Is There No End To The U.S. Unemployment Funk?

Article by Ashish Rajadhyaksha at  Entreprenuership Central


Just the day that everyone in the U.S. is heading out to the beach or go see families to enjoy summer’s nice weather one last weekend before schools reopen, we got hit by the “No New Jobs added in August” bad news.  As expected stocks tanked along with crude oil, while gold and silver rallied, and all this followed by the usual “expert” analysis and counter-analysis from CNBC and Fox Business economists on how political uncertainties in Washington are making things worse, how various scenarios of quantitative easing, tax cuts and tax credits need to be considered to jump start the economy.

As a small business owner who’s responsible for paying my business’s current payroll, rent and other obligations on time, but also as a finance professional with advanced education in accounting, economics, finance and global trade, it makes me wonder why certain solutions that seem fairly obvious to me and my fellow entrepreneurs elude the Washington and Wall Street elite?  Is it because those solutions are so watered down by back room compromises and loopholes that the ideal solutions are just that “ideal”? Or is it because most of them have never created nor know how to create jobs themselves?

So after many heated discussions with my fellow entrepreneurs, sales people and other “real” job creators, here’re my humble recommendations to the leading corporate and government key decision makers:

1.       Adopt Flat Income Tax as opposed to the Progressive Tax Regime we currently have: Steve Forbes’s concept of a flat tax of let’s say 15% warrants more serious consideration than it has received.  Extremely wealthy people and corporates usually don’t pay anywhere near their marginal tax rates, so why pretend Progressive tax structure works? It doesn’t with all the loopholes and exemptions in place.

2.       Rationalize Payroll and Social Security Taxes: Under the current U.S. tax regime, both employees and employers pay payroll taxes but only to a maximum salary level, with no taxes after that threshold.  Why should people making less than the threshold pay higher proportional taxes than those above it? That makes no sense!

3.       Stop emphasizing virtues of home ownership: Nothing has destroyed more American wealth in the last decade than the misplaced, misguided emphasis on home ownership.  While it was virtuous to try to get minorities and low income households to own a home, it was neither realistic nor sustainable as we’ve seen.  Nothing wrong in renting, people!  Housing market is strictly a function of supply and demand, so government should stop interfering in the housing market, and let it improve with the uptick in employment and immigrants moving up the income curve.

4.       Create More Effective Job Banks: One of the biggest problems we’re facing as a nation is the mismatch between jobs advertised and job skills.  The internet job search has created a black hole thru which it’s very hard for candidates to get directly to hiring managers, thereby wasting everybody’s precious time and money.  Why couldn’t there be a public/private job bank where volunteers similar to census workers could pre-screen resumes for private companies?

5.       Provide jobs for Veterans, Homeless People, Petty Thieves, and Unemployed: So that we don’t condemn an entire generation to homelessness, despair and social assistance, we need local jobs programs that could pay reasonable wages to all those disadvantaged or unemployed for more than 6 months in exchange for essential work such as parks maintenance, street cleaning, neighborhood street patrolling, garbage pickup, infrastructure work, etc. E.g.Central Park,

6.       Create manufacturing and design incubators:  To rejuvenate U.S. economy, we’ll need to create local manufacturing incubators that share space, expertise, logistics, planning, warehousing and distribution.  Politicians talk about energy independence, but what economic independence? Rather than becoming anti-imports, we need more products such as I-phones, I-pads and Kindle that are both Made in USA and price competitive at the same time.  Problem now is securing components needed in the entire supply-chain and also getting affordable labor, but why not create localized supply chains through these incubators for microchips, toys, textiles and other labor intensive industries by training and employing the underemployed?

Rather than giving empty “Yes We Can” speeches, our politicians and business leaders should focus on public/private solutions that are local and entrepreneurial in nature.  Businesses (at least SME’s) don’t create jobs thinking about tax rates, they create jobs by revenue growth and demand expectations.  People who keep harping about tax credits as a precondition to creating jobs either knowingly or unknowingly ignore NOL’s and tax harvesting strategies that Corporates will employ even if the rate was 1%.  

So let’s focus our energies in creating the right ground-up demand conditions and not wait for some bureaucrats in Washington for a hand-out!


Any Comments or Feedback?  I would love to hear some of your thoughts on this article.