How much will the job guarantee program cost?
The cost of the job guarantee must be evaluated against the ongoing costs of unemployment and poverty. Unemployment is expensive: towns, cities, and countries already directly and indirectly pay these costs. Workers who are out of a job lose more than a paycheck: socially useful employment gives people purpose and a place in their communities. The cost of unemployment can be calculated in monetary terms, but more significant are the real costs: from the foregone output to the wellbeing of individuals, families, and communities. The job guarantee will reduce these costs while making critical investments.
Recent crises like the Great Financial Crisis and COVID-19 have taught us a vital policy lesson: finance is abundant and readily available for domestic policy priorities. Countries have deployed their financing institutions to address these challenges. Those with monetary sovereignty have far more fiscal space to address them, while others face different degrees of financial constraint. What is true is that the latter still bear the brunt of the costs of unemployment and the direct employment approach offers a viable alternative.
In monetary terms, the costs of even large scale real-world programs have been quite manageable. For example India’s Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) peaked at 0.5% of GDP in 2020-2021 (Drèze, 2022). Trinidad and Tobago’s Unemployment Relief Program peaked at 0.45% of GDP in 2015 (UN ECLAC, 2023). Argentina’s Plan Jefes y Jefas cost 1% of GDP in 2001 and 2002 in the depths of an economic crisis (Kostzer, 2008).
However, none of these programs provide universal access to all jobseekers. A recent study modeled a large-scale and universal Public Service Employment program for the US and placed the costs between 0.5-2.5% of GDP (Wray, Dantas, Fullwiler et al. 2018). Notably, the study does not account for all savings that would result from reducing the real and financial costs of unemployment.
As the 2023 UN report on the Employment Guarantee concludes, “Considering the important benefits to society of tackling unemployment and of providing goods and services undersupplied by the market, financing from general taxation would be fully justified” (Schutter).
Drèze, Jean. (April 1, 2022). “Employment Guarantee in Action: Insights from India”. Economic Democracy Initiative Note.
Daniel Kostzer. (2008). “Argentina: a case study on the Plan Jefes y Jefas de Hogar Desocupados, or the employment road to economic recovery“. Working Paper No. 534. Levy Economics Institute of Bard College. Annandale-on-Hudson, New York. p. 18.
Schutter, Olivier de. (April 18, 2023). “The employment guarantee as a tool in the fight against poverty: report of the Special Rapporteur on Extreme Poverty and Human Rights, Olivier De Schutter“. Geneva. A/HRC/53/33.
United Nations Economic Commission for Latin America and the Caribbean Non-Contributory. “Unemployment Relief Programme (2010-)”. Social Protection Programmes Database website.
Wray, et al. (2018). Public Service Employment: A Path to Full Employment. Levy Economics Institute.
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