Should the Government Subsidize Jobs?

A common objection is that it will encourage fraud — employers will fire workers and then rehire them, to obtain the subsidy. Or, less transparently, it will fire workers and hire replacements, again in order to obtain the subsidy. But a bigger objection, which is also an objection to the original stimulus program, is that it’s not targeted on industries or areas of above-average unemployment. Even in an area of low unemployment, an employer will have an incentive to hire workers in order to obtain the subsidy, but he may do this by hiring workers who already have a job, and the net effect on unemployment will therefore depend on what the hired worker’s former employer does — maybe just pay him to stay.

Comments (3)

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  1. says:

    Good points. Maybe this could possibly work if the employers were monitored. They have to follow guidelines or they don’t obtain the subsidy. For example, the person has to have been unemployed for X amount of time, etc. However, every plan has upsides and downfalls- so, there can be common objections but we’ll never know until it’s tested.

  2. Devon Herrick says:

    The same argument against job subsidies is relevant about the pitfalls of expanding subsidies for health coverage. What’s known as “crowd out” almost guarantees that most of the people who receive the subsidies will not be the ones policymakers originally envisioned would benefit.

  3. Larry C. says:

    The answer to your question is: “NO.”