National Payroll Contest

Michael Ettlinger and Jordan Eizenga propose a competition to encourage firms to hire.

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Job creation isn’t going to get moving to the extent we need until there’s sufficient demand in the economy to get businesses believing that there will be good returns to investing and hiring. In short, they need customers. That said, at the margin there is something to be said for providing other forms of motivation to hire.

One way to do that is to create a “National Payroll Contest” that offers prizes to the firms that generate the greatest increases in payroll over the course of the year. It would be inexpensive, and if it worked it would help create jobs.

The idea is to motivate companies to hire and give raises without offering subsidies for every person on their payroll, which is both expensive and inefficient as most of the jobs subsidized would be jobs that would have existed anyway. Instead, there would be a competition that would motivate many firms to hire and give raises. But only the most expansive firms would receive a benefit from the government.

Winning companies would be selected based on the amount of increase in the wages they pay that are subject to the payroll tax over the year. There would be separate prizes for different categories of companies based on size. Because wage income subject to the payroll tax is only the first $106,800 per employee, the prize would not go to firms that simply increased their top executive salaries the most but to those that either increased the pay of their rank-and-file workers or boosted the number of employees.

For a winning company, the prize would be equivalent to 5 percent of their total payroll subject to payroll tax. In order to give employers more chances to win, and more motivation to get in the game, there would be second and third prizes as well.

The clear benefit of this proposal is that it is relatively inexpensive for the federal government. While it would motivate many firms to go the extra mile in increasing payroll in an effort to win the prize, it would only cost the public coffers the amount of the prize for the winning firms. And that cost could end up being offset by the increased revenue from the increase in hiring.

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