Get a Job!

Free market ideas for reducing unemployment


This summer, faced with a persistent unemployment rate of around 9 percent, labor-force participation lower than at any time since 1983, and a pessimistic public deeply dissatisfied with its elected leaders, President Barack Obama "pivoted" away from a divisive debt ceiling debate toward the subject of jobs. "I…won't stop," the president vowed in his weekly radio address of Aug. 13, "until every American who wants a job can find one." In Michigan, where the unemployment rate is 10.5 percent, Obama proclaimed, "We know that there are things that we can do right now that will support job growth." Things like building roads, extending unemployment benefits, cutting payroll taxes, and investing in clean energy.

The press and Obama's fellow Democrats echoed the president's concern. "A political system that responded rationally to the country's problems would be concentrating on creating jobs," The New Yorker's John Cassidy complained. Rep. Nancy Pelosi (D-Calif.) accused Republicans of having "passed bills that would destroy up to 2 million jobs—nearly 10,000 jobs per day" since she was booted from her role as House speaker. But Pelosi, like Obama, has been talking about what she has serially referred to as "jobs, jobs, jobs, and jobs" since January 2009. All that talk—and multiple pieces of related legislation—have yet to increase the net number of Americans at work.

Republicans have their own jobs agenda, but they mostly prefer to talk trash about the Democrats. "Spurring jobs and the economy is always next on the Obama administration's to-do list," sniped current House Speaker John Boehner (R-Ohio) in an August 3 blog post, "right after more spending, more taxing, and more regulating."

Meanwhile, voters are raising a collective eyebrow at both parties on the employment front. A July Pew Research poll showed an even 39–39 split on which party Americans trust more on jobs. A CNN/ORC poll released in August found that only 29 percent of respondents think there will be more jobs in their communities a year from now, and 26 percent think there will be fewer jobs.

What are some free market ideas for boosting employment? reason asked some of our favorite economists, writers, professors, and entrepreneurs to name one concrete policy change they would recommend to increase job growth. —Lucy Steigerwald

Liberate Labor

Peter Schiff

To make the greatest impact on persistent unemployment, the government should pursue policies that allow the free market to set wages, benefits, and all issues related to employment. Just as employees are allowed to leave jobs for whatever reason, employers should be allowed to hire and fire based on any criteria without fear of litigation. In other words, liability cost for hiring employees should be minimized. Employees become easier to hire once employers know that their downside risks are minimized. In addition, all protective labor laws, including minimum wage laws, should be repealed.

Employment is a voluntary relationship between two parties. Our laws should reflect and support that concept to the highest extent possible. Employees do not qualify for special privileges (inappropriately labeled worker's rights) simply because they accept a job, and employers do not lose their rights and become subjected to special obligations just because they hire. The playing field should be level.  

Peter Schiff is the CEO of Euro Pacific Capital and the author of How an Economy Grows and Why It Crashes (Wiley).

Repeal ObamaCare

Robert Higgs

Repeal of ObamaCare would probably do wonders to spur hiring, especially for permanent positions. Compensation for such jobs usually includes a benefits package with health care insurance, as well as a money wage or salary. Health care insurance often constitutes a major part of the employer's cost of keeping a permanent worker on the payroll, and anything that makes this cost difficult to forecast makes employers leery to take on new workers. 

ObamaCare—the Patient Protection and Affordable Care Act—is a gigantic statute, and it would be a big bite for employers to digest in any event. But as it stands, it serves mainly as an announcement that a large number of legal black boxes must be filled with new regulations that various administrative agencies will eventually promulgate. As Gary Lawson of the Boston University School of Law has written, "Implementation of the Act will require many years and literally thousands of administrative regulations that will determine its substantive content and coverage."

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

Amity Shlaes

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

Ira Stoll

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).

Cut Government

John Stossel

Close the Departments of Labor, Commerce, Agriculture, Energy, and HUD. Then eliminate three fourths of all regulations.  

John Stossel's show Stossel airs Thursdays at 10 p.m. on Fox Business Network.

End Age-Discrimination Laws

Walter Olson

If I could press a button and instantly vaporize one sector of employment law, I think I'd pick age discrimination.

Its beneficiaries are among those needing least assistance. The main cash-and-carry effect of age-bias law is to confer legal leverage on older male holders of desirable jobs, such as managers, pilots, and college professors, who by threatening to raise the issue can extract ampler severance packets than might otherwise be offered them. Much legal talent is wasted in the resulting exit negotiations, which seldom seem to rouse the ire of critics of gaudy executive pay, golden parachutes, and so forth.

It blatantly backfires on those it tries to help. Once cut loose from the old job, those same buyout recipients find it harder to land the next high-level job because of the perception that older hires are more likely to need buyouts not far down the road.

It generates pointless avoidance mechanisms. Ask your HR director about the costly stage in layoff strategy known as "age-balancing the RIF" or about the many small-talk questions you're not supposed to ask at job interviews for fear of seeming interested in the subject ("I notice you're a veteran. Which war?") or about the brain-cracking legal headaches that arise from the premise that (at least in some situations) the design of pension plans is supposed to take no notice of age.

Its intellectual basis is lighter than helium. Race, sex, sexual orientation, and disability each form the basis of a major identity politics movement. But really: "ageism"? It's one thing to abridge liberty to expiate the national guilt of antebellum slavery, but can anyone keep a straight face in proclaiming persons of late middle age a historically oppressed class?

Please, I want to see this law repealed before I'm too old to enjoy it.  

Contributing Editor Walter Olson is the proprietor of Overlawyered.com.

Get Out of the Way

Jeffrey Miron

Policymakers should stop worrying about job growth. Instead, they should focus on eliminating economic policies that impede economic efficiency—runaway entitlements, a horrendous tax code, excessive regulation, impediments to free trade, and more—and let the job situation fix itself.  

Jeffrey Miron is the director of undergraduate studies and a professor of economics at Harvard University. His most recent book is Libertarianism, from A to Z (Basic).

Stimulate Demand

Bruce Bartlett

I don't believe there is any way to increase employment significantly without raising the rate of economic growth. Therefore, the real question is how to raise economic growth. I continue to believe that the economy's fundamental problem is a lack of aggregate demand.

I think a dose of inflation is just what the economy needs, and libertarians should stop being so obsessive about it. Moreover, I think at some point they need to admit that the Fed cannot raise aggregate demand by itself when the economy is in a liquidity trap, which it obviously is based on the level of interest rates being close to zero.

Under these circumstances, I believe that some form of aggressive fiscal policy is necessary to get money circulating, raise the velocity of money, and get the economy out of a liquidity trap. I do not believe, under current circumstances, that there is any type of tax cut that would achieve this goal; only direct spending by the government on purchases of goods and services will help. Therefore, the Fed will, somehow or other, have to figure out how to raise aggregate demand by itself.

The only other thing I can think of to raise growth would be a deliberate devaluation of the dollar, which would raise exports. Theoretically, the Fed could buy as much foreign currency as necessary to bring the dollar down. But this is impractical because foreign countries can retaliate by buying dollars with their own currency or imposing restrictions on U.S. imports. Any policy of devaluation would be strenuously opposed domestically by those who are obsessed with the idea that the dollar should be strong regardless of the economic conditions.

I realize that everything I have just said is totally contrary to the libertarian worldview. However, I believe that implementation of libertarian policies, such as cutting spending and tightening monetary policy, under current economic conditions will only make it worse. I support any regulatory or deregulatory measure anyone can think of to reduce unemployment, but am disinclined to think there are any that will have more than a trivial effect under current macroeconomic conditions.  

Bruce Bartlett was a domestic policy adviser to Ronald Reagan and a treasury official under George H.W. Bush. His most recent book is The New American Economy (Palgrave Macmillan).

Cut Payroll Tax

Bryan Caplan

Easy: Cut employers' share of the payroll tax.  

Bryan Caplan is a professor of economics at George Mason University. His most recent book is Selfish Reasons to Have More Kids (Basic).

Repeal Financial Regs

John Berlau

Repeal portions of the Bush-era Sarbanes-Oxley Act to make it easier for smaller companies to raise capital by going public, and thus expand and create thousands more jobs.

Repeal portions of last year's Dodd-Frank Wall Street Reform and Consumer Protection Act, which has created hundreds of pending rules causing uncertainty and a halt in hiring for everyone from banks and credit unions to retailers and manufacturers that extend credit or hedge financial risks with derivatives.

Pass the bipartisan Small Business Lending Enhancement Act—S. 509 by Sen. Mark Udall (D-Colo.), and in HR 1418, by Rep. Ed Royce (R-Calif.)—to lift the arbitrary cap on business lending by credit unions. The Credit Union National Association estimates that easing this barrier would create over 140,000 jobs in the first year and thousands more in the years after that.  

John Berlau is director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute.

Separate Jobs from Health Care

Michael Munger

I win drinks in bars sometimes by betting on the answers to two questions. First, what nation in the world "lost" the most jobs between 1990 and 2005? Second, what nation in the world leads in the value of manufacturing products? 

The answers are the U.S. and China, but not in that order. China lost by far the most manufacturing jobs between 1990 and 2005, and the U.S. still leads the next largest manufacturing economy by a full 25 percent.

Think about it: In 1990, a "factory" in China was a large shed with 1,200 workers with sewing machines, sitting beside a pile of patterns, cloth, and scraps. Today that factory is 100 times as productive, but it only has 30 employees tending modern and lightning fast machines.

The same thing has happened in the U.S., in industry after industry. As we increased our output, we "lost" jobs to increased productivity. We didn't ship those jobs to China; China lost even more jobs than we did.

The difference is that China more than replaced its lost jobs with new jobs, in new industries. Until recently, the U.S. has always been able to do that, too. What has changed?

The problem is both obvious and hard to see: It's health care costs. The U.S. has produced quite a few new service sector jobs, jobs at the lower end of the pay scale, jobs that don't usually come with health benefits.

But those "good" jobs, the ones that the president is looking for? Health care costs have driven a wedge between what employers pay and what they get in terms of productivity. Wages for workers in many industries have been flat, or nearly flat, in real terms since 1990. But total compensation, especially health care costs on the best jobs, has increased at a rate of more than 3 percent per year on average. 

Employers paying more, workers seeing no increase in take-home pay: a constantly increasing wedge being driven into job growth. More than all of our productivity growth has been sucked into the voracious maw of health care costs. Until we break the connection between jobs and health care, there is no way for the U.S. to begin to recover job growth. 

Unfortunately, the fiasco of health care reform in 2009 made this problem worse, not better. The new law created a complex, expensive system with no cost controls. And since insurance cannot cost less than the care it covers, this implicit but very real tax on job creation is hamstringing the recovery.  

Michael Munger is the director of the philosophy, politics, and economics program at Duke University.

Shrink Government

Dan Mitchell

Faster economic growth is the only one way to enjoy a permanent and sustained improvement in employment. 

The annual Economic Freedom of the World report is a roadmap showing where nations are doing well and where they are doing poorly. Compiled by the Fraser Institute, the report considers 42 different measures that form the basis of five major variables (size of government, legal structure/property rights, sound money, trade, and regulation).

In the United States, the lowest-ranked variable is the size of government, and the U.S. gets particularly low scores for government consumption, followed by transfers and subsidies. In other words, the federal government is too big and it is spending too much money. This suggests that reductions in the burden of federal spending would be a very sound first step. Lower levels of federal spending will free up resources for the productive sector of the economy and allow labor and capital to be used for purposes that add to prosperity.

But reducing a bloated federal budget is just a first step. Looking at the 42 different measures in the EFW report, the United States gets dinged with failing grades in other major categories, including impartial courts, regulation of private sector credit, and cost of bureaucracy.

While the United States doesn't get a failing grade for its tax system, I can't resist also adding that the corrupt internal revenue code should be replaced by a simple and fair flat tax. Eliminating loopholes and instituting one low rate would dramatically improve incentives for work, saving, and investment, while also wiping out distortions that lead people to deliberately misallocate resources.  

Dan Mitchell is a senior fellow at the Cato Institute.

Repair Our Balance Sheets

Vernon L. Smith

The one concrete policy that would address the problem of job growth is to address the joint negative equity problem of the households and banks.

This means that the large banks have to go through de facto bankruptcy and reevaluate their mortgages (and other loans) in line with current mark-to-market home values, thus simultaneously repairing the damaged balance sheets of households. This happened under Sheila Bair's FDIC, where she presided over the restructuring of 360 smaller banks in the last three years.

The same was needed in the Depression, the main difference being that this time around the Fed acted, in 2008–2009, to temporarily address bank insolvency. But there was no follow-through to repair bank-household balance sheets.

So we are stuck with banks not lending and households not spending. Tax reductions, subsidies to business for hiring, and so on do not reach the root of our economic distress.  

Vernon L. Smith is a professor of economics at Chapman University and the 2002 Nobel laureate in economics.

Freeze Regulation

Allan Meltzer

We have made the mistake of using short-term policy changes to try to cope with a long-term problem. There are several long-term changes called for. There is great uncertainty and lack of confidence in the future. That reduces investment and employment. One change that would reduce uncertainty is a five-year moratorium on new regulation except for national security. Another would be a budget agreement that made the debt sustainable. Not likely. Third: corporate tax rate reduction paid for by closing loopholes. Finally, we need assurance that we won't have inflation. A credible, enforced inflation target would work.  

Allan Meltzer is a professor of economics and the political economy at the Carnegie Mellon University Tepper School of Business.

Buy Bonds

Alex Tabarrok

QE3: Fed should buy lots of long-term T-bonds.  

Alex Tabarrok is the Bartley J. Madden professor of economics at the Mercatus Center at George Mason University.

Cap Taxes

Donald Boudreaux

My answer (within the realm of "remotely politically possible") is: Replace all income taxes, including that on capital gains, with a consumption tax. But do this only if the Constitution is amended to prevent government from taxing incomes and capital gains. 

A second, less radical, proposal is to eliminate capital gains taxes and amend the Constitution to prevent Uncle Sam from taxing personal and corporate incomes at marginal rates higher than 20 percent.  

Donald Boudreaux, a professor of economics at George Mason University, blogs at cafehayek.com.

Build Pipelines

Fred L. Smith Jr.

Approve the Keystone XL Pipeline: 20,000 jobs created. The 1,700 mile Keystone XL Pipeline would link expanding Canadian crude production from tar sands with America's first-class refining hubs in the Midwest and along the Gulf. The $7 billion project would roughly double U.S. imports of tar sands oil from western Canada.

Because the Keystone XL pipeline crosses an international border, the primary permitting agency is the State Department. However, oil production from tar sands is more carbon-intensive than traditional production, so environmentalist groups are staunchly opposed to it. As a result, the project has been in a permitting limbo for three years. By approving the project in short order, President Barack Obama would directly create more than 20,000 high-wage manufacturing jobs and construction jobs in 2011–2013, according to an independent analysis by the Perryman Group.  

Fred L. Smith Jr. is president of the Competitive Enterprise Institute.

Decriminalize Employment

Deirdre McCloskey

"Jobs" are deals between workers and employers, and so "creating" them out of unwilling parties is impossible. The state, though, can outlaw deals, and has. So: Eliminate the minimum wage for people younger than 25. The resulting boom in jobs for young people will amaze. Maybe it will inspire voters to get the state out of the job-outlawing business. Probably not, so sure are we that the state "protects" by stopping deals between willing parties.