Michael R. Strain of the American Enterprise Institute recently offered a new jobs agenda in National Review, which includes the following policy initiatives:
There are steps the government can take to help today’s unemployed: Offering relocation vouchers to the long-term unemployed in high-unemployment areas; allowing firms to hire the long-term unemployed at less than the current minimum wage and supplementing their income with an EITC-like payment; reforming our disability insurance program so that it doesn’t serve as a permanent exit from the labor market; publicizing and encouraging worksharing as an alternative to layoffs; getting the government off the backs of entrepreneurs; reducing occupational licensing requirements; encouraging domestic energy production; providing lump-sum bonus payments to unemployed workers who find a job; and more. Some of these suggestions involve more government action; some involve the government getting out of the way; all should be considered.
Strain makes a detailed and convincing case for these labor market reforms in his NR article, which I strongly recommend. In my ideal world, Strain’s agenda would form the basis for the 2014 equivalent of the Contract with America. One has to assume that many GOP candidates, including many GOP incumbents, would resist Strain’s agenda on the grounds that it is too interventionist, heavy-handed, or expensive. As Strain explains, however, the cost of not taking action is enormous:
When a worker is unemployed for such a long time, his skill level falls below that of his employed peers and his professional network weakens. Evidence suggests that employers are extremely reluctant to hire people who have been out of work for a long time. Some of the long-term unemployed end up on disability insurance, effectively ending their careers. Our labor-market crisis represents an enormous loss of economic potential — one that will linger for quite some time even while the economy improves — with millions of capable people who want to work tragically sidelined.
And Strain also recommends a renewed push for states to adopt right-to-work laws. Congressional Republicans might also revisit the Employee Rights Act, which Fred Barnes touted in February of last year. (The ERA, devised by the anti-union activist Richard Berman and strongly opposed by organized labor, would among other things force recertification elections every three years.)
Relocation vouchers are among Strain’s more provocative proposals, as they implicitly involve the shift of long-term unemployed constituents from one region to another. One can imagine state and local officials would embracing relocation vouchers, to reduce the cost of meeting the needs of the long-term unemployed and the poor more broadly, or resisting them, as they might accelerate population decline and (perhaps) economic decline in regions plagued by long-term employment. From a national perspective, however, it seems clear that relocation vouchers, and person-based rather than place-based policies more broadly, have much to recommend them, for reasons Strain outlines:
Unemployment rates vary significantly among the states. In 2012, the average unemployment rate for North Dakota was 3.1 percent. In Nebraska it was 3.9 percent; in South Dakota, 4.4 percent. Vermont, Iowa, Oklahoma, and Wyoming all had unemployment rates below 5.5 percent. Compare that with North Carolina, New Jersey, Rhode Island, California, and Nevada, with 9.5, 9.5, 10.4, 10.5, and 11.1 percent unemployment.
Needless to say, it would be significantly easier for many workers to get a job in North Dakota than in Nevada. But many unemployed Nevadans may lack the financial resources to pick up and move. An employment program should include a relocation subsidy to help the long-term unemployed move from high-unemployment areas to low-unemployment areas, as suggested by economist Enrico Moretti and others.
A program like this already exists under the Trade Adjustment Assistance program. Certain workers who have secured employment in a new city can receive a relocation allowance of up to 90 percent of the “reasonable and necessary expenses” of moving, plus an additional lump-sum payment of up to $1,250. The unemployment-insurance system could create a similar program for the long-term unemployed, possibly financed by letting them take an advance on their UI benefits.
With his new jobs agenda, Strain wins my vote for most important conservative reformer, and the one who could have the biggest beneficial impact on the well-being of Americans struggling to climb the economic ladder. Dylan Matthews of Wonkblog recently gave Strain’s ideas a respectful hearing, and he also made reference to Kevin Hassett’s tentative suggestion that the public sector directly hire the long-term unemployed as a last resort. Reversing the damage that has already been done by long-term employment will be a difficult and, in the short-run at least, expensive undertaking. But it is well worth it.