By Marianela Toledo and Yaël Ossowski | Florida Watchdog
MIAMI — Are direct government incentives for job creation the path to prosperity? Not a chance, says one Florida economist.
Jorge Salazar-Carrillo, professor of economics at Florida International University in Miami, points to the misdirected aims of temporary jobs programs introduced en masse in the American Recovery and Reinvestment Act, signed into law by President Barack Obama in February 2009, the first month of his presidency.
“These programs are traditional macroeconomic policy in the United States,” said Carrillo told Florida Watchdog in a Spanish-language interview.
Many of the law’s jobs provisions seek to encourage economic recovery by implementing various benefit programs for small and medium-sized companies, including tax and direct hiring incentives.
One of the more active incentive programs is “On the Job Training.” The Recovery Act distributed $90 million among various states to implement the program, which simultaneously trains and employs under-skilled workers for specific industry work.
The state government pays the employer up to 90 percent of worker’s salary, while the worker undergoes “training” to obtain skills. Companies also receive tax incentives up to $1,000 for each new hire.
The Florida Department of Economic Opportunity reports that 2,409 Sunshine State residents have participated in the program as of November 2011, when the last report was released.
But what is the percentage of “trained” workers who actually have obtained permanent employment?
An earlier audit by the nonpartisan Government Accountability Office in February 2011 found that the effectiveness of these programs is difficult to quantify — putting millions of taxpayer dollars at risk.
The GAO investigation found that nine federal agencies spent about $18 billion per year to manage 47 different job training programs, many of which overlapped. Furthermore, GAO revealed that little is known about the effectiveness of most of the programs.
The report states there is a “broken gap” between job training and actual sustained employment and recommends a top-bottom consolidation of the job-training programs, one that will “revisit the incentives” offered to states and job creators.
“The companies enjoy accepting the temporary benefits, but once those runs out, they just get rid of the temporary worker,” said Carrillo.
Despite these programs, Florida’s unemployment rate as of May was 8.6 percent, according to the Department of Labor. The national rate as of June was 8.2 percent.
Carrillo noted that because many people have stopped looking for work, the rate actually should be higher, a point supported by the latest economic review study by the Legislature‘s Office of Economic and Demographic Research on July 13.
Instead of creating new incentive programs, Carrillo suggests examining the tax code, adding that the differing levels of income tax are incredibly significant to entrepreneurs.
“The income tax could be rising to 36 percent, the highest in the world. The Japanese have lowered the tax to 25 percent,” said Carrillo.
He said lower income taxes would encourage employers to reinvest billions of dollars in the domestic economy.
“To create jobs, the U.S. may pay attention to the service sector. They have created a million jobs in medicine in the past three years alone,” added Carrillo.
Watch the Spanish-language interview with Jorge Salazar Carrillo: