The Real Math Behind a Federal Job Guarantee

The estimated cost of a Federal Job Guarantee is $543 billion a year.  This number makes a lot of assumptions though, most of which are invalid, and it ignores substantial additional costs.

The current Federal Job Guarantee proposals promise to provide a job for anyone who wants one, at $15 an hour up to 40 hours a week.  The above estimate assumes 81% of unemployed people want full-time work and 19% want part-time work, but basing the budget on the assumption that these will stay the same forever is unwise.  Also, it really does not make a huge difference, once you add in other factors.

An estimated 5.9 million people actively seeking jobs were unemployed last year.  Full-time, at $15 an hour, their wages would cost $184 billion a year.  That is not a whole lot, compared to the ~$800 billion we are spending on other non-medical welfare.  That ignores 400,000 who were recently considered unemployed but have quit looking, call "discouraged workers" by the U.S. Bureau of Labor Statistics.  Include those, and you get a net wage cost of $197 billion.  What about the claim that there are 95 million U.S. adults who could be working but are not?  It turns out a lot of these people do not want jobs.  Over 44 million are retired people.  Most of the remainder are going to college or caring for children or elderly relatives.  A small portion either just do not want to work or are not working for unknown reasons.  It turns out that around 7.9 million able bodied adults in the U.S. are not working either because they cannot find work or because they are just not motivated to work.  A $15 guaranteed wage might be able to convince all 7.9 million to work though, at a wage cost of $246 billion a year.  What about the rest of the 95 million people though?  Would some of them be convinced to work as well, by this?  Many college students do work part-time or even full-time in addition to school, but it is generally difficult for college students to find flexible jobs that can accommodate their class schedules.  Many retired people work part-time for the medical benefits and for a little extra spending money.  Even some people who take care of family members find time to work around that care, when flexible jobs are available.  No Federal job program could reasonably be considered a job guarantee, if it did not do everything it could to work with people who need specialized or flexible schedules.  It would be unreasonable to expect that a Federal Job Guarantee offering $15 an hour would not be taken advantage of by a significant portion of the 87 million people who are not working, because they are doing other, more important things that few employers are willing to accommodate.  What if this demographic takes advantage of the Federal Job Guarantee for an average of 15 hours a week?  (Many retirees will just go for 10, but many will take 20 to 30 hours, if schedules are sufficiently flexible.)  Now we are looking at a $1.27 trillion program, just for wages.

As mentioned above, the initial estimate also ignores substantial additional costs.  The wage cost of a Federal Job Guarantee is very likely to be at least $1 trillion a year.  What about administration though?  Someone has to manage hiring, job placement, human resources, project logistics, acquisition, and a ton of other things.  This is not like running a company.  This is like running a hundred or a thousand companies, and it will require administrative management capable of running that many companies.  We are talking administrative costs on the order of another $1 trillion a year.  To be clear, this is a low ball estimate.  The Federal government currently spends $800 billion a year on non-medical welfare.  Somewhere between $500 billion and $600 billion of that is going into administrative costs, and that is mostly just paying people to check work verifications, look up tax records, and check bank accounts, to make sure applicants actually meet the requirements.  The actual administrative costs for a Federal Job Guarantee would probably be several trillion.

Another major cost of a Federal job guarantee is going to be materials.  The intent for the Federal Job Guarantee programs suggested is to provide jobs where people will work on government infrastructure projects.  The low hanging fruit here is maintaining and expanding the interstate highway system.  Other suggestions include the construction of a transcontinental bullet train system, ecological restoration (ie, cleaning up Federal parks and highways), care giving (nursing home jobs), and "community development projects" (whatever local governments want, probably including creating new parks, building new government and community buildings, and "beautification" projects).  None of these are free, and most require a lot of materials.  Obviously roads and bullet train systems are going to cost far more in materials than labor, especially at only $15 an hour for labor.  Ecological restoration will vary dramatically.  Mere highway cleanup will incur transportation cost and cost for garbage bags and dumping.  If the effort also includes removing vehicle by products from nearby soil, the non-labor cost could skyrocket.  Care giving often appears to be a very labor intensive job, and while it is, labor is still not the biggest expense.  The expenses also include food, medication, and shelter, which can easily outstrip a $15 an hour wage.  This is especially true for nursing homes where there may be only one caregiver for up to 5 or 10 people.  Community development projects will also almost certainly cost more in materials and such than in wages.  Again, let's lowball this and say the average materials cost comes out to about the same as wages, for another $1 trillion.

We cannot just hire as many as 30 million people, tell them what projects they are on, and expect them to complete them.  Each project is going it need its own project planners, which will likely expect a number of experts working together.  In addition, each project will likely need a few highly trained people on-site as well as supervisors to manage the unskilled laborers.  These people are not going to be getting paid only $15 an hour, and some will demand compensation far greater.  Road repair crews tend to have between 5 and 10 people.  At least one of those is trained well enough in road construction and repaid to instruct the others.  Road construction crews can be a bit bigger, but with modern equipment, they do not need to be much bigger.  Construction crews typically also need additional people trained and experienced in the use of the heavier equipment.  We are looking at 10% to 20% of laborers on road infrastructure projects being well trained, with wages running at least $20 an hour.  Supervisors for bullet train systems will cost far more than even that, and they will also require some engineers to manage the construction and to assemble the electrical components, who will have to paid more than five times what the "job guarantee" people are getting.  Clean up crews could have much less supervision, but other ecological restoration projects will require supervisors and managers with far more training and far larger salaries (on the order of two to four times what the "job guarantee" employees are being paid).  Care facilities generally require a number of trained CNAs to be on staff, who may cost as much as $25 an hour, and government run facilities are likely to require at least one (and as many as four, if full shift coverage is required) registered nurse or certified nurse practitioner on staff, with a salary between $60,000 and $120,000 (two to four times what the "job guarantee" people are getting paid).  Community development projects will vary dramatically.  Building construction will require foremen, contracting services, and trained specialists.  Electrical and plumbing cannot legally be done by anyone who is not licensed to do those.  While jobs like insulating do not generally require licenses, it is still going to be necessary to have experienced supervisors to make sure the work meets building code requirements.  Beautification projects will require landscape architects (1.5 to 4 times the cost), horticulturalists (1.5 to 2 times the cost), and other trained and experienced people to manage the work.  Most of this is just the on site stuff, as well.  There will also need to be significant office management to manage budgets and to work with on site experts and supervisors to make sure everything is following the plans and to adapt to unforeseen events.  All of these additional supervisors, managers, and experts are in addition to the people working under the job guarantee program.  This is probably going to cost around another $1 trillion.

So far, the cost is already up to $4 trillion, and this is a lowball.  This estimate also does not include a large number of fairly small costs that will likely add up to something on the order of at least another trillion dollars, nor does it take into account the cost of benefits.  Current proposals also include healthcare benefits as part of the package, and those are unlikely to scale much with work hours.  This means that retired people who only work 10 hours a week, so they can get the healthcare coverage are going to cost the same for that coverage as full-time workers, and they are more likely to need to use it, making them a greater cost for healthcare benefits than full-time workers.  On top of that, the $15 wage and healthcare benefits will likely draw far more people to the program than just what we have considered above.  Currently, 54 million workers are being paid less than $15 an hour, and at least several million more making up to $18 an hour or more working part time do not have healthcare benefits.  That is another $2 trillion or more just in wages and benefits the government will end up spending on the program, as well as similar amounts each for administration, materials, and managements.  The reality is that the minimum cost for a Federal Job Guarantee program will almost certainly be more than $4 trillion, and it could easily cost as much as $15 trillion or more.

A Federal Job Guarantee can hardly guarantee anyone a job, and the price tag is not some measly $500 billion.  The math suggests a cost somewhere around $10 trillion, and even a $15 minimum wage to remove incentive for lower paid people to switch would not be enough, because $15 an hour jobs do not generally include healthcare benefits.  Federal welfare programs do not cost only what beneficiaries get.  They typically cost several times that, and a Federal Job Guarantee is no different.  Again, the math shows a net cost between $4 trillion and $15 trillion, with the most likely cost being around $9 trillion and $10 trillion.  A Federal Job Guarantee is a bad idea.