Yes, There Are Ways To Reduce Unemployment And Revive The Economy

As President Obama begins the second half of his term with a campaign for "jobs and competitiveness," we would do well to consider how he might achieve these worthy goals. It is jobs that matter most to the vast majority of Americans, and unemployment remains at 9.4 percent – about double its pre-recession level. This is a terrible punishment to inflict on millions of Americans who did nothing to deserve it. It will cause long-term and even permanent damage to many of the unemployed and their children.

What can the government do to relieve this suffering? One relatively simple measure is to subsidize employers who are willing to reduce hours rather than lay people off. Germany has demonstrated the success of this approach in the last couple of years. Unemployment in Germany was 7.4 percent just before their recession began in the third quarter of 2008. Today it is 6.7 percent. And Germany had a much steeper decline in output than we did.

The idea is straightforward: employers who are faced with reduced demand can either lay off workers or reduce hours. If they reduce hours for any worker, the government in Germany puts up 60 percent of the lost pay for these reduced hours. The worker keeps her job, with reduced hours but the pay is not reduced nearly as much.

GO HERE to read more.