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This situation creates tremendous uncertainty that affects virtually all firms. After all, no matter how firms may differ in other regards, they all hire employees, and in most cases employee compensation amounts to a major part of their total cost of operation. In the face of this uncertainty, few firms have been, or will be, willing to assume the risk associated with increasing their permanent, full-time workforce.
Robert Higgs is a senior fellow in political economy at the Independent Institute. He is the author of Crisis and Leviathan (Oxford) and several other books.
Reform the Fed
The single thing the U.S. could do to ensure long-term growth, including that of jobs, is to reform our Federal Reserve so that monetary policy is rules-based, not personality-based. Even a return to the gold standard would do, though it is also possible to fashion a monetary regime under which the currency is pegged to a basket of commodities.
Amity Shlaes is a senior fellow in economic history at the Council on Foreign Relations. She is the author of The Forgotten Man (Harper). Her biography of Calvin Coolidge will be released next spring.
Restructure Unemployment Insurance
Congress should stop extending unemployment benefits. Better yet, restructure the unemployment insurance program or block-grant it to the states to allow them to experiment with ways of doing so. The idea is to change the program so it creates an incentive for recipients to get a job, rather than an incentive for them to remain unemployed.
This could involve altering the unemployment benefit formula so that the amount of the payment gradually decreases over time, reducing the propensity of beneficiaries to stay on unemployment until they frantically search for a job and find it just as the benefits run out.
Or it could involve allowing states “the flexibility to convert their unemployment insurance payments from checks sent to the jobless into vouchers that can be used by companies to hire workers,” as Bloomberg News columnist Jonathan Alter suggests, relaying an idea from a Democratic candidate for U.S. Senate from Massachusetts, Alan Khazei.
Or it could involve changing the program so recipients get a hefty share of their benefits up front, as a lump sum. They can then use the money as capital to start small businesses. Or if they find a job quickly, they can save or invest or spend the money. (No repeat passes, though; the idea is to increase incentives for finding or creating a job, not rewards for people who get themselves fired.) Another approach might be to fold unemployment together with health, college, homeownership, and retirement as expenses that people can save for in a tax-favored account.
Ira Stoll is the editor and founder of FutureOfCapitalism.com and the author of Samuel Adams: A Life (Free Press).