I came across this interesting idea by economist Steve Allen (via Greg Mankiw) and attempted to comment there. Not sure if it worked so I will re-post here.
He wrote, “My plan for zero unemployment: There were 14m unemployed workers in August. The $447b stimulus package could be used to generate a check of almost $32,000 to each and every one of them. As a condition of receiving that check, they would be asked to work at some organization, for profit or nonprofit, for one year. These jobs would last just as long as the stimulus package and some of them would no doubt turn into real jobs. Isn’t this a planeveryone could support?”
The problem with this is that each person who receives this money and then starts a job at a company is in effect replacing a real worker at that company. Consider this scenario: Bob is unemployed and receives a check from the government and thus starts working at JOB INC. JOB INC. has no downside to keeping Bob on their staff since he is free to them, but they realize that Bob is doing roughly the same job as Sally who is paid. The company would fire Sally because they now have cheaper labor. This is a job substitution plan and would not net any employment gain.
