Jobs, yes! How to create them.

We must be serious about job creation. So how do we do so?

The Hudson Institute’s Marie-Josee Kravis writes that

new business formation is . . . essential to job growth. Indeed, size is not the defining criterion, [age] is. . . "the younger companies are, the more jobs they create", and this is true irrespective of size. . . young, thriving firms . . . create 20% of new jobs in the U.S.

Of course, Kravis has found these new firms

are the most vulnerable to excessive paperwork, high taxes, and costly regulation [and] highly dependent on credit cards, home equity or local bank loans for their start-up capital. These sources of capital disappeared during the financial crisis, and new restrictions on consumer credit combined with prolonged weakness in housing make them unlikely to re-emerge.

Kravis has little nice to say about government schools at any level. They don’t prepare students for an increasingly knowledge-based job market:

If a business had treated its shareholders the way governments treat students, it would have been vigorously prosecuted, and rightly so. Nevertheless, the same approach is being replicated in job training programs with 47 different federal programs making no dent in the duration of unemployment.

And Kravis warns the Great Recession has made job creation worse:

workers who might find jobs cannot move because they are unable to sell their homes, or lack the confidence that their spouses or partners can find jobs in new locales. [Plus,] government has implemented 14 programs to assist in housing finance with no more success that it has shown in education or the postal system.

Want to create jobs? Kravis says then, one should “do no harm.” She wants every government initiative, program, law, regulation or budget proposal to pass the same litmus test: its effects on growth and job creation.

James Pethokoukis of Reuters has highlighted the big problem with our current job creation pattern. We grow jobs best in the economy’s least-productive areas. Pethokoukis maintains

it is critical to deal comprehensively with the Axis of Economic Evil: Big deficits, high taxes and onerous regulation. America must get more competitive and productive. I find the below chart from McKinsey particularly scary since it shows how much job growth is happening in unproductive areas of the US economy.

The economy's most unproductive areas, as the McKinsey chart shows, are government, education, health care, and social assistance. Forbes’ Steve Forbes believes the Greece/Ireland-like fiscal crisis battering U.S. states offers a chance for “profound reforms.” We can “turn [the] Big Government mantra on its head” and truly liberate people. Forbes recommends changes in three areas:

1. public-employee pensions. We now have an environment in which governments can move to 401(k) types of pension plans, which will avoid . . . inadequate funding.

2. public education. No more centralized management; each school runs autonomously, doing what it thinks is best for its students. 2/3rds of New Orleans children go to charter schools, which escape. . . bureaucratic government and union regulations. [And any unhappy parent] can easily choose a different [school]. The results [are] astounding: Test scores have soared, even though 84% of the students come from low-income families.

3. Medicaid. Governors should vigorously push radical new approaches, such as the health care equivalent of vouchers or food stamps, that allow [for direct] patient control.