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.

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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