First, it is a very expensive way of creating additional jobs. Generally, a rational business will hire only employees it would have hired in any event. Therefore, a jobs tax credit would subsidize new employees who would have been hired in any event. For example, a restaurant would not hire an additional waiter just because the government pays 10-20 percent of his salary. The restaurant manager hires the new waiter because the restaurant has additional customers who need service.
Second, a jobs tax credit causes businesses to become inefficient and less competitive in the long run. A jobs tax credit encourages businesses to use more labor than they should because it is cheap from the tax credit subsidy. Once again, the restaurant manager may make the decision to hire three dishwashers because they are cheap, when he should buy an automatic dishwasher. When the subsidies end, this manager will find that he is at a competitive disadvantage compared to his competitor who invested in an automatic dishwasher.
The best way to create jobs in the private sector is to rely
on long-term incentives that allow businesses to remain flexible enough to
react to market forces and that create incentives to create new businesses and
expand existing businesses. It is also important to remember that the downside
to high productivity and prosperity is the creative destruction of a recession.
It is necessary to weed out inefficient businesses and unnecessary jobs so that
the economy can replace buggy-whip manufacturers with high-tech green
Williams can be heard nightly on Sirius/XM Power 169 from 9 to 10 p.m.