Since the U.S. economy sank in 2008, millions of workers have been laid off, and many of those have remained unemployed on a long-term scale. But with the proposed American Jobs Act, President Obama hopes to stimulate hiring, especially among long-term unemployed.
In an effort to make a dent in the unemployment number, the American Jobs Act would offer employers various tax credits to hire new workers, and payroll taxes would specifically be targeted. In fact, half of the first $5 million in payroll taxes would be cut for 98 percent of businesses, and a payroll tax holiday would be available for businesses that employ new workers or increase wages.
Also among the tax incentives would include a $4,000 tax credit to employers for hiring long-term unemployed workers as well as a provision that outlaws employers from discriminating against unemployed job candidates during the hiring process. These are particularly important components for stimulating job growth, says Ravin Jesuthasan (right), global head of talent management at Towers Watson.
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"It makes a lot of sense because what we've seen over the course of the last year or so is folks who are picking up work are the ones who have been unemployed for short periods of time," Jesuthasan says. "Many companies appear to be ignoring the long-term unemployed. Frankly, we're not going to impact any unemployment numbers without an incentive that specifically targets hiring from this pool."
Many long-term unemployed workers face a stigma because employers believe they are not of the same quality as employed workers. Thus, employers have typically relied on employed workers to fill open positions, but Jesuthasan believes that's a mistake.
As employers have tightened budgets in this economy, they are shutting down entire functions or departments in favor of cheaper outsourcing. The long-term unemployed were victims of budget problems, not talent problems.
Jesuthasan also says the bill could be effective because the tax credits focus on small businesses. Over the past few years, small businesses have especially struggled in this economy, but before that, they were a large, growing employment source. In order to start reducing jobless claims, small businesses need to increase hiring.
"The fact that the bill focuses on small companies makes all the sense in the world," Jesuthasan says. "If you look back at the last 10-15 years, most of our employment growth has come from small companies, even during a time when big companies were shedding jobs and have been doing so fairly consistently."
Of course, at this point, it's impossible to say whether the American Jobs Act will succeed if passed. Perhaps unemployment numbers would finally drop, or maybe it would turn out to be another failed piece of legislation. Still, Jesuthasan believes, the American Jobs Act is at least a step in the right direction.
"This is a good starting point as any," Jesuthasan says. "I think all the right things were done in the bill. What I don't know is if the tax incentives are enough. The tax credits probably could have been stronger, but the fact that it's focused on the long-term unemployed and calls out specific incentives for them is a very positive move."
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