An Unemployment Solution: Pay People to Work Shorter Hours
The unemployment rate is 10.2 percent and virtually certain to rise even higher in the months ahead. Even with the prospect of extended benefits, unemployment is still a crisis for the families affected, as they struggle to pay their mortgage or rent and cover other essential expenses. Millions will end up falling behind, losing their home - in some cases leading to homelessness and/or family break-ups.
Fortunately, there is an easy and quick way to begin to get these unemployed workers back to work. It involves paying workers to work shorter hours. The mechanism can take the form of a tax credit to employers. The government can give them a tax credit of up to $3,000 to shorten their workers' hours while leaving their pay unchanged. The reduction in hours can take the form of paid sick days, paid family leave, shorter workweeks or longer vacations. The employer can choose the method that is best for her workers and the workplace.
If take-home pay is left unchanged as a result of the credit, then demand should be left unchanged. If workers are putting in fewer hours and demand is unchanged, then employers will need to hire more workers.
This logic is as simple as it gets. The process is also quick and cheap. In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job - far less than the cost per job saved through the stimulus package.
Germany has used this policy to keep its unemployment rate at 7.6 percent, about the same as it was before the recession. Imagine if workers in the United States, like workers in Germany, were dealing with the recession by putting in four-day weeks (while getting paid for five) or getting an extra two weeks of paid vacation. This sure beats being unemployed.
Seventeen states already have a "work-share" program in place that allows employers to use unemployment insurance money to cover a reduction in work hours, without a corresponding reduction in pay. More than 100,000 layoffs have been prevented as result of this program.
Senator Jack Reed (D-RI) has a bill that would increase funding for work-share programs and remove some of the bureaucracy. The bill also provides start-up money for the states that don't have programs.
The Reed bill would be a big step towards following the Germany model, taking advantage of a program that is already in place. It could quickly make a big dent in the unemployment rate, by preserving many of the jobs that are now being lost.
In this respect, it is important to clear up a common confusion about the economy. The monthly job growth number is a net figure. Approximately 4 million people leave their jobs every month, half involuntarily. We have job growth if we either create more than 4 million jobs or reduce the number of jobs lost below 4 million.
If a work share program reduced involuntary job loss by 20 percent, or 400,000 per month, it would have the same effect as adding 400,000 new jobs. Over a full year, this would generate nearly 5 million new jobs. This would be a quick and effective way to reduce unemployment.
-- This article was published on November 16, 2009 by New Deal 2.0.
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A good idea but class-ideology may prevent it
By Ward, Peter at Nov 18, 2009 22:14 PM
In terms of reformist possibilities I think this is on the right track. Though, frankly, I don't see the government as being bothered enough about unemployment (or other forms of suffering caused by the economy) to implement it--i.e., they are rabidly classist and seem prepared to sacrifice almost the entire economy as well as the well being of most of the poplulation for the sake of financial institutions. Therefore, if it will take an uprising to implement any kind of constructive change we might as well demand what we really want rather than sell ourselves short with Keynesian compromises such as this.
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Re: A good idea but class-ideology may prevent it
By Ward, Peter at Nov 18, 2009 22:20 PM
True, "Keynesian" comprimises may be more palitable to a public indoctrinated by the Church of Capital and therefore such solutions my seem expedient. However, I figure by the time we convince people to fight for their well being we will have also convinced them of the defiiencies of such comprises as this. In this respect we may have an advantage over more socially oriented European countries in the long run. We have more to fight therefore the potential exists to push social transformation further.
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Only partial, not very good
By Davidson, Carl at Nov 18, 2009 05:40 AM
This can serve as a partial solution, but it's not a very good one. The reason is that it rewards non-production with the tax revenues taken from producers, and thus gives an assist to the rightwing populists. Another problem is that you have to have a job to benefit from it.
More than tax credits, small and medium sized businesses mainly need purchase orders, ie, customers. The economy doesn't care if the purchase order comes from government. Taxpayers, however, can be won to favor deploying taxes for productive investment--winterizing homes and public buildings, modernizing locks and dams on the rivers, light rail and high speed rail, renewable energy production, and so on. This creates new value and makes work not only for the employed, but also the unemployed. Even so, advocates for the unemployed have to fight for their share of it at the base, or they still get bypassed.
Our task as a left within this Keynesianism is to help alter power relations with worker ownership and community stakeholdership and participatory budgeting--all these are bridges to a socialist future.
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A very good idea
By Butler, Gary at Nov 18, 2009 00:57 AM
I like the concept, ie, stimulate the economy by pouring stimulus monies into retaining jobs for average Americans in the ‘real’ economy rather than rewarding the criminal financial speculators responsible for the ‘recession’ in the first place. The average American worker, in the current climate of job threat, would still be reluctant to spend even if his/her job ‘felt’ secure and their income was essentially unaffected through this type of Program unless there was some associated effort on the part of the Federal government to curtail the reckless of the financial section. That doesn’t appear to be happening. Perhaps the history of this and the previous Administration’s selection of Economic advisors, Cabinet members and panels needs a shakeup to ensure the American people are put first over a smaller but seemingly far more important minority.
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