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Another Idea to Pull the Economy Out of Recession

I am not an economist or an expert, but here is another idea that I believe would help pull the economy out of the recession/depression.

Basically, the government could force companies to temporarily stop laying-off their employees. As a result of employees having a short term guarantee that their jobs are secure for the next year or so, this will boost the consumer confidence and spending. Therefore, these employees will be less likely to hold off their spending, and they will most likely not default on their loans. Thus help pull the economy out of recession.

Here is an example of how it will work. Assume that there are approximately 50 companies about to layoff 1,000 jobs each. This would mean a total of 50,000 people are going to lose their jobs. The government intervenes and tells the companies that they CAN NOT layoff these employees. Since most recessions only last about a year, the government would agree to sponsor the salaries of these employees for another year of employment. Assuming the average salary and costs per employee is $100,000, then the total cost to the taxpayers would be $5 billion dollars (50,000 people * $100,000).

Even if the number of laid-off people increases to say 4 million people, then the total cost to the taxpayers would be $400 billion dollars (4,000,000 people * $100,000). This is still significantly less than the trillions of dollars that the government is planning to spend to pull the economy out of this recession.

Since these companies would have to keep these employees in the company for another year, these companies would find meaningful work and/or training for these employees. Currently these positions are being eliminated because of company restructuring from the reduced demand of goods and services. Once the end customers/employees have money again and are willing to spend this money again, demand will rise again. As a result, these companies would want to re-hire employees that they would have laid-off and can afford to resume paying for these employees too. Just by stopping these companies from laying-off employees saves these companies a lot of trouble in the future.

Preventing a large percentage of the population from being temporarily jobless will increase consumer confidence, increase consumer spending, help the companies in the long-term, and help curb loan defaults thus helping the banks too.

Therefore, I believe this plan will greatly shorten the duration of the recession or depression.

by Phil for Humanity
on 02/08/2009

P.S. The idea for this article was submitted by one of my readers. A special "Thank You" to Vanita Gupta.

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