When President Barack Obama convenes a jobs summit today, he and all the brainstorming economists and CEOs, small business owners and labor leaders face a dire predicament.
The nation’s unemployment rate has climbed to 10.2 percent, the highest since 1983. Some 15.7 million Americans are out of work.
Meanwhile, the immediate benefits of the economic stimulus are fading. Analysts say high unemployment is likely to persist.
The Associated Press spoke with a variety of experts who offer four strategies they say should be in the mix at the jobs summit.
When home construction fell sharply, orders to Gary Melillo’s department at a factory in Cranston, R.I., suffered. Workers at Taco Inc. continued building heating, ventilation and air conditioning equipment. But if business didn’t pick up, there wouldn’t be enough work.
“It would be very scary to be totally laid off,” said Melillo, a 25-year veteran of the plant whose wife also works for Taco.
Taco wanted to avoid layoffs. Instead, the company tried a strategy called work-sharing to spread the pain and preserve jobs.
Workers in some departments at Taco were cut to a three-day or four-day week. Unemployment insurance covered more than half their wages, and they kept benefits including health insurance. This year, all Taco’s 292 production workers in Rhode Island and Massachusetts have been on work-sharing at some point.
At least 17 states have some version of work-sharing. Some come with bureaucratic requirements and many programs are little known, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. But broader, more aggressive use could prevent job losses, Baker said.
To help small businesses, some business groups are calling for a payroll tax holiday to give all companies a break from Social Security and Medicare payroll taxes, which total 15 percent.
Half the tax is paid by the employer, the other half by the employee. Suspending the taxes would lower the cost of existing and new workers while putting more money in the pockets of employees. That could boost consumer spending.
Other economists favor a temporary tax cut targeted only at new hires. Companies that add to their payrolls would get a tax break, equal to perhaps 15 percent of pay for the new hires.
A new job corps
The New Deal programs of the 1930s were Washington’s best known effort to put people directly to work. But the federal government has paid to create jobs more recently, and some experts say the time is right to try again.
In the early 1970s, Jersey City, N.J., was short on police officers when the Nixon administration offered money for states and cities to hire unemployed workers. The programs were expanded more than threefold under President Jimmy Carter — roughly $4.5 billion in 1978 to fund about 750,000 jobs nationwide.
“This is a pretty effective way to get money into the economy and into the pockets of people,” says Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers University.
The Public Service Employment efforts of the late 1970s were not perfect. Critics charged that government money was used for wasteful projects and that the programs were ripe for patronage hiring. There was also concern that those hired would displace better paid workers.
Aid to states, cities
With money collected from taxes down and its budget under pressure, the Gary, Ind., school district had to find spending to cut. Nero Lawrence and more than 250 other administrators, teachers and custodians lost their jobs in the fallout.
But a few weeks later, armed with $6 million in stimulus money, the district called to offer Lawrence a new job. He returned to work as a “secondary transitional coach” at the Lew Wallace STEM Academy, grades 7-12 program focused on science, technology and engineering. He counsels at-risk students.
Other coaches hired with stimulus money work with teachers on improving instructional methods and train them to use new technology.
The pressures Gary faces are far from unique. One of the quickest, most direct ways for the federal government to keep people employed, many economists say, is to help state and local governments close their budget gaps. The recession has sent tax revenue plunging, forcing states and cities to cut workers and services.