Erase unemployment; revive economy

I have a suggestion for a temporary new law that might rapidly reduce unemployment and raise demand. Following are my, perhaps challengeable, assumptions and the bare outline of such a law.

Full Employment Recovery

Ÿ Most businesses have balanced the number of their employees with the staffing level needed to meet demand.

Ÿ Most families can sustain a temporary pay cut of less than 20 percent, which is more than they would earn in a layoff should the economy worsen.

Ÿ It is better to have full employment, despite everyone earning less, than it is to pay people for doing nothing.

Ÿ If the unemployed are put to productive work, they will consume more, driving up demand.

Ÿ If the temporary law spurs demand at all, it will necessitate hiring more people. Cutting the average workweek by 20 percent will necessitate new hiring of 20 percent to meet current demand.

Ÿ If employers are required to hire to meet unchanged demand, the employer must pay FICA tax for both old and new employees, potentially increasing Social Security and Medicare contributions.

Ÿ Many ambitious employees with a shorter four-day workweek will find new part-time work to compensate for the temporary reduction of income.

Ÿ When the new law is passed, it will unleash a flood of investment and consumption, causing demand to rise too fast to meet with new hiring alone. This might cause companies to need overtime, so people might not really receive 20 percent less pay.

Ÿ Retirees (me included) should have their state and federal government benefits reduced 20 percent temporarily.

The New Law Basic

Ÿ Limited duration: The law would be self-canceling after a year or two, unless renewed.

Ÿ Hours and pay: Every business must immediately cut their employee’s hours and pay by 20 percent.

Ÿ Employer’s taxes: The government would cut employers’ Social Security and Medicare tax by 20 percent to compensate for the added tax caused by the increase in number of employees.

Roy L. Harmon

Geneva