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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.

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The economic arguments in favor of such a policy are considerable. For workers, having a job that has been reduced to 80 to 90 percent of full time is vastly better than being unemployed, as it keeps you engaged in the workforce and puts far more money in your pocket than if you were living off unemployment alone. For employers, it keeps the workforce ready for an economic upswing. And for the government, supporting a worker whose hours are reduced is much less costly than paying full unemployment.

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The German program this year has cost only $2.9 billion. Adjusting for the larger US population, that suggests the US could fully copy the German system for $10.6 billion – about 1/70th the cost of the $750 billion economic stimulus last February, estimates Kevin Hassett, economic analyst at the American Enterprise Institute.

A program based on Germany’s work-share model would be attractive to firms, workers, and taxpayers because it is cheaper than paying unemployment and it keeps more people employed. That in turn would help maintain consumer spending, which is a big driver of the national economy. 

Seventeen US states allow this sort of work-sharing, but few companies are participating, mostly because, unlike in Germany, the government’s contribution is not large enough to make work-share attractive. Sen. Jack Reed (D) of Rhode Island and Rep. Rosa DeLauro (D) of Connecticut have proposed bills to expand existing state work-share programs, but the White House is not supporting them. 

Administration officials say they want to “create” new jobs rather than “save” old ones, but that’s silly, says economist Dean Baker. Reducing the number of layoffs by a million workers has the same impact on the labor market as creating a million additional jobs.

Obama’s proposal to use some TARP money for lending to small businesses could help, as could his proposal for funding New Deal-type jobs to rebuild America’s infrastructure. China is spending billions in stimulus funds on public-works projects, as is Europe. But will an increasingly deficit-fixated Congress go for it? 

Across the Atlantic, “social capitalism” is weathering this storm better than US-style “Wall Street capitalism.” If the White House can’t figure this out, it may end up as Obama’s “Katrina moment,” hurting the country as well as his political fortunes.

Steven Hill works at the New America Foundation. His forthcoming book is “Europe’s Promise: Why the European Way Is the Best Hope in an Insecure Age.”