Hire People, Retire Things

Publication name: 
Atlantic & McKinsey & Company
Bill Drayton
Release Date: 
July 19, 2011

Editors Note: Atlantic magazine and McKinsey & Co. "brought together some of the top minds in busines, government and the world of ideas, each to answer the same question: What is the single best thing Washington can do to jumpstart job creation? This artilce was part of the blog

Is the country’s only choice either to go off the debt cliff or accept structural sky-high unemployment? (When one includes those who would like a job but who cannot find one, the Get America Working! analysis finds that the United States is short 80 million to 85 million full-time-equivalent jobs, many times the official measure.)

That is the lose–lose choice the current framework gives us. It is a bit like the 1920s and 1930s, when policy was constipated by the dead hand of the “gold standard.” There is another way, and in fact, most of the rest of the world is beginning to move in this direction: change the relative price of people versus things. This is the most fundamental choice any economy makes and one that is as responsive to price signals as any other.

Here is how to do so. Reduce the cost of hiring people 17 percent by eliminating payroll taxes. And keep the budget in balance by adding equivalent taxes on things (materials, energy, land, pollution), which, of course, increases the price of things. The combined result is a 30 percent price shift—a hugely powerful catalyst. By breaking out to a new framework, we would: Click Read More for the full article.