After another round of record job cuts and the longest period of near ten percent unemployment since the Great Depression, it is time for government to rethink what it is doing about job growth. It should start by asking some tough questions. Should not public policy reflect actual human behavior? Does it not make sense that the government creates laws based on how we will act and not how it wants us to act? The government pounds us with tax and regulatory laws that have us spending our times avoiding the government actions rather than pursuing opportunity.
For example, the government says it wants to make sure everyone makes more money, so it raises minimum wage. Business owners, operating in their own self interest, lay people off almost immediately, develop more cost saving ways to get lower paid jobs done, and develop other ways of avoiding the burden. Meanwhile, many of the jobless who have been on unemployment insurance for almost two years have grown comfortable with trading 2,000 hours of doing nothing in exchange for a benefit that is around (and in some cases is more) than minimum wage. Furthermore, because they are on minimum wage, they are often eligible for a plethora of other benefits that will further improve their quality of life for doing nothing.
So what approach would actually make sense? There are things that can be done that would increase employment, lower the burden on government, improve opportunities, and expand the economy:
· End the federal minimum wage entirely. This should be easy because it is unconstitutional in the first place. In the real world, the government hates regulatory vacuums so the national leaders will demand that minimum wage be required by someone, so mandate the states to set their own wage (yes, that is not in the Constitution either, but it is certainly progress). This will allow for creativity to take place in the public policy marketplace. It will make every state think twice before raising the wage (because they may lose businesses to states with a lower wage), allow states to set different wages for particularly hard hit cities, it could even lead to a sub-minimum wage for people under a certain age who are hardest hit by government increases.
· End federal unemployment insurance. This, again, has been a complete disaster for those it was intended to benefit. Paying people to do nothing for two years, as in the current situation, are leading to national entitlement and a people who believe that jobs are "beneath them." Combine minimum wage, which is often less than what people get in unemployment benefits, and you have a real problem on your hands. The federal government (because it hates a regulatory void) should mandate the states to develop programs of their own and we will watch innovation take place. "Workfare" would rise as an alternative (people have to work to receive benefits), they could have programs where the benefit decreases over time and the incentive to find work or other opportunity increases, and other innovations. Another great innovation would be private unemployment policies that would give people the choices of what they wanted their policies to do (help them until they find a job or money to start a business). Because individuals own the policies and know their rates will go up based on the use of it, they will have an ownership attitude and the incentive would be to work and not wait. Furthermore, since the policies are created by private companies, the money would go into capital formation for business activity and not into the black hole of government.
Ronald Reagan said that "government is not a solution to our problem, government is the problem." There is no area where this is truer than in the area of unemployment. We need competition and innovation to solve our employment problems.
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Kevin Price
Host, Price of Business, M-F at 11 am on CBS Radio News
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