'Guaranteed Jobs' Is a Guarantee of Economic Stagnation
Milton Friedman used to tell a story that illustrated the absurdity of creating make-work jobs. Visiting a construction site in a developing country, he saw workers using shovels. Why, he asked, weren’t they using more efficient earth movers? The response he received illustrates the critical flaw in make-work schemes. He was told that using shovels instead of more modern equipment created more jobs, and his people needed jobs. In that case, Friedman responded, “why don’t you just give them spoons?”
The notion that a job is something government can create is a shibboleth, one that has managed to hang around out of a combination of political opportunism, economic ignorance and blind hope. Nonetheless, that hasn’t prevented many Democrats from calling for exactly that. The notion of a “jobs guarantee” has been gaining ground among Democrats, especially potential Democratic candidates for president. As a first step, Sen. Corey Booker of New Jersey has announced he will introduce legislation to establish a three-year pilot program guaranteeing jobs in up to 15 high-unemployment communities and regions across the United States.
Not to be outdone, Sen. Bernie Sanders has been working on his own bill, far more radical than Booker’s. The parameters of Sanders’ planned bill are as broad as they are simple: Washington would guarantee a job with a living wage and good benefits to any resident who wants or needs one. The jobs listed include everything from park maintenance to construction work and home care. That’s not surprising. Whenever a politician puts forward a job creation proposal, construction and infrastructure are “essential” elements, as though all one needs to build things is a shovel, as the government of Friedman’s developing country seemed to think.
In fact, the biggest challenge faced in construction projects is not the shortage of jobs, but the shortage of people with the skills needed to perform them. Construction sector employment has gained in about two-thirds of U.S. metro areas over the past couple of years. A survey by the Associated General Contactors of America last summer found that 70 percent of contractors had a hard time filling skilled labor positions. Anyone who thinks there is a shortage of jobs for skilled labor, hasn’t tried to hire a skilled laborer lately.
Try as hard as it can, one law that no government can repeal is the law of supply and demand. Artificially inflating the demand for construction work (or any other work) without expanding the supply of labor and capital only bids up the price, crowding out the private sector. The result: Fewer jobs, not more. The “jobs guarantee” proposal ignores an important fact about job creation – it is essentially a treadmill. Creating new jobs (and better ones) depends on the private sector being able to pursue the most efficient use of both labor and capital, shedding some jobs even as it creates others. But if everyone is guaranteed a job by government, the private sector would be unable to ramp up employment and production, unable to spawn new businesses and industries – because the workers they need would be off performing their government-guaranteed jobs, and much of the capital they need would be eaten up by government financing the promise.
A jobs guarantee is the equivalent of taking a freeze-frame photo of the economy today, and trying to lock it in place. But progress requires change. Because if the economy doesn’t change, by definition it doesn’t get better. And human beings constantly strive for more.
Rather than focusing on “creating jobs” for everyone, liberals should concentrate on trying to get government to meet needs. That requires a more dynamic private sector, not a diminished one. That approach does not facilitate a sweeping promise to “make every man a king” a la Huey Long, but it does allow for improved living standards – the real goal of economic growth and job creation.
Any voter evaluating job guarantee programs should remember the old maxim: When something sounds too good to be true, it probably is.