Unemployment Issues

In an article in the New York Times the question of whether the Obama administration’s plans to spur company hiring was in question. The administration aims to institute a payroll tax cut for individuals as well as a $4ooo tax credit for companies willing to hire the long term unemployed. From our knowledge of economics we can see how this intends to aid in relieving the current unemployment crisis. With reduction in payroll tax should create more disposable income for consumers which would encourage more spending and thus prompt companies to employ more workers, due to increased revenue. As for the proposed tax credit to companies that hire long term unemployed, it is an incentive as it reduces costs of production by some degree. The question raised in this article however is, to what degree does this benefit companies and spur them to hire more workers?

The answer that seems to be prevalent throughout this article is that the proposed plans may not help that much. Many companies are reluctant to employ unemployed workers for a few reasons. One reason for this reluctance is that a $4000 tax credit to companies may not enough to cover the cost of hiring new workers. In agreement with a chief economist at the United States Chamber of Commerce, what really would be the benefit of gaining a $4000 credit to hire a worker that is paid $80,000? In addition to this there is a “growing stigma” that is attached to those who are considered unemployed. Companies don’t want to hire new workers who were recently unemployed for long terms because of a lack of confidence in these workers’ skill. I argue that these people should not be disregarded because there are many skilled workers who are no unemployed because of job cuts.

With the way these new proposals are designed and the way in which those hiring view the unemployed what will become of the economy?