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Job Creation vs. Job Retention

written by: N Nayab•edited by: Linda Richter•updated: 1/8/2011

Both job creation and job retention are macro-level interventions to help ease unemployment and ensure sustainable economic development. Read on for an understanding of job creation vs job retention.

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    Job Creation vs Job Retention Job creation involves establishing new paid positions or filling existing but unfilled job positions. Such new positions are usually the result of programs or projects undertaken by the government during tough economic times to assist the unemployed seek employment. Job creation may involve either a macroeconomic policy to increase job supply or development of efficient means to pair employment seekers with prospective employers.

    Job retention is intervention through funding to retain existing filled positions, which remains untenable and marked for elimination without such funding. The government usually provides incentives to employers to avoid layoffs and retain jobs during tough economic times, for retaining existing jobs is easier than creating new jobs.

    Image Credit: flickr.com/Rick Cooper

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    Similarities

    Comparing job creation vs. job retention, both are efforts to help the unemployed or control unemployment levels.

    Businesses operating on a purely commercial basis would find many positions unviable or unprofitable to maintain during recession, depression, or other adverse economic conditions. The changed economic conditions might allow elimination of such jobs altogether, passing over the job duties to other employees of the firm, or undertaking such tasks at a lesser cost elsewhere. Such actions by employers, however, result in unemployment and lead to further negative repercussions on the economy. This prompts the government to intervene and provide incentives to companies for creating and retaining jobs and thereby fuel sustainable economic growth.

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    Differences

    The difference between job creation vs job retention lies in the scope. Job creation involves creation of new jobs, therefore exploring new business opportunities, stimulating new demand, and encouraging new start-ups. Job retention, on the other hand, concerns itself with existing jobs and aims at retaining the status quo, discouraging entrepreneurs from relocating jobs, preventing downsizing, and the like. It also takes the shape of bailouts or prevention of company closures.

    Government intervention in providing job creation stimulus usually takes the shape of

    • Encouraging venture capital investments in select high growth industries.
    • Abolishing barriers that impede small business growth.
    • Cutting employers' payroll taxes to help businesses reduce the cost of hiring people.
    • Simplifying access to public procurement contracts to create more business opportunities for small firms, and thereby encouraging the creation of new jobs
    • Declaring a moratorium on some or all business regulations when difficulties in complying with regulation, paper work, and cost of compliance deter entrepreneurs from starting new businesses. A moratorium followed by simplification of regulation would encourage entrepreneurs to start new businesses and thereby create jobs.
    • Establishing enterprise allowance schemes to help the unemployed start small businesses and become self employed.
    • Promoting micro-enterprise development services.
    • Providing stimulus packages for job creation such as large infrastructural projects.

    Government intervention in job retention takes a different approach. This may involve

    • Cutting employment taxes to allow employers to retain employees and survive economic downturn.
    • Promoting part-time work through tax exemptions.
    • Allowing short-time working schemes that allow employers to respond to a short-term fall in demand without making redundancies.
    • Providing bailout packages to prevent bankruptcies.

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    Practical Application

    The concepts of job creation and job retention are an integral part of Keynesian economies and are practiced in many countries. The earliest application in the United States was as part of the New Deal during the Great Depression, when departments such as Civil Works Administration, Public Works Administration, Civilian Conservation Corps, and Works Progress Administration created thousands of jobs for the unemployed.

    The most recent example is the American Reinvestment and Recovery Act of 2009 (ARRA), to overcome high unemployment caused by the recession. This act aims to save and create jobs, cushion the economic downturn, and make crucial public investments. This law allows either payment or reimbursement of wages or salaries with the recovery act funding.

    One example of a job creation and job retention initiative is the Job Creation and Retention Program (“JCRP”) of the New York Economic Development Program that provides eligible companies with discretionary grants of up to $4,000 per full-time job for committing to create a minimum of 75 new jobs in Lower Manhattan and retain at least 200 Lower Manhattan jobs.

    Franklin Roosevelt's Tennessee Valley Authority during the Great Depression of the 1930s is a good example of direct government intervention for social entrepreneurship that helped create many jobs.

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    References

    1. New York Economic and Development Corp. “Job Creation and Retention Program.” http://www.nycedc.com/FinancingIncentives/Financing/JobCreationandRetentionProgram/Pages/JobCreationandRetentionProgram.aspx. Retrieved 03 January 2011.
    2. Federation of Small Businesses. “The FSB Five Point Plan for Job Creation and Retention.” http://www.fsb.org.uk/policy/assets/fsbfivepointplan.pdf. Retrieved 03 January 2011
    3. Recovery.gov. ARRA Job Creation and Retention Guidelines. http://vpf-web.harvard.edu/osp/pdfs/draftARRAJobs%2002%2017%2010.pdf Retrieved 03 January 2011.