Sensible steps to job creation

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News and Observer
By: William Schweke
June 21, 2010

DURHAM -- There is no "paint-by-the-numbers" way to create jobs. One cannot look up the answer by consulting the index of some cookbook and following a simple recipe.

But with the economy suffering the worst recession since the Great Depression and unemployment and business failures at near record levels, action is required.

If we are to be prudent and efficacious, we must design our efforts to foster job creation with certain facts, principles and targets in mind.

First, there are limits to what a state such as North Carolina can do - it cannot print money, run deficits or expand public employment exponentially.

Second, most of what it can achieve will be "oblique." For instance, it will not entail the state of North Carolina necessarily spending vast amounts of money. States already wield a lot of powers that can create jobs by lowering barriers to economic development, such as difficulties accessing capital in the right price, right amounts and the right form; deteriorating public infrastructure; shortfalls of skilled labor; out-of-date tax systems, which cause a state to reel from one tax crisis to another; and cumbersome (albeit necessary) regulations.

Third, with high levels of long-term unemployment, it is important to reach out to discouraged workers, who may not be still seeking jobs. Over time, such ex-workers lose their skills and their motivation and may never work again.

Fourth, communities long-dependent on a traditional economic base may possess a less entrepreneurial "culture," raising new barriers to "re-inventing" themselves. An effort may need to be marshaled to encourage such an initiative and equip it with needed skills and access to capital.

Fifth, a state may rely too much on capital inducement programs that seek to lure firms or by major public works projects such as athletic stadiums or convention centers.

Now, what is to be done?

There are a few ways for a state to create jobs directly. It can provide job growth tax credits and hiring subsidies to small and mid-sized firms for hiring the unemployed. It could even experiment with "transfer payment investment" by allowing its use to subsidize private employers to hire and train welfare recipients. Or, allow a jobless person to continue collecting unemployment insurance for six months while trying to start-up a small business. Furthermore, pass a law that would provide a capped, but refundable tax credit to a new micro-enterprise.

The state could hold conferences and workshops targeted at a variety of professions and occupations, as well as smaller communities, on ways to create small numbers of jobs through voluntary actions and community development efforts. According to Will Lambe of UNC, "community development is economic development" in America's small towns, ranging from Nebraska to North Carolina. Successful projects involving leadership developments, community philanthropy, youth programs, downtown renovation and many other such endeavors generate both marketplace and societal returns.

It can enact work-sharing legislation. Work-sharing allows employment cutbacks to be shared by a company's workforce. Instead of one person being laid off and collecting unemployment insurance, five workers, let's say, are placed on four-day work week and collect UI for the fifth day. This allows a firm to retain its workforce, and the workforce to maintain its skills. The program can be funded by either existing UI monies or by tax credits.

North Carolina can do more to retain firms by investing a small amount of public funds to expand its business visitation efforts and head off troubles faced by firms that are still viable but in danger of closing. Pennsylvania's Steel Valley Authority runs a layoff aversion program which is one model for doing so, while Alabama's Foundation for Growth equips its staff with proprietary software for ascertaining, prioritizing and trouble-shooting the difficulties faced by visited firms.

Older and less-skilled dislocated workers, who are most likely to have difficulties in landing comparable (or any) jobs, should be identified early and receive additional services. One way to do so would be to better integrate federal Trade Adjustment Assistance with rapid response and other funded services. The benefits for retraining and income support are superior in TAA.

"Peer services" such as community adjustment committees, employer-employee oversight committees and peer counselors can make a real difference in aiding the jobless in accessing needed services and in helping dislocated workers accept that their jobs will not come back.

Ideally, effective state actions are based upon creating a climate that nurtures and rewards entrepreneurial initiative among the populace, rather than a zero-sum strategy of stealing jobs from neighboring states.

William Schweke is a senior fellow at the Corporation for Enterprise Development's Durham office.

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