THE BLOG
05/25/2010 05:12 am ET Updated May 25, 2011

Companies Won't Hire Due to Lack of Stimulus - Two Quick, Cheap Fixes

During last month's State of the Union, President Obama unveiled a bold new push to double exports. The plan is indeed bold and could create up to 2 million jobs if implemented in the right circumstances. It's estimated that it could double export sales pushing them over $3 trillion annually.

However the plan has run into a big barrier - the economy. As the Washington Post points out:

But economists, business officials and others say that companies emerging from the recession may have ways to meet new export orders without adding new employees -- by accelerating underused production lines, restoring full workweeks to employees or improving worker productivity, for example.

"We are going to be very careful about hiring," said Jim Dugan, a spokesman for heavy-equipment maker Caterpillar. The company responded to a 37 percent drop in sales last year by cutting 19,000 workers, reducing others' workweeks to four days and idling facilities one week per month. The company is a successful exporter, with about a third of its U.S.-based production sold overseas.

"What we don't want to do is bring someone back and then lay them off again," Dugan said, adding that there are "ways to raise capacity without boosting head count."

Companies hate to hire workers unless they absolutely need to. With the threat of unemployment very high, companies have even more leverage to squeeze workers pushing them to work more and more for less and less pay. Furthermore, in highly skilled industries companies hate to bring on workers that need months of training unless they are positive that work will be a long term investment.

As former ATT CEO Leo Hindrey pointed a few weeks ago companies don't hire workers unless they think the long term market is going to be worth investing in. So we need to do something to change the outlook of the long term market and we need to do it now.

The first thought that comes to mind is taking action against China to fix its currency. Chinese currency is overvalued by 20-40%. The Senate could do this by passing a 25% tariff that would force China to properly value their currency as the Senate previously did in 2005. As a result, between July 2005 and July 2008, the yuan appreciated 21 percent against the dollar.

It's estimated by C. Fred Bergsten that such an appreciation could create 1 million jobs within a year under the most conservative scenarios. More important than the jobs it would create; it would signal to business that the long term business climate of the US would change. It would signal that the United States is willing to be competitive in the global marketplace.

The other thing we could do to get the economy moving quickly is pass the Local Jobs for America Act. The Local Jobs for america Act would put 1 million workers to work right away with very little delay. Basically, it would give money directly from the federal government to hard hit local governments to directly hire or retain 1 million people. Since governments are expected to lay off 900,000 workers as a result of budget cuts, this money could literally create jobs right away.

Both of these measures can be implemented quickly and easily. Implementing them would allow bolder plans like President Obama's export initiative to succeed. As we saw with the stimulus, doing too little just won't cut it in terms of creating jobs. We need a comprehensive approach in order to get the economy moving again.