Press Releases | Budget, Taxes, and Public Investment

News from EPI EPI outlines 11 effective job creation proposals

For Immediate Release: Friday, September 2, 2011
Contact: Phoebe Silag or Karen Conner, 202-775-8810

EPI outlines 11 effective job creation proposals

The unemployment rate in the United States has been at roughly 9% or above since the spring of 2009, and if the federal government does not take action, unemployment will remain above 8.5% through 2012 and around 8.0% through 2014.  In a new Economic Policy Institute briefing paper, Putting America back to work, Ross Eisenbrey, Lawrence Mishel, Josh Bivens and Andrew Fieldhouse outline key criteria by which job creation proposals should be judged and present a list of proposals that would create a significant number of jobs. This list is not exhaustive, but it does illustrate the types and scale of policies needed to put a real dent in joblessness in the near term.

The criteria are:

  • Will the policy make a real difference in job creation in the next 24 months?
  • Is the policy effective and efficient?
  • How is the policy funded?
  • Is the policy at the appropriate scale to produce a substantial number of jobs?

The job creation proposals are divided into three rough categories: existing policies that should be renewed or expanded to prevent the loss of more jobs, budgetary programs that would require new spending and investments, and non-budgetary policies.  The authors explain that the cost of a job creation program actually decreases with its cost-effectiveness.  In other words, the more effective policies are at creating jobs, the more they partially finance themselves.  The job creation proposals are:

  • Temporarily increase disposable income for low- and middle-income consumers by renewing the payroll tax cut or replacing it with a refundable tax rebate, to create roughly 1 million jobs.
  • Renew the Emergency Unemployment Compensation program, increasing employment by 528,000 jobs.
  • Pass President Obama’s budget request for the Surface Transportation Act, increasing employment by an average of 117,000 jobs annually over the next three years, or 350,000 jobs total, with larger job gains in later years.
  • Restore the increased federal Medicaid matching rate, easing state-level budget cuts and tax increases, to create or save 444,000 jobs or more in one year.
  • Enact a direct job creation program to put up to 2.2 million people to work over the next two years repairing schools, rebuilding communities, improving national parks, and rehiring police officers, firefighters, and teachers.
  • Invest $200 billion in renewable energy and energy efficiency improvements, which could increase employment by 2.1 million jobs.
  • Enact a job creation tax credit for firms that add employees, increase hours, or raise wages for rank-and-file workers, which could create 2.4 million jobs over the next two years if designed properly.
  • Implement a federally subsidized work-sharing program, which could employ 1 million more people over the next year.
  • Elicit further monetary support from the Federal Reserve, which could resume large-scale asset purchases and announce a higher inflation target, increasing employment by 2 to 3 million jobs.
  • End currency manipulation by countries that trade with the United States, which could increase employment by up to 2.25 million jobs.
  • Encourage widespread mortgage refinancing to reduce mortgage payments and keep people in their homes, which could increase employment by 62,000 to 248,000 jobs.

Finally, without changes to the debt ceiling deal, any new job creation legislation will result in the federal government reaching the new debt ceiling more quickly and likely lead to another round of protracted negotiations that will almost surely result in nothing that lowers unemployment.  A better choice would be for federal lawmakers to repeal the statutory debt limit.