The TARP and Stimulus programs have stabilized the economy, but not the American family. Job loss continues, albeit at a slower pace. Now the Administration should focus its attention on actual job creation, for with a job can come not only income, but also dignity and the chance at a better job. The upcoming White House Conference on Jobs must, accordingly, focus on mechanisms for actually creating jobs.
This is the second of four posts dealing with such mechanisms for actual job creation. The key to creating jobs quickly is to utilize existing employers, particularly non-profits who have seen their resources diminish precisely at the time of maximum need for their services. The key to creating jobs cheaply is to limit the rate paid per hour and to employ person who would otherwise be on welfare or unemployment insurance, thus gaining a substantial offset in cost.
A program with these features is underway in Los Angeles with the goal of creating by March 2010 10,000 transitional jobs paying $10.00 per hour for up to 40 hours per week. Spearheaded by Supervisor Don Knabe and the Los Angeles County Department of Public Social services, this program uses federal Stimulus money and the County's Transitional Subsidized Employment (TSE) program, which was developed for participants who remain unemployed or underemployed after receiving services and job search assistance.
To simply the administration of the program for both the County and the participating employers, participants will be on the payroll of a County contractor. Participants 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 and will not require creating additional governmental agencies. Because most of the participants would otherwise be receiving a TANF stipend, the incremental cost of creating such jobs is relatively low.
Although the cost of replicating this program throughout the Country would vary by state and family size, in Los Angeles, where the welfare stipend averages approximately $700 per month, the net additional out of pocket cost of this program is quite modest. In Los Angeles, $20,000 a year transitional jobs are being created at virtually no cost to the County and at an incremental cost to the Federal government of under $16,000 per year per participant. This low cost is possible because the savings in the welfare grant of approximately $8,400 per year more than offsets the increased costs due to administration, FICA taxes and workers' compensation insurance. The savings would be even greater if the person offered TSE was receiving extended unemployment insurance which is paid for with 100% federal Treasury dollars.
The true costs of such a program are undoubtedly still less because there are substantial savings (in food stamps, health care, criminal justice, housing and other governmental costs) when persons are employed. By way of comparison, a recent County study 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.
If this program were replicated elsewhere, thousands of transitional jobs could be created more quickly and at a lower cost than in virtually any other way. The unemployment rolls would be reduced while our communities--and especially the non-profits which have been so adversely affected by this recession--would greatly benefit from the work of the program's participants. More importantly, the participants themselves would gain the dignity and income of a job as well as the training and job experience. Perhaps most important of all, a job well done will earn the participants a reference which will lead to a better job as soon as the economy once again begins to create new jobs.
Each dollar available will generate more jobs in small business than can be created by direct government employment.
The most effective jobs program will focus on incentives. They allow the new employee to generate his or her own income and provide taxes to repay the incentives.
A Human Investment Tax Credit Program that might create up to 6 million new jobs and encourage up to 4 million new entrepreneurs is available at: http://www.aesopinstitute.org
A few of the suggested incentives were tested in 1977 and created 20% of all jobs generated in the following year.
These suggested tax incentives can readily be refined and voted into law. That should be an urgent order of business for the Administration and Congress.