Monetizing the Who-You-Know Asset
Monetizing the Who-You-Know Asset
July 9, 2012
If you’re looking for a job, the best asset at your disposal is who you know. Your personal network of friends, families, alumni, and past work associates is extraordinarily valuable. Those are the people you turn to for your job leads, career advice, and sometimes even start-up funding. Most careers grow out of personal connections. But once you get the career you want, your personal network instantly becomes a semi-stranded asset. It’s nice to have it waiting for you if you need it later, but during the dormant time it does you little good. My idea for today involves a way to monetize your personal network and reduce unemployment at the same time.
My key assumption is that the long-term unemployed have relatively ineffective personal networks. This is obviously a gross generalization, but I think it is close enough for my purposes. Stated simply, rich people usually have valuable friends (in economic terms) and unemployed people often don’t.
Suppose the federal government creates a plan in which any citizen in a high tax bracket can volunteer to mentor a person who has been unemployed for one year or more. To start, the government would randomly assign a local unemployed person to each mentor. The deal would be that if the mentor can find a job for the unemployed person, the mentor’s own taxes would be reduced by the amount of taxes paid by the newly hired person over five years. I’ll include payroll taxes in the calculation because many employed people don’t pay federal income taxes. Serial mentoring would be allowed too, so one mentor could help find work for multiple unemployed people, one at a time.
We want to keep the government bureaucracy to a minimum, and keep freedom to a maximum, so let’s assume the entire program is optional for all participants, and the mentors fill out simple tax forms once a year that list the Social Security number of the unemployed person, a log of what steps were taken to help him/her find work, and the date of employment. It’s about the same amount of paperwork you might do to claim a home office deduction. And it would carry the same penalties for lying to the IRS. All the government needs is the Social Security numbers of both the mentor and the newly employed person in order to keep track of taxes paid and tax credits given.
In theory, getting more people working will stimulate the economy enough to compensate the national treasury many times over for the tax benefits given to the mentors. The newly employed will be buying more goods and services and they won’t be a drain on unemployment insurance and social services. Everyone wins.
To make this plan work – and this is probably the most important part – you also need some sort of online system where mentors can “trade” their randomly assigned unemployed people with mentors more suited for the task. For example, one mentor might have better contacts in the technology industry and another mentor might have better contacts in the construction industry. The government should also make it legal for mentors to trade unemployed people for cash, the same way major league baseball players are traded. If I’m a mentor with extraordinary contacts in the technology field, I might be willing to buy from another mentor an unemployed person who has technology skills. I’ll make my money back plus more through tax credits.
Let’s also assume that mentors have no restrictions on how they can prepare their unemployed people for work. For example, a mentor might find a training program and offer to fund it personally if the potential tax credits down the road are tempting enough. Another mentor might fly an unemployed person to North Dakota for an interview in the oil industry. A generous mentor might even cosign on an apartment lease and pay the first month’s rent to make relocation feasible for the unemployed. For the mentor, anything that is legal is fair game. I think you’d see a lot of creative schemes emerge.
Obviously this concept needs a lot of work to tweak the math, plug loopholes, deal with exceptions, and reduce the potential for cheating. All tax policies are imperfect, and this would be no exception. The best you can hope for is that the benefits outweigh the new problems.
A major assumption at the core of this idea is that enough jobs exist to accommodate far more of the unemployed if only we had a better way to match candidates with openings. If you look only at published job openings, you might think the real problem is that the unemployed have the wrong skills. That’s certainly an important part of the larger story. But I think you could still take a big bite out of unemployment by doing a better job matching candidates with openings. Keep in mind that your personal network has invisible, i.e. not published, openings that are exactly the sort you would fill if you were looking for a job yourself. The job you get is usually the job that no one else knew about.
You may now shred this idea.
[Note to Gawker, Salon, Huffington Post, and Jezebel: The best way to take this idea out of context and turn it into fake news is to claim I am advocating that rich people should buy and sell the unemployed just like modern day slave traders.]