How do you create jobs? Finally, this question is finally getting some attention in Washington … sadly, it took increasing painful unemployment reports to get this front and center … but from the ground floor where we live, I don’t see the efficacy of some of the programs being considered.
The NY Times summarized some of the current activity, focused around a jobs tax credit that would cover 2X the payroll cost of new employees over a 2 year span. While some of the details aren’t clear, some have suggested that companies would save about 15% in the first year, and 10% in the second year when hiring a new employee.
While this approach is probably endearing to many, I don’t think it will drive job creation. It’s a modest windfall for employers who are hiring, but I don’t think a 15% cost reduction is going to drive a business in the middle market to change their hiring strategy. Product demand is what drives hiring. Only when demonstrable and sustainable revenue growth is evident will employers begin to think about adding permanent employees to the mix. A jobs credit won’t get many employers juiced about getting ahead of revenue growth in their hiring plans.
White Elephant? Red Herring? No matter. It won’t work.