A “quirky” idea…let’s hold a contest for employers to hire new workers

Here is an idea from the Center for American Progress.  Even they admit it’s “quirky,” but I think it’s more under the “they just don’t get it” category,” or perhaps it’s a matter of “all the liberal backed ideas haven’t worked,” so let’s get quirky. 

Keep in mind as you read the following that employers are still seeking to downsize, minimize wage costs and most obvious among the vast majority of employers, trying to desperately manage health care costs (in the face of another “quirky” progressive idea) mostly by shifting more costs onto workers in the form of higher premiums, deductibles and co-payments and the ever favorite consumer driven high deductible health plan. 

These folks at CAP are right that the fundamental problem is getting people to buy products and services so that there is a reason for companies to hire more workers and be able to pay higher wages…but a contest?

Rather we should find a way to make it more desirable for the 90 percent of Americans who have a job or steady retirement income to buy something. Right now many are scared, uncertain where we are headed, earn no interest on their savings, are confused about what is happening in Washington and wondering who is calling the shots. Whose fault is that?  I respectfully submit we are beyond blaming George Bush.  

But I have to admit, the folks at CAP deserve credit for having an idea, that’s more than we can say for the people in the West Wing. 

A national contest to hire workers (to do what?).  [excerpt]

…create a “National Payroll Contest” that offers prizes to the firms that generate the greatest increases in payroll over the course of the year. It’s an admittedly quirky idea. But hear us out. It would be inexpensive, and if it worked it would help create jobs.

The idea is to motivate companies to hire and give raises without offering subsidies for every person on their payroll, which is both expensive and inefficient as most of the jobs subsidized would be jobs that would have existed anyway. Instead, there would be a competition that would motivate many firms to hire and give raises. But only the most expansive firms would receive a benefit from the government.

Winning companies would be selected based on the amount of increase in the wages they pay that are subject to the payroll tax over the year. There would be separate prizes for different categories of companies based on size. Because wage income subject to the payroll tax is only the first $106,800 per employee, the prize would not go to firms that simply increased their top executive salaries the most but to those that either increased the pay of their rank-and-file workers or boosted the number of employees. For a winning company, the prize would be equivalent to 5 percent of their total payroll subject to payroll tax. In order to give employers more chances to win, and more motivation to get in the game, there would be second and third prizes as well.

The clear benefit of this proposal is that it is relatively inexpensive for the federal government. While it would motivate many firms to go the extra mile in increasing payroll in an effort to win the prize, it would only cost the public coffers the amount of the prize for the winning firms. And that cost could end up being offset by the increased revenue from the increase in hiring.

Of course, for the contest to work as intended, Congress will need to create rules to ensure that companies win the contest fair and square. Rules must be designed to prevent businesses from winning simply by acquiring other companies and claiming the payroll of the combined firms. But such rules need not be complicated.

The most obvious challenge to this idea (aside from being quirky) is the absence of good information for potential participants. A company that is hiring already and might be motivated to hire a bit more to have a chance at the prize is going to be reluctant to do so if it has no idea how it’s faring against its competition. For that reason, developing a system of public reporting from the government that maintained the confidentiality of firms would greatly increase participation.

Clearly, a National Payroll Contest will not alone provide nearly enough jobs to get us back to pre-recession employment levels. This is by no means its purpose. But it can be part of a larger set of policies that try to achieve that end, and Congress should give the contest serious consideration. We need to get people back to work, and to do so perhaps a little friendly competition would not be such a bad thing. This seems like a contest worth having.

Michael Ettlinger is Vice President for Economic Policy and Jordan Eizenga is an Economic Policy Analyst at American Progress.