If you, like me, were listening for a new proposal to help the long-term unemployed in President Obama’s State of the Union last week, you came away disappointed.
He announced that the government had partnered with 300 CEOs of major companies to stop discriminating against the long-term unemployed in their hiring practices.
It’s very difficult to actually determine if those companies live up to that promise and there are still plenty of other companies out there who will still discriminate. Unless we are going to outright ban the practice (which we aren’t going to do), then we need to find a way to make the long-term unemployed more appealing job candidates.
For instance, reducing the minimum wage for the long-term unemployed would incentivise employers to hire them. We can then give them a wage subsidy to ensure they have an adequate standard of living.
We could offer them a relocation assistance to move to an area of low unemployment where their job prospects will be higher.
More job training would help as well.
These are all ways to make it economically rational for employers to hire the long-term unemployed. President Obama didn’t offer anything like that. He just asked companies to voluntarily change their hiring practices.
Luckily, South Dakota Senator John Thune (R) is picking up where the president left off.
The National Review‘s Patrick Brennan reported on Friday about a conference call that Thune had with the American Enterprise Institute’s Michael Strain and the Young Guns Network. You may remember Strain from his essay in National Affairs that laid out different policies that conservatives could adopt to help the long-term unemployed.
Strain has been working with Thune to develop such a plan. Here’s what it looks like:
- Employers would receive a six-month employer side payroll tax holiday for each long-term unemployed individual they hire.
- Those workers would be exempt from the employer mandate in the Affordable Care Act.
- The government would also offer the long-term unemployed low-interest loans to relocate to areas 50+ miles away with an unemployment rate at least 2% below that of their current location.
Now we’re talking!
The employer side payroll tax holiday functions like the reduced minimum wage and wage subsidy. It reduces the cost to employers to hire the long-term unemployed. The low-interest loan is not as generous as a relocation subsidy, but it would still give individuals the opportunity to cheaply relocate.
Finally, the employer mandate exemption makes hiring the long-term unemployed more affordable as well. Democrats may object to this part, but the administration already delayed the mandate for a year. It’s uncertain whether it will ever be enforced.
The elephant in the room is paying for the payroll tax holiday. That’s not free. Thune didn’t mention if he would support adding it to the deficit, but it’s very unlikely that he would be. More likely, he’ll find a spending offset to go with it.
An offset won’t cost very much. Thune estimates that for a worker earning $US40,000 a year, the payroll tax holiday will cost approximately $US1,200. If we’re widely optimistic and say that companies hire two million long-term unemployed workers, that comes to $US2.4 billion.
Either way, this is a much more promising proposal than anything the president brought up in his address last week. Kudos to Thune.
Hopefully we’ll hear more about it soon.
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