Lowering unemployment in the U.S.

The U.S. headline rate of unemployment is dropping but far too slowly to comfort the millions of still unemployed American workers. There are various remedies available. The most important one is an additional large program of Federal investment in the environemnt,  infrastructure and education.There also needs to be greater moral suasion in favor of greater job creation by the corporate sector which is sitting on plenty of cash and owes it to American workers and tax payers to start hiring again.

But there are other additional options. One of them would be to work with employers to subsidize a portion of the hourly wage or weekly salary that a prospective employee could earn for a limited period of time for qualified work. This could involve the redirection of some employment insurance funds, the creation of new funds either through zero interest conditional  forgiveable loans where appropriate or actual short term grants in some cases. In addition to targeting those who have been unemployed for a long duration they could also tackle the more than 8.4 million workers who are only employed part-time when they would rather be working full time.

In April 2006 the U.S. headline rate of unemployment was 4.7 % and this category of underemployed workers stood at 3.9 million. This January the figure had reached 8.407 million when the headline rate stood at 9.0 %. In addition to a program aimed at the long term unemployed more than 27 weeks who number some 6.2 million, one could design a program that targeted these workers who already were working at jobs part-time but were  underemployed and who preferred to increase their hours. This program could increase their monthly hours by say 10 hours a week at some basic wage of 20 -30 $ an hour subsidized by the Federal government for a period of six months. Employers could share in the program by paying a part of this cost or by paying for additional hours beyond this level. In this way one could leverage the advantage that existed in the already created job. The additional income thereby created would help bolster aggregate demand and lower the unemployment rate further while the economy continued to recover.

We have had a positive experience with this sort of approach in Canada in the past and I see no reason why with a bit of adjustment it wouldn't be helpful in the U.S.