GOP Representative Wants to Pay Employers to Hire the Long Term Unemployed

Democrats complain frequently that Republicans don't have a short-term jobs plan, but via The Hill here's a jobs proposal from the GOP side of the aisle. I'm not convinced, however, that it's a very good one:

Rep. Robert Dold (R-Ill.) introduced legislation late last week that proposes a new pilot jobs program under which companies would get a $7,000 subsidy if they hire people who have been out of work for six months or more.

Dold said his proposal, outlined in his Back to Work Blueprint Act, would take money from current job training programs and turn it into a more effective incentive for companies to hire the long-term unemployed.

"The existing federal government programs to provide employment and training solutions are well-intentioned, but with unemployment remaining unacceptably high we must constantly look for new and innovative ways to help get the long-term unemployed back to work," Dold said Monday. "My approach would create an incentive for employers to hire and retain long-term unemployed workers, while giving these job seekers a powerful tool in this difficult job market."

Dold's bill, H.R. 6568, would require the secretary of Labor to study the feasibility of creating certificates for workers who have been unemployed for six months or more and who are deemed to be "reasonably hirable."

Now, it may be the case that the current federal job training programs aren't measuring up and, if they're not going to be shut down, it's worth experimenting with ways to redirect the money. But I suspect Dold's plan would still have a number of problems. For one thing, as the story suggests, verification would be troublesome. In many cases it's probably not actually all that easy for an employer to confirm for tax purposes that a newly hired worker went unemployed for six months prior to being hired.

A bigger potential problem is that it would incentivize employers to delay hiring if their best potential hire hadn't yet made the six month mark. You'd probably see a lot of employers gaming the system, including some small amounts of mild cheating, especially at the margins where it would be easy to fudge fired and hired dates. But mostly you'd see employers wait it out, keeping some people out of work for longer. Pay employers to hire workers who have been unemployed for six months and they'll make sure that more new hires stay unemployed for a full six months before getting hired. 

Relatedly, it could well end up as little more than a handout to firms that hire a lot of seasonal workers. When I worked at a restaurant in a beach town, it was pretty common practice for many employees to be let go during the slow winter months, only to be rehired by the time Spring Break or Memorial Day rolled around. Would the folks who stayed unemployed that whole time qualify for the credit, even though they were rehired every year? 

Obviously if you subsidize the hiring of individuals who have been unemployed for a reasonably long period of time, you'll get more of that, all else being equal. But you'll also probably get more activity that you didn't want too.  

Legislators in both parties love gimmicks like these because they can say they are working to promote jobs. But in the end there's no clever solution to high unemployment. What the unemployed actually need is a stronger, more confident economy with clear, stable, minimal rules and regulations for employers. The best thing that policymakers can do is provide that clarity and stability and otherwise stay out of the way. 

Reason's November 2011 cover package on free-market jobs plans is here.