Getting Stuck Working for Uncle Sam

By Charles Hughes

Wednesday, May 16, 2018

Note: The following piece originally appeared at e21.

Senator Bernie Sanders (I., Vt.) will soon announce his jobs-guarantee proposal. A host of potential 2020 Democratic nominees, such as Senators Cory Booker (D., N.J.), Elizabeth Warren (D., Mass.), and Kamala Harris (D., Calif.), have introduced a separate pilot proposal, which would establish a jobs-guarantee program in 15 high-unemployment areas in the country for three years. Everyone who applied would be guaranteed a job.

While these proposals differ in scale and specifics, the jobs would eventually pay $15 an hour, in addition to other benefits, such as health care and paid leave. I recently wrote a column on the difficulties of matching participants with infrastructure jobs due to lengthy review and permitting times, but individual participants would also face dimmer prospects in the long run.

The generosity of the compensation package offered through the proposals would encourage some people who could have otherwise had low-wage jobs in the private sector to shift over. If the economy were to enter a recession, millions of unemployed might flock to jobs guaranteed by the federal government.

In the short term, these benefits and wages would be a boon to many of these participants. One of the major concerns is how people would fare while in these guaranteed jobs and whether they would ever be able to move out of the program to better employment in the private sector. In a recent meta-analysis, economists David Card of the University of Berkeley, Jochen Kluve of Humboldt University, and Andrea Weber of the University of Mannheim analyzed estimates of over 200 evaluations of active labor-market programs around the world. They found that while job-search assistance, sanctions, or subsidized private-sector-employment programs demonstrate some level of effectiveness, public-sector-employment subsidies generally have negligible or even negative effects across all time horizons.

The authors note that the poor performance of public-employment programs confirms their own earlier work and another study from University of Chicago professor James Heckman. They suggest that the consistently weak performance of public-jobs programs suggests that “private employers place little value on the experiences gained in a public sector program . . . and [programs] only serve to slow down the transition of participants to unsubsidized jobs.”

This could be due to a range of reasons. First, private employers might be skeptical that the work people are doing in public-employment programs helps them develop skills or abilities that would translate to the private sector.

Second, the need for a worker to sign up for the program sends a negative signal about the employee’s skills. If only workers with limited skills or prospects end up in the program, employers assume that participants were unable to find private employment on their own and would not be good candidates.

Third, employers might find it difficult to identify people who performed their jobs well while in the jobs-guarantee program. As I have written previously, the current system for evaluation of federal employees leaves much to be desired.

Out of the almost 1.2 million permanent federal employees included in an analysis by the Government Accountability Office, only one-tenth of 1 percent had a performance rated “unacceptable,” and another three tenths of 1 percent were rated “minimally successful.” More than a third of these employees were rated “outstanding.” If performance reviews in the program are similar to the existing efforts for current employees, they will give minimally useful feedback to employees and impart no information to private-sector employers.

Some participants might have been chronically absent during their time in the program or had lackluster performance. The early draft of the Sanders proposal suggests that a Division of Progress Investigation would have the authority to discipline participants as needed. The track record of disciplinary measures for current government employees should make us extremely skeptical regarding its effectiveness. For these reasons, private companies might then be deterred from hiring people who participated in the jobs-guarantee program.

Aside from the problems related to cost or finding enough timely work for jobs-guarantee participants, the program would also introduce serious concerns about the effects on the long-term prospects for participants. Previous research has found that public-sector-employment programs teach few skills, leading to minimal or negative effects for employees. Once people enter the program, they might never be able to find a way to leave, and the rolls of participants would grow inexorably year after year.