Forget a Higher Minimum Wage—Here’s a Better Way to Help American Workers

A federal job guarantee would reinvigorate American infrastructure and ensure that no workers go home in poverty.

Many mainstream economists say that the U.S. economy has fully “recovered” from the Great Recession. Moody’s chief economist, Mark Zandi, for example, recently warned that “[w]ith the economy at full employment and seeming destined to blow past it, the current [economic] expansion is likely entering its later stages.”

Yet economic security bypasses far too many Americans. For instance, despite a low unemployment rate of 4.3 percent, job seekers still outnumber job openings by the millions, and many prime age workers (25-54) are still outside the workforce. The unemployment rate for black workers (7.5 percent) remains well above any level that could be characterized as full employment.

Even for those with a job, the recovery has not been robust. Despite one of the longest expansions in U.S. history, we must ask “a recovery for whom?” Income earners in the bottom fifty percent haven’t seen a real raise since 1980. According to data from the Economic Policy Institute, while productivity, which is supposed to lead to higher wage, has increased a staggering 73.4 percent from 1973-2015, average hourly compensation of the typical worker has increased only 11.1 percent. In short, real income gains have skipped an entire generation, including the cruel and unjust continuation of poverty for tens of millions of Americans in a country that is by far the richest in absolute terms.

The unevenness of the recovery no doubt led to the frustration that boiled over in the 2016 election and led to the unexpected victory of President Donald Trump. Yet the “solutions” offered by the Trump administration are likely to tilt the field yet further in favor of the wealthiest Americans. Despite their promises of thinking big—25 million new jobs and 4 percent GDP growth—it’s unlikely that these claims will materialize.

Instead, America needs a bold alternative policy that is inclusive and progressive, rather than one that further moves us towards deeper inequalities.

One such bold policy is a federal job guarantee.

The idea is straightforward: the government would ensure that everyone have access to a job with non-poverty wages and benefits, including health insurance.

Similar to the Works Progress Administration (WPA) during the Great Depression, a job guarantee would provide socially useful goods and services, and much needed investment in both our physical and human infrastructure. While the history of New Deal employment programs brings forth images of bridges, roads, dams, and national parks, a modern-day job corps can do even more and aid us in creating a cutting edge 21st century economy. Undoubtedly physical infrastructure investment is important, especially given the United States’ infrastructure D+ grade from the American Society of Civil Engineers. Beyond traditional infrastructure, the program can be mobilized to speed the transition to a green economy; provide for our human infrastructure by, for example, dignifying child care and elder care work with a formal wage, rejuvenate and reinvent the postal service with postal basic banking services, and invest in the human spirit via arts and cultural services.

The benefits of such a program are wide ranging, reaching far beyond those directly employed by it. Everyone will benefit from improved infrastructure and better child care. Our crumbling infrastructure alone costs businesses and the country billions a year, not to mention the average American family loses about $3,400 in disposable income per year from infrastructure-related problems. By eliminating low-wage jobs, we can reduce dramatically the $152.8 billion per year the public spends in supporting low-wage employment. And the savings gained from mobilizing the workforce to push us toward a resource conserving, green economy could extend across generations.

The job guarantee, moreover, could solve another problem beyond unemployment: working poverty.

Having a job is not enough to exit poverty. Many are condemned to poverty despite working full time. A 2016 study by Lonnie Goldman indicates that millions of Americans involuntarily work part time as their employers cut corners—and benefits—to boost their profits.

The Earned Income Tax Credit (EITC), minimum wage laws, living wage ordinances, Medicare and Medicaid, Supplemental and Nutrition Assistance Programs (SNAP), and others have profoundly increased the economic well-being of millions of hardworking Americans. But these programs have proven far from sufficient to ensure that all hard-working Americans do not go home in poverty.

For example, while the EITC has been shown to reduce poverty, economist Jesse Rothstein’s work found that part of the subsidy is captured by employers as the program puts downward pressure on wages. By subsidizing low-wage employment rather than eliminating poverty-level wages, the EITC marginally improves living standards, bypassing the millions who remain unemployed.

The current $7.25 federal minimum wage also falls far short of lifting millions of Americans out of poverty, or, worse, does not address the millions of workers who are unemployed or discouraged from looking for work altogether. At that level, no minimum wage employee can meet their basic needs, including affordable housing. Even if policymakers and activists achieved their goal in the “Fight for $15” movement, the mandated wage floor will not protect those without a job or those whose employers hire them for such limited work hours that they cannot escape poverty.

A guaranteed jobs program, however, would solve this conundrum. By setting the entry wage at $24,600 a year, the poverty line for a family of four, a job guarantee program could provide a path out of poverty for millions of Americans. The program could offer full-time or part-time work – whatever fits the workers’ needs. In addition, the program would provide adequate health care coverage and other benefits for all full-time workers, comparable to benefits offered to civil servants.

The idea of guaranteed jobs has been around for nearly a century, dating back to Huey Long’s Share Our Wealth Plan, but our path towards inequality and political tides seem to be bringing the idea back in vogue after a long hiatus. Current variations on the proposal range from the Jobs for All Act introduced by Congressman John Conyers, to those put forth by Philip Harvey, Pavlina Tcherneva, Bill Black, Stephanie KeltonL. Randall Wray, and Matt Forstater. The Jobs for All Coalition has been a vigilant advocate of the job guarantee for many years..

While politicians on both sides of the aisle are campaigning for both job creation and infrastructure building, the conventional approach of trying to incentivize the private sector to hire more workers and invest in our public infrastructure will fall far short of what could be achieved with a federal job guarantee. For instance, the Trump administration’s proposed $1 trillion infrastructure plan includes the infusion of $200 billion into transportation projects over the next 10 years, with the remaining 80 percent relying largely on tax incentives and tax breaks attempting to bribe, coerce or cajole private firms foreign entities (including foreign governments) to stimulate domestic employment and build our crumbling infrastructure.

Such privatization will transfer and subsidize vital public assets to private and foreign entities at prices and wages below market rates. Giving away these assets amounts to a wealth transfer from the U.S. public to private business owners, who are accountable to corporate shareholders and profit maximizations as opposed to the American electorate and the general welfare. Moreover, the indirect job creation resulting from private tax incentives are less permanent, and more prone to simply serve as substitutes for workers that otherwise would have been hired based on the firm’s employment horizon, instead of direct hiring under a federal job guarantee.

The time has come for a federal job guarantee. The creation of such a program would allow the nation, finally, to meet its obligation under the Full Employment and Balanced Growth Act of 1978 (popularly known as the Humphrey-Hawkins Act). The Act mandated the government target a zero percent unemployment rate by 1988. And the political support? A 2016 study by the Kinder Institute at Rice University found that 76 percent of people thought “[t]he government should see to it that everyone who wants to work can find a job.” Seems that most folks agree with the “right to work” in the most judicious sense of the phrase.

Mark Paul, William Darity Jr., and Darrick Hamilton

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 Associate 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.