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Obama can create jobs by modeling two good ideas

He should combine New Deal-era solutions with Germany's successful work-share program.

By Steven Hill / December 14, 2009

San Francisco

With the nation’s unemployment rate at 10 percent, the highest in a generation, President Obama could learn a thing or two about job creation by heading to the Smithsonian American Art Museum.

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On display is an exhibit of New Deal-era paintings that show men building roads, laying pipe, and shoveling snow. The artists were paid by the New Deal to paint these portraits; and the people in them were paid by the New Deal to construct public-works projects and the nation’s infrastructure.

Almost every community in the United States has a park, bridge, or school constructed during the New Deal, built by the calloused hands and strong backs of Americans who were working directly for the government.

With the US unemployment rate surging to historic proportions, why has the White House avoided New Deal-type programs that could keep Americans employed? 

Aside from a small summer employment program for young people, Mr. Obama seems unwilling to create jobs on the public payroll. But feeling the urgency of the dismal job market, recently he proposed using some leftover money from the Troubled Asset Relief Program (TARP), originally allocated for bailing out failing banks, to lend to small businesses to create jobs. He also proposed increased spending on infrastructure investment and home-weatherizing, also targeted to create jobs. 

That’s in addition to last February’s economic stimulus, which provided billions for investments in energy efficiency, broadband access, and other areas partly to stimulate job growth. 

But it may be too little or too late. So what else should Obama do? After visiting the Smithsonian, he should look across the Atlantic.

Even as US unemployment has more than doubled, in Germany the unemployment rate has hardly increased. Germany was one of the first advanced economies to emerge out of recession and now has a considerably lower unemployment rate than the US, 7.6 percent. The remarkable resilience of the German economy is directly attributable to shrewd policies that have better stimulated its economy. 

The most important of these is known as kurzarbeit, which encourages firms that face a temporary decrease in demand for their products or services to avoid laying off employees by trimming the hours of all employees. 

Under such so-called work-sharing programs, employers spread the burden, and the government then makes up some, or all, of the workers’ lost wages. This encourages firms to use reductions of hours instead of layoffs.