Guaranteed Income vs. Guaranteed Jobs

Yves Smith at Naked Capitalism has an interesting post on the late 18th Century/early 19th Century English Speenhamland system, and as more or less an aside, mentions being somewhat baffled by a reader preference for a guaranteed income system instead of a guaranteed jobs system:

The idea of a basic income guarantee is very popular with readers, more so that the notion of a job guarantee.

I’m at a loss to understand reader objection to the idea of a job guarantee. It would either price many McJobs out of existence or convert them back to their old form, of being part-time positions for young people still in school. It would similarly increase compensation for important jobs like home health care workers that now pay rock-bottom wages.

Read the whole thing, it’s interesting, and not at all solely about guaranteed income versus guaranteed jobs.

But to clear up Smith’s questions about what people find superior about a guaranteed income, I think it’s a few things:

  1. While you can see a lot of benefits to a very well-run guaranteed jobs system, many people (including your humble author) do not have a lot of faith in the technocratic competence of a government to produce a very well-run guaranteed jobs system.  Indeed, I think it’s a very difficult task, much more so than most government programs, and even a basically competent government might find it uniquely difficult.  A poorly run guaranteed jobs system seems like it would have very high administration costs without providing much in the way of tangible benefits.
  2. A guaranteed income system could provide a stepping stone that allowed many people who are currently economically unproductive to become economically productive, and thus generate a good deal of wealth, by allowing such people to participate in the private job market, and potentially either demonstrate to their employers that they were undervalued at first, or to gain skills that allows them to genuinely increase their value.

To expand on point two:  Suppose that the minimum wage is $10 per hour, and you, an employer, are faced with a candidate for a job.  Your best guess is that said candidate will provide $5/hour worth of marginal benefit to your company.  You basically either say, “Well, I just can’t get along without someone filling this position, even if this position is filled at a loss, so I’ll suck it up and pay $10/hour” (which is what the minimum wage is supposed to make you do), or say “No, not worth it” and don’t hire the person (which is what opponents of the minimum wage think you’ll do).

Even if there were no minimum wage, ultimately, people have to be able to eat.  If the functional minimum you can live on is $10/hour, you can’t hire people for $5/hour unless they’re partially supported by others (probably their family or some kind of social safety net).

With a sufficiently high guaranteed income, everyone is fundamentally supported by the government, and there is no real reason to have a minimum wage.  This is potentially empowering!  There are possibly quite a few people who presently can’t get jobs who could get a job if they could be paid $5/hour, or $2/hour, or $1/hour.  And some of those people probably could learn to be worth more than their current wage (or are already worth more than that, but are demographically unusual and can’t get anyone to let them prove their worth).  Some large number of people who are currently idle might potentially not just be given something to do, but also create significant wealth by becoming more and more valuable.

You can see a way that a guaranteed jobs system might make the same thing work, but it depends on it being a pretty good job system.  How do people get out of the guaranteed jobs and into the real job market?  Private employers would have to have some way of getting information out of the guaranteed jobs system that says, “No, this person is now worth employing on the real market.”  If the guaranteed jobs system is excellently managed, we could see success in such a system as proof that the employee is valuable.  But in the (in my view likely) event that the guaranteed jobs system is not excellently managed, private employers might reasonably say, “I can’t tell which people from the guaranteed jobs system are genuinely valuable.”  If we assume that the guaranteed jobs do work which is fundamentally not worth that much, then the potential value of the currently unemployed largely remains not-very-valuable.

It is worth noting that this is an optimistic view of how a guaranteed income system would perform.  The fear is of course that it wouldn’t push many people into the upward virtuous cycle of employment, and would instead allow many people who currently work somewhat grudgingly to drop out of the workforce and become idle.  For a variety of reasons, I don’t really believe in guaranteed income systems.  But I’m not certain which view is right, and I’d love to see a true example (which I don’t think that the English Speenhamland system qualifies as).

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