A Conservative Approach

This blog will be highlighting several different approaches to Fix the Jobs. These approaches are ideas that have been proposed by different thought leaders from different ideological background. Such ideas should be used to stimulate thought about how this country should move forward with critical policy to Fix the Jobs. This is the first post in the series.

A Conservative Approach

Michael Strain, a resident scholar at the American Enterprise Institute, has been advocating for his jobs ideas via his article from National Review Online where he outlines his ideas to his more extensive article for National Affairs. These ideas have begun to gain traction, as Business Insider has reported that Senator John Thune has been interested in Michael Strain’s proposals.

Michael Strain’s main proposals are:

  1. Long-lived investment projects: “The projects selected should have high social value — they should involve things we would want to do even in the absence of a demand shortfall.”

  2. Pro-growth monetary policy: “With inflation below the Fed’s target and unemployment above it, the central bank is failing to uphold both components of its dual mandate. And the budget and debt-ceiling shenanigans in Washington, contractionary fiscal policy, continued weakness in aggregate demand, and the weak economies of Europe and Asia strongly suggest that the Fed should be more concerned about prices falling too low than rising too high. Given the current economic environment, there are steps the Fed could take to respond more aggressively to the weak labor market without compromising its position and its image as a fierce opponent of (above-target) inflation.”

  3. Rolling back oppressive licensing requirements: “average cosmetologist spends 372 days in training to receive an occupational license from the government, while the average emergency medical technician trains for 33 days…The government certainly has a role in ensuring that certain occupations are practiced only by well-trained professionals, but it seems obvious that we have gone too far.”

  4. Reform disability-benefit system: “The share of working-age adults receiving Social Security Disability Insurance benefits doubled from 2.3% in 1989 to 4.6% in 2009…SSDI applications track movements in the unemployment rate across time, providing strong support to the hypothesis that many people who would like to work but can’t find a job end up on disability. The United States must ensure a basic standard of living for the truly disabled, but no one seriously disputes the argument that SSDI needs to be reformed so that it ceases to offer a permanent alternative to working for people who could be in the labor force.”

  5. Cash bonus when people on unemployment insurance (UI) obtain employment: “Giving unemployed workers a modest cash bonus when they secure employment has been shown to be effective in shortening the length of unemployment spells, and, if targeted at workers who have a high probability of exhausting benefits, it can actually save the taxpayers money in the long run.”

  6. Lump-sum UI payments: “With lump-sum unemployment benefits paid, say, every month rather than every week, a worker who got a job at the beginning of a pay period could take in both unemployment compensation and a paycheck for that month. If this gets workers off unemployment faster, then the program could save money over traditional unemployment insurance.”

  7. Promote creation of new businesses: “We should consider temporarily reducing or eliminating the capital-gains tax on new business investment to help them attract capital…”

  8. Relocation assistance: “Many of the long-term unemployed living in, say, New Jersey would likely have a much easier time finding a job in North Dakota. Given that unemployment rates, job-openings rates, and hires rates vary so much across the country, it makes sense to help the long-term unemployed move from a bad labor-market region to a better labor-market region.”

  9. Sub-minimum wages with wage subsidies for long-term unemployed: “A firm considering whether to hire a long-term unemployed worker has to form a judgment on how productive the worker will be…What if the firm is genuinely uncertain? The worker looks good — the firm thinks that after a few months he could be pretty productive — but the firm considers the worker a big risk. If the firm could pay the worker $4 per hour on, say, a four-month trial basis, then it would be more likely to hire him…To ensure that long-term unemployed workers are able to maintain an adequate standard of living in their new jobs, sub-minimum wages should be coupled with an expanded Earned Income Tax Credit or with wage subsidies exclusively available to the long-term unemployed.”

  10. Work-sharing: “Imagine a firm with 100 employees. Each employee earns the same salary. A recession hits, and the CEO of the firm needs to cut payroll by 20% in order to stay in business. How does he proceed? If he is a CEO in the United States, then he will likely lay off 20 workers. Those workers will be eligible for a weekly check through the unemployment-insurance system, which will cost the taxpayer about $300 for the average worker. In this example, taxpayers are on the hook for $6,000 a week. Now, imagine that the CEO takes a different path. Instead of laying off 20 workers, he orders all 100 of his workers to stay home on Fridays, without pay. His payroll expenses are cut by the same amount as before — his firm can stay in business. Each worker can claim 20% of his unemployment benefit, so taxpayers contribute $6,000, just as before. But no one is laid off.”

These proposals range in effectiveness but are all intended to increase employment. Michael Strain realizes that there is truly a jobs crisis and anything that promotes job creation should not be off the table when considering what policy to implement.

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  1. […] This blog will be highlighting several different approaches to Fix the Jobs. These approaches have been proposed by thought leaders from all backgrounds and perspectives. Such ideas should be used as a resource for putting together solutions at all levels about how this country should move forward with critical policy to Fix the Jobs. This is the second post in the series. The first post can be found here. […]

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