The Foreign Service Journal, April 2007

access to the best jobs to those who are rich enough to work for free. To encourage the creation of more jobs, governments should reduce or eliminate employer-paid taxes on labor, which discourages employ- ment, especially of low-wage workers. Most pernicious are any kind of “per head” costs or taxes that create strong disincentives for the creation of low- wage jobs. A per-head charge of $7,000 a year for medical insurance is a nuisance for a firm creating a job paying $100,000 a year — but lethal for one paying only $20,000. The medical insurance issue has especially grave implications for low-wage earn- ers, because insurance costs make up a much larger share of their employ- ment costs. Beyond taxation, health care and education, the public sector should also consider other means to work with people trapped by economic change or other circumstances. Por- table pensions will allow people to save over their careers as they change employers. To help families, the gov- ernment should seriously consider using child-care vouchers or allowing more imported nannies to help work- ing parents. Governments also need to improve services such as public safety and public transportation in depressed areas to enable the poor to compete more effectively and, in cases when an entire region is affect- ed by change, it should offer aid to distressed communities. In addition, the government should also seriously consider setting up a wage insurance system. According to the Brookings Institution, a program to insure 30 to 70 percent of wages for two years would cost around $7 billion a year. As economies develop, govern- ments should also reconsider their biases in favor of manufacturing. The service sector is increasingly impor- tant: Local services account for 60 percent of all jobs in rich countries — and most of the job creation. Al- though there is a negative stereotype of these positions as “McJobs,” service positions are not necessarily less desirable than manufacturing jobs. Some are low-paying, but many are in high-paying fields such as telecom- munications, IT, employment services and health care. In any case, even the lowest-paying service job is better than an informal job, which has no stability or protection. Yet despite this sector’s impor- tance, service-sector productivity re- mains low in many countries because of limited access to capital, overregu- lation and neglect. Services are espe- cially vulnerable to low labor mobility. Governments should also consider using active labor market programs that include job-search assistance, career counseling, training, moving allowances and other re-employment services. A P R I L 2 0 0 7 / F O R E I G N S E R V I C E J O U R N A L 55