The idea of a tax credit for companies that create new jobs, something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation.
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One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.
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[a second proposal would be] a credit in the first year ... equal to 15.3 percent of the cost of adding an employee. In the second year, it would fall to about 10.2 percent.
For example, hiring a worker might cost a small business $50,000 annually. But with the tax credit, the cost would fall to $42,350 in the first year, and then be $44,900 the next year. After that, the cost would return to $50,000.
The credit would apply only to the portion of an employee’s salary under $106,800. Lowering the cap further, however, could provide an even greater benefit to low-wage, unskilled workers.
First, if this gets passed expect anyone who argued for any government stimulus to now argue these aren't real jobs and shouldn't be counted.
Seriously -- this is a good idea and should be done ASAP.
4 comments:
I think this is a bad idea and somewhat akin to the homebuyer tax credit. First, there is no way to differentiate between jobs that would have been hired anyways and those hired because of this credit (which means we pay substantially more per job than the credit implies and likely end up paying more per job than the job itself will end up paying). Second, I highly doubt that this type of credit really will spur any additional job creation, as the business is still on the hook for the $40,000+ cited in the example and will make the hire based on economic conditions and profits regardless of a credit. Third, the cost of such a bill (for its likely small impact) could be huge. Even with a tepid recovery in which payrolls increase by 1,000,000 next year, the credit would cost over 10 billion dollars and again it likely would have little to do with actual hiring decisions.
I second SilverOz with less tact. Why the hell would anyone hire someone they don't need for a 15% discount??
The credit would only apply to "iffy" cases where the company's only a few counted pennies away from hiring a badly needed worker anyway. That may sound appealing, but that would barely budge the numbers. OK, so instead of losing 200,000 jobs, we lose 195,000. Whee.
And as SilverOz says, when hiring does go up, everyone will apply regardless, so the government's on the hook for billions over hiring decisions employers would've made anyway.
We need the government to create jobs. Unfortunately, that's socialism, so there goes that idea.
Wouldn't this be an outstanding time to go permanently to a 32 hour full-time work week?
Time-and-a-half after 32 hours.
Double time after 35 hours.
With average hourly work week now dropping to 33.0 hours, how would that hurt the economy?
Jimdotz -
Unfortunately America has a strong cultural perception that pervades media and the Beltway that everyone should be working over 40 hours/week, and anything less is a worthless freeloader who deserves to die of untreated pre-existing conditions.
Satire aside, a big problem with this solution is benefits. We don't have universal health care, so employers attract workers with a long-term mindset by offering this benefit standard. Unfortunately, that means 4 workers working 30 hours/week are far more expensive than 3 workers working 40 hours/week, because as long as they're "full time" they all get the same fixed-cost benefits.
Now, the argument for universal coverage is that by getting rid of this overhead, companies can freely hire as many workers as they want and just pay them by the (flexible) hour. That'll apply to many jobs so I'm all for it, but it's not salvation for OEMs. Assembly lines won't stop for a single worker -- they all start and stop together. Splitting hours doesn't work for project-based jobs like engineering, either. And really, the norm is more like having 2 workers work 60 hours/week and refusing to hire anyone else or pay overtime. That way, with 40 unpaid hours and benefits for two, you get the equivalent of three full-time workers for the price of two. Universal coverage won't get employers out of that habit. And if you're on the hook to pay a worker a fixed salary because you lobbied for "exempt" to avoid paying them overtime, cutting hours back to 32 won't change anything. They only see it as getting less than their money's worth, so they'll just lay off workers until the workload's back over 40 hours per week per worker.
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