How to Reduce Unemployment

January 3, 2011 10:30

It’s worth asking whether we’ll see 4% unemployment again-and what it will take for us to get there.

by Diana Furchtgott-Roth at Hudson Insitute


In January 2001, at the start of this decade, America’s economy created 268,000 jobs, and the national unemployment rate stood at 4.2%. Five years later, after a so-called “jobless recovery,” the unemployment rate was 4.7%, with 193,000 new jobs created in January 2006. Now the rate is 9.8%, with a scant 39,000 jobs created last month.

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 the Treasury a penalty of $2,000 a year for each uninsured employee. Just expanding from 50 to 52 workers would cost an employer $44,000 a year (the first 30 employees are exempt from penalties), enough to hire one skilled or two entry-level workers.

Reduce Taxes on Repatriated Foreign Corporate Earnings. American companies hold offshore $1 trillion of earnings from foreign operations. They’re discouraged from repatriating these assets by the 35% U.S. corporate tax, the highest among industrialized nations.

Expand Free Trade. Trade creates jobs by expanding employment at U.S. exporters and even when it encourages foreign companies to invest in the United States.

Leave Carbon to Congress.

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% to 26%.

As we enter a new decade, with a new Congress, we shouldn’t regard our 9.8% unemployment rate as the new normal. Rather, we should encourage Congress to draft new laws to fix the problem and return our unemployment rate back where it belongs-to the 4% or 5% range.

Diana Furchtgott-Roth is a Senior Fellow and Director of Hudson Institute’s Center for Employment Policy. She is the former chief economist at the U.S. Department of Labor.


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