The Jobs Bill That Will Get You Fired

You've probably been hearing about a "bipartisan" jobs bill that is the latest D.C. fix for our nation's employment woes. It may help out some unemployed unskilled workers, but it may mean that currently employed unskilled workers should familiarize themselves with the location of their local unemployment office.

Why? It's all about something called, "perverse incentive":

A perverse incentive is an incentive that has an unintended and undesirable effect, that is against the interest of the incentive makers. Perverse incentives by definition produce negative unintended consequences.

What I am specifically referring to in this case is this feature of the proposed bill:

The tax break for hiring unemployed workers would exempt companies from paying the employer's share of Social Security payroll taxes for new workers hired this year, as long as those people had been unemployed at least 60 days. It would save companies 6.2 percent of the new workers' salaries that are subject to Social Security taxes, and would cost about $11 billion over 10 years.

...and this:

The senators hope to unveil legislation as early as Monday that would...extend unemployment payments for those whose benefits have run out, and renew a program that offers the jobless a subsidy for health insurance premiums.

[ Click here to read the quoted article ]

Unless this proposed legislation also stipulates that there must be an increase in the total number of employees a company has to take advantage of the payroll tax break, then folks who perform unskilled labor are probably going to be let go and replaced with workers who can easily be trained to do the same job, but who will cost the employer 6.2% less. (This could be true of folks who work in skilled trades, but will probably occur less frequently.) Coupled with the expanded jobless benefits proposed in the bill, employers will be spared a bit of moral discomfort for letting people go to take advantage of the lower payroll taxes.

The only way this will lead to a gain in employment nationally is if an economic recovery comes along with it. Otherwise, all this will create is employment insecurity for people who otherwise were secure in their jobs!