Infrastructure Investment vs. Job Guarantee

By PHILIP HARVEY

What is the difference between job guarantee and infrastructure investment? And to what extent would infrastructure investment and a J.G. program serve the aims of the other?

The goals of a job guarantee (J.G.) and the infrastructure spending legislation like the American Jobs Plan (AJP) proposed by the Biden Administration or the bipartisan Infrastructure Investment and Jobs Act (H.R.) currently under debate in the U.S. Congress are different.

-> The purpose of J.G. legislation is to close the economy’s job gap through direct job creation and to administer the job creation program to ensure all job seekers access to proper employment providing fair and adequate wages along with safe and healthful working conditions.

-> The purpose of infrastructure investment legislation is to develop and maintain society’s physical and social infrastructure, usually by contracting with private business firms, to perform the work and often stimulate economic growth and create jobs.

Achieving Full Employment

J.G. legislation aims to achieve full employment. Securing everyone’s “right to a useful and remunerative job” was the first entitlement in Franklin D. Roosevelt’s agenda-setting Second (or Economic) Bill of Rights. Direct job creation is necessary to achieve this goal because market economies rarely create as many jobs as needed. Many economists no longer believe that this “job gap” can be closed by promoting economic growth.

Whether it is the result of market forces or a product of macroeconomic manipulation, the commonly accepted view is that economic growth will generate politically unacceptable and economically destabilizing increases in the rate of inflation long before it achieves full employment. In contrast, the direct job creation strategy can be configured to combat inflation while simultaneously creating enough jobs to provide useful and remunerative jobs for everyone who wants paid work.

So, the principal difference between the infrastructure investment proposals and J.G. legislation is that the former is neither intended nor capable of achieving full employment. In contrast, J.G. legislation is designed to overcome the inflationary tendencies that prevent the Keynesian full-employment strategy from achieving full employment. Moreover, compared to the Keynesian job-creation approach, the J.G. proposals would create more jobs per dollar of stimulus spending, do it more quickly, with a fairer distribution of employment opportunities, and a more effective anti-cyclical impact.

A JG program is an inappropriate vehicle for undertaking the large, capital-intensive construction projects funded in legislation like H.R. 3684. Still, it could reduce their cost by serving as a subcontractor in performing less capital-intensive parts of the projects. While infrastructure investment cannot achieve full employment, it is the appropriate public policy tool for large, capital-intensive infrastructure projects like those included in the AJP and H.R. 3684.

Ending Unemployment Insurance

The J.G. direct job creation strategy was first conceived in the United States by New Deal social welfare planners who proposed that it be used to provide workers with “employment assurance” and was successfully tested in programs like the Civilian Conservation Corps (CCC) and Works Progress Administration (WPA).

The strategy was described in a 1933 internal memo: “Relief as such should be abolished” for unemployed workers. The memo argued that the unemployed should be offered real jobs paying good daily wages doing socially useful work suited to their individual skills without having to satisfy a means test. In other words, instead of offering the unemployed public relief (or unemployment insurance), they should be provided quality employment of the sort generally associated with contracted public works. However, to minimize the cost of the undertaking and the amount of time needed to respond to changing needs, the government should serve as its own contractor. The projects should be both less elaborate and more labor-intensive than conventional public works.

New Deal Programs

Other New Deal programs undertook the largest and most capital-intensive construction projects. The most crucial such program was the Public Works Administration (PWA), which used private contractors to complete projects such as the Lincoln Tunnel in New York City, the Grand Coulee Dam in Washington State, the Overseas Highway linking the Florida Mainland with Key West, and 29,000 units of affordable public housing. It was the New Deal program that did the kind of work H.R. 3684 would fund if enacted. The New Deal’s principal direct job creation program, the WPA, also engaged in extensive construction work, but the projects were generally smaller.

The PWA built high schools while the WPA built primary schools. However, the WPA also undertook some substantial projects, included the Tennessee Valley Authority, a number of 20 000-plus seat football stadiums, and the San Antonio River Walk in Texas. A JG direct job creation program would complement the “hard” infrastructure investment funded by legislation like H.R. 3684. And with respect to “soft” infrastructure investment, a J.G. program could play a much more prominent role.

The AJP proposes that $400 billion be invested over the next ten years in improving home health care in the United States, mainly by providing more training and higher pay to home health care workers supported by public funding. This is an example of work ideally suited for a J.G. program, but only if the program included subsidized job training and paid workers according to their skills, experience, and value of the work they perform. H.R.1000 illustrates how both of those features can be incorporated into the design of a J.G. program. However, not all JG proposals include these features. This distinction illustrates how the role such a program can play in supporting both “hard” and “soft” infrastructure investment depends to a significant degree on the details of its design.

Conclusion

It seems likely that H.R. 3684 will be enacted. It would increase the federal government’s hard infrastructure spending by $550 billion over the next 10 years to $1.2 trillion. This is far from adequate. The American Society of Engineers estimates that $2.6 trillion is needed over the next 10 years to meet the nation’s need for hard infrastructure maintenance and improvements. This figure includes the costs of adapting our existing infrastructure to meet the demands of climate change, but not the additional investment needed to achieve the 2050 net-zero carbon emissions goal required to keep global warming at 1.5% C. Still, it’s better than nothing and enactment of the bill should be applauded.

Since funding is the major barrier to increasing both hard and soft infrastructure investment, H.R. 339 establishing a National Infrastructure Bank (NIB), should also be a priority. It would create a public, not-for-profit bank capable of financing up to $5 trillion in state and local government hard infrastructure investment on a 15- to 20-year revolving fund basis without any increase in the federal government’s budget. This would free up federal resources to focus on the net-zero carbon emissions goal by financing ordinary state and local hard infrastructure investment at a zero percent real interest rate repayable with the economic development revenues generated by the investment—and with additional subsidies for poor communities.

As explained above, while the additional jobs created both directly and indirectly by conventional hard infrastructure investment would reduce the economy’s job gap, a JG based on the New Deal’s direct government job creation strategy is needed to achieve true full employment. Moreover, a direct job creation program configured along the lines of H.R. 1000 would have the added advantage of making available an average of several hundred billion dollars’ worth of additional public resources per year while simultaneously reducing the nation’s social welfare spending deficit by eliminating the adverse effects of involuntary unemployment. (While it’s a topic for another day, it is also likely that the savings and additional revenues such a program would generate for all levels of government would exceed its budgeted cost, rendering these benefits effectively costless compared to the expenses governments currently incur in an effort to ameliorate the harm unemployment inflicts on society.)

The needs these resources could address include both soft and hard infrastructure investment. A well-designed JG program could ensure the availability of quality childcare and both home health and daily living care for aging seniors and disabled individuals. Decent affordable homes could similarly be provided for all low- and moderate-income households. The private contracting cost of capital-intensive public works projects could be reduced by assigning program workers earning prevailing wages to perform labor-intensive aspects of those projects with the program picking up the cost of their labor.

In short, a JG program would simultaneously address the problem of unemployment, the economic and social problems that unemployment causes or aggravates, and the inadequate levels of social investment (both hard and soft) from which society currently suffers. It would be a win-win-win policy for the unemployed, communities, and society as a whole.

Philip Harvey is a professor of law and economics at Rutgers Law School. He serves as counsel to the National Jobs for All Network.

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