Tags: packer | Create | Jobs | America

Time to Reverse Course and Create Jobs in America

Tuesday, 23 Aug 2011 08:02 AM

By Andrew Packer

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Albert Einstein once famously quipped, “Insanity is doing the same thing over and over again and expecting different results.”

We’re three years into a national nightmare when it comes to unemployment.

The official rate of unemployment is 9.1 percent. Using older calculation methods that were phased over the last 25 years, the number runs a hair over 16 percent.

What’s being done to improve this? Not much.
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Talk about insanity. It’s clear things need to change. Rather than focus on radical, but unlikely changes, let’s look at two possible changes that can get Americans back to work:

1. Reduce Regulatory Uncertainty

As bad as the employment situation is now, it stands to get much worse over the next few years. Why? Most small-business owners that I talk to sum it up in one word: Obamacare.

According to the Bureau of Labor Statistics, employers pay an average of $30.07 per hour per employee. Only $20.91 of this goes to the employee in salary. The other $9.15, or nearly 30 percent, goes into health care, retirement plans, and other forms of compensation.

Employers are already expecting to pony up even more with the new Obamacare legislation. (Unless, of course, they’re willing to lobby for an exemption, as hundreds of companies have already done.)

Obamacare is just the tip of the iceberg. Regulations on everything from manufacturing techniques to the packaging of goods for sale have grown exponentially. The cost of regulatory compliance is estimated to create an economic drag over $800 billion. That’s 17 percent of GDP.

Instead of an ever-expanding list of regulations, most industries would fare better with fewer regulations. What we lose in quantity can be made up for in quality.

2. Improve Incentives for Job Creation

To paraphrase Ronald Reagan, if you want more of something, subsidize it. If you want less of something, tax it. This aptly denotes the power of incentives.

A few proposals have been announced to offer small tax breaks for businesses that hire, but most have been tepid, offering businesses under $5,000 per employee.

Rather than an individual tax credit for each job, a bigger benefit might reap better rewards. Offering lower tax rates for companies that put Americans to work would prove a clearer incentive system than today’s tepid approach.

Conversely, companies that lay off large numbers of workers could face some kind of penalty, such as having to pay for the first six months of unemployment benefits. It would certainly reduce the possibility of a company CEO cutting the staff just to earn an extra penny per share in profits in the next quarter.

There’s nothing surprising to these two solutions. They’re mostly just common sense. Yet common sense is so rare from policymakers it might as well be a superpower.

Let’s not overlook the obvious benefits of improving the job market: Every working employee pays taxes, rather than receives benefits. Reducing unemployment can make a dent in government spending. It won’t go far enough to solve the problem of government overspending, but it’s a start.

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