On Thursday the Labor Department announced that the number of Americans who filed first-time claims for unemployment insurance, a closely watched measure of job market strength, declined to 388,000 for the week ending Dec. 25, 34,000 fewer than the week before. This is the lowest level since July 2008, and it shows that layoffs are declining. If this trend continues, job creation is headed up. After the work force reabsorbs discouraged workers who dropped out of the labor force, the unemployment rate, now at 9.8 percent, will head down.
Here are five ideas for the new 112th Congress to accelerate job creation.
Repeal Employer Health Insurance Penalties. Beginning in 2014, employers with 51 or more workers who don’t offer the right kind of health insurance will pay penalties of $2,000 a year per worker. Just expanding from 50 to 52 workers would cost an employer $44,000 a year (the first 30 employees are exempt), enough to hire one skilled or two entry-level workers.
Many employers with fewer than 51 workers do not plan to hire more, and those with 55 or 60 are thinking about how to get to 50.
Reduce Taxes on Repatriated Foreign Corporate Earnings. American companies hold offshore $1 trillion of earnings from foreign operations. They’re discouraged from bringing these assets to America by our 35 percent corporate tax, the highest among industrialized nations. If U.S. corporations invest these earnings in other countries, they would pay taxes of 2 percent or less to these governments.
Congress should lower the tax on repatriated earnings to 5 percent. If even half of the $1 trillion held abroad were to come back to the United States, this would create $500 billion in stimulus, adding to investment and employment and Uncle Sam would get $25 billion in tax revenues.
Expand Free Trade. Trade creates jobs by expanding employment at U.S. exporters and encouraging foreign companies to invest in the United States. Trade benefits millions of families who cut their shopping bills by buying low-cost imports.
Dartmouth professor Andrew Bernard writes that “an abundance of evidence indicates that firms entering export markets grow substantially faster in employment and output than non-exporters.”
The Senate could help create jobs at no cost by simply ratifying pending free-trade agreements with South Korea, Panama and Colombia and by expanding global free-trade agreements.
Leave Carbon to Congress. The 111th Congress failed to pass the “cap and trade” bill, which would have allowed the Environmental Protection Agency to issue regulations governing the allocation of allowances to emit greenhouse gases. But this has not deterred EPA from plans to issue such regulations anyway, beginning in January.
Yet in May the nonpartisan Congressional Budget Office reported that job losses from limits on emissions would exceed gains elsewhere from employing workers in “green jobs,” raising the overall unemployment rate.
At no cost, EPA could create jobs by shelving its plans to regulate carbon until Congress acts.
Exempt Teens from the Minimum Wage. The rise in the U.S. minimum wage, in three steps from $5.15 an hour in 2007 to $7.25 an hour in 2009, has contributed to an increase in the teen unemployment rate of 10 percentage points, from 16 percent to 26 percent.
Under federal law, employers are allowed to pay teens $4.25 an hour for 90 consecutive calendar days, or until their 20th birthday, if they show that teens don’t displace other workers.
At no budgetary cost, Congress could expand this minimum-wage exception for teens and give states incentives to incorporate it into their minimum-wage laws.
Thursday brought good news, but the job market needs more help from the 112th Congress to bring our unemployment rate back down where it belongs.
Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.
