

with aggregate demographic indicators of job recipients. The website will help local and state

administers match projects with existing workers in the NIEC. Furthermore, this database will guard

against hastily planned emergency work, ensuring public employment be planned in advance and

coordinated with the policies and needs of the government.

Program Uptake and Costs Estimates

Program uptake and costs are challenging to estimate for a program that will have profound

implications for the economy. Make no mistake, this is a policy to transform the U.S. labor market.

For instance, a recent Economic Policy Institute report analyzing the effect of a $15 minimum wage

phased in by 2024 found that 41 million workers, roughly 29 percent of the wage-earning workforce,

would see a raise.

While the wage rate in the NIEC is lower than this, taking benefits into account

For the 2018 scale, please see Federal Salary Council, “Level of Comparability Payments for January 2018 and Other

Matters Pertaining to the Locality Pay Program,” Office of Personnel and Management, December, 2016,

https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/general-schedule/federal-salary-

council/recommendation16.pdf.

For example, when President Roosevelt established the Civil Works Administration (CWA), the program was fully

functional in about two months, employing over 4 million employees and reaching 8 percent of the labor force.

U3 is the International Labour Organization official unemployment rate that includes individuals that are unemployed

and have actively looked for work within the past four weeks. U6 is a broader unemployment, or ‘underemployment’

rate, which, in addition to U3, includes “discouraged workers,” or those who have stopped looking for work due to

current economic conditions; other marginally attached workers who are willing and able to work but have not actively

sought employment in the past four weeks; part-time workers who seek but cannot attain full-time employment.

David Cooper, “Raising the Minimum Wage to $15 by 2024 Would Lift Wages for 41 Million American Workers,

Economic Policy Institute, April, 2017, http://www.epi.org/publication/15-by-2024-would-lift-wages-for-41-million/.

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may result in a comparable change within the labor market—leading to the direct employment of

millions and raises for tens of millions. In this section, we provide estimates for program uptake and

costs under a job guarantee program in the United States.

Table 1 provides estimates for program uptake and gross cost under the NIEC given the most

recent labor market statistics. Using January 2018 data from the Bureau of Labor Statistics, we

estimate a total annual program cost of $543 billion, or just under 3 percent of GDP. While headline

economic numbers commonly cite the official unemployment measure, we generate the estimate

using a broader notion of unemployment and underemployment, known as U-6. We assume U-6

would be brought down to 1.5 percent—what we believe to be a reasonable estimate for frictional

unemployment in the U.S. economy—by the uptake of employment through the NIEC and the

elimination of involuntary unemployment. This would result in the employment of 10.7 million

workers, or 9.7 million full-time equivalent positions.

TABLE 1

Job Guarantee Expenditure and Uptake Estimates

Unemployment and underemployment (U-6), January 2018

8.2%

Total number of unemployed and underemployed workers (U-6)

13.1 million

Number of unemployed and underemployed workers if U-6 were

at the full employment rate of 1.5%

10.7 million

Full-Time Equivalent (FTE) Demanded

9.7 million

Avg. Annual Wage

$32,500

Avg. spending on supplies and capital goods per FTE

$11,000

Employer's Share of FICA Taxes per FTE

$2,500

Avg. spending on benefits

$10,000

Avg. cost per job

$56,000

Total Cost

$543 billion

Source: Authors’ calculations using the labor force statistics from the Current Population Survey and authors’ own estimates. Note: Full-

time based on 81% demand full time employment (40 hrs) and 19% demanding part-time (20 hrs). FICA rate is 7.65%. We assume only

full-time employees receive benefits.

We expect the number of workers employed under the NIEC to fall substantially as the private

sector responds to the sizable increases in employment and the growth of workers’ purchasing

power under the program. Harvey (2011) provides estimates of indirect job creation from a job

guarantee program, finding that for every direct job created by the government, the private sector

could generate an estimated .26 jobs; however, multipliers tend to be smaller under full employment.

Although the job guarantee may result in the displacement of some workers currently employed in

the private sector, especially at the low end of the labor market, evidence from the minimum wage

debates may provide insight into the employment dynamics with a job guarantee. Previous research

estimating the employment effects of increases in the minimum wage by Allegretto, Dube and co-

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authors consistently shows that the employment effects of modest increases to the minimum wage

are not distinguishable from zero.

Since the job guarantee places a floor in the labor market,

employers will likely have to offer compensation packages at least as desirable as those offered under

the NIEC. Thus, it is, de facto, similar to a rise in the minimum wage; in fact, the increase in total

compensation under NIEC exceeds our traditional conception of the minimum wage.

The gross cost of implementing the NIEC would be offset substantially by increases in local,

state, and federal tax revenues, decreases in uptake of existing social insurance programs, increases in

the growth rate of GDP, and substantial productivity and capacity gains in the U.S. economy. While

we do not argue for the elimination of existing social insurance programs, the uptake of employment

through the NIEC coupled with the establishment of a new floor in the labor market will result in

many families earning incomes above program thresholds. The Congressional Budget Office’s

Budget and Economic Outlook provides current expenditures on social insurance programs.

Using

actual government expenditures from 2016, we see that the U.S. government already spends

hundreds of billions on social insurance programs annually. While these programs have been

estimated to have reduced the poverty rate by half, they have not gone far enough to totally

eliminate working poverty.

What programs could we expect to be scaled back through the reduction of need? With the job

guarantee providing employment at non-poverty wages, we expect the demand for unemployment

insurance ($33 billion FY 2016) to fall substantially.

Temporary Assistance to Needy Families

(TANF; $16 billion FY 2016) could be nearly eliminated, as the job guarantee would be able to fill

the gap for qualifying families in many instances. Additionally, with higher wages from the job

guarantee, fewer households may qualify for the Earned Income Tax Credit (EITC; $70 billion FY

2016). For instance, those without dependents working full-time would no longer qualify, while

those with dependents would be more likely to see EITC benefits reduced as they phase out of the

program due to higher earnings.

With increased earnings, many families are likely to exceed the income limits for the necessary

food assistance program, known as the Supplemental Nutrition Assistance Program (SNAP; $73

billion FY 2016). Finally, with the provision of health benefits to full-time workers through the

Sylvia Allegretto, Arindrajit Dube, Michael Reich, and Ben Zipperer, “Credible Research Designs for Minimum Wage

Studies: A Response to Neumark, Salas, and Wascher,” ILR Review 70, no. 3 (2017), pp 559-592.

It is important to note that the program does not subsidize private employment. Thus, employers cannot replace

private workers with workers from the NIEC program.

“The Budget and Economic Outlook: 2017 to 2027,” Congressional Budget Office, January, 2017,

https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52370-outlookonecolumn.pdf.

Danilo Trisi, “Safety Net Cut Poverty Nearly in Half Last Year,” Center on Budget and Policy Priorities, September

14, 2016, http://www.cbpp.org/blog/safety-net-cut-poverty-nearly-in-half-last-year.

As a result of the 1996 welfare reform, cash assistance rolls have fallen dramatically. The safety net has been

transformed to rely on subsidizing the working poor through the Earned Income Tax Credit (EITC). This transition to a

work-based safety net has particularly hurt those unable to obtain employment.

Unemployment insurance, like the NIEC, expands during times of great need. In 2010, when UI payments peaked,

total expenditures were $162.5 billion.

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NIEC, we expect to see a sizable fall in the need for Medicaid ($368 billion FY 2016) and the

Children’s Health Insurance Program (CHIP; $14 billion FY 2016).

Beyond savings from the reduced need for existing social insurance programs, we argue the NIEC

will also generate sizable increases in tax revenue throughout the economy by increasing productive

capacity and maintaining consumer spending. While the majority of economists in recent history

have argued that monetary policy was sufficient to stabilize the economy, there has been a recent

shift amongst economists recognizing an “activist fiscal policy” is necessary for full employment and

macroeconomic stabilization.

There would also be cost savings associated with enhanced human capacities from a job

guarantee. Research indicates that extended periods of high rates of unemployment in the economy

can lead to “skill losses among workers, reducing human capital and lowering future output.”

Putting millions of people to work through the NIEC will result in the buildup of the United States’

human and physical infrastructure and the provision of additional socially useful goods and services,

resulting in a profound impact on the productivity and the long-term growth rate of the economy.

The program could be financed through a variety of mechanisms. While financing the job

guarantee is not the focus of the paper, we provide three ways to finance the program policymakers

should consider. First, as discussed above, the implementation of a job guarantee will substantially

reduce costs in existing social insurance programs. Non-poverty wages will mean many workers no

longer need to rely on government assistance to meet their basic needs. A recent UC Berkeley

Center for Labor Research and Education study found that $153 billion a year is currently spent on

public assistance programs because of low wages, money which could be repurposed to provide

more people with a non-poverty standard of living.

Also, the program could be financed through

implementing a financial transaction tax (as proposed in Rep. John Conyers’ H.R. 1000 bill),

modifying estate and gift tax provisions, or the implementation of carbon taxes.

Dollar figures in this paragraph represent current expenditures of the program in fiscal year 2016.

Laurence Ball, Brad DeLong, and Larry Summers, “Fiscal Policy and Full Employment,” Center on Budget and Policy

Priorities, April, 2014, https://www.cbpp.org/research/full-employment/fiscal-policy-and-full-employment.

According to a 2017 Report from the Roosevelt Institute’s J.W. Mason, “in 2016, real per capita GDP was 10 percent

below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.”

J.W. Mason, “What Recovery? The Case for Continued Expansionary Policy at the Fed,” The Roosevelt Institute, July,

2017, http://rooseveltinstitute.org/wp-content/uploads/2017/07/Monetary-Policy-Report.pdf.

Sushant Acharya, Julien Bengui, Keshav Dogra, and Shu Lin Wee, “Escaping Unemployment Traps,” Federal Reserve

Board, April 2017, http://economics.rutgers.edu/downloads-hidden-menu/news-and-

events/workshops/macroeconomic-theory/1360-keshavdogra/file.

Ken Jacobs, Ian Perry, and Jenifer MacGillvary, “The High Public Cost of Low Wages,” UC Berkeley Labor Center,

Research Brief, April 2015, http://laborcenter.berkeley.edu/pdf/2015/the-high-public-cost-of-low-wages.pdf.

Some proponents of the job guarantee argue that the federal government could simply fund the program directly

without raising additional tax revenue. For an example, see Michael J. Murray and Mathew Forstater, “The Job

Guarantee and Modern Money Theory,” (Basingstoke, UK: Palgrave Macmillan, 2017).

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Conclusion

A job guarantee would fundamentally transform the current labor market in the United States.

Our current conception of full employment is inadequate; we discuss a bold policy in this paper to

bring the United States to a permanent, more accurate indicator of full employment—by which we

mean that everyone who seeks a job can find one at non-poverty wages. Beyond providing full

employment, the job guarantee could be a turning point for American workers. Workers are faced

with stagnating real wages and a continued erosion of labor’s share of income. The job guarantee

could significantly alter the current power dynamics between labor and capital—particularly for low-

wage workers and traditionally marginalized groups.

Benefits of the program reach beyond those directly employed under the NIEC. If a job guarantee

were to be implemented, it also would function as a de facto employment floor in the labor market.

Private employers would have to offer wages and benefits that are at least competitive with the

NIEC in order to attract workers. The universal nature of the program would ensure jobs for all—

including those with some forms of disability who may not be employed through the private sector.

The universal design is critical to ending working poverty and involuntary unemployment; this is in

contrast to other forms of intervention in the labor market, such as minimum wage laws, which do

not ensure access to employment in the first place. Nevertheless, complementary changes to the

existing social insurance system would be necessary to eliminate poverty entirely, as some individuals

may be unable to work for various reasons.

Despite the discussion of full employment as a national priority for nearly a century now,

policymakers have failed to deliver an economy that prioritized employment for all. Full

employment is a goal that the private market in unable to achieve, therefore requiring government

intervention in the labor market. Above, we discuss a transformative policy proposal—a federal job

guarantee—whereby the government engages in the direct hiring of workers at non-poverty wages

to achieve, and maintain, a full employment economy. Whether or not policymakers agree with the

specifics we suggest in our proposal, we encourage them to think about bold solutions to achieve

and maintain full employment. Restructuring our public policies to eradicate involuntary

unemployment and poverty is within our reach.

Acknowledgements

The authors would like to thank Caterina Chiopris for her excellent research assistance and Jared

Bernstein, Philip Harvey, and Ben Spielberg for their extremely helpful review and feedback. The

authors are grateful to the Nathan Cummings Foundation for research support provided by a grant

made to the Samuel DuBois Cook Center on Social Equity.

One potentially complementary proposal would be a negative income tax, which could provide a basic income for

those unable to work.