With the release of the dismal May 2011 jobs and unemployment report, the news has been filled lately with stories asking the question "What has/can/should the government do to create jobs?"
Some suggestions that I've seen mentioned:
- An employer payroll tax reduction or holiday
- Reduced corporate income tax rates
- Corporate hiring vouchers or other incentives
One of the best answers to this question came from a recent Planet Money Podcast: "How many jobs has Scott Walker created?" The answer was "It is almost impossible to tell."
As the owner of a technology company, I wanted to comment on the one and only factor that will ever factor into my decision to hire a new employee:
- Demand for my product (or service) is likely to grow in the near future, and the business will need additional employees in order to meet that demand.
That's it. No amount of reduced payroll taxes, vouchers, incentives, or decreased regulations will be the deciding factor in my hiring decision. Those programs may make it easier, simpler or less expensive for me to add a new employee, but only after I have made the decision that I need to hire based on an increase in product/service demand.
The only direct impact that a government agency could have on my decision to hire would be to buy my product. The only indirect impact the government could have would be to induce my customers to buy more of my product (a bit like health insurance companies and the individual mandate).
So if the hiring decisions are driven by product demand, can the government do anything to impact that across the economy? Probably. Anything that puts more disposable cash (not debt) into the hands of a large number of US consumers would likely lead to increased product/service demand, and thus to increased hiring.
But businesses won't hire unless they believe the increase in demand will persist for more then the moment/month/season. We need to be sure that the increase is sustainable over the long term.
The only federal-level change that I could imagine meeting these requirements would be a multiyear decrease in the tax or SS/Medicare contribution rates for the largest possible number of consumers.
