Constructive Roles for Government

The private sector is the primary incubator for new jobs in the US, but unfortunately the pace of new hires has been disappointing since 2008.  While the recession is over, the recovery remains painful, challenged by serious budget deficits and slow private sector revenue growth.  We cannot afford a profligate spending government but there are sensible roles for government leadership.    

In August 2013, the economy created 169,000 new jobs, part of the 2,006,000 increase in employment for the year.  Undermining that progress was a drop in labor force participation when 491,000 people abandoned the labor force during the year.  Job creation has been too slow for the 11,300,000 unemployed persons and the 7,800,000 people working only part time because they cannot find enough work.  

Despite large scale underemployment misery, many job openings go unfilled because there are no applicants with the right skill mix in that area, or who will accept the wages offered.  Indeed, some unemployed people can be surprisingly picky.  Supposedly 67% are waiting for the right job, not just a job.  Regulations such as H1B visa caps are accountable for some unfilled jobs that require advanced skills.  When people can stack government program benefits for housing, food, health, training, and other entitlements, the total can dilute motivation to get a job.

There have been signs of economic recovery in sectors such as energy and health care, but many businesses are waiting for signs of revenue growth before they commit to new hires.  The August 2013 NFIB survey shows only 9% of small businesses have plans to increase employment.  Some employers are reluctant to hire or are considering converting some positions to part time due to the high costs of complying with Obamacare obligations.

Regulations and tax policies can warp economic conditions that are otherwise conducive to job creation.  Mandatory minimum wage, mandatory union dues, payroll taxes, and costly benefits (e.g. health care) reduce an employer’s willingness to hire new employees.   

On the other hand, government programs such as retraining, basic research, some safety regulations and export assistance can encourage economic growth and private sector job creation.  Government programs that train for jobs generating substantial income tax revenues are especially helpful.  New or expanded entitlements are counterproductive. 

Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research

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