Labor Day is an occasion to honor and celebrate American workers. The opportunity to work in a decent job gives people and society benefits beyond the income it generates. Conversely, unemployment causes workers and their families distress beyond their loss of income.
Job growth was weak throughout the 2000s, and the past few years unquestionably have been difficult for American workers, as the financial crisis and subsequent recession destroyed jobs at an alarming rate. When President Barack Obama took office, the country was losing 750,000 jobs a month, and more than 7.5 million jobs have been lost since the recession began in late 2007. Although the economy has started to recover and layoffs have declined from their peak, hiring remains too slow to provide enough jobs for the growing workforce.
Since day one, the Obama administration's top priority has been to create the conditions needed for the private sector to create jobs for American workers. Although major legislation, like the Recovery Act - which the nonpartisan Congressional Budget Office estimates has saved or created 2 million to 4.8 million jobs - gets most of the attention, the administration and Congress have taken numerous additional steps to support job growth and help unemployed Americans.
These efforts include assisting states to retain teachers and pay Medicaid costs, the "cash for clunkers" program, an unprecedented expansion of unemployment insurance benefits, and business tax incentives. In addition to all of this support, the administration is actively pursuing legislation for additional tax cuts and better access to capital for small businesses.
A notable example of a targeted measure to boost the economy is the Hiring Incentives to Restore Employment, or HIRE, Act of 2010. In his State of the Union address, Obama called on Congress to create a tax incentive to encourage private sector employers to increase their payrolls. Congress responded with the HIRE Act, which exempts private employers from paying the employer portion of Social Security payroll taxes for newly hired workers who have been unemployed for 60 days or longer. As an added incentive, employers can receive up to an additional $1,000 tax credit for each of the newly hired workers they retain for 52 weeks.
The HIRE Act expires at the end of this year, so employers have a stronger incentive to increase their hiring sooner rather than later.
Analysis suggests that the HIRE Act is working. According to recent data, employers hired some 6.9 million unemployed workers who are eligible for HIRE Act tax relief through July. Moreover, preliminary evidence suggests employers have already claimed tax credits for about one in every four eligible workers hired. This reduces the payroll tax payments employers send to the federal government, leaving them with more money to expand their businesses.
While not all of these jobs were created solely because of the HIRE Act, economist Mark Zandi of Moody's Analytics estimated that one-quarter of a million additional jobs will be added because of the HIRE Act. Even as the unemployment rate remains stubbornly high, employers across the country are claiming the HIRE Act tax credits and hiring individuals who were previously out of work.
It is not just the numbers that point to the success of the HIRE Act. The HIRE Act switches the focus from job loss to job creation. Many businesses are excited by the opportunity to hire workers they may not have been able to hire otherwise.
After being forced to impose a hiring freeze in the beginning of 2009, James Barba, the CEO of the Albany Medical Center in Albany, NY, said the HIRE Act "gave us immediate tax relief ... of hundreds of thousands of dollars, and frankly, made my job considerably easier in deciding that we would hire people again."
The HIRE Act supports the hiring of workers who have faced the greatest difficulty in the job market, and gives employers more of an incentive not only to hire them but also to keep them on the payroll. The program encourages private sector job growth, which is essential to get the economy back on track.
It is an example of the kind of temporary, targeted and responsible economic policy that has been the hallmark of this administration.
That so many eligible unemployed workers have been hired so far is a testament to the dynamism of the American job market and the resourcefulness of American workers and businesses even in a time when unemployment is unacceptably high. That gives us another reason to celebrate the American worker.
Alan B. Krueger is chief economist and assistant secretary for economic policy at the U.S. Department of the Treasury. Readers may write to him at: Department of the Treasury, 1500 Pennsylvania Ave. N.W., Washington, D.C. 20220.
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