How To Put America Back To Work

Our regular contributor, Tom W. Pauken, provided this testimony in writing to the Ways and Means Committee’s Subcommittee on Improving Efforts to Help Unemployed Americans Find jobs on February 11, 2011. As chairman of the Texas Workforce Commission, Pauken has played a pivotal role in a state that has weathered the Great Recession better than most and provides those lessons to the rest of the country. – Ed.

by Tom W. Pauken

Texas has an important story to tell and because I believe our experience can help policymakers here and in other states address the problem of unemployment.

Texas has weathered the current recession better than any other large state.  While we have not been immune to its effects, consider these numbers:

Between December 2000 and December 2010, Texas created 640,600 private sector jobs, according to recent Labor Department reports. That is an 8 percent increase over the last decade. During that same period of time, every other of the ten largest labor market states lost private sector jobs, and the nation as a whole lost more than 3.2 million such jobs.

There are many reasons why Texas has fared better than other states during the downturn. Governor Perry and the Texas legislature have instituted polices of fiscal restraint and lower taxes that have made Texas the number one place for business in our nation. And thanks to our state legislature, the Texas Workforce Commission has administered a new program called Texas Back to Work designed to encourage employers to hire Texans who are unemployed and who have lost their jobs through no fault of their own. More than 10,000 unemployed Texans have been hired and over 2700 employers have benefited as a result of the program and this initiative received the Department of Labor’s best practices award this past fall.

The program provides an incentive of up to $2,000 for hiring qualified UI claimants with the goal of rapid reintegration into the workplace. Employers train, develop and oversee new employees with the purpose of retaining the new hire after an initial 4-month period in order to receive the full incentive.

The program has been a win-win for employers, job seekers, and the taxpayers of Texas. Of the participants in the program, two thirds have successfully completed, with 89% of them continuing to show wages in the following quarter. Program wide, 75% of participants whether they complete or not show wages in the following quarter. More importantly, this program helps Texas businesses with the critical task of maintaining an up-to-date labor force, while also helping unemployed Texans get off the rolls of UI claimants and obtain what they truly seek – a job, not benefits.

Texas Back to Work was funded with seed money provided by our legislature and we later extended the program with federal funds.  I have included a detailed summary of the Texas Back to Work program as part of this testimony.  Please refer to Attachment 1 for more details on the success of the program.

We believe other states would benefit from following Texas’ example, and I would recommend that Congress pass legislation allowing all states the option of using federal and state emergency and extended benefit funds to pursue this cost-effective measure for job-creation. I have included draft language for your consideration to allow states the flexibility to use emergency and extended benefit funds for job subsidy programs.  Please refer to Attachment 2. Now is the time to be proactive, before we find ourselves in January of next year, with extended benefits expiring and wondering how much more impact we could have had.

There are additional changes we believe could make the current system more effective.

I recommend that, as a condition for receiving extended unemployment benefits, recipients would have an option to “Train While They Claim.” Those without a high school diploma could choose to study for their GED.  UI claimants in that category would be entitled to first priority for participation in existing federally funded Adult Basic Education programs.

Those with a high school degree, but lacking specific vocational training, would be able to receive job skills training. Again, this would not require an increase in federal funding, but simply give claimants top priority to participate in existing federally funded training programs.

Alternatively, those who don’t choose to get a GED or receive additional skills training would be required to gain additional on-the-job experience or training by volunteering for community service work for public institutions or approved non-profits like Habitat for Humanity. Those who refuse to participate in one of these three options would no longer be entitled to receive extended unemployment benefits.

I also want to bring your attention to an unprecedented overreach of federal authority over state unemployment statutes which was part of the American Recovery and Reinvestment Act of 2009. Texas was denied $550 million allocated to us by the Act – funds that would have been used to pay unemployed workers in our state. That federal legislation mandated that, in order to receive those funds, not only was the Texas Legislature required to make changes to our laws that would have expanded the number of people eligible to receive unemployment benefits, but our legislature was prohibited from including a sunset provision that would have allowed these changes to expire once the federal funds had been completely exhausted for their intended purpose.

No other federal legislation that I am aware of continues to have strings attached to it after the funding is gone. Such legislation is a first step in the federal government taking over all state unemployment laws in the country.  These provisions need to be repealed.

I would ask the distinguished members here today to initiate legislation that would amend ARRA and allow Texas to receive the money that has already been set aside for us. Texas is not asking for money that is not ours to begin with. Texas is a donor state in the Federal Unemployment Insurance system. For every dollar we contribute, we receive only 35 cents back.

Finally, I would be remiss if I did not emphasize that the key to creating jobs is to grow the private sector. Government programs, no matter how innovative, cannot bring about the kind of fundamental change that is needed to put America back to work.

We currently have a corporate tax system that rewards American businesses for taking on debt – which is deductible – while punitively taxing employment, savings, and capital investment – the engines of economic growth and job creation in the private sector. This is an incentive to export prosperity and export American jobs overseas – which is precisely what has happened over the past decade.

The best way to address this problem is to change the way we tax businesses. Let’s replace our onerous corporate tax system with a revenue-neutral, 8% business-consumption tax that would be border-adjusted.

This new approach to taxing business would raise just as much in revenues, if not more, than the current system of taxation. All goods and services coming into the U.S. would pay the 8% tax while all exports would receive a comparable tax credit as an offset to its company’s business consumption tax. This would reduce the outsourcing of American jobs, encourage long-term investment in U.S. businesses, rebuild our manufacturing base, reduce our trade deficits and put business owners back in charge of the American economy. This is a real economic stimulus plan to get Americans back to work.