Posts Tagged ‘Job Creation’
August 19th, 2011 at 12:53 pm
CA Gov. Brown Picks Wrong ‘Jobs Czar’

California Democratic Governor Jerry Brown appointed Michael Rossi, former Bank of America executive and GMAC subprime mortgage guru, to be his unpaid “jobs czar.” Brown hopes that Rossi will be able to tell Brown how to revive the state’s sagging economy.

It’s telling that Brown chose a career Big Business executive instead of a successful entrepreneur.  The two types of people – and their skill sets – couldn’t be more different.

Rossi’s path to success involved managing large corporate structures that focus heavily on exploiting government-created revenue streams, such as subprime mortgages that but for government-owned Fannie Mae and Freddie Mac’s guarantee would never have been made.  It also doesn’t help that today BofA is announcing its second straight year of layoffs (3,500 employees this year alone).

It would be far better for Brown to enlist the help of an entrepreneur with success starting and growing businesses.  As the Kauffman Foundation showed in a study released last summer, “new firms add an average of 3 million jobs in their first year, while older companies lose 1 million jobs annually.”

Here’s the Kauffman Foundation’s explanation:

Most notably, during recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.

“These findings imply that America should be thinking differently about the standard employment policy paradigm,” said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. “Policymakers tend to focus on changes in the national or state unemployment rate, or on layoffs by existing companies. But the data from this report suggest that growth would be best boosted by supporting startup firms.”

If Governor Brown wants to create jobs he should consult the people creating jobs – not those managing a declining workforce.

April 11th, 2011 at 12:19 pm
Bring On the Ideology

The Wall Street Journal reports that President Barack Obama’s upcoming speech about how to balance the budget will include tax increases along with cuts to programs like Medicare and Medicaid.

The call for higher taxes on America’s job creators will solidify the decision facing voters next year.  The Democrats want more money, while the Republicans want less government.

If there is a positive aspect about the president showing his true tax-and-spend colors, it’s that ideology – how serious people frame reality and their decisions about it – is now front and center in politics.

Rep. Paul Ryan (R-WI) and the GOP want lower taxes and private sector growth.  President Obama and the Democrats want to spend taxpayer money into an ever-growing share of GDP.

Let the debate begin.

August 11th, 2010 at 8:28 pm
Conservative Quandry on the Link Between Unemployment Benefits and Job Creation

Everyone except Paul Krugman at least acknowledges that paying for the recently extended unemployment benefits Congress just authorized is a serious issue; even if some consider it outweighed by other concerns.

In addition to increasing the national debt, extending unemployment benefits may also increase unemployment itself.  As Thomas Cooley explains in Forbes, studies show that unemployment benefits can reduce the urgency to find a new job.  However, Cooley mentions another phenomenon that bears further meditation:

Economists Lawrence Katz and Bruce Meyer, in a 1990 study, showed that an increase of one week of benefits increased the duration of unemployment by about 0.2 weeks. Note that some benefits have been extended up to 99 weeks. A back-of-the-envelope calculation means that going from 26 weeks of benefits to 99 would increase unemployment duration by about 14 weeks very close to the increase in duration shown in Figure 3. Recently, however, in a testimony to the Joint Economic Committee (April 29, 2010) the very same Katz said that the effects are small. The difference between the 1990 study and his current finding is that, according to his research, permanent job losses as opposed to temporary layoffs have played a bigger part in this recession. (Emphasis mine)

Unlike Krugman, I’m not one to quibble with logic and empirical data.  But the current unemployment situation is different from the usual circumstance of entities within a sector reshuffling the staff rosters.  Such events cause minor displacements – though not to individual workers and their families – and can be smoothed out when laid off workers find comparable employment in the same or similar industry.

This recession is different.  As the bolded text above shows there appears to be an economy-wide reduction in workforce afoot.  Employers are discovering unknown efficiencies with contingency workers.  In many cases, former full-time, full-benefit workers are being hired back as independent contractors for project work with no benefits.

Once employers get used to getting more production for less compensation, those former full-time, full-benefit jobs won’t be coming back.  That poses a serious quandary for limited government conservatives.  Should government provide a benefits supplement for those working multiple jobs, but still failing to pay the bills, even if it means adding to the deficit?  On the other hand, should benefits be cut to stop the fiscal bleeding with the hope that the former recipients find a way to make ends meet?

Whatever path is chosen, conservatives need to think hard about how to combine stopping the government spending with policies that enable sustainable private sector job creation.

July 30th, 2010 at 11:34 am
Friday, July 30, 2010: Meg Whitman’s Job Creation Strategy

For political observers looking for a glimpse into former e-Bay CEO and current gubernatorial candidate Meg Whitman’s (R-CA) job creation plan, a 34 page glossy magazine is available for free download (pdf) or delivery.  As both a PR document and a policy manual, the plan is impressive.  After listing the parade of economic horrible facing the Golden State, Whitman moves into prescription mode promising to promote tax cuts and streamline regulations that impede business.

Implementing any of these measures would help California.  Enacting all of them might actually save the state from financial collapse.  However, there is one addition I’d like to see that’s currently missing.

Tell the voters that governments can only create one type of job directly: a government job.  Whether it is a formal state position, a job that is made necessary to comply with a regulation or one to get a government contract, all of these jobs redirect talent and resources towards expanding the tax burden by increasing government spending.

A more sustainable model is implementing the kinds of policies Whitman is pushing; policies that create a tax and regulatory environment favorable to private sector job creation.  The more private sector jobs created means more people have more money, allowing government to lower tax rates while providing the same level of services.

In reality, Whitman as governor can’t create directly a single private sector job without picking winners and losers.  Instead, the most (and the best) she can do is create the conditions for success that allow private business to flourish and add workers.  Who better to educate the public on that point than a person with top-level business executive experience?

May 26th, 2010 at 11:24 am
Fire the Census Worker, Hire the Postman?

For my fellow limited government types out there, here’s an idea to save money and get the decennial census done competently: hire postal workers to count heads.  The suggestion comes from one of the Census Bureau’s “seasonal” workers quoted in the New York Post.

I am totally convinced that the Census work could be very easily done by the US Postal Service.

“When I was trying to look for an address or had a question about a building, I would ask the postman on the beat. They knew the history of the route and can expand in detail who moved in or out etc. I have found it interesting that if someone works one hour, they are included in the labor statistics as a new job being full.

Yes, you read that last sentence correctly.  Whenever the Census Bureau hires a person for at least one hour of work, they can report to the Labor Department that a new job has been created.  And that’s true even if the one-hour worker gets fired and rehired multiple times – multiple hires equal multiple “jobs.”  Our tax dollars at work.  (Or, is it play?)

With these facts, it seems like the census could be achieved much more efficiently by getting the postal worker on the street to knock on the door, deliver some mail, and casually ask how many people live in the unit.  Since people are already comfortable with their usual postal worker, having them ask the questions would be much more likely to guarantee a response.  And, it would save taxpayers the indignity of funding inflated job creation numbers.

March 3rd, 2010 at 12:13 pm
Yelling “Jobs!” in a Crowded Senate Chamber

Today’s Washington Times has a morosely humorous article discussing the current fetish for “jobs creation” bills in Congress.  From confiscating beachfront property to establishing a non-profit government entity to promote travel, nearly every bill in Congress is being fitted into a jobs frame that makes it difficult to oppose on its claims.  But not, of course, on the substance.

For that, we need look no farther than the end of the liberty-loving economics student’s book shelf for a copy of Henry Hazlitt’s “Economics in One Lesson.”  After explaining why full employment is only and always the means to achieving the proper goal of full production, Hazlitt takes aim at the predecessors of our latter day misguided politicos:

Yet our legislators do not present Full Production bills in Congress but Full Employment bills.   Even committees of businessmen recommend ‘a President’s Commission on Full Employment,’ not on Full Production, or even on Full Employment and Full Production.  Everywhere the means is erected into the end, and the end itself is forgotten.”

So too, is the credibility of any member of Congress who thinks that the answer to spurring economic growth comes from anything other than lower, simpler taxes.

January 30th, 2010 at 1:52 pm
A Scarcity of Creativity

The basic point of departure between progressives and classical liberals (a term I’m using to encompass any political ideology that supports a free market) when it comes to solving an economic problem is how each deals with scarcity. Scarcity occurs when the demand for a resource like land, labor, or capital is greater than its supply. The lack of the resource (i.e. it’s scarcity) leads to prioritizing how to use that resource most efficiently. This is where public policy disagreements come into play. Typically, progressives see just about everything as scarce, and argue for a neutral government to allocate scarce items fairly. For progressives, there is almost never an instance where the policy impulse to find a way to create more of something. Instead, government’s task is to “spread the wealth around” – be it energy through carbon credits, capital through welfare redistribution, or health care through rationing.

Classical liberals are of a different mindset. They start by questioning whether the scarce resource is correctly is really scarce. Consider health care. A progressive would argue that if the number of licensed doctors became static or declined, limiting the amount of patient visits per year would be appropriate in order to “share” the scarce resource of medical expertise over the largest amount of people. A classical liberal, though, would ask whether a licensed nurse could be allowed to take on more responsibility for diagnosing and treating patients with common ailments like colds, cuts, and other minor medical problems. By expanding the amount of people who are licensed to treat patients, the scarcity vanishes because people are allowed to visit a medical professional as much as they need to.

Now to the issue of job creation. Rep. Dennis Kucinich (D-OH) is proposing a bill to give people as young as 60 years old a financial incentive to retire early by offering early retirement with social security benefits and health care subsidies paid for from COBRA. The thinking is that are a finite amount of jobs in the American economy, and the federal government must find a way to get older workers out to create room for younger workers. Sounds like jobs are “scarce” these days, right?

Not so fast. The workers who have survived the rash of lay-offs are most likely to be those who are highly producing because businesses can no longer afford to carry dead wood on their payrolls. Moreover, if older workers are convinced to leave the job market, that means centuries of accumulated knowledge and expertise will be leaving with them. In the alternative, if it is the low-skilled elderly that Kucinich is targeting (a more likely scenario since guaranteed Social Security and COBRA benefits aren’t enticements for people making more than minimum wage), the vacancies they create won’t be enough to support younger workers with families trying to get out of apartments and into all those foreclosed houses.

The better way to look at how to create jobs isn’t to figure out how to best allocate the ones in existence – it’s figuring out how to encourage even more to be created. With more people working the economy will be that much stronger, which will eventually lead to the kind of scarcity only an employer fears: not enough hard-working, qualified people to fill all their employment needs.

December 11th, 2009 at 12:53 pm
Dr. Krugman Misdiagnoses What Ails the Job Market

In today’s New York Times, economist Paul Krugman seems to think that along with propping up failed financial institutions and distorting the nation’s currency, the Federal Reserve should also play a part in creating jobs. Predictably, the answer is more government spending.

Mr. Bernanke has received a great deal of credit, and rightly so, for his use of unorthodox strategies to contain the damage after Lehman Brothers failed. But both the Fed’s actions, as measured by its expansion of credit, and Mr. Bernanke’s words suggest that the urgency of late 2008 and early 2009 has given way to a curious mix of complacency and fatalism — a sense that the Fed has done enough now that the financial system has stepped back from the brink, even though its own forecasts predict that unemployment will remain punishingly high for at least the next three years.

The most specific, persuasive case I’ve seen for more Fed action comes from Joseph Gagnon, a former Fed staffer now at the Peterson Institute for International Economics. Basing his analysis on the prior work of none other than Mr. Bernanke himself, in his previous incarnation as an economic researcher, Mr. Gagnon urges the Fed to expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside.

But there is a downside, and it’s more than immediately exceeding the proposed raise in the national debt by $1.8 trillion. As astute observers of California politics say, the government doesn’t have a revenue problem – it has a spending problem. As I’ve mentioned before, the main impediment to private sector job creation is not access to credit: it’s uncertainty about what the government will regulate or tax next. Some form of human activity has to be taxed in order to pay for “stimulus” policies like the one Krugman supports. Business owners know this because they must identify income before they pay out for services, goods, and yes, people. Adding an employee to the payroll is a tremendously expensive decision that isn’t made easier just because the Federal Reserve makes it easier to get a company credit card. If Washington is serious about job creation it needs to stop spending and taxing other people’s money.

November 6th, 2009 at 5:57 pm
When Creating Jobs, Look at Company’s Age, Not Its Size

There’s a fascinating article in today’s Wall Street Journal discussing the best way for government to help spur job creation.

Unfortunately, in troubled economic times the language of recovery is too often tilted toward large, established companies or to “small businesses,” a broad term that traditionally applies to businesses with fewer than 500 employees. The conventional wisdom is that such businesses account for half of the labor force and are therefore the engine of future job creation.

That’s not quite the case. The more precise factor is not the size of businesses, but rather their age. According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years.”

The article by three experts at the Kauffman Foundation targets four measures needed to “create incentives to foster the creation and growth of new businesses.”

• First, welcome immigrants seeking scientific training at American universities by creating a “job creator’s” visa for immigrants who have founded a company in America and demonstrated they have at least one employee.

• Second, unleash America’s academic entrepreneurs by allowing university professors to commercialize ideas outside of their home university’s technology licensing office.

• Third, provide easier access to capital so that more flexible standards would allow prudent lending, when it is sorely needed by many firms to remain alive or meet demand when it begins to grow.

• Finally, make it easier for companies seeking capital to go public by allowing shareholders benefited by Sarbanes-Oxley to vote on whether or not they want to comply with all of the law’s (costly) requirements.

You can read the entire article here.