Many experts argue that state government can't do much to encourage job creation, given the importance of the national and global economies to California's economy. But the Public Policy Institute of California is out with a new report that suggests how state subsidies to employers to hire workers and subsidies to workers to enter the labor market could help with job creation.
The report is detailed and full of caveats. The three biggest: 1. the impact of such subsidies is modest 2. the subsidies should be designed to be simple and easy to use if they are to have much impact at all. 3. such subsidies are not cheap on a per-job basis, so the state's poor budget picture represents a real roadblock policies
But it reaches a couple of important conclusions.
First, in the short term, with the economic weak and recovery as the goal, hiring credits -- that is, subsidies to employers to hire -- can be helpful to the job picture, particularly when the incentives are focused on new hires (rather than increases in the hours of existing employees). Second, in the long term, worker subsidies, via a state add-on to the Earned Income Tax Credit, could help boost employment.
The PPIC report also has what seems to me a promising suggestion for future recessions: the state could create a hiring credit program for employers that's flexible-- that is, ap rogram that "aggressively rewards the hiring of unemployed workers during economic downturns but 'turns off' during better economic times."