The Idiot’s Guide to Creating Jobs and Increasing Employment

It is a very simple to boost employment in an economy, but the proposals issuing from DC are embarrassingly wrongheaded, and will likely have the effect of decreasing employment in the long term. Quite simply, to increase employment, the benefit to a business of hiring a new employee must outweigh the costs. Therefore, the new employee must produce enough revenue to outweigh all of the costs of employing the employee. That employee must not only be productive, but he or she must produce enough goods for services for sale to customers so that he or she covers all costs of being employment and produces some profit to the business.

Accordingly, the simplest method to boost employment is to lower the costs of hiring and maintaining employees. This is such a simple fact that it is overlooked in the tangled rhetoric of politicians “getting people back to work.” How does the government reduce the cost of employing a new employee? Here are some proposals: (1) lower the social security tax, which is currently at a combined (employee and employer portions) 12.4% of all employee pay up to about $90,000; (2) lower the Medicare tax, which is currently at a combined 2.9% of all employee pay not subject to any limit; (3) eliminate state costs on employers for hiring employees such as unemployment insurance and workers compensation, and let the employees save for their own unemployment and let businesses self-insure for workplace injuries; (4) eliminate mandatory benefits coverage and let businesses purchase health and welfare benefits they deem suitable for their employees; (5) limit the ability of employees to sue their employers for damages beyond actual injuries sustained; and (6) eliminate all federal and state labors laws other than those related directly to workplace safety.

Furthermore, at the government hiring level, eliminate all defined benefit public pension schemes for new employees. Those programs are too expensive long-term and rely on the population of government workers to increase every year in the future to fund the pension promises made. In addition, eliminate “prevailing wage” laws that require governments hiring for any infrastructure repair to pay the highest wages – typically union wages – prevailing in a certain area. With millions of unemployed skilled workers, twice as many projects with twice as many workers could be undertaken if the wages that could be paid were regular wages in a region rather than artificially inflated waged based on government requirements.

Finally, encouraging the formation of new businesses will be the best long-term plan for economic growth and employment growth. Companies like Google and Amazon, which employee thousands of employees, did not exist 15 years ago. The economy needs more Googles and Amazons, rather than the federal government propping up aging dinosaurs like General Motors and Chrysler, which are eliminating thousands of employees. Not that the government should try to pick winners – it should not, but it should “get out of the way” and lift the huge tax and regulatory burdens it has imposed on businesses and on hiring and maintaining employees. That is the simple solution. Going into debt to spend billions to try to prop up companies whose markets are declining will require large tax increases in the future to pay for such spending. Those tax burdens will discourage individuals to start new businesses, which will hire employees. Thus, the misguided government spending programs of today to try to boost employment through government spending will discourage business formation employment now and in the future.