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4 Quick Ways to Boost Employment

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It is encouraging to see the Obama administration return its focus to job creation. The stimulus bill passed last February was an important factor in stopping the steepest economic downturn since the Great Depression. The latest report from the Congressional Budget Office indicates that the ARRA of 2009 may have been responsible for creating as many as 1.6 million jobs, lowering the unemployment rate by as much as a full percentage point.

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Nonetheless, the downturn has been markedly worse than was predicted last winter. The unemployment rate is at an unacceptably high level and is now projected to remain high long into the future, remaining in double digits for most of 2010, and not falling below 7.0 percent until late 2012. President Obama has rightly decided that this baseline is unacceptable.

There are four steps that can be taken to reduce the unemployment rate quickly:

  1. Flexible employment credits to allow employers to shorten work hours instead of laying off workers: Each month, employers are laying off close to 2 million workers. If the government gave employers tax credits to shorten work time while leaving pay unchanged, it could reduce these layoffs. If the number of layoffs fell by just 10 percent, this would have the same effect on employment as adding 200,000 jobs a month or 2.5 million a year. Germany has used this mechanism to keep its unemployment rate from rising, even though it has experienced a steeper recession than the United States.

  2. Support for education, health care, and other vital state and local government services: Under budget pressure, state and local governments across the country are cutting these services and laying off workers. Aid from the federal government can allow these workers to keep their jobs and services to continue to be provided.
  3. Direct job creation: There are parts of the country where the unemployment rate now exceeds 25 percent, with youth unemployment well above 40 percent. To prevent a generation of young people from being locked out of the job market, it is important to have public service jobs that can employ people immediately.
  4. Right to rent for homeowners facing foreclosure: If homeowners facing foreclosure had the right to remain in their homes as tenants paying the market rent for a substantial period (5-10 years), it would provide substantial housing security to millions of families while stemming the nation's rising number of foreclosures. This policy could also provide an economic boost since it would free up money for millions of homeowners who are now struggling with mortgage debts that they cannot pay.

Dean Baker is co-director of the Center for Economic and Policy Research.

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