Friday, 9 September 2011

Obama’s employment subsidy: not much use.

The idea that employers should be rewarded in proportion to the number of new or additional employees they take on is as old as the stars. The idea is a waste of time given very high levels of unemployment because a straight rise in demand is simpler and just as effective.

As to lower or “NAIRU” unemployment levels, the idea works for a short time. That is, it reduces NAIRU for a short while, perhaps up to a year or so, but loses its effect thereafter.

Conclusion: the idea is not much use. For a detailed analysis of the idea, see here.


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