Ways to Create Jobs -- Without Cost to Taxpayers

Much of the economic debate over the past two years has been whether – or how much – money is needed from the federal budget to create jobs. The argument that taxpayer money is needed to save or create jobs in America was the implicit purpose of TARP (Troubled Asset Relief Program) and the explicit purpose of the auto company bailouts. The debates over stimulus packages and whether the government should invest in green technology center on using taxpayer dollars as the key to job creation.

It turns out most net job creation comes from startup companies and such companies can be founded and thrive without taxpayer dollars. The Ewing Marion Kauffman Foundation found, “It is now well established that, until the financial crisis and the Great Recession, U.S. job and output growth was driven by the formation of new firms, or startups. All existing firms older than five years (and possibly those older than one year) on net generated no additional jobs.”

There are ways for the U.S. government to facilitate startups but they primarily involve getting out of the way and letting the market function.

Preventing highly skilled foreign-born individuals from starting businesses is one of the ways the U.S. government limits startups. Up until recently, a foreign national could found a business and the company could petition for him or her on an H-1B temporary visa. Not anymore. Under a 2010 policy memorandum, U.S. Citizenship and Immigration Services prohibits approving an H-1B petition for founders of companies.

Placing new regulatory burdens on employers also makes it more difficult to start and maintain businesses. For example, a new bill in Congress, H.R. 2164, would mandate that all companies use an electronic employment verification system known as E-Verify when hiring new employees or, under a complicated set of rules, sometimes use E-Verify for existing employees. An analysis by Bloomberg estimated mandatory E-Verify would cost U.S. employers $2.7 billion a year to comply with the system, with small businesses paying most of those costs. The legislation also includes a ten-fold increase in fines that immigration attorneys warn could put a small company or new venture out of business.

The Kauffman Foundation recently released a paper – found here – that included a series of ideas to create jobs through facilitating entrepreneurship. Among the ideas:

-        Establishing an entrepreneurs visa for foreign-born individuals. Currently there is no appropriate category for a typical foreign-born entrepreneur to start a business in the United States. Allowing such individuals to start a business on a temporary visa and then gain permanent residence (a green card) if the business creates jobs would unleash the entrepreneurial spirit that has historically been one of America’s greatest strengths. (The National Foundation for American Policy released a study on this topic last year.)

-        Awarding green cards to international students with a masters degree or higher in a science, technology, engineering or math (STEM) field from a U.S. university. Without Congressional action, the current wait for an employment-based green card can be 5 to 20 years or more, depending on the country of origin. Freeing such highly skilled individuals from the burden of waiting for many years for permanent residence will allow them to move up within their own companies or someday start businesses.

-         Allowing differential pricing for patent fees. Immigration is not the only area with backlogs. Permitting higher fees for faster adjudication can work with patent applications the same way it works in other areas.

-        Automatic ten-year sunsets for major regulations. The Kauffman Foundation recommends Congress allow rules with a cost of $100 million or more to lapse after ten years. “This would regularly cleanse the books of inefficient and costly rules and, thus, barriers to business formation and growth for all businesses, including startups.”

Unless many more people work for the government – an increasingly dicey proposition given our long-term budget woes – then we need to facilitate business startups to create jobs. Freeing up our immigration, patent and regulatory rules is a great way to do so without costing the taxpayers a dime.