One way that the government can make a serious dent in the jobless rate, which is as high as 30 million, is to implement economist Milton Friedman’s “negative income tax” plan immediately, says money manager Robert Arnott, chairman of Research Affiliates.

Arnott figures such a plan would put those 30 million back to work within five years.

It would work like this: end social welfare programs and the minimum wage. Instead, he says, the Internal Revenue Service would subsidize low income workers, allowing companies to legally hire at much lower rates of pay.
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“A minimum wage punishes willing employers and willing employees. In an effort to force employers to pay a ‘fair’ wage to our least skilled, we erect insurmountable barriers to employment for many potential employees,” Arnott writes on RealClearMarkets.com.

Employers would scoop up workers by the millions at lower pay rates, providing them with job skills. The subsidy would decline as the workers demanded higher wages, Arnott contends.

“Can we find employers willing to hire 30 million people for $1/hour, wages that rise as the job skills improve? Of course we can,” he writes.

“As these low-wage employees learn skills and earn raises, tax revenues will grow, the costs of our social programs will decline and long-term liabilities for entitlements will fall.”

Some Fed officials now say that they are less concerned about inflation and more about long-term joblessness.

Dallas Federal Reserve President Richard Fisher, an inflation hawk, said this week that liquidity in the economy was high enough, and that the unemployment problem could not be resolved by the central bank.