Part 4: http://wp.me/p4bXEi-s0
Congress, more so the Republicans overall, is convinced that the Federal government must decrease spending. Democrats are willing to go along with some of the cuts in spending, but only a handful actually put any real parameters around how they would determine which expenses to cut and which to spare or even increase. Republicans also adhere to a totally disproven theory of economics that essentially says we can create jobs when the government sector spends less, and cuts taxes. The tax cut theory is that it will leave more money in the private sector, which will allow businesses to create jobs with the lowered taxes. Of course, that does not work, since it does very little to increase demand by consumers.
The best way to increase demand is to create jobs. Usually the government handles that job creation task during economic downturns with large public works projects. But since the Congress is convinced that borrowing will imperil our fiscal future by creating debt we cannot repay, or alternatively if we increased taxes, especially on those that have larger incomes, they won’t be able to create jobs. In Part 6 I will explain that taxing wealthy people to pay for jobs, will not decrease demand, since they already have enough money to buy almost anything they need, nor will they create jobs.
So, it all comes down to creating jobs without borrowing, without raising taxes even on the wealthy, and certainly not by lowering taxes. Lowering taxes will starve the government from providing those interim “safety net” services people need while waiting for demand to increase. Increased demand for products creates jobs.
There is a rather simple solution that fits the parameters I have just outlined.
A large number of jobs can be created just by amending the Fair Labor Standards Act (FLSA). This law defines the work week as 40 hours. It defines who is eligible to get paid Time and half when they work over 40 hours, and how the overtime rate of pay is calculated (It’s not exactly what you think). There are also definitions regarding minors work rules, how to classify employees as full time vs part time as well as who can qualify as a salaried employee, contractor, and hourly employee. It’s a federal law and most states have laws that extend many of the provisions of the federal FLSA. Minimum wage is higher than the federal minimum in many states. Some states require employers pay T 1/2 on Holidays and/or Sundays. The list can go on for ever.
So, lets start with the 40 hour work week. Why not reduce the hourly work week to 36 hours? Since we also want the changes to benefit People First, it must have a requirement that there be a coinciding 10% wage increase to offset the hours lost. This little tweak alone would create a lot of jobs since employers would have to hire more workers to fulfill their labor need. I would guesstimate between 500K to 1M jobs would be created just by this alone. The new employees will have money to spend as the unemployed pool is drained, and any additional overtime work will also result in increased spending power. That spending power is always what translates into increased demand.
But how will employers afford the higher pay, fewer hours, and more workers problem. They can get the money from where it all went when productivity was increasing and worker salaries were remaining stagnant (see part 4). Where did those extra earnings go? They went higher pay for executives and record corporate earnings. Shortening the workweek by 10%, while maintaining the same payroll is hardly a stretch. And since these businesses, large and small, will all share the increase in overall salary costs; nobody is advantaged or disadvantaged. It may even go towards creating an escape from the Liquidity Trap our economy is currently caught in. ( http://en.wikipedia.org/wiki/Liquidity_trap )
OK, so that was my the biggest discovery about how to create jobs just by changing one law. No new taxes, no tax cuts; just change a law to bring it closer to current productivity levels as compared to the past 30 years. It also would help towards closing the income gap. In Part 6, I will go into an explanation of other pieces of FLSA changes.