ThoughtNGine

The Power of Ideas

Employment Really Counts

I don’t know of anyone who thinks that the employment crisis is not at the top of the list of government priorities.  And yet, despite the combination of massive stimulus packages and financial bailouts, little success has been achieved to date.  As I write, unemployment is at generational highs; and it is going to get worse.  I have a suggestion that I think would really help.  Whenever the government decides to throw a financial lifeline to a company (bank, insurance company, automobile manufacturer, or anyone else), it should come with two mandatory strings attached.  First, the recipient must agree that it will not reduce headcount for an extended period (say 18 months).  Second, it must also agree to reduce compensation and benefits for everyone (not just the senior executives, and this should also include retirees receiving benefits too) by a minuimum percentage, say 5-10 percent over that period (and, perhaps longer).  Now I know that this will not be a popular suggestion to people working for these institutions (and, if unionized, the unions either).  However, lets face it, companies in need of these rescue packages will probably not survive without the assistance, so all employees are receiving a pretty big benefit from these government rescue packages.  In most cases, compensation and benefit programs are the predominant expense. So cutting this expense raises the likelihood that the company will survive and pay back the taxpayers.  However, beyond this, there are other important benefits.  First, by interrupting the lay-off cycle, we may actually stabilize the economy faster and help us return to growth.  This should have a less disruptive impact on the economy than large headcount reductions.  It will help alleviate the uncertainty that all employees at struggling companies have, so they will be more inclined to spend and make other financial commitments.  Furthermore, it will help alleviate strains on government resources.  Unemployment insurance payments are a tremendous drain on state and local economies.  Keeping people at work will allow such resources to be used for other purposes.  Other sources of assistance will also be freed up.  Finally, it will raise the likelihood that the taxpayer will be repaid, which means that the future of this economy is brighter for everyone.

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February 27, 2009 - Posted by | Economics, Finance, General Interest, Politics | , , ,

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