Paul Krugman Misses – As Do Most – The Problem With A Job Guarantee Scheme

As is usual with Paul Krugman and matters economic he’s right what he says here about a government job guarantee. As is also usual he’s less than perceptive about the real problems with a plan being proposed by people he likes. Ah, well, that’s a fairly usual human failing. But it is worth pondering what is the main and basic problem with the plan that the government is going to provide a job for whoever wants one, whenever.

Krugman’s right here:

Here’s the way some of the critiques seem to run: a large share of the U.S. work force – Baker says 25 percent, but it looks like around a third to me – makes less than $15 an hour. So offering these workers a higher wage would bring a huge rush into public employment, implying a very expensive program.

I insist that it will be a very expensive program, one ruinously so. But not for that reason that Krugman refutes.

Rather, this. OK, so government will offer, and pay for, a job at $15 an hour plus benefits (that’s the actual proposal) to anyone and everyone anywhen. This then underpins all the other choices in the labour market and we all get rich or summat.

OK. Jobs doing what?

No, really, what?

For don’t forget, we cannot look at these or any other jobs as just being about the income people gain from them. Our GDP equation shows that. Incomes, production, consumption, all must equal each other. Someone going to work at $15, well, Meh. But someone getting paid $15 an hour to produce nothing of value?

Do note that by definition government jobs are going to be things which people don’t value over the alternative uses of that labour. If we all did then we’d already be employing those people to do those things, wouldn’t we? Which leads to two rather uncomfortable thoughts about this idea.

Firstly, that whatever tasks are to be performed must, by definition, be those not already preferred by consumers. Secondly, who actually believes in the ability of the bureaucracy to allocate labour productively? You can’t turn up at anything except the most basic day labour and expect to be used that day. But we’ve just insisted that government offer anyone and everyone a well paid job. Doing what? They’ll all end up picking trash or training as diversity advisers, won’t they? At least one of which is useful but given that we don’t pay people $15 an hour plus benefits not something we think worth that price.

That is, we’ve two separate proofs, one from theory and one from observation, that a government jobs guarantee scheme will make us poorer. One because the labour on it must be, by definition, allocated to the things we already say aren’t worth current market wages. And by observation that government is ineffably inefficient at allocating labour anyway.

That is, it’s a ludicrous idea. We’re to put the guys at the DMV in charge of the work allocated to millions upon million of Americans? That’s going to work out well, isn’t it?