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Why the Jobs Bill Passed Today Hurts College Students

Anthony Randazzo
March 17, 2010, 4:22pm

It was right around this time, mid-March, during my senior year that I got my first job coming out of college. Of course it wouldn't start until after I graduated, but I, like all my classmates, were determined to find work before graduating. If this year had been my last in college, I might not have been so lucky. Today the Senate passed a jobs bill that aims to incentivize employers with a tax credit. Here is the gist of it:

Sounds good? On the surface level it might. It might even seem free market. The government is recognizing that incentives matter, and it's using tax cuts to stimulate growth, not direct government outlays.

Of course there is always an unintended consequence to consider. Imagine this scenario:

College student: "Thank you for taking the time to interview me. I am very excited about the chance to work for you."

Employer: "Sure, let me just look at your resume. Hmmm, I see you don't have the number of days you've been out of work listed here."

Student: "Excuse me?"

Employer: "It is now customary to put the number of days out of work you have been on your resume so we know how much hiring you will cost."

Student: "Oh, well, I haven't filed for unemployment yet. I don't graduate for another 60 days."

Employer: "That is too bad, because we can hire an out of work research assistant and pay him the same wage we'd pay you, only we wouldn't have to pay the 6.2 percent payroll tax on him."

Student: "Really? So this is going to be a tough job market?"

Employer: "For you, yes. I would hire you, except for the face that the government will give me $1,000 for hiring someone else for a year."

Student: "Guess I should wait two months after college to start looking for work."

Employer: "We'd be happy to look at your application then. Thanks for stopping by."

Oh, one other way this tax cut hurts today's college students, and pretty much everyone under 50, is that it is reducing some $15 billion in revenues for Social Security. Since this tax cut is not accompanied by a spending cut or some adjustment in Social Security to cover it, this is adding to the national debt and does not amount to fiscal responsibility. It is just more of the same excessive spending for political purposes that is common place in Washington.

Update 5/18:

To clarify my earlier statement about taking from Social Security. Employers typically pay an income tax of 6.2 percent and social security taxes of 6.2 percent. Technically it is the income tax that is being cut. But, by cutting the income tax the government is reducing receipts without making a cut elsehwere and adding to the debt. The higher the debt load, the worse off the going-bankrupt-social security account will be. I should have made my connection clearer given the dual taxes.


Anthony Randazzo is Director of Economic Research


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