Economists Push Employer Tax Break For New Hiring Some economists want Congress to approve a tax credit for employers who create new jobs over the next two years. Supporters say it's cheaper for the government to subsidize private employers who hire more workers than to pass huge spending packages to stimulate the economy.
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Economists Push Employer Tax Break For New Hiring

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Economists Push Employer Tax Break For New Hiring

Economists Push Employer Tax Break For New Hiring

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This is WEEKEND EDITION from NPR News. I'm Liane Hansen.

Even those many economists say the country is in a recovery, employers still aren't hiring. To help solve the problem, a new idea is gaining traction in Washington: a tax credit for employers who hire new workers. NPR's senior business editor Marilyn Geewax joins us once again to talk about this. Welcome back, Marilyn.


HANSEN: So explain how this would work, and who's proposing it?

GEEWAX: Economists are pretty much in agreement on two things these days, Liane. Number one, the economy is in recovery, and number two, the job market is still terrible. So everybody is frustrated, and political leaders want businesses to start creating jobs for the 15 million Americans who really need them.

So everybody's thinking about this, actually: lawmakers, economists, labor experts. Everybody's trying to figure out some formula for generating more jobs.

Last week, the Economic Policy Institute, which is a labor-oriented think tank here in Washington, released a report that said that a jobs-creation tax credit would be the best way to go. They argue that it would create five million new jobs, and their basic idea is that government should provide a refund of 15 percent for an employer's new wage cost and then another refund of 10 percent in 2011. Altogether, that would cost taxpayers about $27 billion, but they say that's pretty cheap for creating more than five million jobs.

HANSEN: Explain how the economy can be recovering when employers aren't hiring new people.

GEEWAX: Well, you know, here's the thing is the economy is growing. That is, profits are picking up, orders are getting stronger. On Friday, we had some good news about housing sales, but the statistics just keep showing that job creation is weak.

You know, even before this recession began, we had weak job growth all through this past decade. That's because global competition forces companies to keep their labor ranks very thin, and of course, we all know there are lots of new technologies that have changed our factories, our offices.

So everything's running more efficiently, and employers just don't want to hire, even in the good times. So now here we are, still in a - maybe in a recovery but a tough environment, and employers are really loath to take on any new employees and especially to absorb those training costs.

HANSEN: Is there a downside to this tax-credit proposal?

GEEWAX: Well, a lot of people think that yes, okay, it could help employers offset the cost of hiring new workers, but on the other hand, you really shouldn't have government trying to shape the economy. They look at what happened with the Cash for Clunkers program. We all remember that from last summer. Consumers were getting money from the government to go out and trade up for their new car, and yeah, that created a lot of activity in the summer, but right after the program ended, so did the sales.

So did it do any good, or did it just shift sales from November to August? And that's what they worry about this tax credit, that maybe companies are poised to start hiring again anyway, and this would just end up being another tax giveaway with very little impact in the long run.

So there are people who just don't like the idea, and they especially worry about people gaming the system, where they might even lay off more workers and then rehire them after they think they could get a tax break.

HANSEN: Is there support for this in Congress?

GEEWAX: This idea has been floated around before, but in recent weeks, this has gotten a lot more traction because everybody's so frustrated about this lack of job recovery. So there are some Republicans who do support it because they like the idea of tax breaks for businesses, and a lot of Democrats like it because they want to see jobs created, especially before next year's elections.

So there is growing support, but the White House hasn't committed to it one way or the other. They haven't ruled it out, haven't ruled it in, but it is in play.

HANSEN: NPR senior business editor Marilyn Geewax. Thanks as always.

GEEWAX: You're welcome.

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