Instead of unemployment benefits, offer a ‘signing bonus’

After 39 weeks, weekly benefits would expire, but the job-seeker would be eligible for a two-month signing bonus if he or she took a job. This bonus opportunity would expire after 52 weeks.

This plan would create a greater incentive to take a job after 26 weeks than after 39 weeks, and a huge incentive to go back to work before a year has passed. The longer one holds out, the less one gets.

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While this proposal may sound harsh to some, since it would cut off weekly benefits at 39 weeks instead of 99, the signing bonus effectively would give the job-taker 11 months of support. During the brutal recession of the early 1980s, which drove the jobless rate to 10.8 percent and bludgeoned factory workers with an uncompetitive dollar, benefits maxed out at 42 weeks.

Under my plan, the signing bonus would be available only as long as the national unemployment rate remains above 7.5 percent. This, too, creates urgency to get back into the workforce before the economy returns to normal.

Moreover, getting people back on the job sooner would help replenish the empty coffers of state and local governments.

To avoid “take the money and run” scams, the bonus would be paid out over three months and would be a one-time-only benefit. If the recipient left the job voluntarily or was fired “for cause” within a year, any payout would be subject to a federal tax rate of 70 percent.

Would this plan get public support? Libertarian critics might complain: “You’re using tax dollars to pay people to get a job, which, after all, they should be doing anyway!”

First, forget fantasyland; we have to start our assessment at the status quo. Isn’t it better to pay people to pack a lunch and show up for work instead of paying them to stay home? Second, since these jobs would be in the private sector, they would be far more stimulative than the sort of public jobs envisaged in the 2009 stimulus plan. Third, the impact on the federal budget would be far more positive than current law.

Let’s say Jobseeker Max, who has been collecting unemployment for six months after losing his $45,000-per-year job, takes a new job for $40,000. His signing bonus would total $5,625 — equivalent to three months’ worth of his unemployment benefits. At first, it might seem that the government has thrown away $5,625. But Jobseeker Max now pays taxes on his new wages, roughly 15 percent of $40,000, or $6,000. This sum is greater than the bonus, assuming he stays on the job for a year.

Remember, aside from reforming entitlements, nothing would help fight the U.S. deficit more than spurring more people to show up for work in the private sector.

The left side of the political spectrum might harp: “You’re throwing hapless people to the wolves. Already, 44 million Americans receive food stamps.” But this plan would not throw people to the wolves; it would lure them back to the workplace.

The BLS reports 3 million job openings at the moment. Granted, not every seeker is well-matched for available jobs. We need more software engineers and miners who understand fracking for natural gas than mortgage brokers baying for borrowers.

But don’t take the “structural mismatch” claim too far. Remember, just four years ago our jobless rate was 4.5 percent. Does anyone believe that in those four years, 6 million American workers hit their sell-by date?

Finally, I can’t deny that food-stamp and jobless rates have soared to frightening levels. But this is an indictment of the current system.

There’s no avoiding some falling wages in a recession. More than half of people who lost jobs between 2007 and 2009took pay cuts to rejoin the workforce, and 36 percent took at least 20 percent haircuts. It’s better for the economy, though, if we speed the hiring process, not throw wrenches into it. Does that mean wages must keep sliding? Of course not. As the economy slowly and painfully gets back on its feet, we can expect some pay raises. In fact, among employed workers today, wages are crawling upward.

Still, as Milton Friedman always reminded, there’s no free lunch. Companies can’t pay employees more unless the employees upgrade their skills. Right now, software engineers are back in fashion in Silicon Valley. But if the only computer code you know is Fortran, your resume is frozen in 1985, and so are your wages.

Losing a job hurts deeply. For all the Dilbert cubicle jokes and television parodies such as “The Office,” most Americans like to work and like their jobs. Gathering around a water cooler beats waiting around for the mailman to show up at the house. We want to feel that rush of dopamine when we face a new challenge at work. We need that forward momentum to be creative and to find some slivers of happiness in this crazy world.

And a signing bonus, like pro athletes and Wall Street guys get — albeit with fewer zeroes — could be a pretty nice push.

Todd G. Buchholz was a White House economic adviser to George H.W. Bush and a former managing director of the Tiger hedge fund. He is the author of “Rush: Why You Need and Love the Rat Race.”

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