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Saturday, September 10, 2011


We've devoted the last few posts to Obama's "jobs" plan, which is mostly a matter of tax cuts. Tax cuts don't work. Payroll tax cuts make life easier for people who already have jobs, but they won't create jobs, and they won't make funding Social Security any easier.

How many jobs would Obama's plan create? No-one can say for sure. The folks at Moody's tell us that the plan would generate 2.6 million new jobs. Of course, the Moody's crew helped get us into this mess when they handed out AAA ratings to crap securities backed by crap mortgages, so forgive me if I remain un-awed by their genius.

For the sake of argument, let's say they are right. How much will each job cost?

The calculation is simple. (Here's a calculator.) Obama's proposal will cost $447,000,000,000. Dividing that number by 2,600,000 gives us $171,923 per job. I'd find that result more encouraging if the amount of jobs we got for the money was sufficient. But 2.6 million jobs aren't enough.

Of course, it is to be hoped that if more people have jobs, demand will increase, which will stimulate new business. But frankly, I think Moody's pulled that $2.6 million number out of its collective rectum. Aside from the tax cuts, most of Obama's program will go toward maintaining unemployment insurance and giving aid to the states. Those moves will preserve the status quo. I guess it would be better to preserve the status quo than to let things become even worse. But frankly, the status quo sucks; we need more radical action.

Let's look at this another way. How many people need jobs? And how much money would you have to pay those people if we gave a job to everyone who wants one?

The Economic Policy Institute says that we are down roughly 11 million jobs.
right now the gap in the U.S. labor market is around 11 million jobs when you take into account both the number of jobs we are down since the start of the recession and the number we should have gained to keep up with normal growth in the working-age population.
I'm not sure if that is THE correct figure, but it sounds about right, so let's use it.

We're talking about 11 million folks desperate for work -- so desperate that even people with college degrees should be willing to work at crappy, low-paying jobs, at least until the economy rights itself and more opportunities for advancement open up.

Let's give these people the opportunity to join a jobs program which I, for want of a better term, will call The Program. The Program will offer a job to anyone who really, really needs one.

How much should people on the Program be paid? Well, one must consider variables. Parents with underaged children need a bigger paycheck than single people do. Rents are hideous in some cities. And of course, some workers are very skilled; many are not.

For present purposes, let's say ten bucks an hour. On average.

Why? Because that figure is higher than minimum wage. You can live on ten bucks an hour. You will not live well, but you won't be living on the street. Believe me: There are a lot of people out there who envy those who make ten bucks an hour.

Most of all (for the purposes of this post), the calculations are easy if we use that number. A person making ten bucks an hour makes $400 a week or $20,800 a year.

And now we know how much money is required to give those 11 million people jobs for one year: $228,800,000,000.

That's roughly half the amount of money Obama is asking for his plan. So we can stretch this out for two years. Two years of guaranteed full employment for everyone.

(Some people say that business cannot tolerate "uncertainty." Well, I just took care of the uncertainty thing right there, didn't I?)

I can hear you screaming: "But if the government is to be the employer of last resort, you need to shell out for a lot more than the cost of labor! You need plants, equipment, raw materials..." The old school term would be "the means of production." I hope that phrase is still permitted.

Guess what? All of that "means of production" stuff is already out there, provided by capitalists all across America.

No, I'm not talking about expropriating it. Nope nope nope. Don't put words into my mouth.

Here's the pitch: Tell employers all across this nation that if they hire workers enrolled in the Program, the Program will pay the cost of labor. The employers will get the added benefit of that labor -- and the cost to them will be zero.

Think about it. Just about every restaurant in America is understaffed, because the profit margin is so narrow. Every store could use a little more help. So could manufacturing, to the extent that American manufacturing still exists. Lots of places would be able to keep longer hours.

Would the Program be "socialism"?

In a previous post, I said that history is not Calvinball: You can't make up the rules as you go along. Well, the English language is not Calvinball either. Traditionally, the word "socialism" refers to government control of the means of production.

That is not what the Program would give us. Nope, nope, nope.

Businessmen would have total control of their businesses. They would make use of the Program only if they want to do so. It's voluntary.

I think they'll want to. What businessman would ignore a chance to get free labor?

Is this like unemployment insurance or welfare? Nope nope nope. People on the Program are required to work.

Would Program workers be given cozy sinecures? Would they be encouraged to be lazy? Nope nope nope. At any time, a bad Program worker could be fired and replaced by a more competent Program worker. These workers would have every motivation to excel, in order to keep their jobs after the two year mark.

What if a Program worker wants more than ten bucks an hour? Simple. That worker should polish his or her resume and scan the internet for high-paying employment -- same as now.

Would the Program depress wages? Hell no! By offering jobs that pay slightly more (though not a lot more) than minimum wage, there would be upward pressure on wages, at least at the lower end of the economic spectrum.

Besides, full employment raises wages across the board. We saw this during the Clinton years. As wages rise, large numbers of people head into higher tax brackets. That's how Clinton was able to get the government out of the red. That is the only way to pay back the national debt.

What about health care? A huge sticking point, admittedly. I've ignored it because (frankly) I wanted to keep the numbers simple in order to get the basic idea across. But I think this issue could be worked out. Personally, I would like to see the government provide health care to Program workers.

(I'd also like to see student loan payments temporarily postponed, or at least reduced, for people on the Program.)

I can see only one real problem. What about those employers (Wal-Mart comes to mind) who would fire current workers in order to hire Program workers?  If that sort of thing happened on a massive scale, the Program would be defeated.

I fear that this aspect of the Program would require regulation and oversight. The Program must have rules. The rules would insure that, in any given place of business, the proportion of non-Program workers could not go down. If it did, then that firm could no longer make use of the Program.

For example: If a small museum had a staff of 20 in 2010, it could not reduce its staff to 19 and then hire a Program worker. It could, however, keep the staff at 20 and then bring in a 21st worker from the Program. The gift shop could always use an extra hand.

Arguably, the Program should be restricted to smaller businesses. Firms would be allowed to hire only a limited number of Program workers.

If you wanted to start up a company, wouldn't you like to have three or four workers (maybe more) with a labor cost of zero, or close to zero? I think there would be a lot more start-ups. A lot more entrepreneurship. A lot more risk-taking.

Write Obama. Write your representative. Write your senator. Tell them to get with the Program.
Let government cover the wages for two years, but the employer cover the benefits. Still paying less than if they had to hire the person outright... but then again, I'm naive.

~Ms. Vandal (who is working more than her fair share of jobs just to keep afloat because she is not paid a fair market value for her degree)
Lobbyists will invariably write the bill that establishes The Program. The Program is also immoral and illegal, but I'll get to that.

Government programs are a pain for a small business to deal with. A lot of paperwork and requirements to consider. Usually it's so much easier not to bother applying unless you have a staff to handle the application work. Often it's only big companies that will actually have the resources to do all the paperwork. And the loopholes will be there waiting for them to exploit. Don't be surprised if the Program has some unintended consequences.

But even if it didn't look to me like a corporatist boondogle in the making, I would still find the proposal objectionable, I dare say offensive!

The biggest probem with the Program is that it's not fair to foreign countries; to companies based in foreign countries that compete with US companies. It looks to me like a blatantly illegal labor subsidy. I suspect WTO will think so too.
Sorry if my last comment sounded a bit harsh. The thing is, I really think you made an important point here:

Obama's proposal will cost $447,000,000,000. Dividing that number by 2,600,000 gives us $171,923 per job. I'd find that result more encouraging if the amount of jobs we got for the money was sufficient. But 2.6 million jobs aren't enough.

You defined an interesting opportunity. That's often more than half the battle. I just think any answer needed to take those other things into account.
Every store could use a little more help. So could manufacturing, to the extent that American manufacturing still exists.

Only if they have sufficient demand that they actually need more help. The Program might be useful at a different point in the cycle, but I think a lot of employers wouldn't even take on a free employee right now. In many cases, the customers just aren't there.

I think you'd probably have some takers, but I doubt if you'd have 11 million. Still, it's better than raiding Social Security for a payroll tax cut which will mostly be used to pay down debt.

How about combining The Program with an honest-to-FDR WPA and an extension of unemployment insurance?
((Ms Vandal)) What can I say? It's as good a plan as any, but $10 /hour is essentially minimum wage...Zerobama of course bailed on his promise to raise the minimum wage to $9. I couldn't live on it. I'd have to sell the house and car and go live with the aging parents. And that may be my fate, given the continuing circumstances...but meanwhile, yes, working in this bs non-economy so I can tell prospective desired employers I'm employed...
Sextus: I'd love to have an FDR style WPA. We need vast improvements to our infrastructure. But you can't get anyone to pay for it.

The demand isn't there because people don't have jobs. The unemployed are a huge drain on the economy. This is a full-employment program. Full employment eventually drives all wages up.

And of course employers will take on free labor. Just think, for example, of domestic service. How many more people would hire a maid or a child care worker if that work was provided free of charge?

prowlerzee: You could live on ten bucks an hour if the alternative were living on the street. For a lot of people -- maybe not you -- that IS the alternative.
I can see only one real problem. What about those employers (Wal-Mart comes to mind) who would fire current workers in order to hire Program workers? If that sort of thing happened on a massive scale, the Program would be defeated.

This is actually a much bigger problem than you realize. Think it through a little more.

I can think of about a bazillion things that need to get done that the free market is not going to do, that would be a better use of the money than providing free labor for existing businesses.
The truth is they have no idea what to do. If they can talk about it in a complicated enough way, they can hide the fact that it isn't going to do anything. It's not meant to do anything.

Repeat: It's not meant to do anything. Just to keep the flow of information going, circulating globally, create the illusion that they are doing something.


And as long as we liberals spend the time dissecting it we are falling into their trap. What else can I say.
On my small farm, I have enough "put-off" work to employ two people full-time for a year, even though I'm not a "for-profit" operation. Since my only income is my teacher's pension, I obviously can't hire people on a full-time basis so a program like you propose could actually put people to work, but again, how would you deal with the evil empires like Wal-Mart?
This is a very insightful article, even if the plan is not perfect.

If I were an employer, I would take the government's generous offer and cut the hour so my staff.

I have no problem with the government hiring people and then working on the nations infrastructure with the new labor force, and I don't give a damn if we call that socialism, ooglthorp, or big government. Call it what you will. Just do it. Labels aren't selling points or detracting points. I look at merit.
Walmart should not be eligible to participate in this plan. It should be for small businesses.
You can't live on ten bucks an hour in many areas of the country--not when you figure in taxes. It's impossible without living on a couch, like I am doing. It's poverty level pay.

The biggest problem with this idea is Obama would NEVER consider it because he is a Reaganite at heart who believes government has no business in spurring demand by creating jobs.
10.00 per hour is about the poverty level mark for a family of our, which is 20k per year.
Saying "a family of our," is just like saying "a family of four," only with fewer pesky letter "f's" involved.
Bob's comment highlights the likelihood that the Program would prove useful to companies in the agricultural sector (already heavily subsidized).

The Program is, pure and simple, a labor subsidy. When farms, canneries, or food producers participate, it can and should be considered an agricultural or food subsidy.

Thanks to the Program, American farmers will find it easier than ever to undercut the world's poorest farmers. Peasants in Haiti, Egypt, Indonesia, and elsewhere will pay dearly for the Program.
Tell me, how is that acceptable? Why is it OK to try to solve an American economic problem at the expense of some of the world's poorest people?

It doesn't matter how they are disguised, US farm subsidies are unethical.

And so is any kind of US labor subsidy that would harm otherwise competitive and ecologically sustainable enterprises located overseas. The world-wide economic mess was made in America. Americans, however well intentioned, have no business externalizing the cost of fixing it. For God's sake, people overseas did not vote for the politicians who created the conditions for the global economic collapse!

One other problem with the Program is that encourages US businesses to be inefficient. Any resource that is free is going to be used inefficiently. Meanwhile, any foreign competitors that survive the Program will be lean and mean. They will come back with a vengence. Short-term, the Program is bad for foreign competitors, but long term it will have made the survivors stronger. First, there will be lot of needless pain and suffering overseas. At the end of the Program, American businesses will be weaker.
"You could live on ten bucks an hour if the alternative were living on the street."

Joseph, I was commiserating with Ms Vandal for juggling various jobs. Actually, given my situation, I will lose my home unless I find something that pays more. A $10/hour job would not even pay my mortgage, and I'm not underwater, I've still got equity. But not enough equity to sell and get a smaller place I could better was my original plan once my son was on his own. I've been "underemployed" for a year trying to leverage being employed into a position where I can break even.
And incredibly, where I live the rents are even more than my I was not being flip here. I have explored many options....including, like you, moving to another city, which is still under consideration.
Walmart should not be eligible to participate in this plan. It should be for small businesses.

I agree, particularly since small businesses are much more efficient at generating jobs than large ones. Phase the program out either by employee count or gross revenues.

And yes, it is a labor subsidy - just as China's subsidy of semiconductors and high-tech assembly plants, or their artificially low exchange rate is.

And I still think that a WPA or CCC program would also be necessary, although I agree with Joe that such a program would never pass now. Too bad we didn't have a Democrat in the White House in 2009, instead of Obama.
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