The voices of Urban Institute's researchers and staff
October 4, 2011

Five Steps to Cut Unemployment

October 4, 2011

The latest word on President Obama’s $448 billion proposal to create up to 2.1 million jobs is that it won’t pass Congress in one piece.  One reason may be the high price tag per job. To reduce unemployment, we need a comprehensive attack that’s cost-effective, well-targeted, well-implemented, and well-administered -- and that works both sooner and later.

Here’s a five-part strategy that fits that bill.  My proposal  would create 4 million new jobs for less than $60 billion net, and it’s far more affordable and effective than President Obama’s.

1. Expand energy development that improves the environment. Speeding up permits for extraction and distribution would allow the U.S. to substitute natural gas for dirtier coal and oil, create hundreds of thousands of high-wage and high-value jobs, reduce foreign oil imports, and lower oil prices and world demand for oil. Converting truck and car fleets from gasoline to natural gas looks increasingly cost-effective and can cut smog and other emissions too.

2. Increase demand for owner-occupied housing. One way to jumpstart housing construction is to create 1 million homeownership vouchers patterned after the rent voucher system, while phasing out the Low-Income Housing Tax Credit, an inefficient subsidy that simply expands supply.  Another zero-cost  housing-related proposal is to  make today’s low mortgage rates available to homeowners whose mortgages are current but who can’t get refinancing because their home value or their income has declined.

3. Provide a generous tax credit for expanding employment. The federal government gives employers a 15% subsidy for increases in the employer’s wage bill (the part subject to social security taxes) above the prior year’s level in the first year and 10% in the second year.

4. Expand apprenticeship training. Apprenticeship combines serious, work-based learning with classroom instruction so novices master core occupational skills and earn valued credentials documenting that mastery.  Government could offer a $6,000 subsidy per apprentice for increases in registered apprenticeship beyond 80% of last year’s level and beef up the Labor Department Office of Apprenticeship’s marketing and technical assistance programs.

5. Fund direct job creation. Years ago, Canada managed to create relatively low-wage jobs by requiring nonprofit sponsors to compete for funding—specifying the “public goods” they promise to produce, whether bike paths, repairs and weatherization for low-income housing, recreational centers, child care, or home care assistance for the elderly and disabled.

Together, these five actions would likely stimulate enough jobs to pull the unemployment rate from 9.1% to 5.5%.

SHARE THIS PAGE

As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.