Bernie Sanders Guarantee Jobs Proposal

Bernie Sanders was a possible presidential candidate from the Democratic Party. He was defeated by Hillary Clinton who went on to compete with Donald Trump.

Bernie Sanders was a known socialist, and that is probably what led to his exit from the Presidential race. However, until now Sanders has been smart enough not to advocate all-out socialism. He has never promoted government ownership of means of production or any such radical policy.

He had indeed advocated a $15 trillion medical bill. He had no idea about how the funding for the bill. It seems like Bernie Sanders just wants to give to the poor even though he has no idea how he can make it economically viable to do so.

Now he has given a proposal that the United States government must guarantee a job to each and every citizen who is willing to work. The idea of job guarantee was considered to be a socialist fantasy by many. However, now Bernie Sanders is trying to bring this idea to mainstream American politics.

It is surprising that some people in the Democratic Party are supporting this proposal. An elementary economic analysis reveals that this proposal will have no positive effects. Instead, it is likely that it may harm the economy in the long run.

The Jobs Guarantee Proposal

Bernie is advocating that the government must pay a minimum wage of $15 per hour to every American who is able and willing to work. Along with the $15 per hour paycheck, Sanders wants to provide all the benefits to these workers as well. These benefits include Medicare and child care. The total expense of such a program is not yet known.

Bernie Sanders has no clue about how these expenses will be funded. However, that does not deter him from undertaking a pilot program in 15 neighborhoods. Bernie Sanders wants the American government to undertake mega projects related to infrastructure and healthcare.

The plan being advocated is unsustainable on several grounds. Some of the most significant objections to the program have been listed down in this article.

Creates Distortions in the Job Market

The job guarantee program suggested by Bernie Sanders would end up creating distortions in the job market. At $15 per hour, the minimum wage for American workers would come up to $31,200 per annum given that they work 40 hours every week of the year. This is very close to $34,000 that is the average wage that Americans earn now. Private employees who do lower end jobs would no longer be interested in working.

Given the fact that government jobs tend to be a lot less stressful, more and more private sector employees would want to quit their jobs and start working for the government. After all, there would be no harm in quitting their jobs. The government will have to pay them irrespective of whether they work or not!

It is estimated that if this program is implemented, the number of people on the payrolls of the government will increase fivefold. This would end up in an economic disaster given the fact that the government does not have the expertise to ensure that such a large number of people are gainfully employed.

Increases in Federal Budget Deficit

If the government has to employ more people, it will need more money to conduct commercial activities. This money can only be raised in the form of taxation. However, since increasing taxes is unpopular, many politicians resort to borrowing money in the short term.

The bottom line is that if the government has to provide jobs, then the government spending will increase drastically. The government is known for being inefficient when it comes to spending money. Hence, they end up spending much more than what was initially planned. All this is likely to result in budget deficits. America is already reeling with massive budget deficits. This scheme, if implemented, will make the situation much worse.

Creates Inflation

The job guarantee program would cause inflation in two ways.

  • Firstly, since the government will start paying higher wages to their employees, the private sector will be compelled to increase wages. These increased wages will lead to higher input costs which will ultimately lead to an increase in prices causing higher inflation
  • Secondly, the government will end up running massive debt because of the increased spending. They may not be able to borrow all the excess money that they have spent. As a result, they may end up printing money to make up for the shortfall. This increases the money supply and causes inflation in the long run.

The problem with these programs is that they tend to be sticky. For instance, most economists and even ordinary people already know that Obamacare is not an effective model. The healthcare costs have shot through the roof as soon as Obamacare got implemented. They are unable to get rid of Obamacare. This is because the people get used to getting free stuff and are not willing to let go even if it means economic destruction. It is for this reason that programs like job guarantee should be vehemently opposed. If implemented, these programs have the potential to ruin the entire economy. Also, it is impossible to turn back once these programs have been implemented.

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