business

Andy Vander Woude runs a small company that converts old tires and plastic bottles into composite pavers for the landscaping and construction industries.

Three-year-old VAST Enterprises has a competitive product and a chance to get real traction, thanks to recent deals that extend its reach as far as California and Texas as a "green" alternative to concrete.

But, like many small businesses, he doesn't have deep pockets. He'd like to hire more employees to meet the demand he knows is out there. But the bankers keep saying no.

Tim Bartik, an economist at the Upjohn Institute for Employment Research in Michigan, believes that he might have a solution for small company CEOs such as Vander Woude: a federal stimulus program aimed at the working class.

Bartik told 150 businesspeople and employment advocates at a Twin Cities forum this month about his study of a successful Minnesota wage subsidy program in 1982-83. Bartik concluded that a relatively modest federal investment in short-term wage subsidies would boost employment and accelerate sustained economic growth. The job subsidy issue also will be on the table at the Obama administration's "jobs forum" in Washington next month.

"The bottom-line benefit of this program is that it works," said Bartik, who also met with key Minnesota legislators. "We're short about 9 million jobs in total in the United States."

Bartik envisions an $8 billion annual federal investment in a wage subsidy program that would employ about 1 million people a year. Prospective employees would be referred to small businesses by training agencies such as HIRED, Resource Inc. or Project for Pride in Living (PPL). Employers would get a wage subsidy of $5 to $8 per hour, depending upon benefits packages, for as long as six months.

Participating employers would agree to keep each subsidized employee on at full pay for at least six months after the subsidies end. Bartik estimates that, based on the Minnesota experience, as many as two-thirds of the companies would retain the workers after one year, thanks to increased revenue.

Bartik's idea resonates with Vander Woude.

"I can't grow as fast as I want without enough equipment or employees," Vander Woude said. "We have the opposite problem of big business."

Generally, big companies are not rehiring the workers they laid off, preferring instead to rebuild profit margins with fewer employees. Forecasters predict that U.S. unemployment, now at 10.2 percent, will peak in the first quarter of 2010, then slowly decline over several years.

A better idea

"We don't have to accept a 'jobless recovery,' said Jane Samargia, CEO of HIRED, a job-training and placement nonprofit. "From north Minneapolis to Burnsville, the situation is the same among the unemployed. People are frightened. There is more depression, chemical abuse and family violence. The very best social service we can provide is a job."

A self-repaying plan

Bartik, based on his study of the Minnesota Emergency Employment Development program, estimates that a larger federal program would pay for itself within several years.

Work is a better economic and psychological investment than unemployment benefits. The jobs also create economic activity, payroll taxes and other levies. And people gain more experience working and contributing than sitting at home drawing an unemployment check.

Cierra Adams, who learned medical office skills through PPL's "Train to Work" job-readiness program, landed a job last year at Northpoint, the North Side primary-care clinic, thanks to a small wage-subsidy program operated by Hennepin County.

"The job only was supposed to last three months," recalled Adams, who makes about $13 an hour. "I treated it as an audition, and I got the part. This job helps me serve my family and the community."

Vander Woude said he would jump to get a couple of well-trained, entry-level workers with a six-month subsidy to turn old tires and plastic bottles into pavers and "thin bricks" for exterior walls.

And $8 billion doesn't seem like much, after the hundreds of billions paid by U.S. taxpayers to bail out the nation's largest financial titans.

If Washington doesn't get it, maybe Minnesota could once again show the way.

"If we cannot get a full-scale [national] program, Minnesota should consider a pilot program so this state can demonstrate the program works," Bartik said.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com