10 Ways to Cut Unemployment in Half

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With unemployment expected to remain above 9 percent for the next year, the government is considering fresh steps to add jobs. 24/7 Wall St. looked at ten possible solutions that could help return us to full employment, which most economists consider around 5 percent. None of these plans are new, many of them are expensive, and some of them have not been used in America for decades, if ever. But in the worst recession of the post-war era, they all deserve consideration.

1.
Germany has a government policy which provides tax credits to companies that shorten work hours rather than lay off employees. Let's say there's a company with 100 jobs that wants to slash its payroll by 10 percent. It can fire 10 people. Or it could reduce hours by 10 percent and get a tax credit from the government to make the employees "whole." Companies save money, but add workers.

2. Saving Small Business. Economists repeatedly make the point that small businesses are and have been the primary engine of job creation in America. They're also at a disadvantage. Large companies have easier access to capital markets and low interest rates even with the depressed economy. By contrast, banks have been reluctant to fund small operations that have little or no cash and uncertain prospects and a relatively small number of customers. The federal government should shoulder some of the risk of small business loans and provide new incentives for banks to lend to smaller businesses.

3. Tax Credits. Tax credits will almost certainly be part of any program to improve unemployment because businesses need a concrete reason to hire during a difficult economic period. Companies have become used to employing people part-time to keep the costs of benefits and severance low. Any plan to increase the number of full-time workers in the labor force will need to address this "part-time" issue. The federal government could provide a tax credit to companies who hire new workers or convert workers from part-time status. This would give enterprises that would like to expand, but are ambivalent about the economy, an incentive to do so.

4. Working For The Government. Many of the FDR economic stimulus programs of the 1930s were failures when viewed through the lens of permanent job replacement. But giving people work, even it if is not permanent, helps buoy the economy during sharp downturns. The Works Progress Administration, created in 1935, added nearly eight million jobs to the economy. Rather than pay the unemployed to stay idle, the government gave them job skills that were useful when the economy recovered.

5.  State Jobs, Not Projects. Not enough of the first stimulus package went to direct job creation and too much went to tax incentives. State and municipal governments have been decimated by the downturn and they require money immediately, if for no other reason than to keep them from firing and furloughing more workers.

6. Pressing China. It will be hard for the economy to recover and for the jobs picture to improve if China keeps its currency advantage compared to the US. The value of the yuan almost certainly improves China's ability to keep the costs of its exports to the US low. It also raise the cost of imports from the US.The federal government would have to do two things to get China to "rethink" its trade and currency policy. Each is risky. The first is that the Treasury Department would have to make a direct threat to Beijing to label it as a Currency Manipulator, a designation which carries with it a number of trade sanctions. The second action by the American government would require that "strategic" imports from China be taxed. This would probably have to include finished metals like aluminum and finished commodities like tires.

7. Underwriting Exports. The Administration has said that the economy needs to boost exports. Even if trade issues with China are resolved, there are still some hurdles. Among the most meaningful is the cost of physical shipping. For products which have low profit margins, the price of air, sea, or ground transportation can be prohibitive. The government could elect to underwrite the cost of shipping, particularly for businesses that are relatively small or larger manufacturing businesses which are in sectors that have had large layoffs.

8. The Minimum Wage. What if we could make the cheapest labor even cheaper -- not for employees, but for employers? Employers would add workers a certain wage below than the minimum wage, and employees would get reimbursed by the federal government. This would not only keep low-wage workers in their jobs, but also it would help businesses add more people for less.

9. Construction Jobs. Construction has been hit as hard as any industry in the recession. With demand for new homes at half-century lows, things could get worse. Construction workers without money can't afford to move to areas where there is still some work. This has created large pools of unemployed workers in the areas of California, Nevada, and Florida. People who build a house cannot build nuclear reactors, but they can work on infrastructure products including the building and improvement of schools and government-owned facilities. We need more money for this kind of construction work.

10. Immigration. There are many metro areas, for example some high-immigration cities in the south, where labor supply swamps labor demand. The federal government can help by providing supplemental aid to these metro areas to create public sector jobs for states and municipalities with particularly high unemployment.


MORE FROM 24/7 Wall Street:
24/7 Wall St: America's Ten Dead Cities
24/7 Wall St: What the Double Dip Recession Could Look Like
24/7 Wall St: The Ten Biggest Labor Strikes

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Douglas A. McIntyre and Michael B. Sauter are editors of 24/7 Wall St., a Delaware-based financial news and opinion operation that produces content for sites including MarketWatch, DailyFinance, Yahoo! Finance, and TheStreet.com.

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