Fantasyland Economics

Despite a rapidly improving job market, senators such as Bernie Sanders, Cory Booker, and Kirsten Gillibrand have called for a new program in which the federal government would provide a full-time job to every American adult who wants one. Their proposal differs from programs like the Earned Income Tax Credit (EITC) or Work Opportunity Tax Credit (WOTC), which partially subsidize private-sector jobs, not government jobs. And unlike the public-works programs of the New Deal, this taxpayer-funded federal job program—details to come—would be permanent.    

Universal employment is a worthy goal. Chronic joblessness depresses lifetime earnings substantially (even after the joblessness ends), damages relationships, and leads to serious health problems. But the new proposal is unworkable and implausible. Advocates estimate that 10.7 million currently unemployed and under-employed Americans would sign up. Yet the guaranteed wage of $15 per hour, plus benefits—which exceeds the current compensation levels for 40 percent of all workers—would induce millions of working Americans to quit their jobs and join the new program. Millions of others not currently looking for work, including retirees, would find the benefit package irresistible. Advocates estimate that the cost of salary, health care, child care, transportation, supplies, and capital goods would total $56,000 per employee. If participation rises to 20 to 35 million—which seems likely—the annual cost would swell to between $1 trillion to $2 trillion. An accompanying reduction in welfare benefits for these workers would offset only a small fraction of this cost.

Even the low-end estimate of $1 trillion would create the largest federal program, exceeding even Social Security.

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