Boost jobs by making it cheaper to hire

Although it may be premature to judge a legislative session at the halfway mark, some preliminary assessments are unavoidable. Without a significant midcourse correction, lawmakers will have made a bad situation worse for Washington workers and their employers.

Few expected much. Successive years of rugged budgeting takes a toll. Democrats who were elected with visions of universal health care, expanded funding for education, and bold environmental initiatives find themselves removing the very planks that were fundamental to their platforms. It’s a joyless task.

Yet there have been — and still are — chances to set the state on a better course. With the statewide unemployment rate approaching 10 percent — it’s already much higher in many counties — job creation should be everyone’s chief concern. Lawmakers all say it is.

The governor puts it at the top of her agenda. Legislators have offered various “jobs packages,” ranging from targeted tax exemptions to massive public works programs, with a nod toward energy efficiency, worker retraining and growing the green economy. There’s no need to nitpick the details of the mostly modest and evolving proposals here.

But such legislative fixes don’t generate sustainable growth. Worse, to the extent they rely on more government spending they increase the debt and tax burden.

There’s a better way. Work with employers to reduce the cost of hiring. Stop viewing business owners as connivers requiring obsessive oversight and rigid regulation. Don’t make it harder for struggling employers to turn a profit.

Begin by looking at workers’ compensation costs. Washington is one of only four states that do not allow private insurers to sell workers comp policies. Here, employers must either self-insure or purchase from the state monopoly, which boosted rates this year an average of 7.6 percent. Unless things change, employers can expect another stiff premium hike next year. An employer coalition proposed legislation to reform the system without reducing worker benefits. The reforms are common across the country, yet inexplicably anathema to union leaders here. The reform bill has yet to get a legislative hearing. (Disclosure: The Washington Research Council released a report supporting the recommendations.)

Employers have also just been hit with major increases in their unemployment insurance taxes. Many Main Street businesses have seen their taxes skyrocket more than 300 percent. Even before the increase, unemployment insurance taxes per employee here were second highest in the country and more than double the national average. Increasing claims are rapidly depleting the state’s once-healthy unemployment insurance trust fund. Despite this, Democratic leaders continue to entertain union-backed legislation to make it easier for part-time employees and people who voluntarily quit their jobs to receive benefits — a proposal that will increase the drain on the trust fund and trigger higher taxes.

Then last Thursday came serious, choreographed steps toward major tax increases. Senate Democrats introduced a bill that would undo the voter-approved initiative requiring a supermajority vote for tax increases. It’s expected to pass this week. Simultaneously, in the House the head of the tax writing committee announced his plan to raise some $360 million, primarily from higher taxes on businesses.

That was just the beginning. Next came a bill to triple — triple — the current tax on hazardous substances, mostly petroleum products. A top priority for environmental activists, the $250 million tax hike would initially generate cash to plug the budget hole, eventually finding its way to a dedicated account for stormwater cleanup. The higher costs would be felt immediately at the gas pump.

Meanwhile, suggestions that the state reopen union contracts to bring public employee compensation, particularly health care benefits, more in line with private sector standards, are met with derision.

There’s still time to turn this around. Lawmakers understand that the persistent high level of unemployment is voters’ top concern. What they don’t seem to get is that by making it more expensive to retain or hire employees they destroy jobs. It’s that simple.

Jobs are being created right now in states with stable public policies and competitive business costs. Often, and this is one of those times, the best thing government can do to create jobs is clear the path, step aside, and let entrepreneurs take the lead.

Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.