Youth unemployment can be sharply reduced by creating a Human Investment Tax Credit program. Such a program will generate up to 6 million jobs and create as many as 4 million small firms while providing generous incentives to employ young people.
In 1975, Bob Edmonds, L.V. Watkins, and I (Mark Goldes) submitted the first of two reports to the Economic Development Administration of the U. S. Department of Commerce. Both were entitled A HUMAN INVESTMENT TAX CREDIT PROGRAM -- a component of an Anti-Inflation and Full Employment Alternative Economic Program. In 1977, the second report laid the groundwork for passage of an Employment Tax Credit Program as a stimulus to recover from the recession. Though it included only a few of the recommended incentives, it generated 2 million private-sector jobs, more than 20 percent of all new jobs created that year. It resulted in more jobs in less time than any single piece of legislation.
Opposed by the White House, the Job Tax Credit was little advertised. Only 34 percent of all businesses were aware of this little-publicized program, and a mere third of those eligible utilized the credits. Since Congress created the program over the Administration's opposition, the following year it was gutted and became the Targeted Jobs Tax Credit, with only a small fraction of its previous effectiveness.
If promoted effectively, with all of the suggested incentives, it would have met or exceeded the original goal of generating three million to six million new jobs and encouraging one million to four million people to become self-employed.
The proposed Employment Tax Credit for small business firms includes the following components stated in 2013 dollars:
- A $3,300 per person tax credit for existing employees. This credit would be limited to 35,000 for a sole proprietor and 70,000 for a corporation.
- A $4,300 per person tax credit to employers for hiring additional people. This credit would be 6,500 per person where individuals hired are under 20 years of age. Such credits would be limited in amount for each employer to 50,000 per year for a sole proprietor and 250,000 for a corporation.
- A $2,300 maximum tax credit per person to provide a Workshare Bonus to employees who work short weeks and thereby spread available employment.
- An $8,500 maximum tax credit for self-employed individuals to help facilitate self-employment.
- A $2,200 per person training credit to employers who participate in training programs to improve job related skills of employees.
- A $2,200 credit to corporations to match or stimulate expanded equity ownership by employees.
Unemployment is one of the most urgent problems we face today. The tax incentives in the Human Investment Tax Credit Program could easily be fine-tuned and voted into law as a bi-partisan measure to reduce unemployment. This should be the first order of business for the new Administration and Congress.
This is a rifle shot approach aimed specifically at quickly lessening unemployment without contributing new inflationary pressures. A package of carefully crafted "carrots" would create up to 6 million additional jobs in the small business sector with an additional 1 to 4 million becoming self-employed. Thus, generating a small business employment reservoir, rather than Government as an employer-of-last-resort.
If the Human Investment Tax Credit Program is updated and implemented, providing a comprehensive attack on the root causes of both unemployment and inflation, it will stimulate the economy and provide hope for millions of jobless or underemployed Americans.
Unemployment should be viewed as an imbalance of the market situation. Present policies speak of creating jobs without taking into consideration the obstacles facing employers. There is no possible way that large businesses or the Government can solve the employment problems of millions of people located in America's diverse neighborhoods and communities. The employer-of-last-resort should not be the Government, but the millions of Americans who comprise that huge reservoir called "small business." Here is the perfect small business opportunity to hire and train youth and new people.
A policy objective should aim at overfull employment (2 percent unemployment, which was attained during WWII) under conditions of price and monetary stability. The method to do this lies in making it financially worthwhile for more people to become employers, while at the same time strengthening those who now exist.
For an updated version, see: HUMAN INVESTMENT at www.aesopinstitute.org
Aesop Institute plans to offer an online course covering this program.
NOW ADD SECOND INCOMES FOR ALL, INDEPENDENT OF JOBS OR SAVINGS
This idea originated with the late Louis O. Kelso, father of the Employee Stock Ownership Plan used by 11,000 companies.
Kelso saw automation coming. He believed it could liberate humans from toil, work we do not choose to do.
He believed that by about age 50, almost everyone in America could receive about half of their income from diversified investments.
A proposed Capital Homestead Act has been drafted by the Center for Economic and Social Justice to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. This will broaden private, individual ownership of our future capital wealth. Every man, woman and child would establish a Capital Homestead Account at their local bank or credit union to acquire a growing stock portfolio that pays dividends. This Super-IRA will supplement income from work and all other sources.
The Human Investment Tax Credit Program, together with the Capital Homestead Act, are two pieces of legislation with the potential to help eliminate poverty and provide essential income to all.
See SECOND INCOMES at www.aesopinstitute.org
Another Aesop Institute online course will cover Second Income material.
Congress should pass both new laws without delay.
They can help us create the most genuinely free society in human history.