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James Adler

James Adler

Posted: December 3, 2009 12:56 PM

Jobs 1.0: Creating Jobs Without Busting The Budget

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It is now clear that left alone the current economic recovery will not create substantial additional jobs any time soon. The scheduling of a December White House Conference on Jobs would appear to signal recognition by the administration that economic stimulus alone is not sufficient. We must find mechanisms that actually create jobs. And the more jobs created, the sooner and at the lowest cost per job, the better.

This post will describe three mechanisms that could be used now to create jobs now without busting the budget and without creating new bureaucracies. Subsequent posts will provide more details concerning each mechanism.

One: Replicate on a national basis a temporary jobs program similar to one underway in Los Angeles County. Using stimulus money, our county has designed a program to create 10,000 new jobs paying $10 per hour for 40 hours per week. The mechanism being used is the County's Transitional Subsidized Employment (TSE) program for persons on CalWORKs, California's TANF program for persons who are employable. Participants will be on the payroll of a County contractor and will be placed into subsidized jobs in all sectors of the economy (non-profit (including faith-based), for profit and governmental) and will be matched with jobs that complement their employment goals. The "host" employer must provide supervision equal to 20% of the wage cost and create jobs that do not displace existing employees. Because this program utilizes existing employers who are supplementing their work forces in order to better serve their clients or customers, job creation can be rapid. Because most of the participants would otherwise be receiving a TANF stipend, the incremental cost of creating such a job is relatively low.

Although the incremental costs would vary by state and family size, in Los Angeles, where the TANF stipend averages approximately $700 per month, the net additional out of pocket cost of this program is modest: Under $16,000 per year per participant in California. The savings would be even greater if the person offered TSE would otherwise be receiving extended unemployment insurance.

If implemented nation-wide, thousands of Americans could trade welfare for a job and would acquire on-the-job training, work skills, the dignity of a job and, for a job well done, a recommendation.

Two: Restructure the existing federal programs that are designed to deal with unemployment and poverty to create programs focused on providing jobs. In this way, today's welfare (and extended unemployment) programs can be converted into tomorrow's jobs program. In budgeting for such a program, the CBO should realize that for every dollar spent to provide a job, there are collateral savings with regard to education, criminal justice, unemployment insurance, food stamps and housing. A recent study by LA County found that approximately $3.50 was saved for every dollar spent to relieve homelessness through rental subsidies for those on general relief. While the return from an employment program would be less, there would nevertheless be substantial aggregate long term savings achieved if our nation would replace its welfare, extended unemployment and related programs with programs providing jobs, a paycheck and dignity.

The experience of the New Deal is instructive. Cash welfare payments at the outset of the New Deal were intended only as temporizing action until actual employment could be provided. Initially, it was easier then -- as it is now -- to pay money than provide jobs. But money payments were to cease -- and did cease -- as soon as job projects could be organized. We should be emulating this model rather than continually extending unemployment insurance or providing welfare to those who could work.

Three: In Los Angeles recently, the transit authority let a bid for light rail cars. Although one of the bidders promised to build a factory in Los Angeles and create hundreds of high paying jobs, these factors were not permitted to be considered. But is not the number of jobs to be created entirely relevant -- especially when the federal government is expending so much to create jobs and there is a real and quantifiable cost to leaving a person unemployed.

To ensure that the federal government as a whole pays the lowest cost, the bidding procedures on infrastructure (and other) projects should be modified to provide a credit for each job created with such credits used only for the purposes of determining the true lowest cost bidder. The credit would be stipulated in the bidding documents, would be calculated for each region's unemployment and would be a measure of the estimated cost to the federal government of an unemployed person in that region (from unemployment insurance, particularly when extended at 100% federal cost, welfare, taxes lost, food stamps and other safety net programs).

Although the cost of a particular project could be somewhat higher to the contracting agency, the federal government as a whole would experience lower costs because the greater employment would result in reduced costs in other federal programs.

Our nation would benefit from the improved infrastructure and lower total cost while at the same time -- maximizing the number of people employed.