To create 2.4 million jobs invest excess corporate cash: study
"Investment in new plant and equipment could help pick up the slack from reduced government expenditure, boosting payrolls and providing a much-needed jolt to economic activity," says UMD researcher Jeffrey Werling. Credit: UMD
U.S. corporations have far less cash on hand to invest than popularly believed - but enough to provide a significant economic stimulus and renewed employment growth in the midst of a tepid economic recovery, concludes a new study by University of Maryland economic researchers.
The study projects that if corporations invested their "excess" cash reserves in capital projects, it could generate as many as 2.4 million jobs over the next three years.
"We estimate that non-financial corporations are holding about $508 billion in excess cash, about one-fourth the size of the 'cash hoard' figures regularly thrown around in the U.S. media," says University of Maryland economist Jeffrey Werling, executive director of the Inforum Research Center. "However, this is still more than three percent of gross domestic product (GDP). Spending even a fraction of these cash reserves on capital investment could substantially boost economic growth and employment."
The Inforum study was commissioned by the UN's International Labour Organization (ILO) as part of its Global Employment Trends 2012. The ILO asked Inforum to project how increased corporate investment could help accelerate the U.S. recovery.
"It's not surprising that U.S. industry would be tight-fisted given the highly uncertain economic environment, but the consequence is a low level of total investment, economic growth and job creation," Werling explains.
"Now, as government fiscal austerity hampers U.S. economic growth, new private spending becomes essential to close the employment gap," he adds. "Investment in new plant and equipment could help pick up the slack from reduced government expenditure, boosting payrolls and providing a much-needed jolt to economic activity."
PROJECTIONS
Using its dynamic model of the U.S. national economy, the Maryland team estimated that expenditure of all the $508 million cash reserve in industry operations across three years starting in 2012 could:
This shows the impact of increased investment on US Employment, millions of jobs, 2011 - 2015. See larger graph here: http://ter.ps/d8 Credit: Inforum/UMD
Add an additional 2.4 million jobs by 2014, reducing the unemployment rate 1.5 percent; Increase U.S. GDP one per cent in 2012, 1.5 per cent in 2013, and 1.6 per cent in 2014.
A more conservative assumption that only half of the excess cash reserves are spent on capital investment creates more than 1 million new jobs over 2012 to 2013, the study finds.
INFRASTRUCTURE BANK
A second scenario envisions creation of an "Infrastructure Bank" into which companies could invest a portion of their cash. Bank deposits would support infrastructure investment projects throughout the economy.
A key feature is the introduction of a tax amnesty program for companies' overseas cash, enacted with a requirement that repatriated funds be invested for three years in an infrastructure bank. These resources would be made available to support a variety of public infrastructure improvement projects throughout the economy. The assumption is that investment in state, local, and federal structures would increase by a total of $250 billion between 2013 and 2016.
This investment is projected to boost GDP about 0.8 per cent in 2014 and 2015, providing employment for an additional 1.1 million workers, the study concludes.
CASH HOARD ESTIMATE
Inforum estimated excess cash holdings among U.S. corporations by comparing current and historical ratios of liquid assets to current liabilities. The current ratio was found to be more than 14 percent greater than the historical average, implying that $508 billion of cash holdings are beyond levels needed for normal operations.
More information: The full Global Employment Trends 2012 report can be found on the ILO web site: http://ter.ps/d7. The Inforum study is reported on page 51. See excerpt here: http://ter.ps/d8
Provided by
University of Maryland
-
From lemons to lemonade: Reaction uses carbon dioxide to make carbon-based semiconductor,
33 comments
-
Thioridazine kills cancer stem cells in human while avoiding toxic side-effects of conventional cancer treatments,
3 comments
-
SpaceX private rocket blasts off for space station (Update),
42 comments
-
Landmark calculation clears the way to answering how matter is formed,
55 comments
-
Research team claims to have found evidence Lake Cheko is impact crater for Tunguska Event,
18 comments
-
Consumption rivalry
May 25, 2012
-
Bilateral trade between all countries
May 24, 2012
-
Is the economic foundation of social media in jeopardy?
May 20, 2012
-
Psychology: Rosenthal and Hawthorne Effect
May 15, 2012
-
Is GDP and National Income the Same Thing?
May 13, 2012
-
Difference between hourly wage and real GDP per hour worked?
May 12, 2012
- More from Physics Forums - Social Sciences
More news stories
Change in developmental timing was crucial in the evolutionary shift from dinosaurs to birds: study
At first glance, it's hard to see how a common house sparrow and a Tyrannosaurus Rex might have anything in common. After all, one is a bird that weighs less than an ounce, and the other is a dinosaur that ...
Other Sciences / Archaeology & Fossils
12 hours ago |
5 / 5 (8) |
0
|
Social welfare cuts ultimately come with heavy price, researchers say
(Phys.org) -- Slashing government funding for Medicaid, food stamps and other programs that serve the poor – while politically popular with some lawmakers and many conservatives – may do more harm ...
Other Sciences / Social Sciences
May 24, 2012 |
4.1 / 5 (23) |
157
Ancient Bethlehem seal unearthed in Jerusalem
Israeli archaeologists have discovered a 2,700-year-old seal that bears the inscription "Bethlehem," the Israel Antiquities Authority announced Wednesday, in what experts believe to be the oldest artifact ...
Other Sciences / Archaeology & Fossils
May 23, 2012 |
3.3 / 5 (15) |
24
Dollars and sense: Why are some people morally against tax?
As the U.S. presidential election campaigns heat up, the economic debate is dominated by bailouts, austerity and, inevitably, taxation. Now a new study published in Symbolic Interaction asks why tax is such an important issue ...
Other Sciences / Social Sciences
May 23, 2012 |
2.3 / 5 (3) |
20
Oldest Jewish archaeological evidence on the Iberian Peninsula
German archaeologists of the Friedrich Schiller University Jena found one of the oldest archaeological evidence so far of Jewish Culture on the Iberian Peninsula at an excavation site in the south of Portugal, ...
Other Sciences / Archaeology & Fossils
May 25, 2012 |
4.2 / 5 (6) |
12
Stunning image of smallest possible five-ringed structure
Scientists have created and imaged the smallest possible five-ringed structure – about 100,000 times thinner than a human hair – and you'll probably recognise its shape.
'Unzipped' carbon nanotubes could help energize fuel cells, batteries
Multi-walled carbon nanotubes riddled with defects and impurities on the outside could replace some of the expensive platinum catalysts used in fuel cells and metal-air batteries, according to scientists at ...
Computer model used to pinpoint prime materials for efficient carbon capture
When power plants begin capturing their carbon emissions to reduce greenhouse gases – and to most in the electric power industry, it's a question of when, not if – it will be an expensive undertaking.
T cells 'hunt' parasites like animal predators seek prey, study shows
By pairing an intimate knowledge of immune-system function with a deep understanding of statistical physics, a cross-disciplinary team at the University of Pennsylvania has arrived at a surprising finding: T cells use a movement ...
Yale study concludes public apathy over climate change unrelated to science literacy
Are members of the public divided about climate change because they don't understand the science behind it? If Americans knew more basic science and were more proficient in technical reasoning, would public consensus match ...
Land and sea species differ in climate change response: study
(Phys.org) -- Marine and terrestrial species will likely differ in their responses to climate warming, new research by Simon Fraser University and Australia’s University of Tasmania has found.
Feb 16, 2012
Rank: 5 / 5 (2)
Feb 16, 2012
Rank: 2 / 5 (4)
Cut spending, create a stable, predictable regulatory environment and get out of the way.
But this limits the power of the state.
Atlas will continue to shrug.
Feb 16, 2012
Rank: 3 / 5 (2)
Feb 16, 2012
Rank: not rated yet
Consider the national economy as a household economy. Constantly spending more than you make can only be ruinous. I am refering to thw constant outward flow of capital, not the equally ruinous Federal Budget Deficit. In the end, the "inflation" tax will nullify Social Security, etc.
As far as companies outsourcing jobs due to cheap labor, this is not greed, just smart. The management goal is to exact the highest possible profit in order to achieve the highest possible stock price. It is the government's job, not the private sector to look after the welfare of a nation's people. Seems bad, and it is. Government was supposed to manage trade, but, lobbyists distorted the mission.
Feb 16, 2012
Rank: not rated yet
Feb 16, 2012
Rank: not rated yet
Feb 16, 2012
Rank: not rated yet
They will never be able to force people or companies to invest without the situation existing. Otherwise it is just a Con job and will not accomplish anything more than a short one time economic growth 'blip'. What you will see is that money being invested in reing around in whergional but not local industries. The stuff being made I China will now be made in the closest local and politically stable but low labour cost area. A lot of that has to do with fuel and transportation costs as well as the demand for better value ie quality goods. Unless there is a good reason ie potential profit that potential investment money will keep shiftng around in where it ends up but unless things change it will not be invested locally.
Feb 17, 2012
Rank: 3.7 / 5 (3)
Feb 17, 2012
Rank: 1 / 5 (1)
"The other force that makes American laws complex is lobbying. The governments drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. "
"Complexity costs money. Sarbanes-Oxley, a law aimed at preventing Enron-style frauds, has made it so difficult to list shares on an American stockmarket that firms increasingly look elsewhere or stay private."
http://www.econom...21547789
Feb 17, 2012
Rank: 1 / 5 (1)
Yup. That is the extent of the Libertarian vision that has outsourced most of America's manufacturing sector and bankrupted the American state.
Well done RyggTard.
Feb 17, 2012
Rank: 1 / 5 (1)
Your Hero - Ron Paul - has pledged to cut spending by 1 trillion dollars in his first year.
Such a cut will put 30 million Americans out of work and return the U.S. economy not to a recession, but to a decades long depression.
As to deregulation. It was the Bush Era deregulation of the banking industry - promoted by Libertarian Interests - that caused the current recession.
Wherever you see deregulation the Libertarian/Randite way you see a massive increase in corporate corruption.
Feb 17, 2012
Rank: 1 / 5 (1)
RyggTard ignores a third reason. The general stupidity of his conservative peers, who don't have sufficient brain cells to comprehend the rules.
And then of course there is the issue of Republican/Libertarian scum complaining that it's too hard simply because they feel simplification will allow them to more easily engage in all manner of corrupt activities.
Like Enron and it's deregulatory ties to the corrupt Bush Administration.
Feb 17, 2012
Rank: 1 / 5 (1)
Consider the Libertarian propaganda organization the AEI...
"Founded in 1943 and located in Washington, D.C., the American Enterprise Institute for Public Policy Research (AEI) is the Godfather of Washington neo-conservative lobby groups - America's richest, largest and most influential think tank. It is also regarded as one of the Bush administration's closest allies."
http://www.lobbyw...PrId=256
Feb 17, 2012
Rank: 1 / 5 (1)
Ya, that movie was another Libertarian Failure. This time at the box office.
Feb 17, 2012
Rank: 1 / 5 (1)
"Trying to please the green lobby by killing the Keystone XL Pipeline ends up angering construction unions without guaranteeing environmentalists support. "
"Obama raised millions from venture capital firms during his presidential campaign, the Post reported, twice as much as John McCain. At first the industrys investment in Obama seemed to pay off: The $787 billion stimulus bill earmarked $80 billion for non-carbon energy investments."
"Even the most devoted machine politician, however, will run up against the institutional, Constitutional, and factional walls that the Founders built into the American system to protect republican government from itself. "
http://freebeacon...ays-pay/
Moral? Follow the Constitutional limits on govt.
Feb 18, 2012
Rank: 1 / 5 (1)
There are a lot of things wrong with Chicago style politics, and to the extent that George Bush Jr. adopted that politics in the white house, goes a long way in explaining why that presidency was the most corrupt in American History, and produced such spectacularly bad results.
But of course Corporations investing their massive hoard of cash in the economy rather than sitting on it has nothing to do with Chicago Style politics.
RyggTard is just humiliating himself again.