Creating Jobs Trumps Building Bridges

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Men walk near rows of Caterpillar products at Quinn Co. Caterpillar in City of Industry, California.

It seems impossible that a handful of companies could put nearly 80,000 people out of work in a day. Caterpillar (CAT), Pfizer (PFE), Texas Instruments (TXN), Sprint (S), and Home Depot (HD) did most of the damage. What was not seen in the headlines was the thousands of smaller American firms which also fired people over the same 24-hours. Could 200,000 people across the economy have been put out of work in one day? Of course.

Economists were alarmed that unemployment was increasing by 500,000 to 550,000 people a month in the last four months of 2008. The rate at which that pace is quickening since the beginning of the year is nearly beyond imagining. Will one million people lose jobs in January? The anecdotal evidence would support a number much nearer to that than the 500,000 or so that most analysts have forecast. (See pictures of a city battered by unemployment.)

There is a powerful argument that the number of people unemployed in the United States could rise by more than 2.5 million people in the first quarter based on the current job situation. The case that no one wants to mention is that the figure could move above three million.

The economic stimulus bill which should get to the president's desk in a month is meant to save or create 3 million to 4 million jobs over the next 2 years. That is impossible. The unemployment hole is getting too big too fast.

The one criticism of the economic stimulus program which comes from almost every corner of the political, economic, and business worlds is that the plan for creating jobs by building infrastructure may take too long.

Beginning projects for expanding the electrical grid for alternative energy requires everything from relocating workers, obtaining local permits, and drawing up the plans designed by engineers. The goal of the program is noble, as are the goals of creating better access to broadband and building more modern schools. None of these programs can be set up quickly enough help stanch the outflow of jobs.

One of the most direct ways of improving employment, or improving unemployment, depending on how quickly people are being put out of work, is to give businesses direct financial incentives to hire.

Tax cuts and rebates are not incentives, at least in an economy that is sinking this fast. The money takes too long to get from the government to the business operator. The system needs something more direct.

The single most direct option is for the government to pay a portion of the salary of each net new employee a company hires. For the recently unemployed, this could be a boon for earlier reemployment. If a company could use new people for expansion but cannot afford them, having 50% of their first year's salary paid by the federal government gives it the opportunity to grow.. This proposal would allow firms which have let people go to save money, even at the peril of the viability of their businesses, the chance to bring them back.

There are, of course, a number of reasons to object to sharing the cost of new employees at private enterprises. The system is subject to fraud. That is accurate, but if the IRS monitors the wages of the people being hired at least the government would have a reasonably accurate count of workers and what they are paid. Businesses that will lie to the IRS are likely to lie to almost any branch of government. It is in their character.

Another charge against supplementing the costs of adding employees to the private sector is that it is a form of welfare. That is almost entirely true, but so is hiring people to build bridges which could be just as easily constructed in a year, or two years, or five. Underwriting infrastructure construction is no more or less welfare than most other forms of stimulating commerce. A job is a job.

What is clear is that none of the jobs the government is trying to create would exist in a deep recession. The normal course of the economy would get the building of bridges done as the capital became available. The same holds true for adding to the energy grid or creating new broadband wiring. In a stable economy, private enterprise would get around to this work based on private capital seeing a need and potential profit.

The alternative to giving U.S. businesses a direct incentive to start hiring people tomorrow is waiting to see if the stimulus package will work on a grander scale. That would be simpler. Four or five large business sectors would get capital to offer hundreds of thousands of jobs each to create the equivalent of a new economy.

If three million jobs disappear between now and March 31, this waiting will have looked good on paper.

Douglas A. McIntyre

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