We have a really, serious problem with job creation. Itâ€™s been more than a half-year since the economy began to grow again â€” including several months of very strong, stimulus-fueled gains â€” but private sector employment continues to fall. The truth is, these results shouldnâ€™t surprise anyone with a long memory. While businesses began to create more new jobs than they destroyed within three months of the end of the 1981-1982 recession, that didnâ€™t happen for a full 14 months following the 1991 downturn and for more than two years after the 2001 recession.
The problem this time looks even more daunting. The economy is growing, but the pace may be moderating already. Thatâ€™s because this time, most Americans have lost part of their savings and part of their homesâ€™ value, leaving them more cautious about going on the kind of spending spree that used to drive early recoveries. And when people are cautious, businesses are too â€” with the result they donâ€™t hire much. To get job creation going, we have to restore confidence so people and firms will begin spending again.
We also have to deal with a deeper problem linked to globalization. In a world with tens of thousands of new businesses created across the globe over the last decade, the resulting, intense competition forces companies to hone their efficiency and control their costs much more stringently. And when their costs for, say, health care and energy go up, they often have to cut back somewhere else â€” and they usually start with jobs and wages. Thatâ€™s why U.S. companies created less than half as many new jobs, relative to how fast the economy grew, during the last expansion as they did in the 1990s and 1980s. To change these dynamics, weâ€™ll have to slow the inflation in health care and energy prices. The Presidentâ€™s reforms enacted last week are a modest, first step; but millions of jobless Americans canâ€™t afford to wait for them to take hold.
They donâ€™t have to: We have developed a four-part program that would substantially accelerate job creation over the next several years. First, President Obama and Congress should make it cheaper for companies to hire new people. The most direct way to do that is to suspend the employerâ€™s share of payroll taxes for new, net hires in their first year on the job â€” that would cover all new employees in firms that expand their total workforce and total payrolls. In the second year, the company would pay 50 percent of the employerâ€™s payroll tax contribution. Employees who work hard for those two years will learn how to do their particular jobs especially well, which should be enough for their employers to keep them on after their payroll tax break ends.
The experts at the Congressional Budget Office found that this approach creates more jobs, per federal dollar spent, than any other. In fact, the jobs bill passed two weeks ago includes a light version of this policy, in a seven-month payroll tax holiday for hiring people who have been out of work for a while. Itâ€™s a start; but we need a permanent program, not a temporary fix, and one that doesnâ€™t ask people to stay jobless until they qualify.
Next, the President and Congress should help everyone become a more valuable worker. Look around: Every modern office or factory is organized around computers, the Internet and other information technologies. Yet, nearly half of people working today â€” and more than half of those out of work â€” have little or no skills to use these technologies. As weâ€™ve argued and written before, we can help everyone become a more valued employee by providing free computer and Internet skill training â€” and we can do that, at relatively little cost, by providing grants to community colleges to cover the cost of keeping their computer labs open and staffed at night and on the weekends, so anyone can walk in and receive training. Here, too, the President has said itâ€™s a good idea â€” so why not enact it now?
Part three of this program involves more assistance for state and local governments to suspend their continuing layoffs of police, prison guards, firemen, sanitation workers, and other public service employees until a genuine economic expansion begins. This was a good idea for the original stimulus package, and itâ€™s just as good an approach for a jobless recovery. And Wall Street can help pay for it with the revenues from a new tax on the bonuses for executives of financial institutions that took taxpayer money to stay afloat. We saved their jobs; now, they can help save ours.
The fourth part of our package involves the arcane structure of taxation for multinational companies. U.S. multinationals today hold some $1 trillion in financial assets outside the United States, bought with the profits they earned abroad. They keep all that money outside America, because while theyâ€™ve already paid foreign taxes on it, they have to pay additional U.S. corporate taxes when they bring those funds home. In practice, weâ€™ll never see most of those funds under current law, since multinationals generally repatriate those profits only when they have domestic tax losses that can offset them. So, Congress at little cost could grant U.S. multinationals one year to bring home these funds and pay a much lower corporate tax rate than normal, so long as they use those funds to create jobs. This approach is the only, virtually free stimulus available to us â€” since the funds come from overseas â€“ and we should grab it.
These four measures wonâ€™t change the structure of this recovery or the larger economic environment in which it is unfolding. Yet, within that structure and environment, these steps could significantly enhance the job prospects of millions of Americans.