Increase government jobs

One of the easiest ways to create jobs is by increasing government jobs. The success of this method can be seen from the federal Works Progress Administration (WPA) in the 1930s which employed more than 8 million people. The jobs created were majority project-based and in construction industry.

But the question is whether we want the government to decide what jobs to be created in the economy. In a capitalist economy definitely not though in the short run it may definitely help. Bouncing back from recession is quite tricky. Companies are in a dilemma where they feel that it may be right time to start increasing production but with demand not fully recovered may not hire immediately. Well here comes the main problem. The demand in the U.S. is mainly consumer-driven and people need to have secure jobs to spend money resulting in a classic chicken-or-egg situation.

Job creation by government can technically resolve this chicken or egg kind of situation. But there is still doubt as to whether such a program creates economic benefit or does it result in economic inefficiency by having the government control job creation. In fact economist feel that the WPA prevented in  people from moving to jobs where they would have been more economically productive and hence actually slowed down the post-Depression recovery.

Provide an encouraging environment to small businesses

Small and medium enterprises are essentially labour intensive and hence create lot of new jobs for the economy. However these enterprises are also the ones who need the maximum help in terms of access to credit to grow. Big businesses more or less are successful in obtaining credit from banks while many small firms have a tough time in getting credit from banks. The solution is quite simple- help these small companies get credit and hence grow and new jobs will automatically be created.

The government has already realised this problem and taken a number of steps in this realm, mainly through the Small Business Administration. However by providing easy credit aren’t we going back to the start of the crisis again. After all easy money was one of the main reasons for the current economic crisis. New businesses are definitely job creators but there are also lot of risks associated with lending to them. Though it is desirable to lend to them but one also needs to look at the other side of the coin also. This is precisely the reason why banks are reluctant to lend money to new businesses particularly in the current situation of economic turmoil.

To sum it up there are few obvious steps that a government can take to create jobs at least in the short run. The best strategy for government however would be stick to its position of controlling  authority in the long term. There are lot of changes taking place in the current economic climate ranging from health care to climate change which is making the business landscape look all the more uncertain in the  coming months and years. There is a lot of uncertainty in the business environment and if some of these uncertainties are resolved then businesses will get a clearer picture of how things will look in the future. With uncertainties resolved they will definitely look at expansion and job creation. The government is best in providing the required support to the corporate by clearing the clouds of uncertainty.

Read more at: Can Mr Obama Really Create Jobs- Part II