The Wage Problem with Guaranteed Jobs

Take a single earner with two dependents who signs up for a guaranteed federal job at the wage its leading designers propose. At $15 an hour, that comes to $31,200 a year. In every state, the household still qualifies for food assistance.

That is the problem at the center of a federal job guarantee. The two candidate wages are far apart. The Levy Economics Institute report sets it at $15 an hour. The federal government already pays its own workforce an average of about $42.74 an hour, which is nearly three times as much. Set the wage low, and the job leaves working families poor enough to qualify for assistance. Set it high, and the job exceeds the typical American paycheck. Either way, the savings that might help pay for the program stay small.

The guarantee is a pledge in both major socialist platforms: the Democratic Socialists of America's Workers Deserve More, and the program the Party for Socialism and Liberation has kept since 2010. Neither says what it would cost.

The most developed design comes from economists at the Levy Economics Institute at Bard College, not the socialist parties themselves. It would employ roughly 15 million people in public service at $15 an hour and, by its designers' estimate, add no more than roughly $450 billion a year to the federal deficit. That wage falls below what most socialists want for the minimum wage, and these are not the jobs and wages most think of when discussing guaranteed jobs or what many of their supporters appear to want.

If the wage is what the federal government pays its own workforce, the bill changes. Pay and benefits alone, not counting health insurance and with no building, equipment, or supervision, come to $1.9 trillion a year for 15 million workers.

That analysis does not pick a pay rate. It takes what a federal job costs today, about $88,900 a year in wages on average, or about $42.74 an hour. The two figures answer different questions. Levy’s $15 is a judgment about what the job ought to pay. The $88,900 is what the government already pays across all skills on its payroll.

A job paying that much would likely attract more than 15 million applicants as it is more than the average paycheck. Not all of them would qualify for a paycheck that large, but the better the job pays, the longer the line.

The wage also decides how much the guarantee saves elsewhere. Unemployment insurance is the obvious place to look. A job that pays better than unemployment benefits shortens the time people collect them. If the average fell from 15.5 weeks to eight, the saving would be $21.0 billion. A drop to four weeks saves $32.2 billion.

Food assistance turns on the same choice. At the Levy wage, the only households that leave are those without a child, an elderly member, or a member with a disability, which saves about $15 billion. At the $88,900 federal wage, no working household would need food assistance, and the saving reaches $53 billion.

The biggest return is not a spending cut, but new taxes. At the $88,900 wage, $1.3 trillion in new paychecks, taxed at 25 to 29 percent, sends $333 billion to $387 billion back to the Treasury in federal income and payroll tax. The full costing of the two platforms already counts it, and it does not close a gap measured in trillions.

So, the guaranteed job could pay $15 an hour, as Levy proposes, or about $42.74, as the federal government already does. Choose the first, and the household earning $31,200 is still in line for food assistance, not what most think when they hear of guaranteed jobs. Choose the second, and the line for the job itself runs past 15 million people. If those are truly “guaranteed” jobs, the number could exceed 15 million.