Creating New Jobs

I found this article in the New York Times called “Stimulus Jobs on State’s Bill in Mississippi”. I thought that it was very interesting because it affects every American that is looking for a job.
Nowadays, finding a job has turned into an almost “Impossible Mission”. Due to the recession, more and more people are losing their jobs every day. As we all know, the economy works like a production line. In a production line, if the first step of the process fails, the product probably won’t be completed. The same thing happens with the economy. If the economy starts falling down it results in a domino effect, consumers spend less money and in return the economy suffers the consequences.
This article talks about how some states in America are trying to solve one of the major problems in the construction of a healthy economy: Unemployment. States, such as Mississippi and Florida, are working on what they call “The steps program”. This program uses, like the article says- “A sliver of the $5 billion in welfare money in last year’s stimulus act”- in order to create employment in the private sector.
In my opinion this is an awesome theory. It would help the business to grow and in return help people to find jobs, which will improve their buying power and help the economy to rise again. In a sense this is the same production line that caused the downfall of the economy, however in reverse.
I have two questions about this theory however;
The businesses will receive benefits for hiring new workers. But once this money has stopped coming in, will the businesses keep those workers in employment?
Will this scheme be financially viable for small businesses to increase their profits enough with the new workers so that they can keep those workers on once the benefits expire?

Click here to read the article:

Unemployment rates by state, seasonally adjusted, September 2009


Dr. Tufte said...

-1 on Victoria for multiple grammatical mistakes.

It's a myth that finding a job is impossible - there are currently 2.5 million job openings in the country. Now, that's a lot less than a few years ago, and it makes the hunt much longer, but it's hardly impossible.

It's also a myth that more and more people are losing their jobs.

We'll take a look at some of this stuff in class: what's really going on is that the job market has changed, and it's not a seller's market any more.

As to the linked article, I'm not averse to this sort of program (theoretically ... that doesn't make it practical).

A big factor in hiring workers is the fixed costs that need to be covered. A subsidy program like this, if it's targeted at those fixed costs, is likely to be successful.

As to keeping the workers, that decision is very much like the shutdown rule from micro (except that here, shutdown means letting someone go). If a worker can bring in enough revenue to cover the variable costs they represent, a business is likely to retain them and wait for better time to pay off the fixed costs associated with hiring them.

So, here's what I conclude:
1) If they're subsidizing fixed costs instead of variable ones, then I like the program better.
2) I'd strictly prefer that they just made moves to cut those fixed costs, since the government is a big creator of them.

Spencer said...

Another thing to consider with this program is that the jobs provided by it will give those employees work experience. From a behavioral standpoint employers don't want to hire someone who has been laid off or has gone through a long period of unemployment and even a temporary job can be put on a resume and count for valuable work experience. This would tend to help with the problem of slower declines in the unemployment rate by making more desirable job applicants.

Spencer said...
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Spencer said...
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Whidbey said...

The idea has good intentions, but could there be some possible repercussions? For example, if a firm gets a "free" worker for a period of time while the economy recovers, could they just use them for the months while their salary is paid by the government and then dump them later on? And instead of encouraging the unemployed to develop new skills, they are putting them into more unskilled positions. So what happens the next time there is a recession? More free jobs? Or should they be helping the unemployed find a better field of work?