A Weak Way to Create Jobs

There is a lot of circumstantial evidence that President Obama is planning to include in his eagerly anticipated post-Labor Day jobs speech a variation on a truly lame state program called Georgia Works.

The program, begun in 2003, pays people on unemployment insurance a small additional stipend, currently $240, if they agree to work 24 hours a week, for no wages, for a private employer while unemployed, in exchange for some form of training by the employer.

The program was actually started by a Democratic state labor commissioner, Mike Thurmond, and continued by his Republican successor. Thurmond went on to run as the Democratic nominee for the Senate in 2010, and lose. Former President Bill Clinton is a big booster of the program, and Obama gave it favorable mention at one of his recent town hall meetings in Iowa: The president said:

“We’ve got to rethink how we do unemployment insurance. There is a smart program in Georgia. What they do is they say, all right, instead of you just getting unemployment insurance, just a check, what we’re going to do is we will give a subsidy to any company that hires you with your unemployment insurance so that you’re essentially earning a salary and getting your foot in the door into that company. And if they hire you full-time, then the unemployment insurance is used to subsidize you getting trained and getting a job.”

But that’s not how the program works at all. Basically, the company gets free labor while the person is receiving unemployment insurance. If the company does hire the person, there is no ongoing wage subsidy or training subsidy.

According to data from the Georgia Department of Labor provided to the Huffington Post, just 16.4 percent of workers who participated in this program between 2003 when the program started and 2010 got hired by the company where they were placed, and only 24 percent got jobs at all. Currently, exactly 19 people are enrolled.

Obama’s characterization sounds more like Danish or Swedish active labor market policy, where government subsidizes serious retraining and then subsidizes wages. But the Georgia program, now run by a very right-wing Republican state administration, is a far cry from that.

Georgia’s top weekly benefit is just $330.

With unemployment stubbornly above 9 percent, and above 15 percent if you count discouraged workers and part-timers seeking full-time work, this program doesn’t make a dent in the problem. It doesn’t create jobs. It simply alters who gets available jobs, while putting downward pressure on wages. As Obama’s suggests, Smith gets his foot in the door ahead of Jones, by offering to work for free.

Why would Obama be interested in such weak tea?

First, there is no additional cost to government.

Second, it has a nice corporate, free-market flavor.

Third, it appeals to Republicans.

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