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The GOP Needs to Be More Than the Party of Heroic Entrepreneurs and Tax Cuts

While the official US unemployment rate continues its steady decline, many other labor-market metrics are far less encouraging. The economy still has nearly 3 million fewer jobs than when the Great Recession began — and 10 million to 12 million fewer than if it were back to the pre-downturn trend. Labor force participation rates have collapsed, with most of the decline due to weak labor demand rather than long-term demographic changes.

The job climate for young workers and the long-term unemployed is particularly toxic. For instance: The long-term unemployed account for 37% of the total unemployed population, three times what’s typical during an expansion. [See above chart.] The risk here is that the long-term unemployed turn into the permanently unemployed as their skills degrade. As it is, there’s a bias against hiring these folks.

In National Review, AEI’s Michael Strain highlights a number of possible policy options. Among them:

1. In many states, companies that need to cut labor costs have the option of giving employees a shortened work week. Unemployment benefits partially compensate for lost wages, and workers get to keep their jobs and benefits. “A limited but active program to keep Americans working might include expanding, supporting, and publicizing work-sharing UI programs.”

2. Temporarily lowering the minimum wage for young and inexperienced workers. ”This would give them the opportunity to begin a résumé, learn occupational skills (including the soft skills of professionalism, punctuality, and dealing with a boss), and build a professional network, all of which could lead to better jobs.”

3. Lowering the minimum wage for the long-term unemployed, while also permanently expanding the Earned Income Tax Credit for all working families.

4. Relocation subsidy to help the long-term unemployed move from high-unemployment areas to low-unemployment areas. Strain: “A program like this already exists under the Trade Adjustment Assistance program. Certain workers who have secured employment in a new city can receive a relocation allowance of up to 90 percent of the ‘reasonable and necessary expenses’ of moving, plus an additional lump-sum payment of up to $1,250. The unemployment-insurance system could create a similar program for the long-term unemployed, possibly financed by letting them take an advance on their UI benefits.”

5. Unemployment insurance-funded lump-sum bonuses to unemployed workers when they get a job “as an incentive for them to search harder and more efficiently.”

6. Assistance to those long-term-unemployed workers who want to start businesses.

7. More high-skill immigration, since “research suggests that skilled immigrants are 30 percent more likely to start a business than U.S. natives — and new businesses create jobs.”

8. Delaying the health care reform requirement that firms with 50 or more full-time workers provide their employees with health insurance.

Strain offers several other ideas, and then gives this important conclusion:

None of these policies are incompatible with the reasonable and correct conservative opposition to massive government programs and to inefficient, poorly designed, and cronyist stimulus packages. But if the GOP wants to enact them, it will have to embrace — or at least acknowledge — the power of active but limited government to do good for society.

Republicans need to be more than the party of the heroic entrepreneur, more than the party of ever-lower marginal income-tax rates, more than the party of balancing budgets and maximizing economic liberty by minimizing government. They need to show that they care about the poor, the struggling, the vulnerable — and that they are willing to pitch in and help. A great place to start would be tackling the most serious economic problem facing the country today, by championing creative, genuinely conservative public policies to decrease unemployment.