The wage subsidy idea - combined with training and technical placement - could work well, even though it may be seen as a "government hand-out" to some. To those who cannot find work, public employment, if handled well, increases the labor supply ("net job growth") and reduces the amount of money paid out in unemployment benefits.
The answer to the question of how to increase the labor supply is perhaps simpler than increasing the demand: to wit, by increasing the number of immigrants one also increases the labor supply; the downside to that is that wages for native-born workers tend to decrease. A second way to increase the labor supply is to raise the age of retirement for workers, and/or raise the age at which pensions for older workers kick in. In either case, more workers remain in the market.
Why do our political leaders favor exports of U.S. goods and "Buy American" policies?
When a nation's trade deficit grows to over $58 billion, as it currently is for the United States, the wise policy for political and economic leaders is to encourage more exports of American goods and better marketing on the global market of American goods.
There is also an urge on the part of political leaders to encourage their citizens to "Buy American" and help reduce the fifty-eight billion in trade deficits. "Buy American" goes along with patriotic and nationalistic themes that any given executive administration may launch.
The problem, on one hand, is that American goods are not always better, and not always cheaper. Take automobiles, for example. The latest reports show that fewer than 50% of American car-buyers are purchasing autos from Detroit manufacturers. Why is that? Detroit produces...
The next best selling car is another Japanese make, the Honda Accord. This is an era when gas prices are hovering around or over $3.00 per gallon. Why would someone "Buy American" (a gas-guzzling Ford pickup truck or Chevy Impala) and pay a lot more for their commute to work? They could buy a Toyota Prius which gets around 60 miles to the gallon - six times what a Hummer from General Motors would get.
The "Buy American" slogan goes back a few years, beginning with the Boston Tea Party and the campaign against British imports. But times have changed, and the call to "Buy American" today rings hollow when a person is searching for quality, reliability and economy from an automobile, for just one example.
Works Cited
Suranovic, Steven M. (2006). International Trade Theory and Policy. George Washington
University. Retrieved April 12, 2007 at http://internationalecon.com/trade/Tch10/T10-2.php.
Institute of Chartered Financial Analysts of India. (2004). Trade Barriers. Retrieved April 13, 2007 at http://www.icfai.org.
MSN. (2007). Autos: Top Ten Car Lists. Retrieved April 13, 2007, at http://autos.msn.com/advice/article.aspx?contentid=2885.
Neumark, David. (2001). Generating Jobs: How to Increase Demand for Less-Skilled Workers
By Richard B. Freeman. Journal of Economic Literature, 39(1), 156-158.
World Trade Organization. (2006). Tariffs/Tariff Barriers. Retrieved April 13, 2007 at http://www.wto.org/english/res_e/res_e.htm#library.
