President Reagan is considering a package of options to reduce unemployment that includes a proposal to tax the benefits paid those out of work, the White House said today.
Details of applying the tax have not yet been worked out, according to White House spokesman Larry Speakes. But the overall purpose, he said, would be to provide an "incentive" to discourage people from staying on unemployment. A second option under consideration is to offer training programs and relocation assistance for unemployed workers to induce them to learn new skills and return to work.
If the administration plan is put into effect, Speakes said, it is anticipated that "a lot of people would get off unemployment and seek jobs." This would happen because the proposed tax on benefits would make unemployment "less attractive," he added, creating the "incentive" for workers to seek new training.
The proposals are among eight outlined in a 16-page option paper recently sent to the president. Another is the establishment of a "youth differential" in the minimum wage to spur the employment of young people.
Speakes said Reagan has not yet discussed the options with his staff or made any decisions on them. Speakes added that Reagan is not likely to seek action on the proposals in the lame duck session of Congress that begins next week, but will probably wait until the next Congress convenes in January.
The ideas to spur employment come on top of Reagan's consideration this week of a proposal to stimulate the economy by advancing the third year of his across-the-board cut in personal income taxes. The president also this week endorsed a 5-cent-a-gallon increase in the federal gasoline tax to repair roads and bridges, but insisted that it isn't intended to be a jobs program, even though it would boost construction and related employment.
With the nation's unemployment rate at 10.4 percent, the highest in 42 years, the administration has been under mounting pressure to alleviate it without responding to demands from Democrats for temporary jobs programs of the sort tried in the past.
The options given to Reagan were developed by an administration task force representing the Treasury, Labor and Commerce departments, as well as the president's Council of Economic Advisers and the White House staff. Speakes added that the options had been sent to the president from his Cabinet Council on Economic Affairs, the central Cabinet-level economic policy group in the White House.
"The objective," Speakes said, "is to attack structural unemployment in the work force," addressing not so much the cyclical "ups and downs" in employment but rather the "changing character of the work force."
Speakes talked with reporters here while the president celebrated Thanksgiving at his mountaintop ranch with members of his family.
The spokesman said Reagan is considering a plan in which unemployment insurance benefits would be taxed and the revenues used for retraining the "long-term structurally unemployed" or other such programs. The long-term structurally unemployed have lost their jobs because their industries are declining. Many of these workers in older industrial cities in the Northeast and Midwest may need assistance in moving their families to the areas where the jobs are.
Currently, unemployment benefits are exempt from taxation up to $18,000 of a family's annual income, or $12,000 for an individual. The administration proposal would reduce these levels, thus exposing more of a worker's benefits to taxation. The level and duration of unemployment insurance benefits differ from one state to another, but the average weekly check in July, the last month for which figures are available, was $114.60.
On the minimum wage, there have been previous suggestions that the employment of young people could be increased if the federal government authorized employers to pay them less than the current minimum wage of $3.35 an hour. Such "sub-minimum wage" proposals have always met with bitter opposition from organized labor.
Speakes did not identify this as one of the options given the president. Instead, he said the administration is considering another option in which the federal government might subsidize employers as an inducement to hire young workers. The subsidy might be made by giving employers a tax credit for part of the full minimum wage they pay young workers.
Speakes did not identify the remaining options except to describe them as part of a "comprehensive" approach the administration is considering to the unemployment problem. "You're only seeing the tip of the iceberg," Speakes added.
He noted that the president has pointed out that a large share of the nation's 11.6 million unemployed are workers who could return to the labor force if they were provided adequate training.
The president recently cited the amount of classified "help wanted" advertising in metropolitan daily newspapers as an indication that the jobs are available for workers who obtain the skills.